Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 202329, 2024
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to
COMMISSION FILE NUMBER 000-22793
PriceSmart, Inc.
(Exact name of registrant as specified in its charter)
Delaware33-0628530
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
9740 Scranton Road, San Diego, CA92121
(Address of principal executive offices)(Zip Code)
(858) 404-8800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.0001 par valuePSMTNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.
Yes x
No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x
No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
                
Large accelerated filerxAccelerated filero
Non-accelerated fileroSmaller Reporting Companyo
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o
No
 x
The registrant had 31,001,10030,654,948 shares of its common stock, par value $0.0001 per share, outstanding at March 31, 2023.2024.


Table of Contents
PRICESMART, INC.
INDEX TO FORM 10-Q
Page
CONSOLIDATED BALANCE SHEETS AS OF FEBRUARY 28, 202329, 2024 (UNAUDITED) AND AUGUST 31, 20222023
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 202329, 2024 AND 2022FEBRUARY 28, 2023 - UNAUDITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 202329, 2024 AND 2022FEBRUARY 28, 2023 - UNAUDITED
CONSOLIDATED STATEMENTS OF EQUITY FOR THE THREE AND SIX MONTHS ENDED FEBRUARY 28, 202329, 2024 AND 2022FEBRUARY 28, 2023 - UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED FEBRUARY 28, 202329, 2024 AND 2022FEBRUARY 28, 2023 - UNAUDITED
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PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PriceSmart, Inc.’s (“PriceSmart,” “we”“we,” the “Company” or the “Company”"our") unaudited consolidated balance sheet as of February 28, 202329, 2024 and the consolidated balance sheet as of August 31, 2022,2023, the unaudited consolidated statements of income for the three and six months ended February 28, 202329, 2024 and 2022,February 28,2023, the unaudited consolidated statements of comprehensive income for the three and six months ended February 28, 202329, 2024 and 2022,February 28,2023, the unaudited consolidated statements of equity for the three and six months ended February 28, 202329, 2024 and 2022,February 28,2023, and the unaudited consolidated statements of cash flows for the six months ended February 28, 202329, 2024 and 2022February 28,2023 are included herein. Also included herein are the notes to the unaudited consolidated financial statements.

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PRICESMART, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
February 28,
2023
(Unaudited)
August 31,
2022
February 29,
2024
(Unaudited)
February 29,
2024
(Unaudited)
August 31,
2023
ASSETSASSETS
Current Assets:Current Assets:
Current Assets:
Current Assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$260,927 $237,710 
Short-term restricted cashShort-term restricted cash9,110 3,013 
Short-term investmentsShort-term investments54,322 11,160 
Receivables, net of allowance for doubtful accounts of $54 as of February 28, 2023 and $103 as of August 31, 2022, respectively16,401 13,391 
Receivables, net of allowance for doubtful accounts of $64 as of February 29, 2024 and $67 as of August 31, 2023
Merchandise inventoriesMerchandise inventories449,101 464,411 
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 
Prepaid expenses and other current assets (includes $3,293 and $0 as of February 29, 2024 and August 31, 2023, respectively, for the fair value of derivative instruments)
Total current assetsTotal current assets836,771 773,579 
Long-term restricted cashLong-term restricted cash10,515 10,650 
Property and equipment, netProperty and equipment, net774,826 757,241 
Operating lease right-of-use assets, netOperating lease right-of-use assets, net106,043 111,810 
GoodwillGoodwill43,185 43,303 
Deferred tax assetsDeferred tax assets27,898 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 
Deferred tax assets
Deferred tax assets
Other non-current assets (includes $1,918 and $7,817 as of February 29, 2024 and August 31, 2023, respectively, for the fair value of derivative instruments)
Investment in unconsolidated affiliatesInvestment in unconsolidated affiliates10,460 10,534 
Total AssetsTotal Assets$1,886,172 $1,808,400 
LIABILITIES AND EQUITYLIABILITIES AND EQUITY
Current Liabilities:Current Liabilities:
Current Liabilities:
Current Liabilities:
Short-term borrowings
Short-term borrowings
Short-term borrowingsShort-term borrowings$10,133 $10,608 
Accounts payableAccounts payable406,581 408,407 
Accrued salaries and benefitsAccrued salaries and benefits35,340 44,097 
Deferred incomeDeferred income32,665 29,228 
Income taxes payableIncome taxes payable9,587 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 
Other accrued expenses and other current liabilities (includes $2,870 and $1,913 as of February 29, 2024 and August 31, 2023, respectively, for the fair value of derivative instruments)
Operating lease liabilities, current portionOperating lease liabilities, current portion7,144 7,491 
Dividends payableDividends payable14,456 — 
Long-term debt, current portionLong-term debt, current portion27,421 33,715 
Total current liabilitiesTotal current liabilities586,583 579,456 
Deferred tax liabilityDeferred tax liability2,105 2,165 
Long-term income taxes payable, net of current portionLong-term income taxes payable, net of current portion4,729 5,215 
Long-term operating lease liabilitiesLong-term operating lease liabilities113,335 118,496 
Long-term debt, net of current portionLong-term debt, net of current portion126,383 103,556 
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 
Other long-term liabilities (includes $4,259 and $3,321 for the fair value of derivative instruments and $12,974 and $12,105 for post-employment plans as of February 29, 2024 and August 31, 2023, respectively)
Total LiabilitiesTotal Liabilities842,260 817,327 
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Stockholders' Equity: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
Common stock $0.0001 par value, 45,000,000 shares authorized; 32,578,542 and 31,934,900 shares issued and 30,656,141 and 30,976,941 shares outstanding (net of treasury shares) as of February 29, 2024 and August 31, 2023, respectively
Common stock $0.0001 par value, 45,000,000 shares authorized; 32,578,542 and 31,934,900 shares issued and 30,656,141 and 30,976,941 shares outstanding (net of treasury shares) as of February 29, 2024 and August 31, 2023, respectively
Common stock $0.0001 par value, 45,000,000 shares authorized; 32,578,542 and 31,934,900 shares issued and 30,656,141 and 30,976,941 shares outstanding (net of treasury shares) as of February 29, 2024 and August 31, 2023, respectively
Additional paid-in capitalAdditional paid-in capital492,099 481,406 
Accumulated other comprehensive lossAccumulated other comprehensive loss(183,703)(195,586)
Retained earningsRetained earnings772,430 736,894 
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)
Less: treasury stock at cost, 1,922,401 shares as of February 29, 2024 and 957,959 shares as of August 31, 2023
Total Stockholders' EquityTotal Stockholders' Equity1,043,912 991,073 
Total Stockholders' Equity
Total Stockholders' Equity
Total Liabilities and EquityTotal Liabilities and Equity$1,886,172 $1,808,400 
See accompanying notes.
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PRICESMART, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED—AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months EndedSix Months Ended
February 28,
2023
February 28,
2022
February 28,
2023
February 28,
2022
Three Months EndedThree Months EndedSix Months Ended
February 29,
2024
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Revenues:Revenues:
Net merchandise sales
Net merchandise sales
Net merchandise salesNet merchandise sales$1,115,999 $1,011,896 $2,141,462 $1,955,939 
Export salesExport sales6,882 8,674 17,340 19,208 
Membership incomeMembership income16,176 15,071 32,071 29,862 
Other revenue and incomeOther revenue and income3,132 2,916 6,122 8,904 
Total revenuesTotal revenues1,142,189 1,038,557 2,196,995 2,013,913 
Operating expenses:Operating expenses:
Cost of goods sold:Cost of goods sold:
Cost of goods sold:
Cost of goods sold:
Net merchandise sales
Net merchandise sales
Net merchandise salesNet merchandise sales937,462 853,633 1,796,530 1,646,826 
Export salesExport sales6,563 8,215 16,552 18,282 
Non-merchandise— — — 1,809 
Selling, general and administrative:
Selling, general and administrative:
Selling, general and administrative:Selling, general and administrative:
Warehouse club and other operationsWarehouse club and other operations103,630 93,993 200,522 185,189 
Warehouse club and other operations
Warehouse club and other operations
General and administrativeGeneral and administrative32,759 33,951 65,931 65,644 
Separation costs associated with Chief Executive Officer departure
Separation costs associated with Chief Executive Officer departure
Separation costs associated with Chief Executive Officer departureSeparation costs associated with Chief Executive Officer departure7,747 — 7,747 — 
Pre-opening expensesPre-opening expenses89 130 89 1,100 
Loss on disposal of assets
Loss on disposal of assets
Loss on disposal of assetsLoss on disposal of assets139 313 297 724 
Total operating expensesTotal operating expenses1,088,389 990,235 2,087,668 1,919,574 
Operating incomeOperating income53,800 48,322 109,327 94,339 
Other income (expense):Other income (expense):
Interest incomeInterest income1,942 549 3,099 1,067 
Interest income
Interest income
Interest expenseInterest expense(2,814)(2,438)(5,563)(4,028)
Other income (expense), net(5,344)(819)(9,910)590 
Other expense, net
Total other expenseTotal other expense(6,216)(2,708)(12,374)(2,371)
Income before provision for income taxes and loss of unconsolidated affiliates47,584 45,614 96,953 91,968 
Income before provision for income taxes and income (loss) of unconsolidated affiliates
Provision for income taxesProvision for income taxes(16,202)(14,139)(32,628)(29,953)
Loss of unconsolidated affiliates(35)(14)(73)(24)
Income (loss) of unconsolidated affiliates
Net incomeNet income31,347 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 
Net income attributable to PriceSmart, Inc. per share available for distribution:
Net income
Net income
Net income per share available for distribution:
Basic
Basic
BasicBasic$1.02 $1.03 $2.07 $2.01 
DilutedDiluted$1.02 $1.03 $2.07 $2.01 
Shares used in per share computations:Shares used in per share computations:
BasicBasic30,74130,57830,72730,565
Basic
Basic29,92030,74130,09530,727
DilutedDiluted30,76030,58230,74030,593Diluted29,92030,76030,09530,740
See accompanying notes.
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PRICESMART, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED—AMOUNTS IN THOUSANDS)
Three Months EndedThree Months EndedSix Months Ended
February 29,
2024
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Three Months EndedSix Months Ended
February 28,
2023
February 28,
2022
February 28,
2023
February 28,
2022
Net income 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 
Net income
Net income
Other Comprehensive Income, net of tax:Other Comprehensive Income, net of tax:
Other Comprehensive Income, net of tax:
Other Comprehensive Income, net of tax:
Foreign currency translation adjustments (1)
Foreign currency translation adjustments (1)
Foreign currency translation adjustments (1)
Foreign currency translation adjustments (1)
12,199 2,413 11,314 (5,718)
Defined benefit pension plan:Defined benefit pension plan:
Net gain/(loss) arising during period
Net gain/(loss) arising during period
Net gain/(loss) arising during periodNet gain/(loss) arising during period(31)20 (59)37 
Amortization of prior service cost and actuarial gains included in net periodic pensions costAmortization of prior service cost and actuarial gains included in net periodic pensions cost37 30 74 64 
Total defined benefit pension planTotal defined benefit pension plan50 15 101 
Derivative instruments:(2)
Derivative instruments:(2)
Unrealized gains/(losses) on change in derivative obligationsUnrealized gains/(losses) on change in derivative obligations160 883 (536)(418)
Unrealized gains/(losses) on change in derivative obligations
Unrealized gains/(losses) on change in derivative obligations
Unrealized gains/(losses) on change in fair value of interest rate swapsUnrealized gains/(losses) on change in fair value of interest rate swaps83 880 (1,632)4,130 
Amounts reclassified from accumulated other comprehensive income to other expense, net for settlement of derivativesAmounts reclassified from accumulated other comprehensive income to other expense, net for settlement of derivatives(14)— 2,722 — 
Total derivative instrumentsTotal derivative instruments229 1,763 554 3,712 
Other comprehensive income (loss)12,434 4,226 11,883 (1,905)
Other comprehensive income
Comprehensive incomeComprehensive income43,781 35,687 76,135 60,067 
Less: comprehensive income attributable to noncontrolling interest— — — 
Comprehensive income attributable to PriceSmart, Inc.$43,781 $35,687 $76,135 $60,064 
Comprehensive income
Comprehensive income
(1)Translation adjustments arising in translating the financial statements of a foreign entity have no effect on the income taxes of that foreign entity. They may, however, affect: (a) the amount, measured in the parent entity's reporting currency, of withholding taxes assessed on dividends paid to the parent entity and (b) the amount of taxes assessed on the parent entity by the government of its country. The Company has determined that the reinvestment of earnings of its foreign subsidiaries are indefinite because of the long-term nature of the Company's foreign investment plans. Therefore, deferred taxes are not provided for on translation adjustments related to non-remitted earnings of the Company's foreign subsidiaries.
(2)See Note 8 - Derivative Instruments and Hedging Activities.
See accompanying notes.
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PRICESMART, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED—AMOUNTS IN THOUSANDS)
Three Months Ended
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Treasury StockTotal
Equity
SharesAmountSharesAmount
Balance at November 30, 202131,598$$469,170 $(188,639)$689,430 736$(27,818)$942,146 
Purchase of treasury stock— — — — 19(1,351)(1,351)
Issuance of restricted stock award31— — — — — — 
Forfeiture of restricted stock awards(3)— — — — — — — 
Stock-based compensation— 4,107 — — — 4,107 
Dividend paid to stockholders— — — — (13,275)— — (13,275)
Dividend payable to stockholders— — — (13,430)— (13,430)
Net income— — — 31,461 — 31,461 
Other comprehensive income— — 4,226 — — 4,226 
Balance at February 28, 202231,626$$473,277 $(184,413)$694,186 755$(29,169)$953,884 
Balance at November 30, 202231,858$$485,096 $(196,137)$769,799 807$(32,398)$1,026,363 
Purchase of treasury stock— — — — 61(4,519)(4,519)
Issuance of restricted stock award63 — — — — — — 
Forfeiture of restricted stock awards(52)— — — — — — 
Stock-based compensation— 7,003 — — — 7,003 
Dividend paid to stockholders— — — — (14,260)— (14,260)
Dividend payable to stockholders— — — — (14,456)— (14,456)
Net income— — — 31,347 — 31,347 
Other comprehensive income— — 12,434 — — 12,434 
Balance at February 28, 202331,869$$492,099 $(183,703)$772,430 868$(36,917)$1,043,912 

Three Months Ended
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Treasury StockTotal
Equity
SharesAmountSharesAmount
Balance at November 30, 202231,858$$485,096 $(196,137)$769,799 807$(32,398)$1,026,363 
Purchase of treasury stock— — — — 61(4,519)(4,519)
Issuance of restricted stock award63 — — — — — — 
Forfeiture of restricted stock awards(52)— — — — — — 
Stock-based compensation— 7,003 — — — 7,003 
Dividend paid to stockholders— — — — (14,260)— (14,260)
Dividend payable to stockholders— — — — (14,456)— (14,456)
Net income— — — 31,347 — 31,347 
Other comprehensive income— — 12,434 — — 12,434 
Balance at February 28, 202331,869$$492,099 $(183,703)$772,430 868$(36,917)$1,043,912 
Balance at November 30, 202332,416$$500,795 $(160,412)$855,606 1,899$(113,748)$1,082,244 
Purchase of treasury stock— — — — 23 (1,766)(1,766)
Issuance of restricted stock awards167 — — — — — — 
Forfeiture of restricted stock awards(4)— — — — — — 
Stock-based compensation— 4,554 — — — 4,554 
Dividend paid to stockholders— — — — (17,781)— (17,781)
Dividend payable to stockholders— — — — (17,771)— (17,771)
Net income— — — 39,271 — 39,271 
Other comprehensive income— — 5,123 — — 5,123 
Balance at February 29, 202432,579$$505,349 $(155,289)$859,325 1,922$(115,514)$1,093,874 
See accompanying notesnotes.

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PRICESMART, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED—AMOUNTS IN THOUSANDS)
Six Months Ended
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Treasury StockTotal
Stockholders'
Equity
Attributable to
PriceSmart, Inc.
Noncontrolling
Interest
Total
Equity
SharesAmountSharesAmount
Balance at August 31, 202131,468$$465,015 $(182,508)$658,919 713$(26,084)$915,345 $869 $916,214 
Purchase of treasury stock— — — — 51(3,784)(3,784)— (3,784)
Issuance of treasury stock(9)— (699)— — (9)699 — — — 
Issuance of restricted stock award171— — — — — — — — 
Forfeiture of restricted stock awards(4)— — — — — — — — 
Stock-based compensation— 8,674 — — — 8,674 — 8,674 
Dividend paid to stockholders— — — (13,275)— (13,275)— (13,275)
Dividend payable to stockholders— — — (13,430)— (13,430)— (13,430)
Net income— — — 61,972 — 61,972 19 61,991 
Other comprehensive income (loss)— — (1,905)— — (1,905)(1,902)
Sale of Aeropost stock— — 287 — — — — 287 (891)(604)
Balance at February 28, 202231,626$$473,277 $(184,413)$694,186 755$(29,169)$953,884 $— $953,884 
Six Months Ended
Six Months Ended
Six Months Ended
Common StockCommon StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
Treasury StockTotal
Equity
SharesSharesAmountSharesAmount
Balance at August 31, 2022Balance at August 31, 202231,698$$481,406 $(195,586)$736,894 793$(31,644)$991,073 $— $991,073 
Purchase of treasury stockPurchase of treasury stock— — — — 82 (5,819)(5,819)— (5,819)
Issuance of treasury stockIssuance of treasury stock(7)— (546)— — (7)546 — — — 
Issuance of restricted stock awardIssuance of restricted stock award237 — — — — — — — — 
Forfeiture of restricted stock awardsForfeiture of restricted stock awards(59)— — — — — — — — 
Stock-based compensationStock-based compensation— — 11,239 — — — 11,239 — 11,239 
Dividend paid to stockholdersDividend paid to stockholders— — — — (14,260)— (14,260)— (14,260)
Dividend payable to stockholdersDividend payable to stockholders— — — (14,456)— (14,456)— (14,456)
Net incomeNet income— — — 64,252 — 64,252 — 64,252 
Other comprehensive incomeOther comprehensive income— — 11,883 — — 11,883 — 11,883 
Balance at February 28, 2023Balance at February 28, 202331,869$$492,099 $(183,703)$772,430 868$(36,917)$1,043,912 $— $1,043,912 
Balance at February 28, 2023
Balance at February 28, 2023
Balance at August 31, 2023
Balance at August 31, 2023
Balance at August 31, 2023
Purchase of treasury stock
Issuance of treasury stock
Issuance of restricted stock awards
Forfeiture of restricted stock awards
Stock-based compensation
Dividend paid to stockholders
Dividend payable to stockholders
Net income
Other comprehensive income
Balance at February 29, 2024
Balance at February 29, 2024
Balance at February 29, 2024
See accompanying notesnotes.
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PRICESMART, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED—AMOUNTS IN THOUSANDS)
Six Months Ended
February 28,
2023
February 28,
2022
Six Months EndedSix Months Ended
February 29,
2024
February 29,
2024
February 28,
2023
Operating Activities:Operating Activities:
Net Income$64,252 $61,991 
Net income
Net income
Net income
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortizationDepreciation and amortization35,443 32,701 
Allowance for doubtful accountsAllowance for doubtful accounts(49)12 
Loss on sale of property and equipmentLoss on sale of property and equipment297 724 
Deferred income taxesDeferred income taxes(737)(2,124)
Equity in losses of unconsolidated affiliates73 24 
Equity in losses (gains) of unconsolidated affiliates
Stock-based compensationStock-based compensation11,239 8,674 
Change in operating assets and liabilities: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 accrualsReceivables, prepaid expenses and other current assets, non-current assets, accrued salaries and benefits, deferred membership income and other accruals(6,513)(19,503)
Receivables, prepaid expenses and other current assets, non-current assets, accrued salaries and benefits, deferred membership income and other accruals
Receivables, prepaid expenses and other current assets, non-current assets, accrued salaries and benefits, deferred membership income and other accruals
Merchandise inventoriesMerchandise inventories15,310 (80,608)
Accounts payableAccounts payable(2,634)(9,811)
Net cash provided by (used in) operating activities116,681 (7,920)
Net cash provided by operating activities
Investing Activities:Investing Activities:
Proceeds from the disposal of Aeropost, net of divested cash— 4,959 
Additions to property and equipment
Additions to property and equipment
Additions to property and equipmentAdditions to property and equipment(53,016)(60,468)
Purchases of short-term investmentsPurchases of short-term investments(47,500)(17,658)
Proceeds from settlements of short-term investmentsProceeds from settlements of short-term investments4,301 41,075 
Proceeds from settlements of long-term investments— 1,484 
Proceeds from disposal of property and equipment
Proceeds from disposal of property and equipment
Proceeds from disposal of property and equipmentProceeds from disposal of property and equipment137 77 
Net cash used in investing activitiesNet cash used in investing activities(96,078)(30,531)
Financing Activities:Financing Activities:
Proceeds from long-term bank borrowings
Proceeds from long-term bank borrowings
Proceeds from long-term bank borrowingsProceeds from long-term bank borrowings33,712 30,180 
Repayment of long-term bank borrowingsRepayment of long-term bank borrowings(16,994)(10,969)
Proceeds from short-term bank borrowingsProceeds from short-term bank borrowings301 20,179 
Repayment of short-term bank borrowingsRepayment of short-term bank borrowings— (4,488)
Cash dividend paymentsCash dividend payments(14,260)(13,275)
Purchase of treasury stockPurchase of treasury stock(5,819)(3,784)
Net cash provided by (used in) financing activities(3,060)17,843 
Net cash used in financing activities
Net cash used in financing activities
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents and restricted cashEffect of exchange rate changes on cash and cash equivalents and restricted cash11,636 42 
Net increase (decrease) in cash, cash equivalentsNet increase (decrease) in cash, cash equivalents29,179 (20,566)
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period251,373 215,479 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$280,552 $194,913 
Supplemental disclosure of noncash investing activities:Supplemental disclosure of noncash investing activities:
Supplemental disclosure of noncash investing activities:
Supplemental disclosure of noncash investing activities:
Capital expenditures accrued, but not yet paid
Capital expenditures accrued, but not yet paid
Capital expenditures accrued, but not yet paidCapital expenditures accrued, but not yet paid$3,937 $8,369 
Dividends declared but not yet paidDividends declared but not yet paid14,456 13,430 
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PRICESMART, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
(UNAUDITED—AMOUNTS IN THOUSANDS)
The following table provides a breakdown of cash and cash equivalents, and restricted cash reported within the statement of cash flows:
Six Months Ended
February 28,
2023
February 28,
2022
Six Months EndedSix Months Ended
February 29,
2024
February 29,
2024
February 28,
2023
Cash and cash equivalentsCash and cash equivalents$260,927 $178,705 
Short-term restricted cashShort-term restricted cash9,110 4,172 
Long-term restricted cashLong-term restricted cash10,515 12,036 
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flowsTotal cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows$280,552 $194,913 
See accompanying notes.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
February 28, 202329, 2024

NOTE 1 – COMPANY OVERVIEW AND BASIS OF PRESENTATION
PriceSmart, Inc.’s (“PriceSmart,” the “Company,”, "we" “we” or "our"“our”) business consists primarily of international membership 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 February 28, 2023,29, 2024, the Company had 5054 warehouse clubs in operation in 12 countries and one U.S. territory (nine(ten in Colombia; eight in Costa Rica; seven in Panama; six in Guatemala; five in the Dominican RepublicRepublic; four each in Trinidad and Guatemala; four in Trinidad;El Salvador; three in Honduras; two each in El Salvador, Nicaragua and 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 Medellín, Colombia and Escuintla, GuatemalaCartago, Costa Rica in 2023.early 2025. Once these fourthis new clubs areclub is open, the Company will operate 5455 warehouse clubs. Our operating segments are the United States, Central America, the Caribbean and Colombia.
PriceSmart continues to invest in technology and talent to support the following three major drivers of growth:
1.Invest in Remodeling Current PriceSmart Clubs, Adding New PriceSmart Locations and Opening More Distribution Centers;
2.Increase Membership Value; and
3.Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities.
Basis of Presentation – The interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 20222023 (the “2022“2023 Form 10-K”). The interim consolidated financial statements include the accounts of PriceSmart, Inc., a Delaware corporation, and its subsidiaries. Intercompany transactions between the Company and its subsidiaries have been eliminated in consolidation.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation – The interim consolidated financial statements of the Company included herein include the assets, liabilities and results of operations of the Company’s wholly owned subsidiaries, subsidiaries in which it has a controlling interest, and the Company’s joint ventures for which the Company has determined that it is the primary beneficiary. The Company’s net income excludes income attributable to non-controlling interests. The Company reports non-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.
The Company determines whether any of the joint ventures in which it has made investments is a Variable Interest Entity (“VIE”) at the start of each new venture and if a reconsideration event has occurred. At this time, the Company also considers whether it must consolidate a VIE and/or disclose information about its involvement in a VIE. A reporting entity must consolidate a VIE if that reporting entity has a variable interest (or combination of variable interests) and is determined to be the primary beneficiary. If the Company determines that it is not the primary beneficiary of the VIE, then the Company records its investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. Due to the nature of the joint ventures that the Company participates in and the continued commitments for additional financing, the Company determined these joint ventures are VIEs.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)— (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 February 28, 202329, 2024 are listed below:
Real Estate Development Joint VenturesCountriesOwnershipBasis of
Presentation
GolfPark Plaza, S.A.Panama50.0 %
Equity(1)
Price Plaza Alajuela PPA, S.A.Costa Rica50.0 %
Equity(1)
(1)Joint venture interests are recorded as investment in unconsolidated affiliates on the consolidated balance sheets.
Use of Estimates TheThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions take into account historical and forward-looking factors that the Company believes are reasonable. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents – The Company considers as cash and cash equivalents all cash on deposit, highly liquid investments with a maturity of three months or less at the date of purchase and proceeds due from credit and debit card transactions in the process of settlement. The Company invests some of our cash in money market funds which are considered equity securities and are held at fair value in Cash and cash equivalents on the consolidated balance sheets. The fair value of money market funds held was $18.1 million as of February 29, 2024 and $100.2 million as of August 31, 2023. We receive interest payments from the money market funds which are recorded in the Interest income line item under the Total other expense caption within the consolidated statements of income.
Restricted Cash – The following table summarizes the restricted cash reported by the Company (in thousands):
February 28,
2023
August 31,
2022
February 29,
2024
February 29,
2024
August 31,
2023
Short-term restricted cashShort-term restricted cash$9,110 $3,013 
Long-term restricted cashLong-term restricted cash10,515 10,650 
Total restricted cash(1)
Total restricted cash(1)
$19,625 $13,663 
(1)Restricted cash consists 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.U.S dollars, of approximately $7.7$5.8 millionwith 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.
Short-Term Investments – The Company considers as short-term investments, certificates of deposit and similar time-based deposits with financial institutions with original maturities over three months and up to one year.year to be short-term investments.
Long-Term Investments – The Company considers as long-term investments, certificates of deposit and similar time-based deposits with financial institutions with original maturities over one year.year to be long-term investments.
Goodwill – Goodwill totaled $43.2$43.1 million as of February 28, 202329, 2024 and $43.3 million as of August 31, 2022.2023. 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.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Receivables Receivables consist primarily of credit card receivables and receivables from vendors and are stated net of allowances for credit losses. The determination of the allowance for credit losses is based on the Company’s assessment of collectability along with the consideration of current and expected market conditions that could impact collectability.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(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. Additionally, we are occasionally required to make payments for tax assessments that we are appealing, notwithstanding that we believe it is more likely than not we will ultimately prevail.
In twoMinimum tax rules, applicable in some of the countries where the Company operates, minimum income tax rules require the Company to paypayment of taxes based on thea percentage of sales, ratherwhen the resulting tax is greater than income. Asthe tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). This can result the Company is making income taxin AMT payments substantially in excess of those itthe Company would expect to pay based on taxable income. TheAs the Company hadbelieves that, in one country where it operates, it should only be ultimately liable for an income-based tax, it has accumulated income tax receivables of $11.3$10.9 million and $11.0$10.7 million and deferred tax assets of $4.0$3.7 million and $3.5$3.2 million as of February 28, 202329, 2024 and August 31, 2022,2023, respectively, in these countries. Thethis country.
While the rules related to refunds of income tax receivables in this country are unclear and complex, the Company has not placed any type of allowance on the recoverability of these tax receivables, deferred tax assets or amounts that may be deemed under-paid, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests and appeals of these rules.
The Company's various outstanding VAT receivables and/or income tax receivables are based on cases or appeals with their own set of facts and circumstances. The Company consults and evaluates with legal and tax advisors regularly to understand the strength of its legal arguments and probability of successful outcomes in addition to its own experience handling complex tax issues. Based on those evaluations, the Company has not placed any type of allowance on the recoverability of the remaining 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.
The Company’s policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows:
Short-term VAT and Income tax receivables, recorded as 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.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where the Company’s subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when the Company does not expect to eventually prevail in its recovery. The Company does not currently have any allowances provided against VAT and income tax receivables.
The following table summarizes the VAT receivables reported by the Company (in thousands):
February 28,
2023
August 31,
2022
Prepaid expenses and other current assets$1,898 $3,890 
Other non-current assets33,964 32,460 
Total amount of VAT receivables reported$35,862 $36,350 
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
February 29,
2024
August 31,
2023
Prepaid expenses and other current assets$5,676 $2,774
Other non-current assets36,104 36,060
Total amount of VAT receivables reported$41,780 $38,834
The following table summarizes the Income tax receivables reported by the Company (in thousands):
February 28,
2023
August 31,
2022
February 29,
2024
February 29,
2024
August 31,
2023
Prepaid expenses and other current assetsPrepaid expenses and other current assets$13,949 $12,077 Prepaid expenses and other current assets$15,492 $$17,749
Other non-current assetsOther non-current assets20,725 19,985 Other non-current assets25,177 19,17619,176
Total amount of income tax receivables reportedTotal amount of income tax receivables reported$34,674 $32,062 Total amount of income tax receivables reported$40,669 $$36,925
Lease Accounting – The Company’s leases are operating leases for warehouse clubs and non-warehouse club facilities such as corporate headquarters, regional offices, and regional distribution centers. The Company determines if an arrangement is a lease and classifies it as either a finance or operating lease at lease inception. Operating leases are included in Operating lease right-of-use assets, net; Operating lease liabilities, current portion; and Long-term operating lease liabilities on the consolidated balance sheets. The Company does not have finance leases.
Operating lease liabilities are recognized at commencement date based on the present value of the future minimum lease payments over the lease term. The Company’s leases generally do not have a readily determinable implicit interest rate; therefore, the Company uses a collateralized incremental borrowing rate at the commencement date in determining the present value of future payments. The incremental borrowing rate is based on a yield curve derived from publicly traded bond offerings for companies with credit characteristics that approximate the Company's market risk profile.
In addition, we adjust the incremental borrowing rate for jurisdictional risk derived from quoted interest rates from financial institutions to reflect the cost of borrowing in the Company’s local markets. The Company’s lease terms may include options to purchase, extend or terminate the lease, which are recognized when it is reasonably certain that the Company will exercise that option. The Company does not combine lease and non-lease components.
The Company measures Right-of-use (“ROU”) assets based on the corresponding lease liabilities, adjusted for any initial direct costs and prepaid lease payments made to the lessor before or at the commencement date (net of lease incentives). The lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are not included in the calculation of the ROU asset and the related lease liability and are recognized as 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.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In January 2024, the Company purchased one of its club's buildings and land, which was previously leased, in Panama City, Panama, for $33.0 million. Management assessed the fair market value using the market and replacement cost methods and, per the assessment, allocated approximately 88.7% of the purchase price to the land and 11.3% of the purchase price to the building. The transaction resulted in the termination of the related ROU asset, net of tax, and lease liability, net of tax, of $8.2 million and $9.1 million, respectively. No gain or loss was recognized as the lease termination occurred due to the purchase of the leased asset. This allocation of the purchase price, after accounting for the impact of the lease termination, resulted in $28.2 million allocated to the land and $3.9 million allocated to the building. Additionally, the Company already carried approximately $8.6 million of leasehold improvements related to the club which have been reclassified to the building and remain on the balance sheet. This purchase triggered a change in the estimate of the depreciable lives of certain leasehold improvements, which were previously limited to the lease term, lowering future annual depreciation. Going forward, the lower annual depreciation expense and the cost savings on straight-line rent expense, partially offset by the depreciation expense on the new building, will save approximately $1.1 million per year, net of tax, within our Warehouse club and other operations expenses in the Company's consolidated statements of income. Additionally, the Company entered into a loan agreement for $16.5 million, paid over 15 years, to partially fund the purchase of our Via Brasil club. We expect approximately $1.0 million in interest payments, net of tax, over the next 12 months associated with this loan, which will continue to decrease as the loan balance is paid off over the life of the loan. The interest expense related to this loan will be recorded within the Interest expense caption on the consolidated statements of income.
Merchandise Inventories –Merchandise inventories, which include merchandise for resale, are valued at the lower of cost (average cost) or net realizable value. The Company provides for estimated inventory losses and obsolescence based on a percentage of sales. The provision is adjusted every reporting period to reflect the trend of actual physical inventory and cycle count results. In addition, the Company may be required to take markdowns below the carrying cost of certain inventory to expedite the sale of such merchandise.
Stock Based Compensation The Company utilizes three types of equity awards: restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and, prior to fiscal year 2024, performance-based restricted stock units (“PSUs”). Compensation related to RSAs, RSUs and PSUs is based on the fair market value at the time of grant. The Company recognizes the compensation cost related to RSAs and RSUs over the requisite service period as determined by the grant, amortized ratably or on a straight-line basis over the life of the grant. The Company also recognizes compensation cost for PSUs over the performance period of each tranche, adjusting this cost based on the Company’sCompany's estimate of the probability that performance metrics will be achieved. IfAs of February 29, 2024, all outstanding PSUs have successfully met all performance metrics except for the Company determines that an award is unlikely to vest, any previously recorded expense is then reversed.requisite service period.
The Company accounts for actual forfeitures as they occur. The Company records the tax savings resulting from tax deductions in excess of expense for stock-based compensation and the tax deficiency resulting from stock-based compensation in excess of the related tax deduction as income tax expense or benefit. In addition, the Company reflects the tax savings (deficiency) resulting from the taxation of stock-based compensation as an operating cash flow in its consolidated statement of cash flows.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(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.
PSUs, similar to RSUs, arewere awarded with dividend equivalents, provided that such amounts becomebecame payable only if the performance metric iswas achieved. At the time the Compensation Committee confirmsconfirmed the performance metric hashad been achieved, the accrued dividend equivalents arewere paid on the PSUs.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Treasury Stock – Shares of common stock repurchased by the Company are recorded at cost, including transaction costs and excise taxes, as treasury stock and result in the reduction of stockholders’ equity in the Company’s consolidated balance sheets. The Company may reissue these treasury shares as part of its stock-based compensation programs. When treasury shares are reissued, the Company uses the first in/first out (“FIFO”) cost method for determining cost of the reissued shares. If the issuance price is higher than the cost, the excess of the issuance price over the cost is credited to additional paid-in capital (“APIC”). If the issuance price is lower than the cost, the difference is first charged against any credit balance in APIC from treasury stock and the balance is charged to retained earnings. During the six months ended February 28, 2023,29, 2024, the Company reissued approximately 7,0003,000 treasury shares.
Fair Value Measurements – The Company measures the fair value for all financial and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring or non-recurringnonrecurring basis. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor.
The Company has establishedASC 820, Fair Value Measurements and Disclosures, sets forth a three-tier fair value hierarchy which prioritizes thethat categorizes inputs to valuation techniques used in measuringto measure and revaluingrevalue fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company was not required to revalue any assets or liabilities utilizing Level 1 or Level 3 inputs at the balance sheet dates. The Company's Level 2 assets and liabilities revalued at the balance sheet dates, on a recurring basis, consisted of cash flow hedges (interest rate swaps and cross-currency interest rate swaps) and forward foreign exchange contracts. In addition, the Company utilizes Level 2 inputs in determining the fair value of long-term debt.
Non-financial assets and liabilities are revalued and recognized at fair value subsequent to initial recognition when there is evidence of impairment. For the periods reported, no impairment of such non-financial assets waswere recorded.
The Company’s current and long-term financial assets and liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums and debt issuance costs. There have been no significant changes in fair market value of the Company’s current and long-term financial assets and liabilities, and there have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities disclosed in the Company’s 20222023 Annual Report on Form 10-K.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(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.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cash Flow Instruments.The Company is a party to receive floating interest rate and pay fixed-rate interest rate swaps to hedge the interest rate risk of certain U.S. dollar denominated debt within its international subsidiaries. The swaps are designated as cash flow hedges of interest expense risk. These instruments are considered effective hedges and are recorded using hedge accounting. The Company is also a party to receive variable or fixed interest rate and pay fixed interest rate cross-currency interest rate swaps to hedge the interest rate and currency exposure associated with the expected payments of principal and interest of U.S. denominated debt within its international subsidiaries whose functional currency is other than the U.S. dollar. The swaps are designated as cash flow hedges of the currency risk and interest-rate risk related to payments on the U.S. denominated debt. These instruments are also considered to be effective hedges and are recorded using hedge accounting. Under cash flow hedging, the entire gain or loss of the derivative, calculated as the net present value of the future cash flows, is reported on the consolidated balance sheets in accumulated other comprehensive loss. Amounts recorded in accumulated other comprehensive loss are released to earnings in the same period that the hedged transaction impacts consolidated earnings. Refer to “Note 8 - Derivative Instruments and Hedging Activities” for information on the fair value of interest rate swaps and cross-currency interest rate swaps as of February 28, 202329, 2024 and August 31, 2022.2023.
Fair Value Instruments. The Company is exposed to foreign currency exchange rate fluctuations in the normal course of business. This includes exposure to foreign currency exchange rate fluctuations on U.S. dollar denominated liabilities within the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts that are intended to offset changes in cash flows attributable to currency exchange movements. The contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar.
Currently, these contracts are treated for accounting purposes as fair value instruments and do not qualify for derivative hedge accounting, and as such the Company does not apply derivative hedge accounting to record these transactions. As a result, these contracts are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company seeks to mitigate foreign currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features and are limited to less than one year in duration.
Revenue Recognition – The accounting policies and other disclosures such as the disclosure of disaggregated revenues are described in “Note 3 – Revenue Recognition.”
Gain Contingencies and Recoveries – A gain contingency is an existing condition, situation, or set of circumstances involving uncertainty as to a possible gain that will ultimately be resolved when one or more future events occur or fail to occur. During the ordinary course of our business, gain contingencies arise when we have the opportunity to recover costs or damages, we incur from insurance carriers or other third parties. Anticipated proceeds in excess of the amount of loss recognized are considered contingent gains. Anticipated proceeds in excess of a loss recognized in the financial statements are not recognized until all contingencies related to the collectability, timing and amount are realizable.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
Cost of Goods Sold – The Company includes the cost of merchandise and food service and bakery raw materials in cost of goods sold:sold - net merchandise sales. The Company also includes in cost of goods sold: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.
For export sales, the Company includes the cost of merchandise and external and internal distribution and handling costs for supplying merchandise in cost of goods sold - exports.
Until the disposal
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Table 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.Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Vendor consideration consists primarily of volume rebates, time-limited product promotions, cooperative marketing efforts, digital advertising, slotting fees, demonstration reimbursements and prompt payment discounts. Volume rebates and time-limited promotions are recognized on a systematic and rational allocation of the cash consideration as the Company progresses toward earning the rebate, provided the amounts to be earned are probable and reasonably estimable. Cooperative marketing efforts and digital advertising are related to consideration received by the Company from vendors for non-distinct online advertising services on the Company’s website and social media platforms. Slotting fees are related to consideration received by the Company from vendors for preferential "end cap" placement of the vendor's products within the warehouse club. Demonstration reimbursements are related to consideration received by the Company from vendors for the in-club promotion of the vendors' products. The Company records the reduction in cost of goods sold on a transactional basis for these programs. On a quarterly basis, the Company calculates the amount of rebates recorded in cost of goods sold that relates to inventory on hand and this amount is reclassified as a reduction to inventory, if significant. Prompt payment discounts are taken in substantially all cases and therefore are applied directly to reduce the acquisition cost of the related inventory, with the resulting effect recorded to cost of goods sold when the inventory is sold.
Selling, General and Administrative – Selling, general and administrative costs consist primarily of expenses associated with operating warehouse clubs and freight forwarding operations.non-income based taxes such as alternative minimum taxes based on revenue or sales. These costs include payroll and related costs, including separation costs associated with the Chief Executive Officer departure, utilities, consumable supplies, repair and maintenance, rent expense, building and equipment depreciation, bank, credit card processing fees, and amortization of intangibles. Also included in selling, general and administrative expenses are the payroll and related costs for the Company’s U.S. and regional management and purchasing centers.
In December 2022, the Company announced that Sherry Bahrambeygui would resign as Chief Executive Officer effective February 3, 2023. In connection with her departure, the Company recognized a one-time separation charge of approximately $7.7 million ($7.2 million net of tax) in the second quarter of fiscal year 2023. This amount consists of approximately $4.2 million of non-cash charges related to the acceleration of certain equity awards and approximately $3.5 million for other separation costs. Given that Ms. Bahrambeygui has substantially rendered the required services per her separation agreement, theThe Company recorded these charges in the current quarter.second quarter of fiscal year 2023. These charges were recorded in the Separation costs associated with Chief Executive Officer departure line item under the Selling, general and administrative caption within the Consolidated Statements of Income and are recorded in the Company’s United States segment. TheIn connection with her departure, the Company accrued for the related charges and substantially fulfilled all payment obligations by the end of the second quarter of fiscal year 2023; however, some vesting of PSUs will occuroccurred in the first quarter of fiscal year 2024.
Pre-Opening Costs – The Company expenses pre-opening costs (the costs of start-up activities, including organization costs and rent) for new warehouse clubs as incurred.
16

TableAsset Impairment and Closure Costs – The Company periodically evaluates its long-lived assets for indicators of Contentsimpairment. Management's judgments are based on market and operational conditions at the time of the evaluation and can include management's best estimate of future business activity. These periodic evaluations could cause management to conclude that impairment factors exist, requiring an adjustment of these assets to their then-current fair value. Future business conditions and/or activity could differ materially from the projections made by management causing the need for additional impairment charges.
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
Loss Contingencies and Litigation – The Company records and reserves for loss contingencies if (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset had been impaired, or a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can be reasonably estimated. If one or both criteria for accrual are not met, but there is at least a reasonable possibility that a material loss will occur, the Company does not record and reserve for a loss contingency but describes the contingency within a note and provides detail, when possible, of the estimated potential loss or range of loss. If an estimate cannot be made, a statement to that effect is made.
17

Related Party Transactions Table of Contents
PRICESMART, INC.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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Foreign Currency Translation – The assets and liabilities of the Company’s foreign operations are translated to U.S. dollars when the functional currency in the Company’s international subsidiaries is the local currency and not U.S. dollars. Assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the exchange rate on the balance sheet date, and revenue, costs and expenses are translated at average rates of exchange in effect during the period. The corresponding translation gains and losses are recorded as a component of accumulated other comprehensive income or loss. These adjustments will affect net income upon the sale or liquidation of the underlying investment.
The following table discloses the net effect of translation into the reporting currency on other comprehensive loss for these local currency denominated accounts for the three and six months ended on February 29, 2024 and February 28, 2023 and 2022 (in thousands):
Three Months EndedSix Months Ended
February 28,
2023
February 28,
2022
February 28,
2023
February 28,
2022
Effect on other comprehensive income (loss) due to foreign currency translation$12,199 $2,413 $11,314 $(5,718)
Three Months EndedSix Months Ended
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Effect on other comprehensive income due to foreign currency translation$6,697 $12,199 $10,233 $11,314 
Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains (losses), including transactions recorded involving these monetary assets and liabilities, are recorded as Other income (expense) in the consolidated statements of income (in thousands):
Three Months EndedSix Months Ended
February 28,
2023
February 28,
2022
February 28,
2023
February 28,
2022
Currency loss$(5,555)$(1,775)$(10,058)$(3,638)
Three Months EndedSix Months Ended
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Currency loss$(7,137)$(5,555)$(9,838)$(10,058)
Recent Accounting Pronouncements Adopted
There were no new accounting standards that had a material impact on the Company’s consolidated financial statements during the six-month period ended February 28, 2023,29, 2024, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of February 28, 202329, 2024 that the Company expects to have a material impact on its consolidated financial statements.
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Table of Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
NOTE 3 – REVENUE RECOGNITION
Performance Obligations
The Company identifies each distinct performance obligation to transfer goods (or bundle of goods) or services. The Company recognizes revenue when (or as) it satisfies a performance obligation by transferring control of the goods or services to the customer.
Net Merchandise Sales. The Company recognizes net merchandise sales revenue, net of sales taxes, on transactions where the Company has determined that it is the principal in the sale of merchandise. These transactions may include shipping commitments and/or shipping revenue if the transaction involves delivery to the customer.
Non-merchandise Sales. Until the disposal of Aeropost in the first quarter of fiscal 2022, the Company recognized non-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.
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.
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Table of Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Platinum Points Reward Programs. The Company currently offers Platinum Memberships in all of its 12 countries. Themarkets. In the first six months of fiscal year 2024, we raised the annual fee for a Platinum Membership isby $5 to approximately $75.$80 in most markets. The Platinum Membership provides Members with a 2% rebate on most items, up to an annual maximum of $500. The rebate is issued annually to Platinum Members on March 1 and expires August 31. Platinum Members can apply this rebate to future purchases at the warehouse club during the redemption period. The Company records this 2% rebate as a reduction of revenue at the time of the sales transaction. Accordingly, the Company has reduced 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% 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.
Co-branded Credit Card Points Reward Programs. Most of the Company’s subsidiaries have points reward programs related to co-branded credit cards. These points reward programs provide incremental points that can be used at a future time to acquire merchandise within the Company’s warehouse clubs. This results in two performance obligations, the first performance obligation being the initial sale of the merchandise or services purchased with the co-branded credit card and the second performance obligation being the future use of the points rewards to purchase merchandise or services. As a result, upon the initial sale, the Company allocates the transaction price to each performance obligation with the amount allocated to the future use points rewards recorded as a contract liability within other accrued expenses and other current liabilities on the consolidated balance sheet. The portion of the selling price allocated to the reward points is recognized as Net merchandise sales when the points are used or when the points expire. The Company reviews on an annual basis expired points rewards outstanding, and the expired rewards are recognized as Net merchandise sales on the consolidated statements of income within markets where the co-branded credit card agreement allows for such treatment.
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Table of Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(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 cards. The Company periodically reviews unredeemed outstanding gift certificates,cards, and the gift certificatescards that have expired are recognized as “Other revenue and income” on the consolidated statements of income.
Co-branded Credit Card Revenue Sharing Agreements. As part of the co-branded credit card agreements that the Company has entered into with financial institutions within its markets, the Company often enters into revenue sharing agreements. As part of these agreements, in some countries, the Company receives a portion of the interest income generated from the average outstanding balances on the co-branded credit cards from these financial institutions (“interest generating portfolio” or “IGP”). The Company recognizes its portion of interest received as revenue during the period it is earned. The Company has determined that this revenue should be recognized as “Other revenue and income” on the consolidated statements of income.
Contract Performance Liabilities
Contract performance liabilities as a result of transactions with customers primarily consist of deferred membership income, other deferred income, deferred gift card revenue, Platinum points programs, and liabilities related to co-branded credit card points rewards programs which are included in deferred income and other accrued expenses and other current liabilities in the Company’s consolidated balance sheets. The following table provides these contract balances from transactions with customers as of the dates listed (in thousands):
Contract Liabilities
February 28,
2023
August 31,
2022
Contract LiabilitiesContract Liabilities
February 29,
2024
February 29,
2024
August 31,
2023
Deferred membership incomeDeferred membership income$31,128 $28,000 
Other contract performance liabilitiesOther contract performance liabilities$20,140 $10,473 
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Table of Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Disaggregated Revenues
In the following table, net merchandise sales are disaggregated by merchandise category (in thousands):
Three Months EndedSix Months Ended
February 28,
2023
February 28,
2022
February 28,
2023
February 28,
2022
Foods & Sundries$552,153 $492,776 $1,064,046 $963,726 
Fresh Foods325,479 289,122 620,766 558,797 
Hardlines119,689 120,335 235,285 232,274 
Softlines66,372 64,561 120,790 115,034 
Other Business52,306 45,102 100,575 86,108 
Net Merchandise Sales$1,115,999 $1,011,896 $2,141,462 $1,955,939 
19
Three Months EndedSix Months Ended
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Foods & Sundries$610,665 $552,153 $1,168,915 $1,064,046 
Fresh Foods367,199 325,479 696,799 620,766 
Hardlines144,201 119,689 276,771 235,285 
Softlines72,138 66,372 126,957 120,790 
Food Service and Bakery55,607 44,807 105,876 86,852 
Health Services11,106 7,499 20,612 13,723 
Net Merchandise Sales$1,260,916 $1,115,999 $2,395,930 $2,141,462 

Table of Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
NOTE 4 – EARNINGS PER SHARE
The Company presents basic net income per share using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders and that determines basic net income per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings that would have been available to common stockholders. A participating security is defined as a security that may participate in undistributed earnings with common stock. The Company’s capital structure includes securities that participate with common stock on a one-for-one basis for distribution of dividends. These are the restricted stock awards and(“RSAs”), restricted stock units (“RSUs”) and performance stock units (“PSUs”) issued pursuant to the 2013 Equity Incentive Award Plan. ThePlan, provided that the Company does not include performance stock unitsPSUs as participating securities until the performance criteriaconditions have been met. As of February 29, 2024, all outstanding PSUs have successfully met all performance metrics except for the requisite service period. RSAs are satisfied.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. PSUs, similar to RSUs, are awarded with dividend equivalents, provided that such amounts become payable only if the performance metric is achieved. At the time the Compensation Committee confirms the performance metric has been achieved, the corresponding dividend equivalents are paid on the PSUs. The Company determines the diluted net income per share by using the more dilutive of the two class-method or the treasury stock method and by including the basic weighted average of outstanding performance stock units for which performance criteria have not been met in the calculation of diluted net income per share under the two-class method and including all potential common shares assumed issued in the calculation of diluted net income per share under the treasury stock method.
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Table of Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table sets forth the computation of net income per share for the three and six-monthssix months ended February 29, 2024 and February 28, 2023 and 2022 (in thousands, except per share amounts):
Three Months EndedSix Months Ended
February 28,
2023
February 28,
2022
February 28,
2023
February 28,
2022
Net income attributable to PriceSmart, Inc.$31,347$31,461$64,252$61,972
Three Months EndedThree Months EndedSix Months Ended
February 29,
2024
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Net incomeNet income$39,271$31,347$77,318$64,252
Less: Allocation of income to unvested stockholdersLess: Allocation of income to unvested stockholders(51)(78)(627)(600)
Net income attributable to PriceSmart, Inc. available for distribution$31,296$31,383$63,625$61,372
Net income available for distributionNet income available for distribution$39,157$31,296$76,425$63,625
Basic weighted average shares outstandingBasic weighted average shares outstanding30,74130,57830,72730,565Basic weighted average shares outstanding29,92030,74130,09530,727
Add dilutive effect of performance stock units (two-class method)Add dilutive effect of performance stock units (two-class method)1941328Add dilutive effect of performance stock units (two-class method)1913
Diluted average shares outstandingDiluted average shares outstanding30,76030,58230,74030,593Diluted average shares outstanding29,92030,76030,09530,740
Basic net income per shareBasic net income per share$1.02$1.03$2.07$2.01Basic net income per share$1.31$1.02$2.54$2.07
Diluted net income per shareDiluted net income per share$1.02$1.03$2.07$2.01Diluted net income per share$1.31$1.02$2.54$2.07
NOTE 5 – STOCKHOLDERS’ EQUITY
Dividends
The following table summarizes the dividends declared and paid during fiscal year 20232024 and 20222023 (amounts are per share):
First PaymentSecond Payment
First Payment
First Payment
First PaymentSecond Payment
DeclaredDeclaredAmountRecord
Date
Date
Paid
Date
Payable
AmountRecord
Date
Date
Paid
Date
Payable
AmountDeclaredAmountRecord
Date
Date
Paid
Date
Payable
AmountRecord
Date
Date
Paid
Date
Payable
Amount
2/1/2024
2/3/20232/3/2023$0.92 2/16/20232/28/2023N/A$0.46 8/15/2023N/A8/31/2023$0.46 
2/3/2022$0.86 2/15/20222/28/2022N/A$0.43 8/15/20228/31/2022N/A$0.43 
The Company anticipates the ongoing payment of semi-annual dividends in subsequent periods, although the actual declaration of future dividends, if any, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements, taking into account the uncertain macroeconomic conditions on our results of operations and cash flows.
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Table of Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss
The following tables disclose the effects on accumulated other comprehensive loss of each component of other comprehensive income (loss), net of tax (in thousands):
Attributable to
PriceSmart
Noncontrolling
Interests
Total
Beginning balance, September 1, 2022$(195,586)$— $(195,586)
Foreign currency translation adjustments11,314 — 11,314 
Defined benefit pension plans (1)
15 — 15 
Derivative instruments (2)
554 — 554 
Ending balance, February 28, 2023$(183,703)$— $(183,703)
Amount
Beginning balance, September 1, 2023$(163,992)
Foreign currency translation adjustments10,233 
Defined benefit pension plans (1)
211 
Derivative instruments (2)
(1,741)
Ending balance, February 29, 2024$(155,289)
Attributable to
PriceSmart
Noncontrolling
Interests
Total
Beginning balance, September 1, 2021$(182,508)$251 $(182,257)
Foreign currency translation adjustments(5,718)(5,715)
Defined benefit pension plans (1)
101 — 101 
Derivative instruments (2)
3,712 — 3,712 
Sale of Aeropost— (254)(254)
Ending balance, February 28, 2022$(184,413)$— $(184,413)
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Table of Contents
Attributable to
PriceSmart
Noncontrolling
Interests
Total
Beginning balance, September 1, 2021$(182,508)$251 $(182,257)
Foreign currency translation adjustments(19,034)(19,031)
Defined benefit pension plans (1)
(341)— (341)
Derivative instruments (2)
6,170 — 6,170 
Amounts reclassified from accumulated other comprehensive loss127 — 127 
Sale of Aeropost— $(254)(254)
Ending balance, August 31, 2022$(195,586)$— $(195,586)
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Amount
Beginning balance, September 1, 2022$(195,586)
Foreign currency translation adjustments11,314 
Defined benefit pension plans (1)
15 
Derivative instruments (2)
554 
Ending balance, February 28, 2023$(183,703)
Amount
Beginning balance, September 1, 2022$(195,586)
Foreign currency translation adjustments33,708 
Defined benefit pension plans (1)
(1,819)
Derivative instruments (2)
(443)
Amounts reclassified from accumulated other comprehensive loss148 
Ending balance, August 31, 2023$(163,992)
(1)Amounts reclassified from accumulated other comprehensive income (loss) related to the minimum pension liability are included in warehouse club and other operations in the Company's consolidated statements of income.
(2)Refer to Note"Note 8 - Derivative Instruments and Hedging Activities."
Retained Earnings Not Available for Distribution
The following table summarizes retained earnings designated as legal reserves of various subsidiaries which cannot be distributed as dividends to PriceSmart, Inc. according to applicable statutory regulations (in thousands):
February 28,
2023
August 31,
2022
Retained earnings not available for distribution$8,971 $8,648 
February 29,
2024
August 31,
2023
Retained earnings not available for distribution$9,401 $9,110 
Share Repurchase Program
In July 2023 we announced a program authorized by our Board of Directors to repurchase up to $75 million of our common stock. We successfully completed the program in the first quarter of fiscal year 2024. We purchased a total of approximately 1,007,000 shares of our common stock under the program. The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which permitted us to repurchase common stock at times when we might otherwise have been precluded from doing so under insider trading laws or self-imposed trading restrictions. We have no plans to continue repurchases or adopt a new repurchase plan at this time. However, the Board of Directors could choose to commence another program in the future at its discretion after its review of the Company’s financial performance and anticipated capital requirements.
Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):
Three Months EndedSix Months Ended
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Number of common shares acquired935,663
Average price per common share acquired$$$74.13$
Total cost of common shares acquired$$$69,362$
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Table of Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)— (Continued)
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company and its subsidiaries are subject to legal proceedings, claims and litigation arising in the ordinary course of business related to the Company’s operations and property ownership. The Company evaluates such matters on a case by case basis, and vigorously contests any such legal proceedings or claims which the Company believes are without merit. The Company believes that the final disposition of these matters will not have a material adverse effect on its financial position, results of operations or liquidity. It is possible, however, that the Company's results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to such matters.
The Company establishes an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and adjusts the amount as appropriate. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable. If it is at least a reasonable possibility that a material loss will occur, the Company will provide disclosure regarding the contingency.
On August 5, 2022, PriceSmart received notice from Click USA Inc. and Aeropost, Inc. alleging that PriceSmart had breached certain provisions of a Stock Purchase Agreement between PriceSmart and Click USA, Inc. dated October 1, 2021, concerning the sale of Aeropost, Inc. to Click USA Inc. In this notice, Click USA Inc. and Aeropost, Inc. allege that PriceSmart made inaccurate or incomplete representations and warranties relating to Aeropost, Inc.’s cyber security and the condition of its IT systems in connection with the sale. Click USA Inc. and Aeropost, Inc. further asserted that, in or around April 2022, Aeropost, Inc. suffered cyberattacks, and they seek to hold PriceSmart liable for some amount of damages due to alleged losses directly relating to the cyberattacks 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 $3.0 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 $4.0 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.
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Table of ContentsIncome Taxes
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
Income Taxes
For interim reporting, the Company useswe estimate 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 subjectrequired to file federal and state income taxestax returns in the United States and numerousincome tax and various other tax returns in multiple foreign jurisdictions. Significant judgmentsjurisdictions, each with changing tax laws, regulations and administrative positions. This requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. We record the benefits of uncertain tax positions in our financial statements only after determining it is more likely than not the uncertain tax positions would sustain challenge by taxing authorities, including resolution of related appeals or litigation processes, if any. We develop our assessment of an uncertain tax position based on the specific facts and legal arguments of each case and the associated probability of our reporting position being upheld, using internal expertise and the advice of third-party experts. However, our tax returns are requiredsubject to routine reviews by the various taxing authorities in the determinationjurisdictions in which we file our tax returns. As part of these reviews, taxing authorities may challenge, and in some cases presently are challenging, the interpretations we have used to calculate our tax liability. In addition, any settlement with the tax authority or the outcome of any appeal or litigation process might result, and in some cases has resulted, in an outcome that is materially different from our estimated liability. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated income tax expense. financial statements as appropriate. Variations in the actual outcome of these cases could materially impact our consolidated financial statements.

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 itsour ability to recover our deferred tax assets in the jurisdictionsjurisdiction 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 incorporatesincorporate 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, the Company considerswe consider three years of cumulative operating income (loss).
The Company is required to file federal and state tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation of these tax returns requires the Company to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by the Company. The Company, in consultation with its tax advisors, bases its tax returns on interpretations that are believed to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various taxing authorities in the jurisdictions in which the Company files its returns. 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.
The Company accrues an amount for its estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. There were no material changes in the Company’s uncertain income tax positions during the six months ended February 28, 2023.income.
In evaluating the exposure associated with various non-income tax filing positions, the Company accrues for probable and estimable exposures for non-income tax related tax contingencies. As of February 28, 202329, 2024 and August 31, 2022,2023, the Company has recorded within other accrued expenses and other current liabilities a total of $1.4 million and $1.1$9.6 million, respectively, for various non-income tax related tax contingencies.

23

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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
While the Company believes the recorded liabilities are adequate, there are inherent limitations in projecting the outcome of litigation, in estimating probable additional income tax liability taking into account uncertain tax positions and in evaluating the probable additional tax associated with various non-income tax filing positions. As such, the Company is unable to make a reasonable estimate of the sensitivity to change of estimates affecting its recorded liabilities. As additional information becomes available, the Company assesses the potential liability and revises its estimates as appropriate.
In twoMinimum tax rules, applicable in some of the countries where the Company operates, minimum income tax rules require the Company to paypayment of taxes based on a percentage of sales, ratherwhen the resulting tax is greater than income. Asthe tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). This can result the Company is making income taxin AMT payments substantially in excess of those itthe Company would expect to pay based on taxable income. TheAs the Company hadbelieves that, in one country where it operates, it should only be ultimately liable for an income-based tax, it has accumulated income tax receivables of $11.3$10.9 million and $11.0$10.7 million as of February 28, 2023 and August 31, 2022, respectively, and deferred tax assets of $4.0$3.7 million and $3.5$3.2 million as of February 28, 202329, 2024 and August 31, 2022,2023, 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.
23

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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
this country.
Other Commitments
The Company is also committed to non-cancelable construction service obligations for various warehouse club developments and expansions. As of February 28, 202329, 2024 and August 31, 2022,2023, the Company had approximately $14.4$10.3 million and $16.5$11.3 million, respectively, in contractual obligations for construction services not yet rendered.
As of February 29, 2024, the Company has signed a lease agreement for a facility to be built by the lessor related to the relocation of its warehouse club in Miraflores, Guatemala. As part of the agreement, the landlord has agreed to build a shell building which is estimated to be delivered in the first half of calendar year 2025. Once this building is ready, the Company expects to use approximately $12.1 million in cash to outfit this club. The lease will have a term of approximately 20 years, with a 5-year renewal option, and will commence upon delivery of the shell building to the Company. Per the lease agreement, the Company will pay monthly fixed base rent payments which increase annually based on the Consumer Price Index. The Company will also pay variable rent payments if the yearly warehouse sales for the location are in excess of a certain threshold. A collateralized incremental borrowing rate was used to determine the present value of estimated future minimum lease commitments. The present value of estimated future minimum lease commitments for this lease are as follows (in thousands):
Twelve Months Ended February 28 (except in case of leap year February 29),Amount
2026$1,132 
20271,655 
20281,616 
20291,577 
20301,540 
Thereafter19,808 
Total future lease payments$27,328 
From time to time, the Company has entered into general land purchase and land purchase option agreements. The Company’s land purchase agreements are typically subject to various conditions, including, but not limited to, the ability to obtain necessary governmental permits or approvals. A deposit under an agreement is typically returned to the Company if all permits or approvals are not obtained. Generally, the Company has the right to cancel any of its agreements to purchase land without cause by forfeiture of some or all of the deposits it has made pursuant to the agreement. As of February 28, 2023,29, 2024 the Company had entered into threefour land purchase agreements that, if completed, would result in the use of approximately $10.6$14.0 million in cash. Lastly,Additionally, the Company has one lease option agreement for one additionalthe Miraflores warehouse club. Oneclub relocation, as mentioned above.
24

Table 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.Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below summarizes the Company’s interest in real estate joint ventures, commitments to additional future investments and the Company’s maximum exposure to loss as a result of its involvement in these joint venture as of February 28, 202329, 2024 (in thousands):
EntityEntity%
Ownership
Initial
Investment
Additional
Investments
Net Income (Loss)
Inception to
Date
Company’s
Variable
Interest
in Entity
Commitment
to Future
Additional
Investments(1)
Company's
Maximum
Exposure
to Loss in
Entity(2)
Entity%
Ownership
Initial
Investment
Additional
Investments
Net Income (Loss)
Inception to
Date
Company’s
Variable
Interest
in Entity
Commitment
to Future
Additional
Investments(1)
Company's
Maximum
Exposure
to Loss in
Entity(2)
GolfPark Plaza, S.A.GolfPark Plaza, S.A.50 %$4,616 $2,402 $(96)$6,922 $99 $7,021 
Price Plaza Alajuela PPA, S.A.Price Plaza Alajuela PPA, S.A.50 %2,193 1,236 109 3,538 785 4,323 
TotalTotal$6,809 $3,638 $13 $10,460 $884 $11,344 
(1)The parties intend to seek alternate financing for the project,projects, which could reduce the amount of investments each party would be required to provide. The parties may mutually agree on changes to the project,projects, which could increase or decrease the amount of contributions each party is required to provide.
(2)The maximum exposure is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company to provide additional financial support.
NOTE 7 – DEBT
Short-term borrowings consist of unsecured lines of credit.credit and short-term overdraft borrowings. The following table summarizes the balances of total facilities, facilities used and facilities available (in thousands):
Facilities Used
Total Amount
of Facilities
Short-term
Borrowings
Letters of
Credit
Facilities
Available
Weighted average
interest rate
February 28, 2023 - Committed$75,000 $— $151 $74,849 — %
February 28, 2023 - Uncommitted91,000 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 - Uncommitted91,000 10,608 — 80,392 5.3 
August 31, 2022 - Total$166,000 $10,608 $73 $155,319 5.3 %
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
Facilities Used
Total Amount
of Facilities
Short-term
Borrowings
Facilities
Available
Weighted average
interest rate
February 29, 2024 - Committed$75,000 $— $75,000 — %
February 29, 2024 - Uncommitted96,000 6,101 89,899 13.1 
February 29, 2024 - Total$171,000 $6,101 $164,899 13.1 %
August 31, 2023 - Committed$75,000 $— $75,000 — %
August 31, 2023 - Uncommitted91,000 8,376 82,624 13.2 
August 31, 2023 - Overdraft Used (Uncommitted)— 303 — 12.0 
August 31, 2023 - Total$166,000 $8,679 $157,624 12.7 %
As of February 28, 202329, 2024 and August 31, 2022,2023, 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.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table provides the changes in long-term debt for the six months ended February 28, 2023:29, 2024:
(Amounts in thousands)(Amounts in thousands)Current
portion of
long-term debt
Long-term
debt (net of current portion)
Total
Balances as of August 31, 2022$33,715 $103,556 $137,271 (1)
Balances as of August 31, 2023
Balances as of August 31, 2023
Balances as of August 31, 2023$20,193 $119,487 $139,680 (1)
Proceeds from long-term debt incurred during the period:Proceeds from long-term debt incurred during the period:
Guatemala subsidiary— 12,454 12,454 
Barbados subsidiary— 7,460 7,460 
Honduras subsidiary1,002 12,796 13,798 
Panama subsidiary
Panama subsidiary
Panama subsidiary
Total proceeds from long-term debt incurred during the period
Total proceeds from long-term debt incurred during the period
Total proceeds from long-term debt incurred during the periodTotal proceeds from long-term debt incurred during the period1,002 32,710 33,712 
Repayments of long-term debt:Repayments of long-term debt:(8,175)(8,819)(16,994)
Repayments of long-term debt:
Repayments of long-term debt:
Reclassifications of long-term debt due in the next 12 months
Reclassifications of long-term debt due in the next 12 months
Reclassifications of long-term debt due in the next 12 monthsReclassifications of long-term debt due in the next 12 months868 (868)— 
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar(2)
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar(2)
11 (196)(185)
Balances as of February 28, 2023$27,421 $126,383 $153,804 (3)
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar(2)
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar(2)
Balances as of February 29, 2024
Balances as of February 29, 2024
Balances as of February 29, 2024$37,615 $102,350 $139,965 (3)
(1)The carrying amount of non-cash assets assigned as collateral for these loans was $155.6$156.2 million. The carrying amount of cash assets assigned as collateral for these loans was $5.3$3.5 million.
(2)These foreign currency translation adjustments are recorded within Otherother comprehensive income (loss).income.
(3)The carrying amount of non-cash assets assigned as collateral for these loans was $172.0$140.0 million. The carrying amount of cash assets assigned as collateral for these loans was $4.4$2.5 million.
As of February 28, 202329, 2024 and August 31, 2022,2023, the Company had approximately $102.9$83.9 million and $110.7$91.2 million, respectively, of long-term loans held in the U.S. entity and in several foreign subsidiaries, which require these entities to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. The Company was in compliance with all covenants or amended covenants for both periods.
The Company entered into a loan agreement for $16.5 million to partially fund the purchase of our Via Brasil club in Panama. This loan has a term of 15 years and an interest rate of 1.80% plus the 3-month variable Secured Overnight Financing Rate (SOFR). Additionally, the loan includes a 1.00% special interest compensation fund (FECI) surcharge on the outstanding balance. Refer to “Note 2 – Summary of Significant Accounting Policies” for additional information.
Annual maturities of long-term debt are as follows (in thousands):
Twelve Months Ended February 28,Amount
2024$27,421 
Twelve Months Ended February 28 (except in case of leap year February 29),Twelve Months Ended February 28 (except in case of leap year February 29),Amount
2025202537,926 
2026202615,534 
2027202713,288 
2028202843,483 
2029
ThereafterThereafter16,152 
TotalTotal$153,804 
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)— (Continued)
NOTE 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to interest rate risk relating to its ongoing business operations. To manage interest rate exposure, the Company enters into hedge transactions (interest rate swaps) using derivative financial instruments. The objective of entering into interest rate swaps is to eliminate the variability of cash flows in the LIBORSOFR interest payments associated with variable-rate loans over the life of the loans. As changes in interest rates impact the future cash flow of interest payments, the hedges provide a synthetic offset to interest rate movements.
In addition, the Company is exposed to foreign currency and interest rate cash flow exposure related to non-functional currency long-term debt of twoone of its wholly owned subsidiaries. To manage this foreign currency and interest rate cash flow exposure, the Company’s subsidiaries entered into cross-currency interest rate swaps that convert their U.S. dollar denominated floating interest payments to functional currency fixed interest payments during the life of the hedging instrument. As changes in foreign exchange and interest rates impact the future cash flow of interest payments, the hedges are intended to offset changes in cash flows attributable to interest rate and foreign exchange movements.
These derivative instruments (cash flow hedging instruments) are designated and qualify as cash flow hedges, with the entire gain or loss on the derivative reported as a component of other comprehensive loss. Amounts are deferred in other comprehensive loss and reclassified into earnings in the same income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings.
The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business, including foreign-currency exchange-rate fluctuations on U.S. dollar denominated liabilities within its international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts (NDFs) that are intended to offset changes in cash flow attributable to currency exchange movements. These contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. Currently, these contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate foreign-currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
Cash Flow Hedges
As of February 28, 2023,29, 2024, 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.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes agreements for which the Company has recorded cash flow hedge accounting for the six months ended February 28, 2023:29, 2024:
EntityEntityDate
Entered
into
Derivative
Financial
Counter-
party
Derivative
Financial
Instruments
Initial
US$
Notional
Amount
Bank
US$
loan
Held
with
Floating Leg
(swap
counter-party)
Fixed Rate
for PSMT
Subsidiary
Settlement
Dates
Effective
Period of swap
EntityDate
Entered
into
Derivative
Financial
Counter-
party
Derivative
Financial
Instruments
Initial
US$
Notional
Amount
US$
Loan
Held With
Floating Leg
(swap
counter-party)
Fixed Rate
for PSMT
Subsidiary
Settlement
Dates
Effective
Period of swap
Colombia subsidiaryColombia subsidiary26-Sep-22Citibank, 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, 2022September 26, 2022 - September 24, 2024Colombia subsidiary30-Nov-23Citibank, N.A. ("Citi")Cross currency interest rate swap$10,000,000 PriceSmart, Inc.PriceSmart, Inc.5.00%11.27 %30th day of each November, May and August, and 28th day of each February (except in case of a leap year, 29th day of each February) beginning on February 29, 2024November 30, 2023 - November 30, 2026
Colombia subsidiaryColombia subsidiary3-May-22Citibank, 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, 2022May 3, 2022 - May 3, 2027Colombia subsidiary12-Apr-23Citibank, N.A. ("Citi")Cross currency interest rate swap$10,000,000 PriceSmart, Inc.PriceSmart, Inc.4.00%11.40 %11th day of each July, October, January and April, beginning on July 11, 2023April 12, 2023 - April 11, 2028
Colombia subsidiaryColombia subsidiary17-Nov-21Citibank, 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, 2022November 17, 2021 - November 18, 2024Colombia subsidiary26-Sep-22Citibank, N.A. ("Citi")Cross currency interest rate swap$12,500,000 PriceSmart, Inc.PriceSmart, Inc.3.00%10.35 %24th day of each December, March, June and September beginning December 26, 2022September 26, 2022 - September 24, 2024
Colombia subsidiaryColombia subsidiary3-Dec-19Citibank, 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, 2020December 3, 2019 - December 3, 2024Colombia subsidiary3-May-22Citibank, N.A. ("Citi")Cross currency interest rate swap$10,000,000 PriceSmart, Inc.PriceSmart, Inc.3.00%9.04 %3rd day of each May, August, November and February, beginning on August 3, 2022May 3, 2022 - May 3, 2027
Colombia subsidiaryColombia subsidiary27-Nov-19Citibank, 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, 2020November 27, 2019 - November 27, 2024Colombia subsidiary17-Nov-21Citibank, N.A. ("Citi")Cross currency interest rate swap$10,000,000 PriceSmart, Inc.PriceSmart, Inc.3.00%8.40 %17th day of each February, May, August, and November, beginning on February 17, 2022November 17, 2021 - November 18, 2024
Panama subsidiary25-Jun-18Bank of Nova Scotia ("Scotiabank")Interest rate swap$14,625,000 Bank of Nova ScotiaVariable rate 3-month Libor plus 3.0%5.99 %23rd day of each month beginning on July 23, 2018June 25, 2018 - March 23, 2023
Colombia subsidiaryColombia subsidiary3-Dec-19Citibank, N.A. ("Citi")Cross currency interest rate swap$7,875,000 Citibank, N.A.Variable rate 3-month SOFR plus 2.45%7.87 %3rd day of each December, March, June and September beginning March 3, 2020December 3, 2019 - December 3, 2024
Colombia subsidiaryColombia subsidiary27-Nov-19Citibank, N.A. ("Citi")Cross currency interest rate swap$25,000,000 Citibank, N.A.Variable rate 3-month SOFR plus 2.45%7.93 %27th day of each November, February, May and August beginning February 27, 2020November 27, 2019 - November 27, 2024
PriceSmart, Inc.PriceSmart, Inc.7-Nov-16MUFG Union Bank, N.A. ("Union Bank")Interest rate swap$35,700,000 Union BankVariable rate 3-month Libor plus 1.70%3.65 %1st day of each month beginning on April 1, 2017March 1, 2017 - March 1, 2027PriceSmart, Inc.7-Nov-16U.S. Bank, N.A. ("U.S. Bank")Interest rate swap$35,700,000 U.S. BankU.S. BankVariable rate 3-month SOFR plus 1.7%3.65 %1st day of each month beginning on April 1, 2017March 1, 2017 - March 1, 2027
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)— (Continued)
For the three and six months ended February 28, 202329, 2024 and February 28, 2022,2023, 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 ClassificationIncome Statement Classification
Interest
expense on
borrowings(1)
Cost of
swaps(2)
TotalIncome Statement Classification
Interest expense on borrowings (1)
Cost of swaps (2)
Total
Interest expense for the three months ended February 29, 2024
Interest expense for the three months ended February 28, 2023Interest 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 29, 2024
Interest expense for the six months ended, February 28, 2023Interest 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 
(1)This amount is representative of the interest expense recognized on the underlying hedged transactions.
(2)This amount is representative of the interest expense recognized on the interest rate swaps and cross-currency swaps designated as cash flow hedging instruments.
The total notional balance of the Company’s pay-fixed/receive-variable interest rate swaps and cross-currency interest rate swaps was as follows (in thousands):
Notional Amount as of Notional Amount as of
Floating Rate Payer (Swap Counterparty)Floating Rate Payer (Swap Counterparty)February 28,
2023
August 31,
2022
Floating Rate Payer (Swap Counterparty)February 29,
2024
August 31,
2023
Union Bank$30,706 $31,344 
U.S. Bank
Citibank N.A.Citibank N.A.57,263 66,353 
Scotiabank7,875 8,625 
TotalTotal$95,844 $106,322 
Total
Total
Derivatives listed on the table below were designated as cash flow hedging instruments. The table summarizes the effect of the fair value of interest rate swap and cross-currency interest rate swap derivative instruments that qualify for derivative hedge accounting and its associated tax effect on accumulated other comprehensive (income)/lossincome/(loss) (in thousands):
February 28, 2023August 31, 2022
February 29, 2024February 29, 2024August 31, 2023
Derivatives designated as cash flow hedging instrumentsDerivatives designated as cash flow hedging instrumentsBalance Sheet
Classification
Fair
Value
Net Tax
Effect
Net
OCI
Fair
Value
Net Tax
Effect
Net
OCI
Derivatives designated as cash flow hedging instrumentsBalance Sheet
Classification
Fair
Value
Net Tax
Effect
Net
OCI
Fair
Value
Net Tax
Effect
Net
OCI
Cross-currency interest rate swaps
Cross-currency interest rate swapsCross-currency interest rate swaps
Other current assets
$41 $(11)$30 $2,736 $(348)$2,388 
Cross-currency interest rate swapsCross-currency interest rate swaps
Other non-current assets
13,550 (4,742)8,808 10,289 (4,559)5,730 
Cross-currency interest rate swapsCross-currency interest rate swaps
Other current liabilities
— — — (82)25 (57)
Interest rate swapsInterest rate swaps
Other non-current assets
2,444 (540)1,904 1,596 (6)1,590 
Net fair value of derivatives designated as hedging instrumentsNet fair value of derivatives designated as hedging instruments$16,035 $(5,293)$10,742 $14,539 $(4,888)$9,651 
Net fair value of derivatives designated as hedging instruments
Net fair value of derivatives designated as hedging instruments
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Table of Contents
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)— (Continued)
Fair Value Instruments
From time to time the Company enters into non-deliverable forward foreign-exchange contracts. These contracts are treated for accounting purposes as fair value contracts and do not qualify for derivative hedge accounting. The use of non-deliverable forward foreign-exchange contracts is intended to offset changes in cash flow attributable to currency exchange movements. These contracts are intended primarily to economically hedge exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar.
The following table summarizes the non-deliverable forward foreign exchange contracts that are open as of February 28, 2023:29, 2024:
Financial Derivative
(Counterparty)
SubsidiaryDates
Entered into (Range)
Derivative Financial
Instrument
Total Notional
Amounts
(in thousands)
Settlement
 Dates (Range)
Scotiabank Colpatria, S.A.Citibank, N.A. ("Citi")Colombia11-Jan-202331-Aug-2023 - 17-Feb-202328-Feb-2024Forward foreign exchange contracts (USD)$3,50014,500 17-Apr-202320-Mar-2024 - 14-Nov-202324-Jul-2024
Citibank, N.A. ("Citi")Colombia18-Jan-2023 - 23-Feb-2023Forward foreign exchange contracts (USD)$6,000 19-May-2023 - 16-Nov-2023
Banco FicohsaHonduras22-Feb-2023 - 28-Feb-2023Forward foreign exchange contracts (USD)$5,000 1-Mar-2023 - 7-Mar-2023
Forward derivative gains and (losses) on non-deliverable forward foreign-exchange contracts are included in Other income (expense), net in the consolidated statements of income in the period of change, but the amounts were immaterial for the three and six month periods ended February 28, 202329, 2024 and February 28, 2022.2023.
NOTE 9 – SEGMENTS
The Company and its subsidiaries are principally engaged in the international operation of membership shopping in 5054 warehouse clubs located in 12 countries and one U.S. territory that are located in Central America, the Caribbean and Colombia. In addition, the Company operates distribution centers and corporate offices in the United States. The Company has aggregated its warehouse clubs, distribution centers and corporate offices into reportable segments. The Company’s reportable segments are based on management’s organization of these locations into operating segments by general geographic location, which are used by management 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 management. When the Company does so, the previous period amounts and balances are reclassified to conform to the current period's presentation.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)— (Continued)
The following tables summarize by segment certain revenues, operating costs and balance sheet items (in thousands):
United
States
Operations
United
States
Operations
Central
American
Operations
Caribbean
Operations(1)
Colombia
Operations
Reconciling
Items(2)
Total
Three Months Ended February 29, 2024
Revenue from external customers
Revenue from external customers
Revenue from external customers
Intersegment revenues
Depreciation, property and equipment
Operating income
Operating income
Operating income
Net income
United
States
Operations
Central
American
Operations
Caribbean
Operations(1)
Colombia Operations
Reconciling
Items(2)
Total
Capital expenditures, net
Capital expenditures, net
Capital expenditures, net
Six Months Ended February 29, 2024
Six Months Ended February 29, 2024
Six Months Ended February 29, 2024
Revenue from external customers
Revenue from external customers
Revenue from external customers
Intersegment revenues
Depreciation, property and equipment
Operating income
Operating income
Operating income
Net income
Long-lived assets (other than deferred tax assets)
Goodwill
Total assets
Capital expenditures, net
Three Months Ended February 28, 2023
Three Months Ended February 28, 2023
Three Months Ended February 28, 2023Three Months Ended February 28, 2023
Revenue from external customersRevenue from external customers$6,882 $694,210 $332,306 $108,791 $— $1,142,189 
Revenue from external customers
Revenue from external customers
Intersegment revenuesIntersegment revenues365,177 6,801 1,137 1,175 (374,290)— 
Depreciation, Property and equipment1,478 8,925 4,792 2,299 — 17,494 
Depreciation, property and equipment
Amortization, IntangiblesAmortization, Intangibles381 — — — — 381 
Operating income (loss)Operating income (loss)6,964 56,633 25,474 4,662 (39,933)53,800 
Net income (loss) attributable to PriceSmart, Inc.Net income (loss) attributable to PriceSmart, Inc.1,279 46,442 20,424 3,135 (39,933)31,347 
Capital expenditures, netCapital expenditures, net3,338 16,067 3,968 5,031 — 28,404 
Capital expenditures, net
Capital expenditures, net
Six Months Ended February 28, 2023
Six Months Ended February 28, 2023
Six Months Ended February 28, 2023Six Months Ended February 28, 2023
Revenue from external customersRevenue from external customers$17,340 $1,323,289 $639,831 $216,535 $— $2,196,995 
Revenue from external customers
Revenue from external customers
Intersegment revenuesIntersegment revenues772,817 13,383 2,651 1,880 (790,731)— 
Depreciation, Property and equipment2,856 17,724 9,423 4,675 — 34,678 
Depreciation, property and equipment
Amortization, IntangiblesAmortization, Intangibles765 — — — — 765 
Operating income (loss)Operating income (loss)20,556 106,763 49,977 9,530 (77,499)109,327 
Net income (loss) attributable to PriceSmart, Inc.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)Long-lived assets (other than deferred tax assets)74,226 524,474 209,684 169,934 — 978,318 
GoodwillGoodwill8,981 24,149 10,055 — — 43,185 
Total assetsTotal assets221,076 959,064 474,637 231,395 — 1,886,172 
Capital expenditures, netCapital expenditures, net8,829 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 revenues372,536 5,030 1,333 779 (379,678)— 
Depreciation, Property and equipment1,541 8,598 4,023 2,556 — 16,718 
Amortization, Intangibles380 — — — — 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, net1,298 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 revenues786,879 10,028 2,777 1,601 (801,285)— 
Depreciation, Property and equipment2,006 16,898 8,041 4,920 — 31,865 
Amortization, Intangibles836 — — — — 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 
As of August 31, 2023
As of August 31, 2023
As of August 31, 2023
Long-lived assets (other than deferred tax assets)Long-lived assets (other than deferred tax assets)75,543 497,585 212,418 176,911 — 962,457 
Goodwill8,982 24,309 10,043 — — 43,334 
Total assets191,677 860,718 463,236 257,699 — 1,773,330 
Capital expenditures, net3,207 26,051 22,047 16,085 — 67,390 
As of August 31, 2022
Long-lived assets (other than deferred tax assets)
Long-lived assets (other than deferred tax assets)Long-lived assets (other than deferred tax assets)$71,743 $498,204 $218,021 $175,194 $— $963,162 
GoodwillGoodwill8,981 24,250 10,072 — — 43,303 
Investment in unconsolidated affiliatesInvestment in unconsolidated affiliates— 10,534 — — — 10,534 
Total assetsTotal assets230,411 867,898 474,411 235,680 — 1,808,400 
(1)Management considers its club in the U.S. Virgin Islands to be part of its Caribbean operations.
(2)The reconciling items reflect the amount eliminated on consolidation of intersegment transactions.
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PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)— (Continued)
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated all events subsequent to the balance sheet date as of February 28, 202329, 2024 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.
The Company has decided to distribute excess cash to stockholders in the form of a special dividend. On March 10, 2023,April 3, 2024, the Company's Board of Directors declared a one-time $1.00 per share special dividend payable on April 30, 2024 to stockholders of record on April 19, 2024. The declaration of future dividends (ongoing or otherwise), if any, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements, taking into account the uncertain macroeconomic conditions on our results of operations and cash flows.
The Company executed a lease agreement forhas purchased land in Escuintla, Guatemala for the purpose of constructing a newand plans to open its ninth warehouse club which it expects to openin Costa Rica, located in Cartago, approximately 10 miles east from the nearest clubs in the fall of 2023.greater San Jose metropolitan area. The lease agreementclub will result in the recognition ofbe built on a lease liabilitysix-acre property and right-of-use asset of approximately $1.5 million.
On March 31, 2023, the Company executed a purchase agreement for land in Santa Ana, El Salvador for the purpose of constructing a new warehouse club, which it expectsis anticipated to open in early 2024.2025. Once this new club is open, PriceSmart will operate 55 warehouse clubs in total.

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PRICESMART, INC.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements concerning PriceSmart, Inc.'s ("PriceSmart",PriceSmart," the "Company","Company," "we" or "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”Factors" and “Part"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, 20222023 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.30, 2023. Forward-looking statements speak only as of the date that they are made, and the Company doeswe do not undertake to update them,these statements, except as required by law. In addition, these risks are not the only risks that the Company faces. The Company could also be affected by additional factors that apply to all companies operating globally and in the U.S., as well as other risks that are not presently known to the Company or that the Company currently considers to be immaterial.
Overview
PriceSmart was founded in 1996 by Sol and Robert Price, the creators of Price Club, the original warehouse club operator. The mission of our businessPriceSmart is to improve the lives of our employees and Members, provide socially responsible support to the communities in which we operate our business and deliver a fair financial return to our investors. PriceSmart is the only membership-basedits warehouse club business in Central America, the markets where we operate in Latin AmericaCaribbean and the Caribbean. FollowingColombia at operating standards as good as, or superior to, warehouse club operations in the tradition of PriceClub® and Costco®, our goal is to offer high quality merchandise at the lowest possible prices by leveraging volume purchasing and eliminating inefficiencies from the distribution network.United States.

PriceSmart opened its first locationAs of February 29, 2024, we had 54 warehouse clubs in Panama City, Panama in October of 1996. Today, our company operates 50 warehouse clubsoperation in 12 countries, plus the U.S. Virgin Islands, with revenues in excess of $4.0$4.4 billion in fiscal year 2022.2023. We believe PriceSmart has become one of the most respected and trusted brands in the region. With nearly two million membership accounts and more than three million cardholders, we believe PriceSmart is an essential part of the shopping experience for consumers and small businesses in PriceSmart's markets.

Membership is a key characteristic of warehouse clubs. As of February 28, 2023, PriceSmart had almost 1.8 millionmembership accounts. OurDepending on the market in which they live, our Diamond Members generally pay an annual membership fee of approximatelyapproximately $35 to $40, and our Platinum Members generally pay $75 to $80 per year in 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.

As is typicalPriceSmart sources slightly more than half its merchandise from suppliers within the region, with the balance of all warehouse clubmerchandise sourced throughout the world. Product selection includes basic consumable merchandise for consumers and businesses, PriceSmart stocks a limited number of stock keeping units (SKU’s). Our SKU count is less than 3,000 items,Member’s Selection compared to a grocery store that might stock 30,000 SKU’s or a hypermarket that might stock over 100,000 SKU’s. We believe limiting the number of SKU’s contributes to efficiencies at all levels of our business, thereby supporting lower prices for our Members.®

PriceSmart also offers an extensive selection of its own private label products under the brand “Member’s Selection®. The Member’s Selection® brand provides our Members with high quality private label merchandise at prices lower than the comparable national brands. Similar to other warehouse clubs,and unique consumable and non-consumable products that are often not otherwise available in its markets.
PriceSmart continually focuses on innovation. In recent years, PriceSmart has food courts at all locations with the traditional selection of hot dogsadded optical, audiology, and pizza, along with other items. Unique topharmacy services in many of its locations. PriceSmart provides online shopping to our Members and offers both home delivery and curbside pickup. 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.

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Our warehouse clubs range in sales floor size from approximately 30,000 to 60,000 square feet. Our larger clubs are typically located in and around densely populated major cities that include a large penetration of consumers withis making significant disposable income. Our smaller clubs tend to be in areas with less population density, but where there are significant opportunities to serve the population and supply and support businesses. We also operate smaller format clubs in urban areas where it is difficult to secure sufficient real estate at a reasonable cost. 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 investinvestments in technology to enhance Memberboth improve the online shopping experience and convenience. We believe technology allows us to access valuable data that supports our ability to increase efficiencies and gain important insights about ourfor its Members and their shopping preferences.to enhance operating efficiencies in its supply chain and the back office.
With more than 11,000 employees, PriceSmart supports the best working conditions possible for its employees. We nowseek to provide digital membershipsafe and auto-renewal for the convenience of our Members. Additionally, technology is fundamental to providing a platformpleasant working environments for our membersemployees, along with excellent pay and benefits, including healthcare and retirement benefits.
PriceSmart is committed to shop online.

Our logistics and distribution infrastructure is key to maximizing efficiencies. We continually review and upgrade our logistics and distribution systems in an attempt to capture efficiencies as our business grows in sales volume, in geography and through activity generated by e-commerce. We utilize regional distribution centersimproving the quality of life for people living in the U.S.communities in which it does business. The newly created PriceSmart Foundation, in partnership with Price Philanthropies Foundation, provides school supplies to more than 150,000 children and Costa Rica as well as several local distribution centerseyeglasses to distribute merchandise efficientlythousands of children through its Aprender y Crecer program. The Foundation also makes philanthropic donations to support work force development, small business entrepreneurship and to create flexibility to mitigateimprove the risk of supply-chain disruption. We also seek to capture efficiencies by using specialized distribution centers for produce and centralized production for categories such as bakery and meat processing.

Purchasing land and constructing warehouse clubs is generally our largest ongoing capital investment. Securing land for warehouse club locations is challenging in several of our markets because suitable sites at economically feasible prices are difficult to find. We believe ownership of our real estate in many of our markets provides several advantages, including lower operating expenses, flexibility to expand or otherwise enhance our buildings, long-term control over the use of the property and potential increase of value in future years. Although we prefer to own real estate, we sometimes lease our real estate when leasing provides the best available opportunity.

We do not currently face direct competition from U.S. membership warehouse club 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.

environment.
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We believe that operating our business at the highest standards, providing outstanding jobs for our employees and being good stewards of the communities in which we operate result in PriceSmart being a good investment for our stockholders.

The number of warehouse clubs for each country or territory were as follows:
Country/Territory
Country/Territory
Country/TerritoryCountry/TerritoryNumber of
Warehouse Clubs
in Operation as of February 28, 2022
Number of
Warehouse Clubs
in Operation as of February 28, 2023
Anticipated Warehouse Club Openings in Calendar Year 2023Anticipated Warehouse Club Openings in Calendar Year 2024Number of
Warehouse Clubs
in Operation as of February 28, 2023
Number of
Warehouse Clubs
in Operation as of February 29, 2024
Anticipated
Warehouse Club
Openings in
Fiscal Year 2025
ColombiaColombia991Colombia910
Costa RicaCosta Rica88Costa Rica81
PanamaPanama77Panama7
GuatemalaGuatemala56
Dominican RepublicDominican Republic55Dominican Republic5
Guatemala551
TrinidadTrinidad44Trinidad4
El SalvadorEl Salvador24
HondurasHonduras33Honduras3
El Salvador2211
NicaraguaNicaragua22Nicaragua2
JamaicaJamaica12Jamaica2
ArubaAruba11Aruba1
BarbadosBarbados11Barbados1
U.S. Virgin IslandsU.S. Virgin Islands11U.S. Virgin Islands1
TotalsTotals495031Totals50541
Our warehouse clubs, one regional distribution center and several smaller local distribution centers are located in Latin America and the Caribbean, and our corporate headquarters, U.S. buying operations and our larger regional distribution center are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia.
We are currently constructing a 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 May 2023. It will be our third club in El Salvador. We have also purchased land and plan to open our fourthninth warehouse club in El Salvador,Costa Rica, located in Santa Ana,Cartago, approximately 4010 miles westeast from the nearest club in the capital of San Salvador.Jose. The club will be built on a five-acresix-acre property and is anticipated to open in early 2024. In addition, we are proceeding with the construction of a warehouse2025. Once this new 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 nearest 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 four new clubs are open, we will operate 549 warehouse clubs.

clubs in Costa Rica and 55 warehouse clubs in total.
We also export products to a retailer in the Philippines and are exploring expansion of that business in other markets.
Factors Affecting Ourthe Business
Overall economic trends, foreign currency exchange volatility, and other factors impacting the business
Our sales and profits vary from market to market depending on general economic factors, including GDP growth; consumer preferences; foreign currency exchange rates; political policies and social conditions; local demographic characteristics (such as population growth); the number of years we have operated in a particular market; and the level of retail and wholesale competition in that market. The economies of many of our markets are dependent on foreign trade, tourism, and foreign direct investments. Uncertain economic conditions and slowdown in global economic growth and investment may impact the economies in our markets, causing significant declines in GDP and employment and devaluations of local currencies against the U.S. dollar.
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During the second 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, especially Costa Rica, benefited from currency appreciation which off-set most of the currency devaluations experienced in our other countries. SubstantialAlthough we have seen recent inflationary pressures subsiding, substantial product cost increases due to inflation orand 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, which increased . These factors have increased the complexity of managing our inventory flow and business; however, during business and resulted in substantial inventory markdowns on certain non-food product categories in the first six monthsthird quarter of fiscal year 2023, we saw a general improvement in transit days2022. In addition, shipping and a reduction in freight rates of our shipping containers. We are workingincreased dramatically during that time. While supply chains and transportation rates have normalized, we continue to work 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 shipping routes, increased throughput, and provided flexibility to mitigate our supply-chainsupply chain challenges and risks more effectively.
Currency fluctuation can be one of the largest variables affecting our overall sales and profit performance as we have experienced in prior fiscal years, because many of our markets are susceptible to foreign currency exchange rate volatility. In the second quarter of fiscal year 2024, some markets, especially Colombia and Costa Rica, benefited from currency appreciation, which helped offset currency devaluations we experienced in some of the other countries. During the first six months of fiscal year 2024 and 2023, approximately 79.6% and 2022, approximately 78.8% and 77.9%, respectively, of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 48.9%49.4% and 48.7%48.9% consisted of sales of products we purchased in U.S. dollars for each period, respectively.
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 23% as of February 28, 2023 compared to February 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 strategically held pricing steady on certain commodity and high volume items in our U.S. Foods and U.S. Fresh categories imported to Colombia, instead of increasing the prices to reflect the rising costs of these items. We 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.”
Our wallet-share capture of total retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our Members. Demographic characteristics within each of our markets can affect both the overall level of sales and future sales growth opportunities. Certain island markets, such as Aruba, Barbados and the U.S. Virgin Islands, offer us limited upside for sales growth given their overall market size.
At times we face difficulties in the shipment and importation of merchandise to our warehouse clubs in certain markets, such as disputes with customs and tax authorities in Nicaragua which delayed the issuance of importation clearance in May 2023. We also continue to face the risk of political instability which may have significant effects on our business. For example, civilprotestors set up roadblocks in Panama during October and November 2023, disrupting traffic to our clubs throughout most of the market, as a reaction to an agreement between the Panamanian government and a mining company. Roadblocks in Guatemala in October 2023 relating to election protests also limited access to certain of our warehouse clubs. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021. Nicaragua and Honduras experienced anti-government protests in 2019; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018.
Our operations are subject to volatile weather conditions and natural disasters. In November 2020, Hurricanes Eta and Iota brought severe rainfall, winds, and flooding to a significant portion of Central America, especially Honduras, which caused significant damage to parts of that country’s infrastructure. Although our warehouse clubs were not significantly affected and we were able to manage our supply chain to keep our warehouse clubs stocked with merchandise, similar natural disasters could adversely impact our overall sales, costs and profit performance in the future.
Changes in tax laws, increases in the enacted tax rates, adverse outcomes in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. In one of the countries where we operate, the government made changes several years ago in the method of computing minimum tax payments, under which the government sought to require retailers to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). We, together with our tax and legal advisers, appealed these interpretations and litigated our cases in the country’s court system. Nevertheless, in the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute. To address the inherent risk of operating in a country in which tax legislation changes can significantly impact our low margin business model and in which our ability to successfully appeal the application of these taxes is limited, we have increased prices in this market to offset or partially offset the rise in costs to comply with the annual AMT payment.
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Periodically, we experience a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity), particularly in Trinidad.. This can and has impeded our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products and to otherwise redeploy these funds in our Company. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. For instance, during fiscal year 2021, we experienced significant limitations on our ability to convert Trinidad dollarsdollars to U.S. dollars or other tradeabletradable currencies. Our balance as of February 28, 202329, 2024 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $14.7$36.9 million, a decrease of $85.8$63.6 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 U.S. Dollardollar liquidity in the market through its interventions, we are subject to continued challenges in convertingconverting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency.


During the third quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars. As of February 29, 2024, our Honduran subsidiary had approximately $
26.9 million of cash and cash equivalents and short-term investments denominated in Honduran lempiras, which cannot be readily converted to U.S. dollars for general use within the Company.We are actively working with our banking partners and government authorities to address this situation.
Mission and Business Strategy
PriceSmart exists to improve the lives and businesses of our Members, our employees and our communities through the responsible delivery of the best quality goods and services at the lowest possible prices. Our mission isWe aim to serve as a model company, which operates profitably and provides a good return to our investors, by providing Members in emerging and developing markets with exciting, high qualityhigh-quality merchandise sourced from around the world and valuable services at compelling prices in safe U.S. styleU.S.-style clubs and through PriceSmart.com. We prioritize the well-being and safety of our Members and employees. We provide good jobs, fair wages and benefits and opportunities for advancement. We strive to treat our suppliers right and empower them when we can.can, including both our regional suppliers and those from around the world. We try to conduct ourselves in a socially responsible manner as we endeavor to improve the quality of the lives of our Members and their businesses, while respecting the environment and the laws of all the countries in which we operate. TheWe also believe in facilitating philanthropic contributions to communities in which we do business. We charge Members an annual membership fee that enables us to operate our business with lower margins than traditional retail stores. As we continue to invest in technological capabilities, we are increasing our tools to drive sales and operational efficiencies. We believe we are well positioned to blend the excitement and appeal of our brick-and-mortar business with the convenience and additional benefits of online shopping and services and, meanwhile, enhance Member experience and engagement.
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Growth
As we look to the future, our Company is focused on three major drivers of growth:
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 Capabilities
I.Invest in Remodeling Current PriceSmart Clubs, Adding New PriceSmart Locations and Opening More Distribution Centers. We believe that one of the quickest and most effective ways to increase sales and profitability is to increase the size and efficiency of our existing warehouse clubs and the number of parking spaces inat our high-volume locations. For instance, we are currently remodeling our clubs in San Pedro Sula, Honduras; Santiago, Dominican Republic; and Port of Spain, Trinidad and Tobago. We are also currently expanding one of our clubs in San Salvador, El Salvador. We've recently entered into a lease agreement to relocate and extend the lease term for our Miraflores club, which is our highest selling location in Guatemala. The new warehouse will have increased sales floor square footage and a greater number of parking spaces, along with covered parking for our Members. We have also completed the purchase of our Via Brasil club in Panama, which is the club with the highest sales volume in our Panama market. We continue to pursue opportunities to add new warehouse club growth opportunitiesclubs in our existing markets and to assess opportunities in new markets. Currently our pipeline of new clubs includesWe have 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 seconda new warehouse club in Medellin, Colombia, which we expect to open beforeCartago, near the closecapital of calendar year 2023. Additionally, we plan to open our sixth warehouse clubSan Jose, in Guatemala, locatedCosta Rica, in Escuintla, which we expect to open in the fall of 2023.early 2025. Our distribution network currently consists of major distribution centers in Miami and Costa Rica, complemented by varying distribution activitiesfacilities in our other markets. Based on our experience with ourthe 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. Distribution centers areIn October 2023, we relocated our distribution center in Panama, increasing the square footage which will allow us to drive more efficiencies within our distribution network. We have also strategically importantsigned a lease agreement for a distribution center in providing the infrastructure to support PriceSmart.com online sales to both our business and our family Members.Guatemala. In addition to major distribution centers, PriceSmart has been investing in what we call Produce Distribution Centers,produce distribution centers, which enable us to purchase, process and package produce we purchase directly from farms both in our markets as well as for imported produce.
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II.Increase Membership Value. We are seeking to attract more Members and retain our current Members by expanding the benefits of being a Member of PriceSmart through sales, services, and convenience.PriceSmart. As benefits grow and the value of being a PriceSmart Member increases, adjustments to the membership fee may be warranted. We have increased this fee by $5 in most countries during the first six months of fiscal year 2024. A larger membership base and higher membership fee contribute to the bottom line of the business.business and can be reinvested in providing better pricing to our Members. We focus on growth of our membership base, Member renewal rates and spend per Member as part of determining how Members see our value. By adding more benefits that Members can only obtain with us, we expect to seebelieve we can achieve growth in the number of Members, which drives Membership income and MerchandiseNet merchandise sales. Recent examples of enhancements we have made to the value of membership include: additional services, such as the ability for all of our Members to transact on PriceSmart.com; pickup and delivery service in all of our clubs; and the implementation and expansion of our Well-being initiative, which offers Opticaloptical services with free eye exams for the Memberour Members and additional members of their families and deeplylower prices on discounted eyeglass frames, Audiologyaudiology services with free hearing exams and deeply discounted hearing aids, and, in some of our markets, Pharmacy, which provides a significant convenience to our Members.pharmacies. Another way we enhance Membership value is through ourby offering private label offering, “Member’s Selection®,merchandise under the “Member’s Selection®a brand, thatwhich is available only to PriceSmart Members. We believe the Member’s Selection®Selection® brand carries goodwill and is recognized in our markets for value. Private label products also provides usprovide the opportunity to source quality items locally when appropriate.locally. Select local sourcing has multiple benefits, including support of local communities in which we operate by enhancing business activity and creating direct and indirect jobs, mitigation of foreign currency exchange risk, and reduced supply chain exposure. These initiatives offer additional benefits and services for our Members, whether they choose to shop on-line, in-club, or both. During the first six months of fiscal 2023,year 2024, our private label sales represented 25.9%27.1% of total merchandise sales, up from 23.5% for25.9% in the same period of fiscal year 2022,2023, and we plan to continue to invest in the development of additional private label products under the “Member’s Selection®Member’s Selection®” brand.
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III.Drive Incremental salesSales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities. We recognize the growing expectation of consumers in our markets for convenience. As a result, we continue to improve the functionality and content of PriceSmart.com and to expand our product offerings 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, which allow us to better identify Member preferences, we believe we have been able to provide our Members with enhancements to the membership experience and our merchandise procurement. PriceSmart.com and these tools provideprovides the opportunity for us to continually strengthen and expand the scope of our relationship with each Member and offer incremental products and services in the future. Our PriceSmart.com offering 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 environmentenvironments in which we are in.do business.
Financial highlights for the second quarter of fiscal year 20232024 included:
Total revenues increased 10.0%13.1% over the comparable prior year period. The extra day from the leap year on February 29, 2024 had a favorable impact on total revenue compared to the comparable prior year period.
Net merchandise sales increased 10.3%13.0% over the comparable prior year period. We ended the quarter with 5054 warehouse clubs compared to 4950 warehouse clubs at the end of the second quarter of fiscal year 2022. Foreign currency exchange rate fluctuations impacted net2023. Net merchandise sales negatively by 0.2% versus- constant currency increased 9.0% over the same three-month period in thecomparable prior year.year period.
Comparable net merchandise sales (that is, sales in the 4950 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 13 weeks ended March 5, 20233, 2024 increased 8.5%8.8%. Foreign currency exchange rate fluctuations impacted comparableComparable net merchandise sales negatively by 0.2%- constant currency for the 13 weeks ended March 3, 2024 increased 5.2%.
Membership income for the second quarter of fiscal year 20232024 increased 7.3%14.6% to $16.2$18.5 million over the comparable prior year period.
Total gross margins (net merchandise sales less associated cost of goods sold) increased 12.8%11.0% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 16.0%15.7%, an increase of 40 basis points 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.
Operating income for the second quarter of fiscal year 2023 was $53.8 million, an increase of 11.3%, or $5.5 million, compared to the second quarter of fiscal year 2022.
We recorded a $5.3 million net loss in other income (expense), net primarily from currency transactions in the second quarter of fiscal year 2023 compared to a $0.8 million net currency loss primarily from currency transactions in the same period last year.
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Our effective tax rate increased in the second quarter of fiscal year 2023 to 34.0% from 31.0% in the second quarter of fiscal year 2022. The increase in the effective tax rate is primarily related to separation costs associated with the departure of our former Chief Executive Officer.
Net income attributable to PriceSmart for the second quarter of fiscal year 2023 was $31.3 million, or $1.02 per diluted share, compared to $31.5 million, or $1.03 per diluted share, in the second quarter of fiscal year 2022.
Adjusted net income for the second quarter of fiscal year 2023 was $38.5 million, or an adjusted $1.25 per diluted share, compared to $31.5 million, or $1.03 per diluted share, in the second quarter of fiscal year 2022.
Financial highlights for the six months ended February 28, 2023 included:
Total revenues increased 9.1% over the comparable prior year period.
Net merchandise sales increased 9.5% over the comparable prior year period. We ended the first six months of fiscal 2023 with 50 warehouse clubs compared to 49 warehouse clubs at the end of the second quarter of fiscal 2022. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 1.2% versus the comparable six-month period.
Comparable net merchandise sales (that is, sales in the 49 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 26 weeks ended March 5, 2023 increased 6.8%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 1.1%.
Membership income increased 7.4% to $32.1 million.
Total gross margins (net merchandise sales less associated cost of goods sold) increased 11.6% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 16.1%, an increasedecrease of 30 basis points or 0.3% from the same period in the prior year.
Selling, general and administrative expenses increased 8.7%9.1% compared to the second quarter of fiscal year 2023, primarily due to a one-time $7.7 million severance charge for the departure of the Company's former Chief Executive Officer.higher compensation, depreciation expense and professional fees.
Operating income for the second quarter of fiscal year 2024 was $109.3$63.6 million, an increase of 15.9%18.2%, or $15.0$9.8 million, compared to the first six monthssecond quarter of fiscal 2022.year 2023.
We recorded a $9.9$7.1 million net loss in total other income (expense) primarily from currency transactionsexpense in the current six-month periodsecond quarter of fiscal year 2024 compared to a $0.6$6.2 million net gain primarily from the disposal of Aeropostloss in total other expense in the same period last year. This increase in total other expense was primarily due to an increase in other expense, net of $1.7 million, driven by an increase in total overall foreign currency losses, partially offset by higher interest income of $1.3 million, comparatively, because of significantly more investments of surplus cash at higher yields.
Our effective tax rate increased fordecreased in the first six monthssecond quarter of fiscal year 20232024 to 33.7%30.5% from 32.6%34.0% in the first six monthssecond quarter of fiscal 2022,year 2023. The decrease in the effective tax rate is primarily related to the non-recurrence of the separation costs associated with the departure of our former Chief Executive Officer.
Net income attributablefor the second quarter of fiscal year 2024 was $39.3 million, or $1.31 per diluted share, compared to PriceSmart$31.3 million, or $1.02 per diluted share, in the second quarter of fiscal year 2023.
Adjusted net income for the second quarter of fiscal year 2024 was $39.3 million, or an adjusted $1.31 per diluted share, compared to adjusted net income of $38.5 million, or $1.25 per diluted share, in the comparable prior year period.
Adjusted EBITDA for the second quarter of fiscal year 2024 was $84.1 million compared to $79.4 million in the same period last year.

Financial highlights for the six months ended February 29, 2024 included:
Total revenues increased 11.9% over the comparable prior year period. The extra day from the leap year on February 29, 2024 had a favorable impact on total revenue compared to the comparable prior year period.
Net merchandise sales increased 11.9% over the comparable prior year period. We ended the first six months of fiscal year 2024 with 54 warehouse clubs compared to 50 warehouse clubs at the end of the second quarter of fiscal year 2023. Net merchandise sales - constant currency increased8.0% over the comparable prior year period.
Comparable net merchandise sales (that is, sales in the 50 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 26 weeks ended March 3, 2024 increased 8.4%. Comparable net merchandise sales - constant currency for the 26 weeks ended March 3, 2024 increased 4.7%.
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Membership income for the first six months of fiscal year 2024 increased 13.1% to $36.3 million over the comparable prior year period.
Total gross margins (net merchandise sales less associated cost of goods sold) increased 10.3% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.9%, a decrease of 20 basis points or 0.2% from the same period in the prior year.
Selling, general and administrative expenses increased 10.5% compared to the first six months of fiscal year 2023, primarily due to higher compensation, professional fees and depreciation expense.
Operating income was $64.3$121.8 million, an increase of 11.4%, or $12.5 million, compared to the first six months of fiscal year 2023.
We recorded a $9.2 million net loss in total other expense in the first six months of fiscal year 2024 compared to a $12.4 million net loss in total other expense in the same period last year. This decrease in total other expense was primarily due to an increase of $3.0 million in interest income comparatively.
Our effective tax rate decreased for the first six months of fiscal year 2024 to 31.4% from 33.7% in the first six months of fiscal year 2023. The decrease in the effective tax rate is primarily related to the non-recurrence of the separation costs associated with the departure of our former Chief Executive Officer.
Net income for the first six months of fiscal year 2024 was $77.3 million, or $2.07$2.54 per diluted share, compared to $62.0$64.3 million, or $2.01$2.07 per diluted share, in the comparable prior year period.
Adjusted net income for the first six months of fiscal year 20232024 was $71.4$77.3 million, or an adjusted $2.30$2.54 per diluted share, compared to adjusted net income of $60.5$73.6 million, or an adjusted $1.96$2.37 per diluted share, in the comparable prior year period.
Adjusted EBITDA for the first six months of fiscal year 2024 was $161.9 million compared to $154.6 million in the same period last year.
Non – GAAP (Generally Accepted Accounting Principles) Financial Measures
The accompanying Consolidated Financial Statements, including the related notes, are presented in accordance with U.S. GAAP (Generally Accepted Accounting Principles). In addition to relevant GAAP measures, we also provide non-GAAP measures, including adjusted net income, and adjusted net income per diluted share, adjusted EBITDA, net merchandise sales - constant currency and comparable net merchandise sales - constant currency because management believes these metrics are useful to investors and analysts by excludingbecause they exclude items that we do not believe are indicative of our core operating performance. These measures are customary for our industry and commonly used by competitors. TheseHowever, these non-GAAP financial measures should not be reviewed in isolation or considered as an alternative to any other performance measure derived in accordance with GAAP. In addition, adjusted net incomeGAAP and adjusted net income per diluted share may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

Adjusted Net Income and Adjusted Net Income per Diluted Share
The adjustedAdjusted net income and adjusted net income per diluted share metrics are important measures used by management to compare the performance of our core operating resultsoperations between periods. We define adjusted net income as net income, as reported, adjusted for: separation costs associated with the departure of our former Chief Executive Officer, gain on the salewrite-off of ourcertain Aeropost subsidiaryreceivables, and the tax impact of the foregoing adjustments on net income. We define adjusted net income per diluted share as adjusted net income divided by the weighted-average diluted shares outstanding.
We believe adjusted net income and adjusted net income per diluted share are useful metrics to investors and analysts because they present more accurate year-over-year comparisons for our net income and net income per diluted share because adjusted items are not the result of our normal operations.
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Three Months EndedThree Months EndedSix Months Ended
February 29,
2024
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Net income as reported
Adjustments:
Separation costs associated with Chief Executive Officer departure (1)
Separation costs associated with Chief Executive Officer departure (1)
Separation costs associated with Chief Executive Officer departure (1)
Three Months EndedSix Months Ended
February 28,
2023
February 28,
2022
February 28,
2023
February 28,
2022
Net income as reported$31,347 $31,461 $64,252 $61,972 
Adjustments:
Separation costs associated with Chief Executive Officer departure (1)
7,747 — 7,747 — 
Gain on sale of Aeropost subsidiary (2)
— — — (2,736)
Aeropost-related write-offs (2)
Aeropost-related write-offs (2)
Aeropost-related write-offs (2)
Tax impact of adjustments to net income (3)
Tax impact of adjustments to net income (3)
(550)— (550)1,280 
Adjusted net incomeAdjusted net income$38,544 $31,461 $71,449 $60,516 
Net income per diluted shareNet income per diluted share$1.02 $1.03 $2.07 $2.01 
Separation costs associated with Chief Executive Officer departure (4)
0.23 — 0.23 — 
Gain on sale of Aeropost subsidiary (5)
— — — (0.05)
Net income per diluted share
Net income per diluted share
Separation costs associated with Chief Executive Officer departure
Aeropost-related write-offs
Aeropost-related write-offs
Aeropost-related write-offs
Adjusted net income per diluted shareAdjusted net income per diluted share$1.25 $1.03 $2.30 $1.96 
(1)    Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer in February 2023.
(2)    Reflects a gain$2.1 million of $2.7 million associated withAeropost-related write-offs in the salefirst quarter of our Aeropost subsidiary on October 1, 2021.fiscal year 2023.
(3)    Reflects the tax effect of the above-mentioned adjustments.
Adjusted EBITDA
Adjusted EBITDA is defined as net income before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including interest income; other income (expense), net; separation costs associated with Chief Executive Officer departure; and Aeropost-related write-offs. The following is a reconciliation of our Net income to Adjusted EBITDA for the periods presented:
Three Months EndedSix Months Ended
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Net income as reported$39,271 $31,347 $77,318 $64,252 
Adjustments:
Interest expense3,293 2,814 6,109 5,563 
Provision for income taxes17,259 16,202 35,412 32,628 
Depreciation and amortization20,491 17,875 39,985 35,443 
Interest income(3,225)(1,942)(6,091)(3,099)
Other expense, net (1)
7,036 5,344 9,162 9,910 
Separation costs associated with Chief Executive Officer departure (2)
— 7,747 — 7,747 
Aeropost-related write-offs (3)
— — — 2,125 
Adjusted EBITDA$84,125 $79,387 $161,895 $154,569 
(1)    Primarily consists of transaction costs of converting the local currencies into available tradable currencies in some of our countries with liquidity issues and foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars) for the three and six months ended February 29, 2024. Primarily consists of foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars) for the three and six months ended February 28, 2023.
(2)    Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer and the gain on sale of Aeropost subsidiary.
(4)     The separation costs associated with Chief Executive Officer departure, net of tax, reduced net income per diluted share by $0.23 in the second quarter of fiscalFebruary 2023.
(5)(3)    The gain from the saleReflects $2.1 million of Aeropost, net of tax, contributed $0.05 to net income per diluted shareAeropost-related write-offs in the first quarter of fiscal 2022.year 2023.
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Net Merchandise Sales Constant Currency and Comparable Net Merchandise Sales Constant Currency
As a multinational enterprise, we are exposed to changes in foreign currency exchange rates. The translation of the operations of our foreign-based entities from their local currencies into U.S. dollars is sensitive to changes in foreign currency exchange rates and can have a significant impact on our reported financial results. We believe that constant currency is a useful measure, indicating the actual growth of our operations. When we use the term "net merchandise sales – constant currency," it means that we have translated current year net merchandise sales at prior year monthly average exchanges rates. Net merchandise sales - constant currency results exclude the effects of foreign currency translation. Similarly, when we use the term "comparable net merchandise sales – constant currency," it means that we have translated current year comparable net merchandise sales at prior year monthly average exchanges rates. Comparable net merchandise sales – constant currency results exclude the effects of foreign currency translation. Refer to “Management’s Discussion & Analysis – Net Merchandise Sales” and “Management’s Discussion & Analysis – Comparable Net Merchandise Sales” for our quantitative analysis and discussion. Reconciliations between net merchandise sales – constant currency and comparable net merchandise sales - constant currency and the most directly comparable GAAP measures are included where applicable.
COMPARISON OF THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023 AND 2022
The following discussion and analysis compares the results of operations for the three-month and six-month periods ended on February 28, 202329, 2024 with the three-month and six month-periodssix-month periods ended on February 28, 20222023 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.
Net Merchandise Sales
The following tables indicate the net merchandise club sales in the reportable segments in which we operate and the percentage growth in net merchandise sales by segment during the three and six months ended February 28, 202329, 2024 and February 28, 2022:2023:
Three Months Ended
February 28, 2023February 28, 2022
Amount% of net
sales
Increase/ (Decrease) from prior yearChangeAmount% of net
sales
Three Months EndedThree Months Ended
February 29, 2024February 29, 2024February 28, 2023
AmountAmount% of Net
Sales
Increase from Prior YearChangeAmount% of Net
Sales
Central AmericaCentral America$681,667 61.1 %$78,630 13.0 %$603,03759.6 %Central America$766,174 60.7 60.7 %$84,507 12.4 12.4 %$681,66761.1 %
CaribbeanCaribbean327,754 29.4 38,323 13.2 289,43128.6 
ColombiaColombia106,578 9.5 (12,850)(10.8)119,42811.8 
Net merchandise salesNet merchandise sales$1,115,999 100.0 %$104,103 10.3 %$1,011,896100.0 %Net merchandise sales$1,260,916 100.0 100.0 %$144,917 13.0 13.0 %$1,115,999100.0 %
Six Months Ended
Six Months Ended
Six Months Ended
February 29, 2024February 29, 2024February 28, 2023
AmountAmount% of Net
Sales
Increase from Prior YearChangeAmount% of Net
Sales
Central AmericaCentral America$1,453,167 60.7 %$154,448 11.9 %$1,298,71960.6 %
Caribbean
Colombia
Net merchandise salesNet merchandise sales$2,395,930 100.0 %$254,468 11.9 %$2,141,462100.0 %
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Six Months Ended
February 28, 2023February 28, 2022
Amount% of net
sales
Increase/ (Decrease) from prior yearChangeAmount% of net
sales
Central America$1,298,719 60.6 %$135,086 11.6 %$1,163,63359.5 %
Caribbean630,618 29.5 72,854 13.1 557,76428.5 
Colombia212,125 9.9 (22,417)(9.6)234,54212.0 
Net merchandise sales$2,141,462 100.0 %$185,523 9.5 %$1,955,939100.0 %
Comparison of Three and Six Months Ended February 29, 2024 and February 28, 2023 and 2022
Overall, total net merchandise sales grew 10.3%by 13.0% for the second quarter and 9.5%11.9% for thesix-month period ended February 28, 2023.29, 2024 respectively. The second quarter increase resulted from a 3.8%10.0% increase in transactions and a 6.2%2.7% increase in average ticket. For the six-month period, the increase resulted from a 3.4%9.1% increase in transactions and a 5.9%2.5% increase in average ticket. The extra day from the leap year on February 29, 2024 favorably impacted transactions by 1.1% and 0.5% for the second quarter and six-months ended February 29, 2024, respectively. Transactions represent the total number of visits our Members make to our warehouse clubs resulting in a sale and the total number of PriceSmart.com curbside pickup and delivery service transactions. Average ticket represents the amount our Members spend on each visit or PriceSmart.com order. We had 5054 clubs in operation as of February 28, 202329, 2024 compared to 4950 clubs as of February 28, 2022.2023.
Net merchandise sales in our Central America segment increased 13.0%12.4% and 11.6%11.9% for the second quarter and six-months ended February 28, 2023,29, 2024, respectively. These increases had a 780760 basis point (7.8%points (7.6%) and 690720 basis point (6.9%points (7.2%) positive impact on total net merchandise sales growth. All markets within this segment had positive net merchandisegrowth for the second quarter and six-months ended February 29, 2024. We opened our third and fourth warehouse club in El Salvador in May 2023 and February 2024, respectively. We also opened our sixth warehouse club in Guatemala in November 2023. Our club in Santa Ana, El Salvador opened on February 15, 2024, having a minimal impact on sales growth for the three and six-month periods ended February 28, 2023.quarter.
Net merchandise sales in our Caribbean segment increased 13.2%7.2% and 13.1%6.8%, respectively, for the second quarter and the six-months ended February 28, 2023.29, 2024. The increase for the quarter had a 380210 basis point (3.8%points (2.1%) positive impact on net merchandise sales growth and the increase for the six-months had a 370200 basis point (3.7%points (2.0%) positive impact on net merchandise sales growth. All of our markets in this segment had positive net merchandise sales growth.
Net merchandise sales in our Colombia segment increased 34.5% and 26.9% for the second quarter and the six-months ended February 29, 2024, respectively. This increase had a 330 basis points (3.3%) and 270 basis points (2.7%) positive impact on total net merchandise sales growth. The primary driver of the increased sales for the quarter and six-months ended was due to the significant appreciation of the Colombian peso, which has positively impacted reported sales in the three and six-months ended February 29, 2024, when compared to the comparable prior year period. We added one new club to the segment when compared to the comparable prior-year period. We opened our secondtenth warehouse club in JamaicaColombia in April 2022.
Net merchandise sales in our Colombia segment decreased 10.8% and 9.6% for the second quarter and the six-months ended February 28, 2023, respectively. This decrease had a 130 basis point (1.3%) and 110 basis point (1.1%) negative impact on total net merchandise sales growth. The primary driver of the decreased revenue for the quarter was due to the significant devaluation of the Colombian peso during the current fiscal year, which has negatively impacted sales in the second quarter of fiscal yearSeptember 2023.
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The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage change from the three and six-month periodperiods ended February 28, 2023. The term “currency exchange rates” refers to the currency exchange rates29, 2024. When we use to convert netthe term "net merchandise and comparablesales - constant currency," it means that we have translated current year net merchandise sales for all countries whereat prior year monthly average exchanges rates. Net merchandise sales - constant currency results exclude the functionaleffects of foreign currency translation. Impact of foreign 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.net merchandise sales.
Currency Exchange Rate Fluctuations for the
Three months Ended
February 28, 2023
Amount% change
Three Months Ended
February 29, 2024
Three Months Ended
February 29, 2024
Net Merchandise SalesNet Merchandise SalesNet Merchandise Sales - Constant CurrencyImpact of Foreign Currency ExchangeNet Merchandise Sales GrowthNet Merchandise Sales - Constant Currency Growth% Impact of Foreign Currency Exchange
Central AmericaCentral America$16,245 2.6 %Central America$766,174 $$741,390 $$24,784 12.4 12.4 %8.8 %3.6 %
CaribbeanCaribbean2,952 1.0 
ColombiaColombia(21,513)(18.1)
Net merchandise sales$(2,316)(0.2)%
Consolidated totalConsolidated total$1,260,916 $1,216,765 $44,151 13.0 %9.0 %4.0 %
Currency Exchange Rate Fluctuations for the
Six Months Ended
February 28, 2023
Amount% change
Central America$13,933 1.2 %
Caribbean7,615 1.4 
Colombia(45,082)(19.3)
Net merchandise sales$(23,534)(1.2)%
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Six Months Ended
February 29, 2024
Net Merchandise SalesNet Merchandise Sales - Constant CurrencyImpact of Foreign Currency ExchangeNet Merchandise Sales GrowthNet Merchandise Sales - Constant Currency Growth% Impact of Foreign Currency Exchange
Central America$1,453,167 $1,397,838 $55,329 11.9 %7.6 %4.3 %
Caribbean673,531 685,855 (12,324)6.8 8.8 (2.0)
Colombia269,232 228,096 41,136 26.9 7.5 19.4 
Consolidated total$2,395,930 $2,311,789 $84,141 11.9 %8.0 %3.9 %
Overall, the effects of currency fluctuations within our markets had approximately $2.3$44.2 million and $23.5$84.1 million, or 20 basis point (0.2%) and 120400 basis points (1.2%(4.0%), negative of positive impact and 390 basis points (3.9%) of positive impact on net merchandise sales for the quarter and six-months ended February 28, 2023,29, 2024, respectively.
Currency fluctuations had a $16.2$24.8 million and $13.9$55.3 million, or 260360 basis point (2.6%points (3.6%) and 120430 basis point (1.2%points (4.3%), positive impact on net merchandise sales in our Central America segment for the quarter and six-months ended February 28, 2023.29, 2024. These currency fluctuations contributed approximately 140220 basis points (1.4%(2.2%) and 70260 basis points (0.7%(2.6%) of the positive impact on net merchandise sales for the quarter and six-months ended February 28, 2023.29, 2024. The Costa Rica Colócolón appreciated significantly against the dollar as compared to the same three-month and six-month period a year ago, and was a significant factor in the contribution to the favorable currency fluctuations in this segment.
Currency fluctuations had a $3.0$5.6 million and $7.6$12.3 million, or 100170 basis point (1.0%points (1.7%) and 140200 basis point (1.4%points (2.0%), positivenegative impact on net merchandise sales in our Caribbean segment for the quarter and six-months ended February 28, 2023.29, 2024. These currency fluctuations contributed approximately 3050 basis points (0.3%(0.5%) and 4060 basis points (0.4%(0.6%) of positivenegative impact on total net merchandise sales respectively.growth for the quarter and six-months ended February 29, 2024. This positivenegative impact was primarily driven by the appreciationdevaluation of the Dominican Peso as compared to the same three-monththree and six-month periodperiods a year ago.
Currency fluctuations had a $21.5$25.0 million and $45.1$41.1 million, or 1,8102,350 basis point (18.1%points (23.5%) and 1,9301,940 basis point (19.3%points (19.4%), negativepositive impact on net merchandise sales in our Colombia segment for the quarter and six-months ended February 28, 2023.29, 2024. These currency fluctuations contributed approximately 230 basis points (2.3%) and 190 basis points (1.9%) and 230 basis points (2.3%) of the total negativepositive impact on total net merchandise sales for the quarter and six-months ended February 28, 2023.29, 2024.
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Comparable Merchandise Sales
We report comparable net merchandise sales on a “same week” basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close of a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher 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 one of our warehouse clubs opened during fiscal year 20222023 and three of our clubs opened during fiscal year 2024 will not be used in the calculation of comparable sales until it hasthey have been open for at least 13 ½ months. Therefore, comparable net merchandise sales includes 4950 warehouse clubs for the thirteen-week periodthirteen and twenty-six-week periods ended March 5, 2023.3, 2024.
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The following tables indicate the comparable net merchandise sales in the reportable segments in which we operate and the percentage changes in net merchandise sales by segment during the thirteen and twenty-six weektwenty-six-week periods ended March 3, 2024 and March 5, 2023 and February 27, 2022 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 sales
Thirteen Weeks EndedThirteen Weeks Ended
March 3, 2024March 3, 2024 March 5, 2023
% Increase
in Comparable
Net Merchandise Sales
% Increase
in Comparable
Net Merchandise Sales
% Increase/(Decrease)
in Comparable
Net Merchandise Sales
Central AmericaCentral America13.1 %10.6 %Central America8.1 %13.1 %
CaribbeanCaribbean6.9 13.1 
ColombiaColombia(10.6)1.7 
Consolidated comparable net merchandise salesConsolidated comparable net merchandise sales8.5 %10.3 %Consolidated comparable net merchandise sales8.8 %8.5 %
Twenty-Six Weeks Ended
March 3, 2024March 5, 2023
% Increase
in Comparable
Net Merchandise Sales
% Increase/(Decrease)
in Comparable
Net Merchandise Sales
Central America8.6 %10.6 %
Caribbean6.2 6.8 
Colombia13.9 (11.9)
Consolidated comparable net merchandise sales8.4 %6.8 %
Twenty-Six Weeks Ended
March 5, 2023February 27, 2022
% Increase/(Decrease)
in comparable
net merchandise sales
% Increase/(Decrease)
in comparable
net merchandise sales
Central America10.6 %12.3 %
Caribbean6.8 9.1 
Colombia(11.9)(0.5)
Consolidated comparable net merchandise sales6.8 %9.9 %
Comparison of Thirteen and Twenty-Six-Week Periods Ended March 3, 2024 and March 5, 2023 and February 27, 2022
Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the thirteen-week period ended March 5, 20233, 2024 increased 8.5%8.8%. 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, 20233, 2024 increased 6.8%8.4%.
Comparable net merchandise sales in our Central America segment increased 13.1%8.1% and 10.6%8.6% for the thirteen-week and twenty-six week periodsperiod ended March 5, 2023,3, 2024, respectively. All of our markets in Central America had positive comparable net merchandise sales growth for the thirteen-week and twenty-six week periods ended March 5, 2023.3, 2024. The positive comparable net merchandise sales growth for our Central America segment contributed approximately 770500 basis points (7.7%(5.0%) and 630520 basis points (6.3%(5.2%) of positive impact in total comparable merchandise sales for the thirteen-week and twenty-six week periods ended March 5, 2023,3, 2024, respectively.
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Comparable net merchandise sales in our Caribbean segment increased 6.9%6.3% and 6.8%6.2% for the thirteen-week and twenty-six week periods ended March 5, 2023.3, 2024, respectively. These increases contributed approximately 200180 basis points (2.0%) and 190 basis points (1.9%(1.8%) of positive impact on total comparable merchandise sales for the thirteen-week and twenty-six week periods ended March 5, 2023, respectively.3, 2024.
Our Dominican Republic market continued its strong performance in the thirteen-week and twenty-six week periods ended March 5, 2023, with 15.1% and 17.1% comparableComparable net merchandise sales growth, respectively. This strong performance was offset byin our Jamaica market, which declined in comparable net merchandise sales by 5.0%Colombia segment increased 20.7% and 6.0%13.9% for the thirteen-week and 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 club not included in the calculation.
Comparable net merchandise sales in our Colombia segment decreased 10.6% and 11.9% for the thirteen-week and twenty-six week periods ended March 5, 2023,3, 2024, respectively. These decreasesincreases contributed approximately 120200 basis points (1.2%(2.0%) and 140 basis points (1.4%) of negativepositive impact in total comparable merchandise sales for the thirteen-week and twenty-six week periods ended March 5, 2023,3, 2024, respectively. The decreaseincrease in Colombia during the thirteen-week and twenty-six week periodperiods was primarily due to the foreign currency devaluation.appreciation.
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When we use the term "comparable net merchandise sales - constant currency," it means that we have translated current year comparable net merchandise sales at prior year monthly average exchanges rates. Comparable net merchandise sales - constant currency results exclude the effects of foreign currency translation. The following tables illustrate the comparable net merchandise sales - constant currency percentage growth and the impact that changes in foreign currency exchange rates had on our comparable merchandise sales in dollars and the percentage changegrowth for the thirteen-week and twenty-six week periods ended March 5, 2023:3, 2024:
Currency Exchange Rate Fluctuations for the Thirteen Weeks Ended March 5, 2023
Amount% change
Thirteen Weeks Ended
March 3, 2024
Thirteen Weeks Ended
March 3, 2024
Comparable Net Merchandise Sales GrowthComparable Net Merchandise Sales GrowthComparable Net Merchandise Sales - Constant Currency Growth/(Decline)% Impact of Foreign Currency Exchange
Central AmericaCentral America$16,846 2.8 %Central America8.1 %4.6 %3.5 %
CaribbeanCaribbean2,6670.9 
ColombiaColombia(21,292)(18.2)
Consolidated comparable net merchandise salesConsolidated comparable net merchandise sales$(1,779)(0.2)%Consolidated comparable net merchandise sales8.8 %5.2 %3.6 %
Twenty-Six Weeks Ended
March 3, 2024
Comparable Net Merchandise Sales GrowthComparable Net Merchandise Sales - Constant Currency Growth/(Decline)% Impact of Foreign Currency Exchange
Central America8.6 %4.5 %4.1 %
Caribbean6.2 8.1 (1.9)
Colombia13.9 (3.8)17.7 
Consolidated comparable net merchandise sales8.4 %4.7 %3.7 %
Currency Exchange Rate Fluctuations for the Twenty-Six Weeks Ended
March 5, 2023
Amount
% change
Central America$15,305 1.3 %
Caribbean7,4451.4 
Colombia(44,055)(18.9)
Consolidated comparable net merchandise sales$(21,305)(1.1)%
Overall, the mix of currency fluctuations within our markets had an approximately $1.8 million360 basis points (3.6%) of positive impact and $21.3 million, or 20370 basis point (0.2%points (3.7%) and 110 basis point (1.1%), negativeof positive impact on comparable net merchandise sales for the thirteenthirteen-week and twenty-six week periods ended March 5, 2023.3, 2024.
Currency fluctuations within our Central America segment accounted for approximately 190210 basis points (1.9%(2.1%) and 80250 basis points (0.8%(2.5%) of positive impact on total comparable merchandise sales for the thirteenthirteen-week and twenty-six week period,periods, respectively. Our Costa Rica market was the main contributor as the market experienced currency appreciation when compared to the same periods last year.
Currency fluctuations within our Caribbean segment accounted for approximately 3050 basis points (0.3%(0.5%) and 4060 basis points (0.4%(0.6%) of negative impact on total comparable merchandise sales for the thirteen-week and twenty-six week periods, respectively. Our Dominican Republic market experienced currency devaluation when compared to the same period last year.
Currency fluctuations within our Colombia segment accounted for approximately 200 basis points (2.0%) and 180basis points (1.8%) of positive impact on total comparable merchandise sales for the thirteenthirteen-week and twenty-six week periods, respectively. This reflects the appreciation of the Colombian peso's foreign currency exchange rate when compared to the same period respectively. Our Dominican Republic, Jamaica, and Trinidad markets all experienced currency appreciation.a year ago.
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Currency fluctuations within our Colombia segment accounted for approximately 240 basis points (2.4%) and 230 basis points (2.3%) of negative impact on total comparable merchandise sales for the thirteen and twenty-six week period, respectively. This reflects the devaluation of the Colombian peso when compared to the same periods a year ago.
Membership Income
Membership income is recognized ratably over the one-year life of the membership.
Three Months Ended
February 28, 2023February 28, 2022
AmountIncrease/ (Decrease) from prior year% Change
Membership
income % to
net merchandise
club sales
Amount
Membership income - Central America$9,854$8749.7 %1.4 %$8,980
Membership income - Caribbean4,3383448.6 1.3 3,994
Membership income - Colombia1,984(113)(5.4)1.9 2,097
Membership income - Total$16,176$1,1057.3 %1.4 %$15,071
Six Months Ended
February 28, 2023February 28, 2022
AmountIncrease/ (Decrease) from prior year% Change
Membership
income % to
net merchandise
club sales
Amount
Three Months EndedThree Months Ended
February 29, 2024February 29, 2024February 28, 2023
AmountAmount% of Total Operating IncomeIncrease from Prior Year% ChangeMembership
Income % to
Net Merchandise
Sales
Amount% of Total Operating Income
Membership income - Central AmericaMembership income - Central America$19,379 $1,624 9.1 %1.5 %$17,755
Membership income - CaribbeanMembership income - Caribbean8,753 786 9.9 1.4 7,967
Membership income - Caribbean
Membership income - Caribbean
Membership income - ColombiaMembership income - Colombia3,939 (201)(4.9)1.9 4,140
Membership income - Colombia
Membership income - Colombia
Membership income - Total
Membership income - Total
Membership income - Total$18,53829.1 %$2,36214.6 %1.5 %$16,17630.1 %
Six Months Ended
Six Months Ended
Six Months Ended
February 29, 2024February 29, 2024February 28, 2023
AmountAmount% of Total Operating IncomeIncrease/(Decrease) from Prior Year% ChangeMembership
Income % to
Net Merchandise
Sales
Amount% of Total Operating Income
Membership income - Central America
Membership income - Caribbean
Membership income - Caribbean
Membership income - Caribbean
Membership income - Colombia
Membership income - Colombia
Membership income - Colombia
Membership income - Total
Membership income - Total
Membership income - TotalMembership income - Total$32,071 $2,209 7.4 %1.5 %$29,862$36,28729.8 %$4,21613.1 %1.5 %$32,07129.3 %
Number of accounts - Central AmericaNumber of accounts - Central America967,406 36,890 4.0 %930,516
Number of accounts - Central America
Number of accounts - Central America
Number of accounts - Caribbean
Number of accounts - Caribbean
Number of accounts - CaribbeanNumber of accounts - Caribbean460,855 23,790 5.4 437,065
Number of accounts - ColombiaNumber of accounts - Colombia339,295 (5,213)(1.5)344,508
Number of accounts - Colombia
Number of accounts - Colombia
Number of accounts - TotalNumber of accounts - Total1,767,556 55,467 3.2 %1,712,089
Number of accounts - Total
Number of accounts - Total
Comparison of Three and Six Months Ended February 29, 2024 and February 28, 2023
The number of memberMember accounts as of February 28, 202329, 2024 was 3.2%5.0% higher than the number of accounts as of February 28, 2022.2023. Membership income increased 7.3%14.6% and 7.4%13.1% over the three and six-month periods ended February 28, 2023,29, 2024, respectively, compared to the same prior-year periods.period.
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Membership income increased in all of our Central America and Caribbean segments and decreased in our Colombia segment in the three and six-month periods ended February 28, 2023.29, 2024. The consolidated increase in membership income is primarily due to an increase in the membership base since the comparable prior year period. Since August 31, 2022,period and the $5 increase to our membership fee in most markets during the first six months of fiscal year 2024. In our Central America segment, membership income increased compared to the second quarter of fiscal year 2023, attributed to the opening of three new clubs. Similarly, in the Caribbean segment, membership income rose compared to the same period of fiscal year 2023, primarily attributed to the $5 increase to our membership fee. In the Colombia segment, membership income increased compared to the second quarter of fiscal year 2023 due to the appreciation of the Colombian peso against the U.S. dollar, an increase in membership fees, excluding sales tax, and Caribbeanthe opening of a new club. Additionally, all of our 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.
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since August 31, 2023.
We offer the Platinum Membership program in all locations where PriceSmart operates. The annual fee for a Platinum Membership in most markets is approximately $75.$75 to $80, depending on the market in which the Member lives. The Platinum Membership program provides Members with a 2% rebate on most items, up to an annual maximum of $500. We record the 2% rebate as a reduction on net merchandise sales at the time of the sales transaction. Platinum Membership accounts are 8.2%9.6% of our total membership base as of February 28, 2023,29, 2024, an increase from 6.8%8.2% as of February 28, 2022.2023. Platinum Members tend to have higher renewal rates than our Diamond Members.
Our trailing twelve-month renewal rate was 88.0%88.3% and 89.8%88.0% for the periods ended February 28, 202329, 2024 and February 28, 2022,2023, respectively. This compares to a trailing twelve-month renewal rate of 86.9% for the period ended August 31, 2023.
Other Revenue
Other revenue primarily consists of non-merchandise revenue from freight and handling fees generated from the marketplace and casillero operations we sold in October 2021,our interest-generating portfolio from our co-branded credit cards and rental income from operating leases where the Company is the lessor.
Three Months Ended
February 28, 2023February 28, 2022
AmountIncrease/ (Decrease) from prior year% ChangeAmount
Miscellaneous income$2,619$349 15.4 $2,270
Rental income513(133)(20.6)646
Other revenue$3,132$216 7.4 %$2,916
Three Months EndedThree Months Ended
February 29, 2024February 29, 2024February 28, 2023
AmountAmountIncrease from Prior Year% ChangeAmount
Six Months Ended
February 28, 2023February 28, 2022
AmountIncrease/ (Decrease) from prior year% ChangeAmount
Non-merchandise revenue$$(3,307)(100.0)%$3,307
Miscellaneous income
Miscellaneous income
Miscellaneous incomeMiscellaneous income5,016699 16.2 4,317$3,402$783 29.9 29.9 %$2,619
Rental incomeRental income1,106(174)(13.6)1,280Rental income58370 13.6 13.6 513513
Other revenueOther revenue$6,122$(2,782)(31.2)%$8,904Other revenue$3,985$853 27.2 27.2 %$3,132
Six Months Ended
Six Months Ended
Six Months Ended
February 29, 2024February 29, 2024February 28, 2023
AmountAmountIncrease from Prior Year% ChangeAmount
Miscellaneous income
Miscellaneous income
Miscellaneous income$6,530$1,514 30.2 %$5,016
Rental incomeRental income1,15852 4.7 1,106
Other revenueOther revenue$7,688$1,566 25.6 %$6,122
Comparison of Three and Six Months Ended February 28, 202329, 2024 and February 28, 20222023
The primary driver of the decreaseincrease in other revenue for the three and six-months ended February 28, 202329, 2024 was an increase in Miscellaneous income driven by an increase in incentive fee revenue due to Members having higher average outstanding balances on our co-branded credit cards compared to the sale of our Aeropost subsidiary and its marketplace and casillero operations on October 1, 2021.prior year period.
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Results of Operations
Three Months Ended
Three Months EndedThree Months Ended
Results of Operations ConsolidatedResults of Operations ConsolidatedFebruary 28, 2023February 28, 2022Increase/ (Decrease)Results of Operations ConsolidatedFebruary 29, 2024February 28, 2023Increase/ (Decrease)
(Amounts in thousands, except percentages and number of warehouse clubs)(Amounts in thousands, except percentages and number of warehouse clubs)
Net merchandise sales
Net merchandise sales
Net merchandise sales
Net merchandise sales
Net merchandise salesNet merchandise sales
Net merchandise salesNet merchandise sales$1,115,999$1,011,896$104,103$1,260,916$1,115,999$144,917
Total gross marginTotal gross margin$178,537$158,263$20,274Total gross margin$198,231$178,537$19,694
Total gross margin percentageTotal gross margin percentage16.0%15.6%0.4%Total gross margin percentage15.7%16.0%(0.3)%
RevenuesRevenues
Revenues
Revenues
Total revenues
Total revenues
Total revenuesTotal revenues$1,142,189$1,038,557$103,632$1,291,950$1,142,189$149,761
Percentage change from prior periodPercentage change from prior period10.0%Percentage change from prior period13.1%
Comparable net merchandise salesComparable net merchandise sales
Total comparable net merchandise sales increase/(decrease)8.5%10.3%(1.8)%
Comparable net merchandise sales
Comparable net merchandise sales
Total comparable net merchandise sales increase
Total comparable net merchandise sales increase
Total comparable net merchandise sales increase8.8%8.5%0.3%
Total revenue margin
Total revenue margin
Total revenue margin
Total revenue margin
Total revenue marginTotal revenue margin
Total revenue marginTotal revenue margin$198,164$176,709$21,455$221,087$198,164$22,923
Total revenue margin percentageTotal revenue margin percentage17.3%17.0%0.3%Total revenue margin percentage17.1%17.3%(0.2)%
Selling, general and administrativeSelling, general and administrative
Selling, general and administrativeSelling, general and administrative$144,364$128,387$15,977
Selling, general and administrative
Selling, general and administrative
Selling, general and administrative
Selling, general and administrative$157,469$144,364$13,105
Selling, general and administrative percentage of total revenuesSelling, general and administrative percentage of total revenues12.6%12.4%0.2 %Selling, general and administrative percentage of total revenues12.2%12.6%(0.4)%
Operational data
Operational data
Operational data
Adjusted EBITDA (1)
Adjusted EBITDA (1)
Adjusted EBITDA (1)
$84,125$79,387$4,738
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Table(1)     See “Item 2. Management’s Discussion & Analysis – Non - GAAP Financial Measures” for the definition of ContentsAdjusted EBITDA and a reconciliation to GAAP net income as reported.
Three Months Ended
Three Months EndedThree Months Ended
Results of Operations ConsolidatedResults of Operations ConsolidatedFebruary 28,
2023
% of
Total Revenue
February 28,
2022
% of
Total Revenue
Results of Operations ConsolidatedFebruary 29,
2024
% of
Total Revenue
February 28,
2023
% of
Total Revenue
Operating income- by segmentOperating income- by segment
Central America
Central America
Central AmericaCentral America$56,6335.0 %$46,0524.4 %$61,3104.7 %$56,6335.0 %
CaribbeanCaribbean25,4742.2 21,7552.1 
ColombiaColombia4,6620.4 6,1240.6 
United StatesUnited States6,9640.6 8,2990.8 
Reconciling Items (1)
Reconciling Items (1)
(39,933)(3.5)(33,908)(3.3)
Operating income - TotalOperating income - Total$53,8004.7 %$48,3224.7 %Operating income - Total$63,6184.9 %$53,8004.7 %
(1)The reconciling items reflect the amount eliminated upon consolidation of intersegment transactions.
Six Months Ended
Results of Operations ConsolidatedFebruary 28, 2023February 28, 2022Increase/ (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 percentage16.1%15.8%0.3%
 
Revenues
Total revenues$2,196,995$2,013,913$183,082
Percentage change from comparable period9.1%
 
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 percentage17.5%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 revenues12.5%12.5%— %
 
Warehouse clubs
Warehouse clubs at period end50491
Warehouse club sales floor square feet at period end2,4842,43846
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Six Months Ended
Results of Operations ConsolidatedFebruary 28,
2023
% of
Total Revenue
February 28,
2022
% of
Total Revenue
Operating income- by segment
Central America$106,7634.9 %$89,4314.4 %
Caribbean49,9772.3 41,6332.1 
Colombia9,5300.4 12,5020.6 
United States20,5560.9 14,5560.7 
Reconciling Items (1)
(77,499)(3.5)(63,783)(3.2)
Operating income - Total$109,3275.0 %$94,3394.6 %
Six Months Ended
Results of Operations ConsolidatedFebruary 29, 2024February 28, 2023Increase/ (Decrease)
(Amounts in thousands, except percentages and number of warehouse clubs)
Net merchandise sales
Net merchandise sales$2,395,930$2,141,462$254,468
Total gross margin$380,517$344,932$35,585
Total gross margin percentage15.9%16.1%(0.2)%
Revenues
Total revenues$2,458,425$2,196,995$261,430
Percentage change from prior period11.9%
Comparable net merchandise sales
Total comparable net merchandise sales increase8.4%6.8%1.6%
Total revenue margin
Total revenue margin$425,284$383,913$41,371
Total revenue margin percentage17.3%17.5%(0.2)%
Selling, general and administrative
Selling, general and administrative$303,453$274,586$28,867
Selling, general and administrative percentage of total revenues12.3%12.5%(0.2)%
Operational data
Adjusted EBITDA (1)
$161,895$154,569$7,326
Warehouse clubs at period end54504
Warehouse club sales floor square feet at period end2,6462,484162
(1)     See “Item 2. Management’s Discussion & Analysis – Non - GAAP Financial Measures” for the definition of Adjusted EBITDA and a reconciliation to GAAP net income as reported.
Six Months Ended
Results of Operations ConsolidatedFebruary 29,
2024
% of
Total Revenue
February 28,
2023
% of
Total Revenue
Operating income- by segment
Central America$118,2124.8 %$106,7634.9 %
Caribbean50,0502.0 49,9772.3 
Colombia8,2090.3 9,5300.4 
United States17,8450.7 20,5560.9 
Reconciling Items (1)
(72,485)(2.9)(77,499)(3.5)
Operating income - Total$121,8314.9 %$109,3275.0 %
(1)The reconciling items reflect the amount eliminated upon consolidation of intersegment transactions.
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The following table summarizes the selling, general and administrative expense for the periods disclosed:
Three Months Ended
February 28,
2023
% of
Total Revenue
February 28,
2022
% of
Total Revenue
Three Months Ended
Three Months Ended
February 29,
2024
February 29,
2024
% of
Total Revenue
February 28,
2023
% of
Total Revenue
Warehouse club and other operationsWarehouse club and other operations$103,630 9.1 %$93,993 9.1 %Warehouse club and other operations$117,774 9.1 9.1 %$103,630 9.1 9.1 %
General and administrativeGeneral and administrative32,759 2.8 33,951 3.3 
Separation costs associated with Chief Executive Officer departureSeparation costs associated with Chief Executive Officer departure7,747 0.7 — — 
Pre-opening expensesPre-opening expenses89 — 130 — 
Pre-opening expenses
Pre-opening expenses
Loss on disposal of assets
Loss on disposal of assets
Loss on disposal of assetsLoss on disposal of assets139 — 313 — 
Total Selling, general and administrativeTotal Selling, general and administrative$144,364 12.6 %$128,387 12.4 %Total Selling, general and administrative$157,469 12.1 12.1 %$144,364 12.6 12.6 %
Six Months Ended
Six Months Ended
Six Months Ended
February 29,
2024
February 29,
2024
% of
Total Revenue
February 28,
2023
% of
Total Revenue
Warehouse club and other operationsWarehouse club and other operations$227,739 9.3 %$200,522 9.1 %
General and administrative
Separation costs associated with Chief Executive Officer departure
Pre-opening expenses
Pre-opening expenses
Pre-opening expenses
Loss on disposal of assets
Loss on disposal of assets
Loss on disposal of assets
Total Selling, general and administrativeTotal Selling, general and administrative$303,453 12.3 %$274,586 12.5 %
Six Months Ended
February 28,
2023
% of
Total Revenue
February 28,
2022
% of
Total Revenue
Warehouse club and other operations$200,5229.1 %$185,1899.2 %
General and administrative65,9313.0 65,6443.3 
Separation costs associated with Chief Executive Officer departure7,7470.4 — 
Pre-opening expenses89— 1,100— 
Loss on disposal of assets297— 724— 
Total Selling, general and administrative$274,58612.5 %$252,65712.5 %
Comparison of Three and Six Months Ended February 28, 202329, 2024 and February 28, 20222023
Total gross margin is derived from our Revenue – Net merchandise sales less our Cost of goods sold – Net merchandise sales and represents our sales and cost of sales generated from the business activities of our warehouse clubs. We express our Total gross margin percentage as a percentage of our Net merchandise sales.
On a consolidated basis, total gross margin percentageas a percent of net merchandise sales for the three and six months ended February 28, 202329, 2024 was 16.0%15.7% and 16.1%15.9%, 40 basis points (0.4%) and 30 basis points (0.3%) higherand 20 basis points (0.2%) lower than the comparable prior year 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 services and bakery, and improved front end margin.
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We anticipate aThe decrease in the Total Gross Margin rate for both the thirdthree and fourth quarters of fiscal year 2023, when compared to the first two quarters of the fiscal year. This decreasesix-month periods ended February 29, 2024 is mainly due to the eliminationremoval of oura COVID premium from merchandise pricing and a reduction in ourliquidity premiums for items sold in Trinidad, foreign currency exchange premium, as well as an expected margin decreaseresulting in Colombia. In Colombia we have determined not toa negative impact of 30 basis points (0.3%). However, this was partially offset by a 10 basis points (0.1%) increase the sales price on select items on which our costs have increased in an effort to reduce the cost burden to our Membersmargins in this market during this period of exceptionally high inflationfood service and significant devaluation of the Colombian Peso. We are considering additional strategic pricing actions in Colombia.bakery offerings.
Total revenue margin is derived from Total revenues, which includes our Net merchandise sales, Membership income, Export sales, and Other revenue and income less our Cost of goods sold for net merchandise sales, Export sales, and Non-merchandise revenues. We express our Total revenue margin as a percentage of Total revenues.
Total revenue margin increased 30decreased 20 basis points (0.3%(0.2%) for the three monthsand six-month periods ended February 28, 202329, 2024, compared to the prior-year period, which is primarily the result of the higher total gross margin percentage of 40 basis points (0.4%). 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 higherlower total gross margin percentage of 30 basis points (0.3%). and 20 basis points (0.2%) for the quarter and six-months ended February 29, 2024, respectively.
Selling, general, and administrative expenses consist of warehouse club and other operations, general and administrative expenses, separation costs associated with the Chief Executive Officer departure, pre-opening expenses, and loss on disposal of assets. In total, selling, general and administrative expenses increased $16.0$13.1 million compared to the prior year, and increaseddecreased as a percentage of total revenue, increasingrevenues, decreasing by 2040 basis points (0.2%(0.4%) to 12.6%12.2% of total revenue for the second quarter of fiscal year 20232024 compared to 12.4%12.6% of total revenues for the second quarter of fiscal year 2022. 2023.
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Selling, general and administrative expenses increased $21.9$28.9 million for the first six months of fiscal year 2024 compared to the prior year, but remained unchangeddeclined 20 basis points (0.2%) to 12.3% as a percentage of total revenue compared to 12.5% of total revenue for the first six months of fiscal year 20232023. This decrease as a percentage of total revenue is largely due to the $7.7 million, or 40 basis points (0.4%) of total revenue, of separations costs associated with the Chief Executive Officer departure recorded in the prior year period and 2022.partially offset by an increase in our Warehouse club and other operations expenses of $27.2 million or 20 basis points (0.2%) of total revenue.
Warehouse club and other operations expenses remained unchanged asat 9.1% of total revenues for the second quarter of fiscal year 20232024 and 2022.2023.
Warehouse club and other operations expenses decreasedincreased to 9.1%9.3% of total revenues for the first six months of fiscal year 2023ended February 29, 2024 compared to 9.2%9.1% for the prior-year period. This was primarily due to 10our Colombia market which increased 20 basis points (0.1%(0.2%) as a percentage of lower operations expenses from our casillero and marketplace businessrevenue year over year due to the saleimpact of Aeropostthe appreciation of the Colombian peso on October 1, 2021.our warehouse club and other operations expenses in Colombia. Additionally, we opened one new club in Colombia on the first day of fiscal year 2024.
In January 2024, the Company purchased one of its club buildings and land, which was previously leased, in Panama City, Panama, for $33.0 million. This purchase triggered a change in the estimate of the depreciable lives of certain leasehold improvements, previously limited to the lease term, lowering future annual depreciation expense. The lower annual depreciation expense and the cost savings on straight-line rent expense, partially offset by the depreciation expense on the new building, will save approximately $1.1 million per year, net of tax within our Warehouse club and other operations expenses in the Company's consolidated statements of income. Additionally, the Company entered into a loan agreement for $16.5 million, paid over 15 years, to partially fund the purchase of our Via Brasil club. We expect approximately $1.0 million in interest payments, net of tax, over the next 12 months associated with this loan, which will continue to decrease as the loan balance is paid off over the life of the loan. The interest expense related to this loan will be recorded within the Interest expense caption on the consolidated statements of income.
General and administrative expenses decreasedincreased to 2.8%3.0% of total revenues for the second quarter of fiscal year 20232024 compared to 3.3%2.8% for the second quarter of fiscal year 2022.2023. The 5020 basis point (0.5%points (0.2%) decreaseincrease is primarily due to the leveraging of generalincreased compensation costs and administrativetravel along with certain non-recurring expenses when comparedrelated 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.

professional fees.
General and administrative expenses decreased toremained unchanged at 3.0% of total revenues for the first six months of fiscal year 2023 compared to 3.3% for the first six months of fiscal year 2022. The 30 basis point (0.3%) decrease is primarily due to the leveraging of general2024 and administrative expenses.2023.

    We recorded $7.7 million, or 70 basis points (0.7%) of total revenue, inIn the second quarter of fiscal year 2023, we recorded costs for separation and other related termination benefits for our former Chief Executive Officer who resigned effective February 3, 2023. Of this amount $4.2 million in net charges related to adjustments to non-cash stock-based compensation. All separation-related benefits in connection with our Chief Executive Officer’s departure have beenWe accrued as of February 28, 2023. We do not expect any significant additional charges relating to her resignation in future periods. These costs, net of tax, negatively impacted earnings per share for the threerelated charges and six-months ended February 28, 2023substantially fulfilled all payment obligations by $0.23 per share.
the end of the second quarter of fiscal year 2023; however, some vesting of performance stock units occurred in the first quarter of fiscal year 2024. On a go-forward basis, our Interim Chief Executive Officer has declined to receive compensation for his services during his term; therefore, we expect selling,Selling, general and administrative expenses will be positively impacted, compared to prior Chief Executive Officer compensation levels, by $2.5 million of savings each quarter during his term, net ofreduced by salary increases for other executives related to the change in leadership.leadership.
Operating income in the second quarter of fiscal year 20232024 increased to $53.8$63.6 million (4.7%(4.9% of total revenue) compared to $48.3$53.8 million (4.7% of total revenue) for the same period last year. This reflects the increasedecrease in total revenue margin of 3020 basis points (0.3%(0.2%), partially offset by a 2040 basis point (0.2%points (0.4%) increase in deleveragingdue to the leveraging of selling, general and administrative expenses over the comparable prior-year period.
Operating income for the six months ended February 28, 2023 29, 2024increased to $109.3$121.8 million (5.0%(4.9% of total revenue) compared to $94.3$109.3 million (4.6%(5.0% of total revenue) for the same period last year.
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Interest Income
Net interest income represents the earnings generated from interest-bearing assets held by PriceSmart, Inc. and our wholly owned foreign subsidiaries. These assets include investments in fixed income securities and deposits held with financial institutions. The interest income is derived from the interest payments received on these assets, which serve to enhance our overall financial returns.
Three Months Ended
February 29,
2024
February 28,
2023
AmountChangeAmount
Interest income$3,225$1,283$1,942
Six Months Ended
February 29,
2024
February 28,
2023
AmountChangeAmount
Interest income$6,091$2,992$3,099

Comparison of Three and Six Months Ended February 29, 2024 and February 28, 2023
Net interest income increased for the three and six-month periods ended February 29, 2024, primarily due to an increase in investments at higher yields when compared to the comparable prior year period.
Interest Expense
Three Months Ended
February 29,
2024
February 28,
2023
AmountChangeAmount
Interest expense on loans$2,865$(199)$3,064
Interest expense related to hedging activity657467190
Less: Capitalized interest(229)211(440)
Net interest expense$3,293$479$2,814
Six Months Ended
February 29,
2024
February 28,
2023
AmountChangeAmount
Interest expense on loans$5,763$46$5,717
Interest expense related to hedging activity1,072535537
Less: Capitalized interest(726)(35)(691)
Net interest expense$6,109$546$5,563

Comparison of Three and Six Months Ended February 29, 2024 and February 28, 2023
Net interest expense reflects borrowings by PriceSmart, Inc. and our wholly owned foreign subsidiaries to finance new land acquisition and construction for new warehouse clubs and distribution centers, warehouse club expansions, the capital requirements of warehouse clubsclub and other operations, increase U.S. dollar liquidity in our Trinidad subsidiary and ongoing working capital requirements.
Three Months Ended
February 28,
2023
February 28,
2022
AmountChangeAmount
Interest expense on loans$3,064$1,261$1,803
Interest expense related to hedging activity190(718)908
Less: Capitalized interest(440)(167)(273)
Net interest expense$2,814$376$2,438
Six Months Ended
February 28,
2023
February 28,
2022
AmountChangeAmount
Interest expense on loans$5,717$2,577$3,140
Interest expense related to hedging activity537(1,220)1,757
Less: Capitalized interest(691)178(869)
Net interest expense$5,563$1,535$4,028
Comparison of Three and Six Months Ended February 28, 2023 and February 28, 2022
Net interest expense increased for the three-monththree and six-month periodperiods ended February 28, 202329, 2024 primarily due to higher interest rates and higher long-term borrowings outstandingexpenses related to our hedging activities when compared to the comparable prior year period.
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Other Income (Expense),Expense, Net
Other income (expense),expense, net consists of currency gains or losses, as well as net benefit costs related to our defined benefit plans and other items considered to be non-operating in nature.
Three Months Ended
February 28,
2023
February 28,
2022
AmountChange% ChangeAmount
Other Expense, net$(5,344)$(4,525)552.5 %$(819)
Six Months Ended
February 28,
2023
February 28,
2022
AmountChange% ChangeAmount
Other Income (Expense), net$(9,910)$(10,500)(1,779.7)%$590 
Three Months Ended
February 29,
2024
February 28,
2023
AmountChange% ChangeAmount
Other expense, net$(7,036)$(1,692)31.7 %$(5,344)
Six Months Ended
February 29,
2024
February 28,
2023
AmountChange% ChangeAmount
Other expense, net$(9,162)$748 (7.5)%$(9,910)
Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains/(losses) are recorded as currency gains or losses. Additionally, gains or losses from transactions denominated in currencies other than the functional currency of the respective entity also generate currency gains or losses.
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Comparison of Three and Six Months Ended February 29, 2024 and February 28, 2023 and 2022
For the three and six-months ended February 28, 202329, 2024, the primary driver of Other income (expense),expense, net included a $3.9$3.4 million and $7.4$6.0 million loss,of transaction costs, respectively, due to revaluation of monetary assets and liabilities (primarily U.S. dollars) in severalsome of our markets. Of those amounts,countries with liquidity issues associated with increased spreads and converting the local currencies into available tradable currencies before converting them to U.S. dollars. Additionally, Costa Rica contributed a $1.9$2.5 million and $2.8$2.3 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 transaction costsThis was accompanied by a depreciation of $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 tradable currencies, such as euros or Canadian dollars, before converting them toHonduran lempira, which resulted in a loss from our net U.S. dollars.dollar liability position in that market.
Provision for Income Taxes
Three Months Ended
February 28,
2023
February 28,
2022
AmountChangeAmount
Three Months EndedThree Months Ended
February 29,
2024
February 29,
2024
February 28,
2023
AmountAmountChangeAmount
Provision for income taxesProvision for income taxes$16,202$2,063$14,139Provision for income taxes$17,259$1,057$16,202
Effective tax rateEffective tax rate34.0%31.0%Effective tax rate30.5%34.0%
Six Months Ended
Six Months Ended
Six Months Ended
February 29,
2024
February 29,
2024
February 28,
2023
AmountAmountChangeAmount
Provision for income taxesProvision for income taxes$35,412$2,784$32,628
Effective tax rateEffective tax rate31.4%33.7%
Six Months Ended
February 28,
2023
February 28,
2022
AmountChangeAmount
Provision for income taxes$32,628$2,675$29,953
Effective tax rate33.7%32.6%
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Comparison of Three and Six Months Ended February 28, 202329, 2024 and February 28, 20222023
For the three months ended February 28, 2023,29, 2024, the effective tax rate was 34.0%30.5% compared to 31.0%34.0% for the prior year period. The increasedecrease in the effective tax rate versus the prior year was primarily attributable to the following factors:
A comparably favorable net tax impact from non-recurring items of 3.2%, primarily related to the non-recurrence of separation costs associated with the departure of our former Chief Executive Officer; and
A comparably favorable net tax impact from recurring items of 1.0%0.3%, primarily resulting from valuation allowances we took with respect to deferred tax assets from foreign tax credits that are no longer deemed recoverable; and
A comparably unfavorable net tax impact from non-recurring items of 4.0%, primarily related to separation costs associated with the departure of our former Chief Executive Officer.recoverable.
For the six months ended February 28, 2023,29, 2024, the effective tax rate was 33.7%31.4% compared to 32.6%33.7% for the prior year period. The increasedecrease in the effective tax rate versus the prior year was primarily attributable to the following factors:
A comparably favorable net tax impact from non-recurring items of 1.6%, primarily related to the non-recurrence of separation costs associated with the departure of our former Chief Executive Officer; and
A comparably favorable net tax impact from recurring items of 1.0%0.7%, primarily resulting from valuation allowances we took with respect to deferred tax assets from foreign tax credits that are no longer deemed recoverable; andrecoverable.
A comparably unfavorable benefit from non-recurring items of 2.1%, primarily related to separation costs associated with the departure of our former Chief Executive Officer.
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Other Comprehensive Income (Loss)
Three Months Ended
February 28,
2023
February 28,
2022
AmountChange% ChangeAmount
Other Comprehensive Income$12,434 $8,208 194.2 %$4,226 
Six Months Ended
February 28,
2023
February 28,
2022
AmountChange% ChangeAmount
Other Comprehensive Income (Loss)$11,883 $13,788 723.8%$(1,905)
Three Months Ended
February 29,
2024
February 28,
2023
AmountChange% ChangeAmount
Other Comprehensive Income$5,123 $(7,311)(58.8)%$12,434 
Six Months Ended
February 29,
2024
February 28,
2023
AmountChange% ChangeAmount
Other Comprehensive Income8,703 $(3,180)(26.8)%$11,883 
Comparison of Three and Six Months Ended February 28, 202329, 2024 and February 28, 20222023
Our otherOther comprehensive income of approximately $12.4 million for the second quarter of fiscal year 20232024 resulted primarily from the comprehensive gain of approximately $12.2 million from foreign currency translation adjustments related to assets and liabilities and the translation of the statements of income related to revenue, costs and expenses on the statements of income of our subsidiaries whose functional currency is not the U.S. dollar, accompanied by approximately $0.2 million related to unrealized gains on changes in our derivative obligations. Other comprehensive income fordollar. During the six-months ended February 28, 2023first six months of 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 appreciation of the local currency against the U.S. dollar for our Costa Rica subsidiary. For the six-month period,fiscal year 2024, the largest translation adjustments were related to the appreciation of the local currency against the U.S. dollar of our Colombia and Costa Rica subsidiary,subsidiaries, partially offset by the devaluation of the local currencies against the U.S. dollar for our Colombia and Dominican Republic subsidiaries.subsidiary. Other comprehensive income for the six-months ended February 29, 2024 of approximately $8.7 million was primarily the result of the comprehensive gain of $10.3 million from foreign currency translation adjustments offset by approximately $1.7 million related to unrealized losses on changes in the fair value of our derivative obligations.
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LIQUIDITY AND CAPITAL RESOURCES
Financial Position and Cash Flow
Our operations have historically supplied us with a significant source of liquidity. We generate cash from operations primarily through net merchandise sales and membership fees. Cash used in operations generally consistconsists 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 operationsoperations. We also have returned cash to stockholders through a semiannual dividend and to pay dividends onby repurchasing shares of our common stock.stock pursuant to the stock repurchase program we commenced in the fourth quarter of fiscal year 2023 and completed in the first quarter of fiscal year 2024. We evaluate our funding requirements on a regular basis to cover any shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity if necessary. Refer to “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.
Repatriation of cash and cash equivalents held by foreign subsidiaries may require us to accrue and pay taxes. We have no plans at this timetaxes for certain jurisdictions. If we decide to repatriate cash through the payment of a cash dividendsdividend by our foreign subsidiaries to our domestic operations, we will accrue taxes if and therefore, have not accrued taxes that would be due from repatriation.
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when appropriate.
The following table summarizes the cash and cash equivalents, including restricted cash, held by our foreign subsidiaries and domestically (in thousands):
February 28,
2023
August 31,
2022
February 29,
2024
February 29,
2024
August 31,
2023
Amounts held by foreign subsidiariesAmounts held by foreign subsidiaries$241,013$203,952Amounts held by foreign subsidiaries$155,983$139,050
Amounts held domesticallyAmounts held domestically39,53947,421Amounts held domestically26,592113,152
Total cash and cash equivalents, including restricted cashTotal cash and cash equivalents, including restricted cash$280,552$251,373Total cash and cash equivalents, including restricted cash$182,575$252,202
The following table summarizes the short-term investments held by our foreign subsidiaries and domestically (in thousands):
February 28,
2023
August 31,
2022
February 29,
2024
February 29,
2024
August 31,
2023
Amounts held by foreign subsidiariesAmounts held by foreign subsidiaries$24,322$11,160
Amounts held domesticallyAmounts held domestically30,000Amounts held domestically15,000 16,78716,787
Total short-term investmentsTotal short-term investments$54,322$11,160Total short-term investments$93,630 $$91,081
As of February 28, 202329, 2024 and August 31, 2022,2023, there were no certificates of deposit with a maturity of over a year held by our foreign subsidiaries or domestically.

From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products or otherwise fund our operations. Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradeabletradable currencies. We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradeabletradable currencies. During the third quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars.We are actively working with our banking partners and government authorities to address this situation. We have and continue to take additional actions in this respect. Refer to “Management’s Discussion & Analysis – Factors Affecting Our Business” for our quantitative analysis and discussion.
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Our cash flows are summarized as follows (in thousands):
Six Months Ended
February 28,
2023
February 28,
2022
Change
Net cash provided by (used in) operating activities$116,681 $(7,920)$124,601
Six Months EndedSix Months Ended
February 29,
2024
February 29,
2024
February 28,
2023
Change
Net cash provided by operating activitiesNet cash provided by operating activities$127,666 $116,681 $10,985
Net cash used in investing activitiesNet cash used in investing activities(96,078)(30,531)(65,547)Net cash used in investing activities(105,264)(96,078)(96,078)(9,186)(9,186)
Net cash provided by (used in) financing activities(3,060)17,843 (20,903)
Net cash used in financing activitiesNet cash used in financing activities(92,343)(3,060)(89,283)
Effect of exchange ratesEffect of exchange rates11,636 42 11,594Effect of exchange rates314 11,636 11,636 (11,322)(11,322)
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents$29,179 $(20,566)$49,745 
Net cash provided by operating activities totaled $116.7$127.7 million and net cash used in operating activities totaled $7.9$116.7 million for the six months ended February 28, 202329, 2024 and February 28, 2022,2023, respectively. For the six-monthssix months ended February 28, 2023,29, 2024, cash provided by operating activities increased primarily due to an increase in net income without non-cash items which contributed $15.0 million, as well as shifts in working capital generated from changes in our merchandise inventory and accounts payable positions, which contributed $103.1 million, and$8.7 million. This was partially offset by a positivenegative net change in our other various operating assets and liabilities when compared to the six-months ended February 28, 2022. The2023. Specifically, changes in our various operating assets and liabilities resulted in a net usechange of $12.7 million of cash in operating activities inused for the prior year resulted primarily from an increase in inventory to accommodate pandemic-influenced consumer preferences and to mitigate out-of-stocks due to supply-chain disruptions during that period. Our inventory buildup for 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.
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six months ended February 29, 2024.
Net cash used in investing activities totaled $96.1$105.3 million and $30.5$96.1 million for the six months ended February 28, 202329, 2024 and February 28, 2022,2023, respectively. The $65.5$9.2 million increase in cash used in investing activities is primarily the resultdue to a $51.3 million increase in purchases of short-term investments and a net decrease$50.5 million increase in property and equipment expenditures to support growth of our real estate footprint. This was partially offset by a $92.6 million increase in proceeds from settlements of short-term investments and an increase in purchases of short-term investments, compared to the same six-month period a year-ago. The decrease in proceeds from settlements is primarily due toWe opened three additional clubs during the overall net decreasefirst six months of short-term investments in Trinidad as fewer of those investments settled comparatively and we are investing our excess U.S. dollar balances in that market in shorter dated certificates of deposits or other liquid investments classified as cash or cash equivalents.fiscal year 2024.
Net cash used in financing activities totaled $3.1$92.3 million and net cash provided by financing activities totaled $17.8$3.1 million for the six months ended February 28, 202329, 2024 and February 28, 2022,2023, 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 investmentsThe $89.3 million increase in technology to support our omni-channel initiatives. The $20.9 million shift from cash provided by, to cash used in financing activities is primarily the result of a net decreaserepurchases of treasury stock during the first six months and lower proceeds from short-termlong-term bank borrowings compared to the same six-month period a year-ago.year ago.
The following table summarizes the dividends declared and paid during fiscal yearsyear 2024 and 2023 and 2022 (amounts are per share):
First PaymentSecond Payment
First PaymentFirst PaymentSecond Payment
DeclaredDeclaredAmountRecord
Date
Date
Paid
Date
Payable
AmountRecord
Date
Date
Paid
Date
Payable
AmountDeclaredAmountRecord
Date
Date
Paid
Date
Payable
AmountRecord
Date
Date
Paid
Date
Payable
Amount
2/1/2024
2/3/20232/3/2023$0.92 2/16/20232/28/2023N/A$0.46 8/15/2023N/A8/31/2023$0.46 
2/3/2022$0.86 2/15/20222/28/2022N/A$0.43 8/15/20228/31/2022N/A$0.43 
On April 3, 2024, the Company's Board of Directors declared a one-time $1.00 per share special dividend payable on April 30, 2024 to stockholders of record on April 19, 2024. The Company has decided to distribute excess cash to stockholders in the form of a special dividend. The declaration of future dividends (ongoing or otherwise), if any, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements, taking into account the uncertain macroeconomic conditions on our results of operations and cash flows.
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Capital Expenditures
Capital expenditures were $103.5 million for the six months ended February 29, 2024, of which $37.2 million and $66.3 million were maintenance and growth expenditures, respectively. Capital expenditures for fiscal year 2023 were $142.5 million, of which $69.3 million and $73.2 million were maintenance and growth expenditures, respectively. In January 2024, the Company purchased its club building and land, which were previously leased, in Panama City, Panama for $33.0 million. Maintenance expenditures are typically for operational fixtures and equipment, building refurbishment, solar, technology and other expenses. Growth expenditures are for new clubs, purchases of previously leased clubs, investments to move existing clubs to better locations, supply chain improvements, and major remodels.
Short-Term Borrowings and Long-Term Debt
Our financing strategy is to ensure liquidity and access to capital markets while minimizing our borrowing costs. The proceeds of these borrowings were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, acquisitions, dividends and repayment of existing debt. Please refer to “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 7 – Debt.”Debt" for further discussion.
Future Lease and Other Commitments
We place a strong emphasis on managing future lease commitments related to various facilities and equipment that support our operations. We believe our current liquidity and cash flow projections can cover future lease commitments. As of February 29, 2024, we have signed one lease agreement for a facility to be built by the lessor which has not yet commenced. Please refer to "Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 6 – Commitments and Contingencies" for further discussion.
Derivatives
Please refer to “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 8 – Derivative Instruments and Hedging Activities” for further discussion.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have had, or are reasonably likely to have, a material current or future effect on its financial condition or consolidated financial statements.
Repurchase of Equity SecuritiesCommon Stock and Reissuance of Treasury Shares Related to Employee Stock Awards
At the vesting dates for restricted stock awards to our employees, we repurchase a portion of the shares that have vested at the prior day's closing price per share and apply the proceeds to pay the employees' minimum statutory tax withholding requirements related to the vesting of restricted stock awards. The Company expects to continue this practice going forward. We do not currently have a stock repurchase program.
Shares of common stock repurchased by us are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in our consolidated balance sheets. We may reissue these treasury shares in the future.
We have reissued treasury shares as part of our stock-based compensation programs. During the six-months ended February 28, 2023,29, 2024, we reissued approximately 7,0003,000 treasury shares.
Share Repurchase Program
In July 2023 we announced a program authorized by our Board of Directors to repurchase up to $75 million of our common stock. We successfully completed the share repurchase program in the first quarter of fiscal year 2024.We purchased a total of approximately 1,007,000 shares of our common stock under the program. The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which permitted us to repurchase common stock at a time that we might otherwise have been precluded from doing so under insider trading laws or self-imposed trading restrictions. We have no plans to continue repurchases or adopt a new repurchase plan at this time.However, the Board of Directors could choose to commence another program in the future at its discretion after its review of the Company’s financial performance and anticipated capital requirements.
54
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Table of Contents
Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands):
Three Months EndedSix Months Ended
February 29,
2024
February 28,
2023
February 29,
2024
February 28,
2023
Number of common shares acquired935,663
Average price per common share acquired$$$74.13$
Total cost of common shares acquired$$$69,362$
Critical Accounting Estimates
The preparation of our consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require management to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Management continues to review its accounting policies and evaluate its estimates, including those related to business acquisitions, contingencies and litigation, income taxes, value added taxes, and long-lived assets. We base our estimates on historical experience and on other assumptions that management believes to be reasonable under the present circumstances. Using different estimates could have a material impact on our financial condition and results of operations.
Income Taxes
For interim reporting, we estimate an 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 subjectrequired to file federal and state income taxestax returns in the United States and numerousincome tax and various other tax returns in multiple foreign jurisdictions. Significant judgmentsjurisdictions, each with changing tax laws, regulations and administrative positions. This requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. We record the benefits of uncertain tax positions in our financial statements only after determining it is more likely than not the uncertain tax positions would sustain challenge by taxing authorities, including resolution of related appeals or litigation processes, if any. We develop our assessment of an uncertain tax position based on the specific facts and legal arguments of each case and the associated probability of our reporting position being upheld, using internal expertise and the advice of third-party experts. However, our tax returns are requiredsubject to routine reviews by the various taxing authorities in the determinationjurisdictions in which we file our tax returns. As part of these reviews, taxing authorities may challenge, and in some cases presently are challenging, the interpretations we have used to calculate our tax liability. In addition, any settlement with the tax authority or the outcome of any appeal or litigation process might result, and in some cases has resulted, in an outcome that is materially different from our estimated liability. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated income tax expense. financial statements as appropriate. Variations in the actual outcome of these cases could materially impact our consolidated financial statements.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant 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 consider three years of cumulative operating income (loss).income.
We are required to file federal and state income tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation
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Table of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by us. We, in consultation with our tax advisors, base our tax returns on interpretations that we believe 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 we file our tax returns. As part of these reviews, a taxing authority may disagree with respect to the interpretations we used to calculate our tax liability and therefore require us to pay additional taxes.Contents
We accrue an amount for our estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has 50% or less likelihood of being sustained. This requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. There were no material changes in our uncertain income tax positions for the period ended on February 28, 2023.
Tax Receivables
We pay Value Added Tax (“VAT”) or similar taxes, income taxes, and other taxes within the normal course of our business in most of the countries in which we operate related to the procurement of merchandise and/or services we acquire and/or on sales and taxable income. VAT is a form of indirect tax applied to the value added at each stage of production (primary, manufacturing, wholesale and retail). This tax is similar to, but operates somewhat differently than, sales tax paid in the United States. We generally collect VAT from our Members upon sale of goods and services and pay VAT to our vendors upon purchase of goods and services. Periodically, we submit VAT reports to governmental agencies and reconcile the VAT paid and VAT received. The net overpaid VAT may be refunded or applied to subsequent returns, and the net underpaid VAT must be remitted to the government.
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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.
In twoMinimum tax rules, applicable in some of the countries where the Company operates, there have been changes in the method of computing minimum tax payments, under which the governments have sought to require the Company to paypayment of taxes based on a percentage of sales, ratherwhen the resulting tax is greater than taxable income. Asthe tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). This can result we have made and may continue to make income taxin AMT payments substantially in excess of those wethe Company would expect to pay based on taxable income. TheAs the Company hadbelieves that in one country where it operates it should only be ultimately liable for an income-based tax, it has accumulated income tax receivables of $11.3$10.9 million and $11.0$10.7 million as of February 28, 2023 and August 31, 2022, respectively, and deferred tax assets of $4.0$3.7 million and $3.5$3.2 million as of February 28, 202329, 2024 and August 31, 2022,2023, respectively, in this country.
The Company’s various outstanding VAT receivables and/or income tax receivables are based on cases or appeals with their own set of facts and circumstances. The Company consults and evaluates with legal and tax advisors regularly to understand the strength of its legal arguments and probability of successful outcomes in addition to its own experience handling these countries.complex tax issues. While the rules related to refunds of income tax receivables in these countries are either unclear orand complex, the Company has not placed any type of allowance on the recoverability of thesethe remaining 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 frompursuant to tax assessments that we are appealing asbecause 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.
Our policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows:
Short-term VAT and Income tax receivables, recorded as Other current assets: This classification is used for any countries where our subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. We also classify as short-term any approved refunds or credit notes to the extent that we expect to receive the refund or use the credit notes within one year.
Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where our subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when we do not expect to eventually prevail in our recovery of such balances. We do not currently have any allowances provided against VAT and income tax receivables.
Long-lived Assets
We evaluate quarterly our long-lived assets for indicators of impairment. Indicators that an asset may be impaired are:
the asset's inability to continue to generate income from operations and positive cash flow in future periods;
loss of legal ownership or title to the asset;
significant changes in its strategic business objectives and utilization of the asset(s); and
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the impact of significant negative industry or economic trends.
Management's judgments are based on market and operational conditions at the time of the evaluation and can include management's best estimate of future business activity, which in turn drives estimates of future cash flows from these assets. These periodic evaluations could cause management to conclude that impairment factors exist, requiring an adjustment of these assets to their then-current fair market value. Future business conditions and/or activity could differ materially from the projections made by management causing the need for additional impairment charges. We did not record any impairment charges during the second quarter of fiscal year 20232024 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.
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Goodwill
Goodwill is not amortized, but is evaluated for impairment annually or whenever events or changes in circumstances indicate that the value of a certain asset may be impaired. Generally, this evaluation begins with a qualitative assessment to determine whether a quantitative impairment test is necessary. If we determine, after performing an assessment based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative impairment test would be performed. The quantitative test for impairment requires management to make judgments relating to future cash flows, growth rates and economic and market conditions. These evaluations are based on determining the fair value of a reporting unit or asset using a valuation method such as discounted cash flow or a relative, market-based approach. Historically, our reporting units have generated sufficient returns to recover the cost of our goodwill. Because of the nature of the factors used in these tests, if different conditions occur in future periods, future operating results could be materially impacted. For approximately $43.2 million of certain acquired goodwill, the fair value was greater than the carrying value; however, any deterioration in the fair value may result in an impairment charge.
Seasonality
Historically, our merchandising businesses have experienced holiday retail seasonality in their markets. In addition to seasonal fluctuations, our operating results fluctuate quarter-to-quarter as a result of economic and political events in markets that we serve, the timing of holidays, weather, the timing of shipments, product mix, and currency effects on the cost of U.S.-sourced products which may make these products more or less expensive in local currencies and therefore more or less affordable. Because of such fluctuations, the results of operations of any quarter are not indicative of the results that may be achieved for a full fiscal year or any future quarter. In addition, there can be no assurance that our future results will be consistent with past results or the projections of securities analysts.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to our operations result primarily from changes in interest rates and changes in currency exchange rates. There have been no material changes in our market risk factors at February 28, 202329, 2024 compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022.2023.
From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products and to otherwise redeploy these funds in our Company. Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradeabletradable currencies. We are working with our banks in Trinidad to source tradeabletradable currencies. During the third quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars.We are actively working with our banking partners and government authorities to address this situation. Refer to “Item 2. Management’s Discussion & Analysis – Factors Affecting Our Business” and “Item 2. Management’s Discussion & Analysis – Liquidity: Financial Position and Cash Flow” for our quantitative analysis and discussion.
Information about the financial impact of foreign currency exchange rate fluctuations for the three and six-month periods ended February 28, 202329, 2024 is disclosed in “Item 2. Management’s Discussion & Analysis – Other Expense, net”.net.”
Information about the change in the fair value of our hedges and the financial impact thereof for the three and six-month periods ended February 28, 202329, 2024 is disclosed in “Item 1. Financial Statements: Notes to Consolidated Financial Statements, Note 8 – Derivative Instruments and Hedging Activities.”
Information about the movements in currency exchange rates and the related impact on the translation of the balance sheets of our subsidiaries whose functional currency is not the U.S. dollar for the three and six-month periodperiods ended February 28, 202329, 2024 is disclosed in “Item 2. Management’s Discussion & Analysis – Other Comprehensive Loss.”
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ITEM 4. CONTROLS AND PROCEDURES
Limitations on Effectiveness of Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the timelines specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decision regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certain unconsolidated entities. Because we do not control or manage those entities, our control procedures with respect to those entities were substantially more limited than those we maintain with respect to our consolidated subsidiaries.
Evaluation of Disclosure Controls and Procedures
As required by SEC Rules 13a-15(e) or 15d-15(e), we carried out an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
In the ordinary course of business, we review our system of internal control over financial reporting and make changes to our systems and processes to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems and automating manual processes. There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibit 31.1 and 31.2 to this report.
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PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are often involved in claims arising in the ordinary course of business seeking monetary damages and other relief. Based upon information currently available to us, none of these claims is expected to have a material adverse effect on our business, financial condition or results of operations. Refer to Part I. “Item 1. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 6 – Commitments and Contingencies” for additional information regarding our legal proceedings.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the following risk factor, which supplements and should be readfactors discussed in conjunction with the information appearing under Part I. “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022.
We may not successfully manage2023. There have been no material changes in the transition associated with the resignation of our Chief Executive Officer, which could have an adverse impact on the Company.

On December 9, 2022, the Company announced that Sherry Bahrambeygui would resign as Chief Executive Officer, effective February 3, 2023, the dateCompany’s risk factors from those discussed in Part I, Item 1A 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 ofAnnual Report Form 10-K for the Board, became Interim Chief Executive Officer, John Hildebrandt was promoted to President and Chief Operating Officer and David Price was promoted to Executive Vice President, initially serving as Chief of Staff to the Chairman and currently as Chief of Staff to the Interim Chief Executive Officer.
fiscal year ended August 31, 2023.
Ms. Bahrambeygui will continue serving stockholders as a member of the Board of Directors of the Company. Prior to her tenure as 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. 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.

Leadership transitions can be inherently difficult to manage. An inadequate transition to a new leadership team may cause disruption within the Company, adversely affecting our financial performance and ability to meet operational goals and strategic plans. Management turnover also inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution. In addition, to the extent we experience additional management turnover, competition for top management is high and it may take months to find a candidate that meets our requirements. If we are unable to attract and retain qualified management personnel, our business could suffer.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)None.
(b)None.
(c)Purchase of Equity Securities by the Issuer and Affiliated Purchasers.
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Upon vesting of restricted stock awarded by the Company to employees, the Company repurchases shares and withholds the amount of the repurchase payment to cover employees’ tax withholding obligations. As set forthAdditionally, we announced in July 2023 that the Board of Directors authorized a program to repurchase up to $75 million of our common stock. During the first quarter of fiscal year 2024, we successfully completed the share repurchase program. We purchased a total of approximately 1,007,000 shares of our common stock under the program. The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, which permitted us to repurchase common stock at a time that we might otherwise have been precluded from doing so under insider trading laws or self-imposed trading restrictions. We have no plans to continue repurchases or to adopt a new repurchase plan at this time. However, the Board of Directors could choose to commence another program in the future, at its discretion, after its review of the Company’s financial performance and anticipated capital requirements.
The following table below, duringsets forth information on our common stock repurchase activity for the quarter ended February 28, 2023, the Company repurchased 61,22429, 2024 (dollars in thousands, except total number of shares in the indicated months. These were the only repurchases of equity securities made by the Company during the second quarter of fiscal year 2023. The Company does not have a stock repurchase program.purchased and per share data):
Period(a)
Total Number
of Shares
Purchased
(b)
Average Price
Paid Per Share
(c)
Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
(d)
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the
Plans or
Programs
December 1, 2022 - December 31, 2022— $N/A
January 1, 2023 - January 31, 202320,329 71.42N/A
February 1, 2023 - February 28, 202340,895 75.00N/A
Total61,22473.81
PeriodTotal Number
of Shares
Purchased
Average Price
Paid Per Share
Total Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Programs
Maximum
Dollar Value of
Shares That
May Yet Be
Purchased
Under the
Plans or
Programs
December 1, 2023 - December 31, 2023— $$— 
January 1, 2024 - January 31, 202423,106 76.44
February 1, 2024 - February 29, 2024— 
Total23,106$76.44 $— 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
(a)Exhibits:
3.1(1)
3.2(2)
3.3(3)
3.4(4)
3.5(5)
3.53.6(5)(6)
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*    Identifies managementManagement contract or compensatory plan or arrangement.arrangement required to be filed as an exhibit to this Quarterly Report on Form 10-Q.
**    These certifications are being furnished solely to accompany this Report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of PriceSmart, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.
(1)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 1997 filed with the Commission on November 26, 1997.
(2)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2004 filed with the Commission on April 14, 2004.
(3)Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2004 filed with the Commission on November 24, 2004.
(4)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on February 2, 2024.
(5)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2015.
(5)(6)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on December 9, 2022.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PRICESMART, INC.
Date:April 10, 20239, 2024By:/s/ ROBERT E. PRICE
Robert E. Price
Interim Chief Executive Officer
(Principal Executive Officer)
Date:April 10, 20239, 2024By:/s/ MICHAEL L. MCCLEARY
Michael L. McCleary
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
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