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PRICESMART INC

PRICESMART INCPSMTEarnings & Financial Report

Nasdaq · Consumer Discretionary · Retail-Variety Stores

PriceSmart, Inc. is a United States based operator of membership warehouse clubs in Central America, the Caribbean, and South America. PriceSmart was founded by Sol and Robert Price, founders of Price Club; Robert Price is chairman of the board.

What changed in PRICESMART INC's 10-K — 2023 vs 2024

Top changes in PRICESMART INC's 2024 10-K

431 paragraphs added · 393 removed · 318 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

57 edited+15 added−11 removed34 unchanged
Velasco served as Division Counsel Latin America for AbbVie Inc., a publicly traded global biopharmaceutical company and he held in-house legal roles at Abbott Laboratories, Hanes Brands Inc. and Sara Lee Corporation, and he began his career in private practice specializing in the Latin America region.
Velasco served as Division Counsel Latin America for AbbVie Inc., a publicly traded global biopharmaceutical company, and he held in-house legal roles at Abbott Laboratories, Hanes Brands Inc. and Sara Lee Corporation. He began his career in private practice specializing in the Latin America region.
We compete in a variety of ways, including the prices at which we sell our merchandise, merchandise selection and availability, services offered to customers, location, store hours and the shopping convenience and overall shopping experience we offer. We also prioritize above all the safety of our Members and our employees.
We compete in a variety of ways, including the prices at which we sell our merchandise, merchandise selection and availability, services offered to customers, location, store hours, shopping convenience and the overall shopping experience we offer. We also prioritize above all the safety of our Members and our employees.
Product selection includes basic consumable merchandise for consumers and businesses, “ Member’s Selection ® ” private label merchandise 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 added optical, audiology, and pharmacy services in many of its locations.
Product selection includes basic consumable merchandise for consumers and businesses, “ Member’s Selection ® ” private label merchandise and unique consumable and non-consumable products that are often not otherwise available in our markets. PriceSmart continually focuses on innovation. In recent years, PriceSmart has added optical, audiology, and pharmacy services in many of its locations.
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 of our existing warehouse clubs and the number of parking spaces at our high-volume locations.
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 at our high-volume locations.
A larger membership base and higher membership fee contribute to the bottom line of the 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.
A larger membership base and higher membership fee contribute to the bottom line of the business or 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 believe we can achieve growth in the number of Members, which drives Membership income and Merchandise sales.
By adding more benefits that Members can only obtain with us, we believe we can achieve growth in the number of Members, which drives Membership income and Net merchandise sales.
Data we can access about our Members not only provides better connectivity with our Members, but also enables us to identify and pursue additional opportunities to provide value for our Members. Membership has been a basic operating characteristic in the warehouse club industry, beginning over 47 years ago at Price Club, the first membership warehouse club business.
Data we can access about our Members not only provides better connectivity with our Members, but also enables us to identify and pursue additional opportunities to provide value for our Members. Membership has been a basic operating characteristic in the warehouse club industry, beginning over 48 years ago at Price Club, the first membership warehouse club business.
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 our clubs; and the implementation and expansion of our Well-being initiative, which offers optical services with free eye exams for our Members and additional members of their families and lower prices on discounted eyeglass frames, audiology services with free hearing exams and deeply discounted hearing aids, and, in some of our markets, pharmacies.
Recent examples of enhancements we have made to the value of membership include: providing the ability for all of our Members to transact on PriceSmart.com; pickup and delivery service in our clubs; and the implementation and expansion of our Well-being initiative, which offers optical services with free eye exams for our Members and additional members of their families and lower prices on discounted eyeglass frames, audiology services with free hearing exams and deeply discounted hearing aids, and, in some of our markets, pharmacies.
We are proud to hire from the local communities where we operate, which then enhances our understanding of the legislation and operating environment of each country, so we can better serve our Members. We believe we provide our employees with excellent wages, as well as comprehensive benefit programs, which generally include life and health insurance and post-employment savings plans.
We are proud to hire from the local communities where we operate, which then enhances our understanding of the operating environment and legal framework of each country, so we can better serve our Members. We believe we provide our employees with excellent wages, as well as comprehensive benefit programs, which generally include life and health insurance and post-employment savings plans.
Our buyers identify and purchase new and exciting items, including our own “ Member’s Selection ® ” private label products. Many of these products are available only at PriceSmart in the markets in which we operate. Innovation. The warehouse club industry has been operating for almost 50 years, following the founding of Price Club in 1976.
Our buyers identify and purchase new and exciting items, including our own “ Member’s Selection ® ” private label products. Many of these products are available only at PriceSmart in the markets in which we operate. 3 Table of Contents Innovation. The warehouse club industry has been operating for almost 50 years, following the founding of Price Club in 1976.
We offer merchandise and services in the following categories: • Consumables, consisting primarily of groceries, cleaning supplies, and health and beauty aids, representing approximately 50% of our net merchandise sales; • Fresh Foods, including meat, produce, deli, seafood and poultry, representing approximately 29% of our net merchandise sales; • Hardlines, including electronics, large and small appliances, automotive, hardware, sporting goods, and seasonal products, representing approximately 11% of our net merchandise sales; • Softlines, including clothing, domestics and home furnishing products, representing approximately 5% of our net merchandise sales; • Food service and bakery, representing approximately 4% of our net merchandise sales; and • Health services, including optical, audiology and pharmacy, representing approximately 1% of our net merchandise sales.
We offer merchandise and services in the following categories: • Consumables, consisting primarily of groceries, cleaning supplies, and health and beauty aids, representing approximately 49% of our net merchandise sales; • Fresh Foods, including meat, produce, deli, seafood and poultry, representing approximately 30% of our net merchandise sales; • Hardlines, including electronics, large and small appliances, automotive, hardware, sporting goods, and seasonal products, representing approximately 11% of our net merchandise sales; • Softlines, including clothing, domestics and home furnishing products, representing approximately 5% of our net merchandise sales; • Food Service and Bakery, representing approximately 4% of our net merchandise sales; and • Health Services, including optical, audiology and pharmacy, representing approximately 1% of our net merchandise sales.
In addition, we offer a robust range of courses in technical and language skills, as well as instruction in wellness and valuable “life tools” such as the principles of managing personal or household finances, raising resilient children, and how to maintain healthy boundaries and a good work-life balance.
In addition, we offer a robust range of courses in technical and language skills, as well as instruction in wellness and valuable “life tools,” such as the principles of managing personal or household finances, raising resilient children, and how to maintain healthy boundaries and a good work-life balance.
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. 1 Table of Contents The number of warehouse clubs for each country or territory were as follows : Country/Territory Number of Warehouse Clubs in Operation as of August 31, 2022 Number of Warehouse Clubs in Operation as of August 31, 2023 Anticipated Warehouse Club Openings in Calendar Year 2023 Anticipated Warehouse Club Openings in Calendar Year 2024 Colombia 9 9 1 — Costa Rica 8 8 — — Panama 7 7 — — Dominican Republic 5 5 — — Guatemala 5 5 1 — Trinidad 4 4 — — Honduras 3 3 — — El Salvador 2 3 — 1 Nicaragua 2 2 — — Jamaica 2 2 — — Aruba 1 1 — — Barbados 1 1 — — U.S.
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. 1 Table of Contents The number of warehouse clubs for each country or territory were as follows : Country/Territory Number of Warehouse Clubs in Operation as of August 31, 2023 Number of Warehouse Clubs in Operation as of August 31, 2024 Anticipated Warehouse Club Openings in Fiscal Year 2025 Colombia 9 10 — Costa Rica 8 8 1 Panama 7 7 — Guatemala 5 6 1 Dominican Republic 5 5 — Trinidad 4 4 — El Salvador 3 4 — Honduras 3 3 — Nicaragua 2 2 — Jamaica 2 2 — Aruba 1 1 — Barbados 1 1 — U.S.
Approximately 48.5% of our sales come from merchandise sourced in the U.S., Asia and Europe. One of the primary advantages we have compared to most of our local competitors is our United States-based buying team that sources merchandise from suppliers in the U.S. and around the world.
Approximately 49% of our sales come from merchandise sourced in the U.S., Asia and Europe. One of the primary advantages we have compared to most of our local competitors is our United States-based buying team that sources merchandise from suppliers in the U.S. and around the world.
Each month we facilitate a wide range of activities in the countries in which we operate, including celebrations of birthdays and work anniversaries, volunteering, employee appreciation, and health and wellness events, and recreational opportunities such as football (soccer) games and 5K runs.
Each month we facilitate a wide range of activities in the countries we operate in, including celebrations of birthdays and work anniversaries, volunteering, employee appreciation, health and wellness events, and recreational opportunities such as futbol (soccer) games and 5K runs.
We will make available our annual report on Form 10-K and our annual Proxy Statement for the fiscal year 2023 at the internet address http://materials.proxyvote.com/741511 as soon as reasonably practicable after electronically filing such material with or furnishing it to the SEC.
We will make available our annual report on Form 10-K and our annual Proxy Statement for the fiscal year 2024 at the internet address https://materials.proxyvote.com/741511 as soon as reasonably practicable after electronically filing such material with or furnishing it to the SEC.
PriceSmart's Membership Policy We offer three types of memberships: Diamond, Business and Platinum. The Diamond Membership is targeted at individuals and families. The annual fee for a Diamond Membership (entitling Members to two cards), in most markets as of August 31, 2023 was approximately $35 (excluding tax).
PriceSmart's Membership Policy We offer three types of memberships: Diamond, Business and Platinum. The Diamond Membership is targeted at individuals and families. The annual fee for a Diamond Membership (entitling Members to two cards), in most markets as of August 31, 2024 was approximately $40 (excluding tax).
Business Members include a broad cross section of businesses such as restaurants, institutions including schools, and other businesses that purchase products for resale and supplies used in their businesses. These business Members represent a significant source of sales and profit and provide purchasing volume that gives us better prices from our suppliers. 3 Table of Contents Worldwide Sourcing.
Business Members include a broad cross section of businesses such as restaurants, institutions, and other businesses that purchase products for resale and supplies used in their businesses. These business Members represent a significant source of sales and profit and provide purchasing volume that gives us better prices from our suppliers. Worldwide Sourcing.
We also face competition from online retailers, such as Amazon.com, Inc. and Mercado Libre in Colombia, and last-mile delivery services that serve our markets, and we expect that this type of competition will grow and intensify in the future.
We also face competition from online retailers, such as AmazonGlobal and Mercado Libre in Colombia, and last-mile delivery services that serve our markets, and we expect that this type of competition will grow and intensify in the future.
Virgin Islands 1 1 — — Totals 50 51 2 1 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.
Virgin Islands 1 1 — Totals 51 54 2 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 i n the United States.
McCleary is Executive Vice President and Chief Financial Officer. Mr. McCleary joined the Company in 2003 and has over 30 years of international finance, tax and accounting experience. David N. Price has been a director of the Company since February 2022. Mr.
McCleary is Executive Vice President and Chief Financial Officer. Mr. McCleary joined the Company in 2003 and has over 30 years of international finance, tax and accounting experience. David N. Price was elected as a director of the Company in February 2022.
In fiscal year 2023, our private label sales represented 26.3% of total merchandise sales, up from 24.7% for fiscal year 2022, and we plan to continue to invest in the development of additional private label products under the “ Member’s Selection ® ” brand. 5 Table of Contents III.
In fiscal year 2024, our private label sales represented 27.6% of total merchandise sales, up from 26.3% for fiscal year 2023, and we plan to continue to invest in the development of additional private label products under the “ Member’s Selection ® ” brand. 5 Table of Contents III.
Other Information PriceSmart, Inc. was incorporated in the State of Delaware in 1994. Our principal executive offices are located at 9740 Scranton Road, San Diego, California 92121. Our telephone number is (858) 404-8800. Our website home page on the Internet is www.pricesmart.com. We make our website content available for information purposes only.
Other Information PriceSmart, Inc. was incorporated in the State of Delaware in 1994. Our principal executive offices are located at 9740 Scranton Road, San Diego, California 92121. Our telephone number is (858) 404-8800. Our website home page on the internet is www.pricesmart.com.
Another way we enhance Membership value is through our private label offering, “ Member’s Selection ® ” a brand that is available only to PriceSmart Members. We believe the “ Member’s Selection ® ” brand carries goodwill and is recognized in our markets for value. Private label products also provide the opportunity to source quality items locally.
Another way we enhance Membership value is by offering private label merchandise under the “ Member’s Selection ® ” brand, which is available only to PriceSmart Members. We believe the “ Member’s Selection ® ” brand carries goodwill and is recognized in our markets for value. Private label products also provide the opportunity to source quality items locally.
We also export products to a retailer in the Philippines and are exploring expansion of that business in other markets. 2 Table of Contents Merchandising A fundamental part of our value proposition is making available to our retail and business Members a selection of high quality merchandise and services sourced within our region and from around the world, at lower prices than our competitors.
However, we are exploring expansion of our export business in other markets and recently began exporting to a retailer in the Bahamas. 2 Table of Contents Merchandising A fundamental part of our value proposition is making available to our retail and business Members a selection of high-quality merchandise and services sourced within our region and from around the world, at lower prices than our competitors.
We believe membership promotes Member loyalty, and membership fees contribute to our ability to operate our business on lower margins than conventional retailers and wholesalers. Membership fees were equal to approximately 1.5% of net merchandise sales and 35.8% of operating income in fiscal year 2023.
We believe membership promotes Member loyalty, and membership fees contribute to our ability to operate our business on lower margins than conventional retailers and wholesalers. Membership fees were equal to approximately 1.6% of net merchandise sales and 34.1% of operating income in fiscal year 2024.
With nearly 2 million membership accounts and more than 3 million cardholders, PriceSmart is an essential part of the shopping experience for consumers and small businesses in PriceSmart’s markets. PriceSmart sources slightly more than half its merchandise from suppliers within the region, with the balance of merchandise sourced throughout the world.
With nearly two million membership accounts and almost four million cardholders, we believe PriceSmart is an essential part of the shopping experience for consumers and small businesses in PriceSmart’s markets. PriceSmart sources slightly more than half its merchandise from suppliers within the region, with the balance of merchandise sourced throughout the rest of the world.
With more than 11,000 employees, PriceSmart supports the best working conditions possible for its employees. We provide safe and pleasant working environments for our employees, along with excellent pay and benefits, including healthcare and retirement benefits. PriceSmart is committed to improving the quality of life for people living in the communities in which it does business.
We seek to provide safe and pleasant working environments for our employees, along with excellent pay and benefits, including healthcare and retirement benefits. PriceSmart is committed to improving the quality of life for people living in the 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 eyeglasses to thousands of children through its Aprender y Crecer program. The Foundation also makes philanthropic donations to support work force development, small business entrepreneurship and to improve the environment.
In partnership with Price Philanthropies Foundation, PriceSmart provides school supplies to approximately 150,000 children, and eye exams to thousands of children through its Aprender y Crecer program. In addition, the newly created PriceSmart Foundation makes grants to support work force development, small business entrepreneurship and to improve the environment.
As of August 31, 2023, we had 51 warehouse clubs in operation in Central America, the Caribbean and Colombia. PriceSmart currently operates 52 warehouse clubs and we believe it has become one of the most respected and trusted brands in the region.
As of August 31, 2024 , we had 54 warehouse clubs in operation in Central America, the Caribbean and Colombia. We believe PriceSmart has become one of the most respected and trusted brands in the region.
PriceSmart provides online shopping to our Members and offers both home delivery and curbside pickup. PriceSmart is also making significant investments in technology to both improve the online shopping experience for its Members and to enhance operating efficiencies in its supply chain and the back office.
PriceSmart provides online shopping to our Members and offers both home delivery and curbside pickup. PriceSmart is making significant investments in technology to both improve the online shopping experience for its Members and to enhance operating efficiencies in its supply chain and the back office. PriceSmart seeks to provide the best working conditions possible for our almost 12,000 employees.
The Platinum Membership provides Members with a 2% rebate on most items, up to an annual maximum of $500. Platinum Members can apply this rebate to future purchases at the warehouse club at the end of the annual membership period. The rebate is issued annually to Platinum Members on March 1 and expires August 31.
Platinum Members can apply this rebate to future purchases at the warehouse club at the end of the annual membership period. The rebate is issued annually to Platinum Members on March 1 and expires August 31.
Patent and Trademark Office and in certain foreign countries. We also rely on copyright and trade secret laws to protect our proprietary rights. We attempt to protect our trade secrets and other proprietary information through agreements with our employees, consultants and suppliers. There can be no assurance, however, that we will be successful in protecting our proprietary rights.
We attempt to protect our trade secrets and other proprietary information through agreements with our employees, consultants and suppliers. There can be no assurance, however, that we will be successful in protecting our proprietary rights.
Francisco Velasco has been Executive Vice President, General Counsel and Secretary of the Company since July 2016 and Chief Ethics & Compliance Officer since October 2016. Prior to joining PriceSmart, Mr.
Francisco Velasco has been Executive Vice President - Chief Legal Officer, Registered In-House Counsel, Chief Risk & Compliance Officer and Corporate Secretary of the Company since May 2024. He served as Executive Vice President, General Counsel, Chief Ethics & Compliance Officer and Secretary of the Company from October 2016 to May 2024. Prior to joining PriceSmart, Mr.
It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K. 8 Table of Contents Available Information The PriceSmart, Inc. investor relations website or internet address is https://investors.pricesmart.com.
The information on our website is not incorporated by reference in this Annual Report on Form 10-K. 8 Table of Contents Available Information The PriceSmart, Inc. investor relations website or internet address is https://investors.pricesmart.com.
He previously held the position of Executive Vice President and Chief of Staff to the Chairman of the Board and the Company’s Interim Chief Executive Officer, Robert Price, from December 2022 to July 2023. From August 2021 to December 2022, Mr.
Prior to his current role, he was the Executive Vice President and Chief of Staff to the Chairman of the Board and the Company's Interim Chief Executive Officer, Robert Price, from December 2022 to July 2023. Between August 2021 and December 2022, Mr. Price served as Vice President for Environmental and Social Responsibility.
We believe a focus on talent development leads to long-serving, loyal employees, which improves efficiencies in operations, thus resulting in higher quality service to our Members.
We believe a focus on talent development leads to long-serving, loyal employees, which improves efficiencies in our operations, thus resulting in higher quality service to our Members. In fiscal year 2024, we held more than 6,400 corporate talent development learning sessions, which included general leadership training.
We also have developed better inbound and outbound online communication channels, and we are using data analytics to better understand our Members’ evolving preferences. Experienced Management Team. Robert E.
We believe that our future success is highly dependent on our capacity to continue to adapt and innovate to meet the needs of our current and future Members. We also have developed better inbound and outbound online communication channels, and we are using data analytics to better understand our Members’ evolving preferences. Experienced Management Team. Robert E.
We also invest in technology to capture operational efficiencies and enhance our decision-making for the dynamic environments in which we we do business. Distribution Efficiency We have consistently believed that distribution efficiency is fundamental for success in selling merchandise in our traditional clubs, and in today’s world, this principle holds true for purchases made online.
Distribution Efficiency We have always believed that distribution efficiency is fundamental for success in selling merchandise in our traditional clubs, and in today’s world, this principle holds true for purchases made online.
We also face competition from wholesale trade companies. 7 Table of Contents Human Capital As of August 31, 2023, we had approximately 11,000 employees. Approximately 96% of our employees were employed outside of the United States, and about 1,800 employees were represented by labor unions.
Lastly, we face competition from wholesalers selling food and/or general merchandise, which more directly competes with our business-to-business sales. 7 Table of Contents Human Capital As of August 31, 2024, we had approximately 12,000 employees. Approximately 96% of our employees were employed outside of the United States, and about 1,900 employees were represented by labor unions.
In most markets, our Business Members pay an annual membership fee of approximately $35 for a primary and secondary membership card and approximately $10 for additional add-on membership cards. Only businesses can qualify for a Business Membership. Members can now sign-up and renew their memberships as well as choose auto-renewal online.
In most markets, our Business Members pay an annual membership fee of approximately $40, or approximately $80 for Business Platinum, for a primary and secondary membership card and approximately $15 for additional add-on membership cards. Only businesses can qualify for a Business Membership, which permits up to three additional members.
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.
For instance, we are currently remodeling our clubs in San Pedro Sula, Honduras and Santiago, Dominican Republic. In the fourth quarter of fiscal year 2024, we completed the remodel of our warehouse in Port of Spain, Trinidad and Tobago and the expansion of our warehouse club in Liberia, Costa Rica.
Price served the Company as Vice President for Environmental and Social Responsibility and had previously served as the Company’s Vice President for Omnichannel Initiatives and Environmental and Social Responsibility. From August 2018 to August 2020, Mr. Price was employed as a Director in our E-Commerce division.
Before that, he was Vice President for Omnichannel Initiatives and Environmental and Social Responsibility. From August 2018 to August 2020, Mr. Price worked as a Director in our E-Commerce division. He holds a Master's degree in International Affairs from the University of California San Diego and a Bachelor of Science from the University of Southern California.
Price has been an employee of the Company since July 2017, and was appointed as Executive Vice President and Chief Transformation Officer in July 2023. Several key areas now report to Mr. Price including Information Technology, PriceSmart.com, and the Project Management Office to foster better collaboration and alignment across the entire Company.
He has been with the Company since July 2017 and was promoted to Executive Vice President and Chief Transformation Officer in July 2023. Mr. Price leads several important areas, including Information Technology, PriceSmart.com, and Payment Solutions and Services.
PriceSmart.com provides 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.
This provides us the opportunity to continually strengthen and expand the scope of our relationship with each Member and offer new products and services in the future. Additionally, we can strengthen our data analytics around Member behavior on the website and app to better serve their preferences.
As of August 31, 2023, we had 49 optical locations, 10 pharmacies and 24 audiology locations open. We expect to continue the rollout of audiology to a majority of our clubs and markets in fiscal year 2024. In addition, we plan to increase the number of pharmacy locations by expanding this service in Panama and Guatemala.
As of August 31, 2024, we had 53 optical locations, 14 pharmacies and 29 audiology locations open. We expect to continue the rollout of audiology in fiscal year 2025. In addition, we expect to have pharmacies in substantially all clubs in Costa Rica, Panama and Guatemala by the end of fiscal year 2025.
Any rebate amount not redeemed by August 31 is recognized as breakage revenue. Following many years where our annual membership fee for two cards has been $35 in most markets ($75 for Platinum), we recently decided to raise our fee by $5 in most markets for all membership types.
Following many years where our annual membership fee for two cards has been $35 in most markets ($75 for Platinum), we recently decided to raise our fee by $5 in all but one market for all membership types. These fee increases took place on a staggered basis in most countries during fiscal year 2024.
We've recently entered into a lease agreement to relocate and extend our lease life for our Miraflores club, which is our highest selling location in Guatemala. The new warehouse will have increased sales floor square footage and a greater number of parking spaces, along with covered parking for our Members.
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 also completed the purchase of the land and building for our Via Brasil club in Panama, which we previously leased.
We are seeking to attract more Members and retain our current Members by expanding the benefits of being a Member of PriceSmart. As benefits grow and the value of being a PriceSmart Member increases, adjustments to the membership fee may be warranted.
As benefits grow and the value of being a PriceSmart Member increases, adjustments to the membership fee may be warranted. We increased this fee by $5 in all but one market on a staggered basis in fiscal year 2024.
We anticipate that our Costa Rica distribution center will also be fulfilling online orders for our Members, especially higher ticket products, such as major appliances. Recently, we leased an approximately 120,000 square foot building in Panama City, Panama that will serve as a distribution center for our warehouse clubs in Panama.
In October 2023, we relocated our distribution center in Panama City, Panama to an approximately 120,000 square foot leased building that serves as a distribution center for our warehouse clubs in Panama. This distribution center operates in a similar way to our distribution center in Costa Rica.
After the initial 60 day period, Members may receive a refund for the prorated share of their remaining membership fee if they so request. Our Intellectual Property Rights It is our policy to obtain appropriate intellectual property rights protection for trademarks by filing applications for registration of eligible trademarks with the U.S.
Our membership agreements provide that if our Members cancel their membership in the first 60 days, they will receive a full refund. After the initial 60 day period, Members may receive a refund for the prorated share of their remaining membership fee if they so request.
We expect these fee increases to take place on a staggered basis in most countries during fiscal year 2024. 6 Table of Contents We promote our Business Membership by offering certain merchandise targeted primarily to businesses such as restaurants, hotels, convenience stores, offices and institutions.
Any rebate amount not redeemed by August 31 is recognized as breakage revenue. 6 Table of Contents We promote our Business and Business Platinum Memberships by offering certain merchandise targeted primarily to businesses such as restaurants, hotels, convenience stores, offices and institutions.
We have recently leased land and have plans to open our sixth warehouse club in Guatemala, located in Escuintla, approximately 40 miles south of the nearest club in the capital of Guatemala City. The club is being built on a five-acre property and is anticipated to open on November 30, 2023.
The club will be built on a six-acre property and is anticipated to open in the spring of 2025. Additionally, we expect to formalize a land lease in the first quarter of fiscal year 2025 and build our seventh warehouse club in Guatemala, located in Quetzaltenango, approximately 122 miles west from the nearest club in the capital of Guatemala City.
In Colombia, we raised the Diamond Membership fee to 132,000 COP in January 2023, yielding a current Membership price of approximately $32. The Company currently offers the Platinum Membership program in all thirteen of its markets. The annual fee for a Platinum Membership in most markets is approximately $75 (excluding tax).
The Company currently offers the Platinum Membership program in all thirteen of its markets, which entitles Members to two cards. The annual fee for a Platinum Membership in most markets is approximately $80 (excluding tax). The Platinum Membership provides Members with a 2% rebate on most items, up to an annual maximum of $500.
We recognize membership income over the 12-month term of the membership. Deferred membership income was $31.1 million and $28.0 million as of August 31, 2023 and August 31, 2022, respectively. Our membership agreements provide that if our Members cancel their membership in the first 60 days, they will receive a full refund.
Members can sign-up and renew their memberships as well as choose auto-renewal online. We recognize membership income over the 12-month term of the membership. Deferred membership income was $36.2 million and $31.1 million as of August 31, 2024 and August 31, 2023, respectively.
We have also purchased land and plan to open our fourth warehouse club in El Salvador, located in Santa Ana, approximately 40 miles west from the nearest club in the capital of San Salvador. The club is being built on a five-acre property and is anticipated to open in early 2024.
Our operating segments are the United States, Central America, the Caribbean and Colombia. We have purchased land and plan to open our ninth warehouse club in Costa Rica, located in Cartago, approximately 10 miles east from the nearest club in the capital of San Jose.
We continue to pursue opportunities to add new warehouse clubs in our existing markets and to assess opportunities in new markets. In September 2023, we opened a new warehouse club in Medellín, Colombia. On November 30, 2023, we plan to open our sixth warehouse club in Guatemala in the city of Escuintla.
The Via Brasil club had the highest sales volume in our Panama market during fiscal year 2024. We continue to pursue opportunities to add new warehouse clubs in our existing markets and to assess opportunities in new markets.
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Our operating segments are the United States, Central America, the Caribbean and Colombia. In September 2023, we opened a new warehouse club in Medellín, Colombia, bringing the total number of warehouse clubs in operation by the Company to 52.
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This club will be built on a four-acre property and is anticipated to open in the summer of 2025. Once these two new clubs are open, we will operate 56 warehouse clubs in total.
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Once these two new clubs are open, we will operate 54 warehouse clubs.
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We also historically exported products to a retailer in the Philippines, but effective August 31, 2024, our business relationship with that retailer ceased, except for some outstanding merchandise orders to be fulfilled in fiscal year 2025.
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We believe that our future success is highly dependent on our capacity to continue to adapt and innovate to meet the needs of our current and future Members. We plan to expand our omni-channel offering to include additional services such as drop-ship and the creation of a digital business-to-business application.
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We are also currently expanding our clubs in San Salvador, El Salvador and Portmore, Jamaica. During fiscal year 2024, we entered into a lease agreement to relocate and extend the lease term for our Miraflores club, which is our highest selling location in Guatemala.
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Additionally, we have plans to open a new warehouse club in Santa Ana, El Salvador, in early 2024. Our distribution network currently consists of major distribution centers in Miami and Costa Rica, complemented by varying distribution facilities in other markets.
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We have plans to open a new warehouse club in Cartago, near the capital of San Jose, in Costa Rica, in the spring of 2025. Additionally, we expect to formalize a land lease in the first quarter of fiscal year 2025 and build our seventh warehouse club in Guatemala, in the city of Quetzaltenango, in the summer of 2025.
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Based on our experience with the 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.
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We are enhancing our distribution and logistics network through the opening of distribution centers in China and in each of our multi-club markets, either operated by PriceSmart or through the use of third-party logistics providers. We expect to reduce landed costs and lead times (via direct shipments from Asia to our local markets) and improve our working capital.
Removed
In addition to major distribution centers, PriceSmart has been investing in produce distribution centers, which enable us to purchase, process and package produce we purchase directly from farms in our markets as well as imported produce. II. Increase Membership Value.
Added
In addition to our regional distribution center in Costa Rica, we have PriceSmart-operated distribution centers in various stages of development and implementation in markets such as Panama, Guatemala, and Trinidad. 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.
Removed
Increase Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities . We recognize the growing expectation of consumers in our markets for convenience. As a result, we continue to improve the functionality and content of PriceSmart.com and to expand our product offerings available online.
Added
Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities . We recognize the growing expectation of consumers to control their shopping experience. Consumers are more engaged than ever before and want access 24 hours a day and 7 days a week.
Removed
We also build and apply technological tools to continue to learn more about and strengthen our relationships with each of our Members. Using data analytics, we believe we have been able to provide our Members with enhancements to the membership experience.
Added
We’ve continued to tailor our digital experience to match this expectation and meet our Members when and where they want to shop. In fiscal year 2024, we completed a country by country roll out of our new PriceSmart.com website and mobile application (Android and iOS) to complement our in-club shopping.
Removed
Our PriceSmart.com offering provides data that informs us regarding the potential viability of new clubs in new areas and offers us options to serve and expand into new markets without the need for a traditional brick & mortar club location.
Added
The website and app use a MACH or headless architecture, which is designed for speed and scalability. We can now build and release new Member facing digital experiences without a full, end to end, technology redevelopment.
Removed
This distribution center will operate in a similar way to our distribution center in Costa Rica. Our management team is engaged in a comprehensive study for improving our distribution infrastructure, to better serve our Members, lower the net landed cost of our merchandise, enhance operating efficiencies and lower the construction and equipment costs for our warehouse clubs.
Added
Identification of delivery service areas, patterns in site searches, most viewed items and segmented homepage offerings are a few examples of the capabilities we now have through our investment in the digital experience for the Member. We are also continually finding ways to deploy technology that improves efficiency.
Removed
In fiscal year 2023, we held more than 2,700 corporate talent development learning sessions, which included general leadership training as well as women-specific leadership training, in addition to courses on emotional intelligence and motivating employees.
Added
For example, we have and will continue to enhance our order picking technology to reduce the time it takes to fulfill an order for the Member. This allows us to meet our Member's service expectations and expand our capacity for more orders.
Added
Lastly, the Company has signed one promissory lease agreement for a future distribution center in Guatemala. In the third quarter of fiscal year 2024, we started using distribution centers run by a third party in four different markets, Guatemala, Honduras, Nicaragua and El Salvador.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

67 edited+49 added−22 removed94 unchanged
The civil unrest in Colombia paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021. Austerity and tax reform measures for Colombia and other Latin American countries with high national debt levels and income disparity pose a risk for political instability.
Civil unrest in Colombia paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021. Austerity and tax reform measures for Colombia and other Latin American countries with high national debt levels and income disparity pose a risk for political instability.
In addition, such events could have a material adverse effect on our reputation with our Members, employees, vendors and stockholders, as well as our operations, results of operations, financial condition and liquidity, could result in the release to the public of confidential information about our operations and financial condition and performance and could result in litigation against us or the imposition of penalties or liabilities.
In addition, such events could have a material adverse effect on our reputation with our Members, employees, vendors and stockholders, as well as our results of operations, financial condition and liquidity; could result in the release to the public of confidential information about our operations and financial condition and performance; and could result in litigation against us or the imposition of penalties or liabilities.
In addition, a greater concentration of e-commerce sales could result in a reduction in the amount of traffic in our warehouse clubs, which would, in turn, reduce the opportunities for cross-club sales of merchandise that such traffic creates and could reduce our sales within our clubs, materially adversely affecting the financial performance of the physical retail side of our operations.
In addition, a greater concentration of e-commerce sales could result in a reduction in the amount of traffic in our warehouse clubs, which would, in turn, reduce the opportunities for cross-club sales of merchandise that such traffic creates and could reduce our sales within our clubs, materially affecting the financial performance of the physical retail side of our operations.
Of this amount, $1.0 million is a reserve we recorded against an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million is an accrual for the unpaid years of the dispute in which we made tax payments using the original computation based on taxable income.
Of this amount, $1.0 million is a reserve we recorded against an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million for the unpaid years of the dispute in which we made tax payments using the original computation based on taxable income.
We have experienced these limitations in Colombia and in some of our other existing markets, which has negatively affected our growth rates in those markets. Limitations on the availability of appropriate sites for new warehouse clubs in the areas targeted by us could have a material adverse effect on the future growth of PriceSmart.
We have experienced these limitations in Colombia, primarily in Bogotá, and in some of our other existing markets, which has negatively affected our growth rates in those markets. Limitations on the availability of appropriate sites for new warehouse clubs in the areas targeted by us could have a material adverse effect on the future growth of PriceSmart.
Changes in tax laws or their implementation, 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.
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.
For example, the Colombian peso exchange rate with the U.S. dollar devalued approximately 15% on average throughout fiscal year 2023 compared to fiscal year 2022 reducing our U.S. dollar value of sales and negatively affecting overall demand for our merchandise in Colombia.
For example, the Colombian peso exchange rate with the U.S. dollar devalued approximately 15% on average throughout fiscal year 2023 compared to fiscal year 2022, reducing our U.S. dollar value of sales and negatively affecting overall demand for our merchandise in Colombia during that year.
We seek to adjust our product sales pricing, operate more efficiently, and increase our comparable store net sales to offset inflation, currency rate changes, changes in tax rates or in the methods used to calculate or collect taxes on our sales or income and other factors that can increase costs.
We seek to adjust our product sales pricing, operate more efficiently, and increase our comparable store net sales to help offset inflation as well as currency rate changes, changes in tax rates or in the methods used to calculate or collect taxes on our sales or income and other factors that can increase costs.
We also may experience changes in energy and commodity prices driven by climate change as well as new regulatory requirements resulting in higher compliance risk and operational costs. We face difficulties in the shipment of, and risks inherent in the importation of, merchandise to our warehouse clubs.
We also may experience changes in energy and commodity prices driven by climate change as well as new regulatory requirements resulting in higher compliance risk and operational costs. 11 Table of Contents We face difficulties in the shipment of, and risks inherent in the importation of, merchandise to our warehouse clubs.
This merchandise originates from various countries and is transported over long distances, over water and over land, which results in: • substantial lead times needed between the procurement and delivery of products, thus complicating merchandising and inventory controls; • the possible loss of products due to theft or potential damage to, or destruction of, ships or containers delivering goods; • product markdowns due to the prohibitive cost of returning merchandise upon importation; • product registration, tariffs, customs and shipping regulation issues in the locations we ship to and from; • ocean freight and duty costs; and • possible governmental restrictions on the importation of merchandise.
This merchandise originates from various countries and is transported over long distances, over water and over land, which results in: • substantial lead times needed between the procurement and delivery of products, thus complicating merchandising and inventory controls; • the possible loss of products due to theft or potential damage to, or destruction of, ships or containers delivering goods; • product markdowns due to the prohibitive cost of returning merchandise upon importation; • product registration, tariffs, customs and shipping regulation issues in the locations we ship to and from; • the possibility of business interruption due to transportation and port strikes; • ocean freight and duty costs; and • possible governmental restrictions on the importation of merchandise.
We operate in relatively small markets. Given the growth of our sales over the past few years, market saturation could impact the rate of future sales growth. We might open warehouse clubs in new markets in the future.
We operate in relatively small markets. Given the growth of our sales over the past few years, market saturation could impact the rate of future sales growth. 14 Table of Contents We might open warehouse clubs in new markets in the future.
Also, accidents or personal injuries that sometimes occur in our facilities, such as a Member slipping and falling or product falling from a rack, could result in negative publicity or otherwise damage the Company's reputation. We face the risk of exposure to product liability claims, a product recall and adverse publicity.
Also, accidents or personal injuries that sometimes occur in our facilities, such as a Member slipping and falling or injuries caused by product falling from a rack, could result in negative publicity or otherwise damage the Company's reputation. 15 Table of Contents We face the risk of exposure to product liability claims, a product recall and adverse publicity.
For example, we have begun migrating to a new point-of-sale system, Elera™, a Toshiba product, and if we are not able to successfully implement this product, or experience significant delays, it may jeopardize our operations or result in additional costs. Not updating our systems on a timely basis could leave us at a disadvantage relative to our competitors.
For example, we have begun migrating to the Elera™ point-of-sale system, which is a Toshiba product, and if we are not able to successfully implement this product, or experience significant delays, it may jeopardize our operations or result in additional costs. 16 Table of Contents Not updating our systems on a timely basis could leave us at a disadvantage relative to our competitors.
As of August 31, 2023, we had 51 warehouse clubs in operation, located in 12 countries and one U.S. territory (nine in Colombia; eight in Costa Rica ; seven in Panama ; five in the Dominican Republic and Guatemala ; four in Trinidad ; three in Honduras and El Salvador; two each in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands) .
As of August 31, 2024, we had 54 warehouse clubs in operation, located in 12 countries and one U.S. territory (ten in Colombia; eight in Costa Rica ; seven in Panama ; six in Guatemala; five in Dominican Republic ; four each in Trinidad and El Salvador; three in Honduras; two each in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands) .
The monetary lease liability subject to revaluation as of August 31, 2023 was $32.5 million. Due to the mix of foreign currency exchange rate fluctuations during fiscal year 2023 , the impact to the consolidated statements of income of revaluing this liability was immaterial. Item 1B. Unresolved Staff Comments None. 20 Table of Contents
The monetary lease liability subject to revaluation as of August 31, 2024 was $31.5 million. Due to the mix of foreign currency exchange rate fluctuations during fiscal year 2024, the impact to the consolidated statements of income of revaluing this liability was immaterial. Item 1B. Unresolved Staff Comments None.
Our financial performance is subject to risks inherent in operating and expanding our international membership warehouse club business, which include: • changes in, and inconsistent enforcement of, laws and regulations, including those related to tariffs and taxes; • the imposition of foreign and domestic governmental controls, including expropriation risks; • natural disasters; • trade restrictions, including import-export quotas and general restrictions on importation; • difficulty and costs associated with international sales and the administration of an international merchandising business; • crime and security concerns that can adversely affect the economies of the countries in which we operate and which require us to incur additional costs to provide additional security at our warehouse clubs; • political instability, such as the protests and civil unrest in Colombia in 2022 and 2021, in Honduras and Nicaragua in 2019, and a general strike in Costa Rica in 2018; • product registration, permitting and regulatory compliance; • volatility in foreign currency exchange rates; • general economic and business conditions; • pandemics; and • interruption of our supply chain.
Our financial performance is subject to risks inherent in operating and expanding our international membership warehouse club business, which include: • changes in, and inconsistent enforcement of, laws and regulations, including those related to tariffs and taxes; • the imposition of foreign and domestic governmental controls, including expropriation risks; • natural disasters; • trade restrictions, including import-export quotas and general restrictions on importation; • difficulty and costs associated with international sales and the administration of an international merchandising business; • crime and security concerns that can adversely affect the economies of the countries in which we operate and which require us to incur additional costs to provide additional security at our warehouse clubs; • political instability, such as anti-government protests in Panama and Guatemala in 2023 and civil unrest in Colombia in 2022 and 2021; • product registration, permitting and regulatory compliance; • volatility in foreign currency exchange rates; • limitations on our ability to convert foreign currencies; • general economic and business conditions; • pandemics; and • interruption of our supply chain.
Failure to adequately maintain our systems or disruptions of our systems could harm our business and adversely affect our results of operations . Given the high number of individual transactions we have each year, we seek to maintain uninterrupted operation of our business-critical computer systems.
We rely extensively on computer systems to process transactions, summarize results and manage our business. Failure to adequately maintain our systems or disruptions of our systems could harm our business and adversely affect our results of operations . Given the high number of individual transactions we have each year, we seek to maintain uninterrupted operation of our business-critical computer systems.
As of August 31, 2023, our Honduran subsidiary had approximately $19.6 million of cash and cash equivalents denominated in lempiras, which cannot be readily converted to U.S. dollars for general use within the Company. We are actively working with our banking partners and government authorities to address this situation.
As of August 31, 2024 , our Honduran subsidiary had approximate ly $22.3 million of cash and cash equivalents denominated in 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.
If we buy too much of a product, we might be required to reduce prices or otherwise liquidate the excess inventory, which could have an adverse effect on margins (net sales less merchandise costs) and operating income.
If we buy too much of a product, we might be required to reduce prices or otherwise liquidate the excess inventory, which could have an adverse effect on margins (net sales less merchandise costs) and operating income. If we do not have sufficient quantities of a popular product, we might lose sales and profits we otherwise could have made.
We believe these upgrades plus several projects begun in fiscal year 2023, such as our point-of-sale system replacement and e-commerce replacement, will modernize our key revenue-generating systems and reduce risk of disruption.
We believe these upgrades plus several other projects, such as our point-of-sale system replacement and e-commerce replacement, will modernize our key revenue-generating systems and reduce risk of disruption.
Our balance as of August 31, 2023 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $18.2 million, a decrease of $82.3 million from the peak of $100.5 million as of November 30, 2020.
Our balance as of August 31, 2024 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $60.2 million, a decrease of $40.3 mill ion from the peak of $100.5 million as of November 30, 2020.
We have noted that certain retailers are making investments in upgrading their locations which may result in increased competition. Further, it is possible that current U.S. warehouse club operators may decide to enter our markets and compete more directly with us in a similar warehouse club format.
We have noted that certain retailers are making investments in upgrading their locations or opening of new stores which may result in increased competition. Further, it is possible that other warehouse club operators may decide to enter our markets and compete more directly with us in a similar warehouse club format.
However, if the peso were to weaken again and we hold pricing steady or take pricing actions to lower the cost to our Members to mitigate a decrease in demand, then consolidated Total Gross Margins could be negatively impacted.
However, if the Colombia peso were to weaken again and we were to again absorb the costs of the devaluation or take pricing actions to lower the cost to our Members to mitigate a decrease in demand, consolidated Total gross margins could be negatively impacted.
As of August 31, 2023, we had a total of 51 warehouse clubs operating in 12 foreign countries and one U.S. territory, 40 of which operate under currencies other than the U.S. dollar. For fiscal year 2023, approximately 78.8% of our net merchandise sales were in foreign currencies.
As of August 31, 2024, we had a total of 54 warehouse clubs operating in 12 foreign countries and one U.S. territory, 42 of which operate under currencies other than the U.S. dollar. For fiscal year 2024, approximately 79.5% of our net merchandise sales were in foreign currencies.
We currently have labor unions in three of our markets (Trinidad, Barbados and Panama). A work stoppage or other limitation on operations from union or other labor-related matters could occur for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements.
A work stoppage or other limitation on operations from union or other labor-related matters could occur for any number of reasons, including as a result of disputes under existing collective bargaining agreements with labor unions or in connection with negotiation of new collective bargaining agreements.
Each year, computer hackers, cyber terrorists, and others make numerous attempts to access the information stored in companies’ information systems. The increased use of remote work infrastructure has also increased cybersecurity risk, as remote work continues even post COVID-19. The use of data by our business and our business associates is regulated in all of our operating countries.
Each year, computer hackers, cyber terrorists, and others make numerous attempts to access the information stored in companies’ information systems. The increased use of remote work infrastructure has also increased cybersecurity risk, as remote work continues even post COVID-19.
In addition, even if a product liability claim is not successful or is not fully pursued, the negative publicity surrounding a product recall or any assertion that our products caused illness or injury could have a material adverse effect on our reputation with existing and potential Members and on our business, financial condition and results of operations. 15 Table of Contents We rely extensively on computer systems to process transactions, summarize results and manage our business.
In addition, even if a product liability claim is not successful or is not fully pursued, the negative publicity surrounding a product recall or any assertion that our products caused illness or injury could have a material adverse effect on our reputation with existing and potential Members and on our business, financial condition and results of operations.
Moreover, a security breach could require us to devote significant management resources to address the problems created by the security breach and to expend significant additional resources to upgrade further the security measures that we employ to guard such important personal information against cyberattacks and other attempts to access such information, resulting in a disruption of our operations. 17 Table of Contents Business acquisitions or divestitures and new business initiatives could adversely impact the Company’s performance .
Moreover, a security breach could require us to devote significant management resources to address the problems created by the security breach and to expend significant additional resources to upgrade further the security measures that we employ to guard such important personal information against cyberattacks and other attempts to access such information, resulting in a disruption of our operations.
Any violations of anti-corruption laws, even if prohibited by our internal policies, could adversely affect our reputation, business, or financial performance. 18 Table of Contents We could be subject to additional tax liabilities or subject to reserves on the recoverability of tax receivables .
Any violations of anti-corruption laws, even if prohibited by our internal policies, could adversely affect our reputation, business, or financial performance. We could be subject to additional tax liabilities or subject to reserves on the recoverability of tax receivables . We are subject to income taxes in the U.S. and many foreign jurisdictions.
Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results of operations, cash flow and prospects.
Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results of operations, cash flow and prospects. External Factors that Could Adversely Affect Us Our financial performance is dependent on international operations, which exposes us to various risks.
In the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute in one of the aforementioned countries.
For example, in fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute in one country.
For example, roadblocks arose in Guatemala in October 2023 following instability from recent elections. In addition, roadblocks also arose in Panama in October 2023 disrupting traffic to our clubs throughout most of the market as a reaction to an agreement between the Panamanian government and a mining company.
In addition, protestors set up roadblocks in Panama in 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.
Legal and Compliance Risks We face compliance risks related to our international operations. In the United States and within the international markets where we operate, there are multiple laws and regulations that relate to our business and operations.
We do not maintain life or disability insurance for our key executives. 19 Table of Contents Legal and Compliance Risks We face compliance risks related to our international operations. In the United States and within the international markets where we operate, there are multiple laws and regulations that relate to our business and operations.
We or our third-party service providers may be unable to anticipate one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and others may attempt to defeat our security measures or those of our third-party service providers and breach our or our third-party service providers' information systems.
If we or those with whom we share information fail to comply with these laws and regulations, we could be subjected to legal risk as a result of non-compliance. 17 Table of Contents We or our third-party service providers may be unable to anticipate one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and others may attempt to defeat our security measures or those of our third-party service providers and breach our or our third-party service providers' information systems.
We have decided that the risk, cost, and implementation cycle time of a holistic ERP system was not a sound strategy. We have instead turned our focus to a coordinated program of upgrading packaged applications and replacing in-house applications with packaged applications designed to improve our capabilities with less risk, and in less time.
We instead turned our focus to a coordinated program of upgrading packaged applications and replacing in-house applications with packaged applications designed to improve our capabilities with less risk, and in less time.
These initiatives might not provide the anticipated benefits, may provide them on a delayed schedule or at a higher cost or may cause disruptions in our business. 16 Table of Contents Any failure by us to maintain the security of the information that we hold relating to our Company, Members, employees and vendors, could damage our reputation with them, could disrupt our operations, could cause us to incur substantial additional costs and to become subject to litigation and could materially adversely affect our operating results.
Any failure by us to maintain the security of the information that we hold relating to our Company, Members, employees and vendors, could damage our reputation with them, could disrupt our operations, could cause us to incur substantial additional costs and to become subject to litigation and could materially affect our operating results.
Economic conditions such as contraction in the financial market, increased governmental ownership or regulation of the economy, higher interest rates, high rates of inflation or deflation, higher fuel prices, increased barriers to entry such as higher tariffs and taxes, and other macroeconomic factors that affect consumer spending may adversely affect the demand for and prices of the products we sell in our warehouse clubs.
Economic conditions in our markets can be adversely affected by contractions in financial markets, increased governmental ownership or regulation of the economy, higher interest rates, high rates of inflation or deflation, higher fuel prices, increased barriers to entry such as higher tariffs and taxes, and other macroeconomic factors.
Fluctuations in exchange rates for foreign currencies have and could continue to reduce the U.S. dollar value of sales, earnings and cash flows we receive from our non-U.S. markets, increase our supply costs (as measured in U.S. dollars) in those markets, negatively impact our competitiveness in those markets or otherwise adversely impact our business results or financial condition.
Fluctuations in exchange rates for foreign currencies have and could continue to reduce the U.S. dollar value of sales, earnings and cash flows we receive from our non-U.S. markets, increase our supply costs (as measured in U.S. dollars) in those markets, negatively impact our competitiveness in those markets or otherwise adversely impact our business results or financial condition. 9 Table of Contents Our business depends heavily on the uninterrupted operation of our distribution facilities located in Miami, Florida and San Jose, Costa Rica, our warehouse clubs located in Colombia, Central America and the Caribbean, and our headquarters and buying operations in San Diego, California.
In the spring of 2020, the novel coronavirus (COVID-19) pandemic resulted in government authorities in our markets taking actions to mitigate the spread of COVID-19, including travel restrictions, border closings, restrictions on public gatherings, stay-at-home orders and other quarantine and isolation measures.
Our operations were disrupted by the COVID-19 pandemic and actions government authorities in our markets took to mitigate the spread of COVID-19, including travel restrictions, border closings, restrictions on public gatherings, stay-at-home orders and other quarantine and isolation measures. The pandemic also resulted in delays or difficulty sourcing products and threatened the health of our employees and Members.
Privacy and information-security laws and regulations change, and compliance with them may result in cost increases due to, among other things, systems changes and the development of new processes. If we or those with whom we share information fail to comply with these laws and regulations, we could be subjected to legal risk as a result of non-compliance.
Privacy and information-security laws and regulations change, and compliance with them may result in cost increases due to, among other things, systems changes and the development of new processes.
Merchandise imported into our markets is generally purchased by the Company in U.S. dollars and priced and sold in the local currency of that country. If the local currency devalues against the U.S. dollar, we may elect to increase prices in the local currency to maintain our target margins, making the products more expensive for our Members.
If the local currency devalues against the U.S. dollar, we may elect to increase prices in the local currency to maintain our target margins, making the products more expensive for our Members. We may also decide to reduce or modify the flow of merchandise into those markets.
As a result of such translations, fluctuations in currency exchange rates from period-to-period may result in our consolidated financial statements reflecting significant adverse period-over-period changes in our financial performance or reflecting a period-over-period improvement in our financial performance that is not as robust as it would be without such fluctuations in the currency exchange rates. 19 Table of Contents In addition, devaluing foreign local currencies compared to the U.S. dollar could negatively impact the purchasing power of our Members for imported merchandise in those countries.
As a result of such translations, fluctuations in currency exchange rates from period-to-period may result in our consolidated financial statements reflecting significant adverse period-over-period changes in our financial performance or reflecting a period-over-period improvement in our financial performance that is not as robust as it would be without such fluctuations in the currency exchange rates.
In two countries, there have been changes in the method of computing minimum tax payments, under which the governments have sought to require the Company 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.
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").
As demonstrated by our launch of our PriceSmart.com curbside pickup and delivery service, we are increasing our investments in e-commerce, technology and other customer initiatives. The success of our e-commerce initiative continues to depend in large measure on our ability to build and deliver a seamless shopping experience across the physical and digital retail channels.
The success of our e-commerce initiative continues to depend in large measure on our ability to build and deliver a seamless shopping experience across the physical and digital retail channels.
If we do not maintain a successful and relevant omni-channel experience for our Members, our ability to compete and our results of operations could be adversely affected. We are exposed to significant weather events and other natural disaster risks that might not be adequately compensated by insurance, and we are susceptible to the long-term impacts of climate change.
We are exposed to significant weather events and other natural disaster risks that might not be adequately compensated by insurance, and we are susceptible to the long-term impacts of climate change.
Moreover, each country in which we operate has different governmental rules and regulations regarding the importation of foreign products. Changes to the rules and regulations governing the importation of merchandise may result in additional delays, costs or barriers in our deliveries of products to our warehouse clubs or may affect the type of products we select to import.
Changes to the rules and regulations governing the importation of merchandise may result in additional delays, costs or barriers in our deliveries of products to our warehouse clubs or may affect the type of products we select to import. In addition, only a limited number of transportation companies service our regions.
As a result of their beneficial ownership, these stockholders have the ability to significantly affect the outcome of all matters submitted to our stockholders for approval, including the election of directors.
Of this amount, approximately 71.1% (i.e., 10.9% of our total outstanding shares) is held by charitable entities. As a result of their beneficial ownership, these stockholders have the ability to significantly affect the outcome of all matters submitted to our stockholders for approval, including the election of directors.
Dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency.
Dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency. 21 Table of Contents Additionally, during 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 might not be able to adjust prices, operate more efficiently or increase our comparable store net sales in the future to a great enough extent to offset increased costs. Inflationary pressures in general and significant foreign currency devaluation such as in our Colombian market affected our ability to adjust prices during most of fiscal year 2023.
We might not be able to adjust prices, operate more efficiently or increase our comparable store net sales in the future to a great enough extent to offset increased costs.
Significant changes in the relationships or the agreements that govern the terms through which business is conducted could have a material adverse effect on our business, financial condition and results of operations.
These include, but are not limited to, local, regional, and international merchandise suppliers, information technology suppliers, equipment suppliers, financial institutions, credit card issuers and processors, and lessors. Significant changes in the relationships or the agreements that govern the terms through which business is conducted could have a material adverse effect on our business, financial condition and results of operations.
We may also decide to reduce or modify the flow of merchandise into those markets. Depending on the severity of the devaluation and corresponding price increase (as experienced in Colombia in fiscal 2023), the demand for, sales of, and profitability of those products could be negatively impacted.
Depending on the severity of the devaluation and corresponding price increase (as experienced in Colombia in fiscal 2023), the demand for, sales of, and profitability of those products could be negatively impacted. From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity).
Future losses from business interruption may not be adequately compensated by insurance and could have a material adverse effect on our business, financial condition, and results of operations. 11 Table of Contents Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) are expected to be widespread and unpredictable.
Furthermore, the long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions, drought, or rising sea levels) or transition risks (such as regulatory or technology changes) are expected to be widespread and unpredictable.
A few of our stockholders own approximately 15.9% of our voting stock as of August 31, 2023, which may make it difficult to complete some corporate transactions without their support and may impede a change in control. Robert E. Price, the Company’s Chairman of the Board and Interim Chief Executive Officer, and affiliates of Mr.
As part of the settlement, we will pay the minimum tax on a go-forward basis. 20 Table of Contents A few of our stockholders own approximately 15.3% of our voting stock as of August 31, 2024, which may make it difficult to complete some corporate transactions without their support and may impede a change in control. Robert E.
We also continue to rely on other systems we developed internally a number of years ago, and we plan to migrate to more industry-standard technologies. Several years ago, we began evaluating options to replace our ERP system. However, we intentionally deferred this project as originally contemplated in order to more thoroughly assess our overall IT landscape.
Several years ago, we began evaluating options to replace our ERP system. However, we intentionally deferred this project as originally contemplated in order to more thoroughly assess our overall IT landscape. We decided that the risk, cost, and implementation cycle time of a holistic ERP system was not a sound strategy.
Upgrades planned and expected to start in fiscal year 2024 include a packaged forecast and replenishment system (RELEX) for buying and upgrades to our packaged WMS (Warehouse Management System) and TMS (Transportation Management System) for logistics.
We are continuing to work on the implementation of a packaged forecast and replenishment system (RELEX) for buying and upgrades to our packaged WMS (Warehouse Management System) and TMS (Transportation Management System) for logistics.
A lengthy work stoppage or significant limitation on operations could have a substantial adverse effect on our financial condition and results of operation. Risks Associated with Our Business Strategy and Operations Any failure by us to manage our widely dispersed operations could adversely affect our business.
Risks Associated with Our Business Strategy and Operations Any failure by us to manage our widely dispersed operations could adversely affect our business.
Price, including Price Philanthropies, The Price Group, LLC, The Robert & Allison Price Charitable Remainder Trust and various other trusts, collectively beneficially own approximately 15.9% of our outstanding shares of common stock. Of this amount, approximately 73.1% (i.e., 11.6% of our total outstanding shares) is held by charitable entities.
Price, the Company’s Chairman of the Board and Interim Chief Executive Officer, and affiliates of Mr. Price, including Price Philanthropies, The Price Group, LLC, The Robert & Allison Price Charitable Remainder Trust and various other trusts, collectively beneficially own approximately 15.3% of our outstanding shares of common stock.
We may not adequately anticipate all the changing demands that will be imposed on these systems. Any failure of our systems or our inability to effectively update our internal systems or procedures as required could have a material adverse effect on our business, financial condition and results of operations.
Any failure of our systems or our inability to effectively update our internal systems or procedures as required could have a material adverse effect on our business, financial condition and results of operations. 13 Table of Contents We depend on maintaining and expanding our membership base, and any harm to our relationship with our Members could have a material adverse effect on our business, net sales and results of operations .
In addition, our investments in e-commerce and technology initiatives will adversely impact our short-term financial performance, and our failure to realize the benefits of these investments may adversely impact our financial performance over the longer term. 14 Table of Contents We are subject to risks associated with our dependence on third-party suppliers and service providers, and we have no assurances of continued supply, pricing or access to new merchandise.
In addition, our investments in e-commerce and technology initiatives will adversely impact our short-term financial performance, and our failure to realize the benefits of these investments may adversely impact our financial performance over the longer term.
Certain of our suppliers had their manufacturing operations disrupted by the outbreak, and were subject to significant shipping delays impacting our supply chain. Pandemics or events of this sort have had, and may have in the future, an adverse effect on our business. Political and other factors in each of our markets may have significant effects on our business.
Pandemics or events of this sort have had, and may have in the future, an adverse effect on our business. Political and other factors in each of our markets may have significant effects on our business. For example, protestors set up roadblocks in Guatemala in October 2023 general elections.
Some of our competitors have greater resources, buying power and name recognition than we have. We also face competition from online retailers who serve our markets, and we expect that this type of competition will grow and intensify in the future.
We also face competition from online retailers who serve our markets, and we expect that this type of competition will grow and intensify in the future. 10 Table of Contents In the countries in which we operate, we do not currently face direct competition from membership warehouse club operators.
If we do not have sufficient quantities of a popular product, we might lose sales and profits we otherwise could have made. 13 Table of Contents Future sales growth depends, in part, on our ability to successfully open new warehouse clubs in our existing and new markets .
Future sales growth depends, in part, on our ability to successfully open new warehouse clubs in our existing and new markets .
Please see Part II. “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K for further discussion of the effect of currency rate changes, inflation and other economic factors on our operations. 9 Table of Contents Our financial performance is dependent on international operations, which exposes us to various risks.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K for further discussion of the effect of currency rate changes, inflation and other economic factors on our operations. We face significant competition. Our international warehouse club business competes with exporters, importers, wholesalers, local retailers and trading companies in various international markets.
While major international online retailers have not established a significant penetration in any of our markets, Amazon.com, Inc. continues to expand its online marketplace and make additional investments to bolster its presence in Colombia. Also, it is possible that Amazon.com, Inc. or smaller regional companies will increase the penetration of online shopping in the rest of our markets.
While major international online retailers have not established a significant penetration in any of our markets, AmazonGlobal continues to expand its online marketplace and ships into most of our markets. However, other regional online retailers, such as MercadoLibre, have continued to increase their presence in our markets.
Our current ERP (Enterprise Resource Planning) system is not supported by the developer of the software, which could increase the risk of a system disruption. In addition, there are newer versions available from the vendors of some of our other internal systems offering greater functionality and reliability which we have not yet implemented.
In addition, there are newer versions available from the vendors of some of our other internal systems offering greater functionality and reliability that we have not yet implemented. We also continue to rely on other systems we developed internally a number of years ago, and we are in the process of migrating these systems to more industry-standard technologies.
Damaged and destroyed roads restricted traffic flow, adversely affecting customer access for some time after the hurricane.
Damaged and destroyed roads restricted traffic flow, adversely affecting customer access for some time after the hurricane. Future losses from business interruption may not be adequately compensated by insurance and could have a material adverse effect on our business, financial condition, and results of operations.
External Factors that Could Adversely Affect Us Negative economic conditions created or exacerbated by inflation, and higher interest rates could adversely impact our business in various respects.
For more information about the lack of U.S. dollar availability risks we face, see "Financial and Accounting Risks – We are subject to volatility in foreign currency exchange rates and limits on our ability to convert foreign currencies into U.S. dollars." Negative economic conditions created or exacerbated by inflation, and higher interest rates could adversely impact our business in various respects.
Removed
The retail food business is hypersensitive to general changes in economic conditions. A significant decline in the economies of the countries in which our warehouse clubs are located may adversely affect our operating results.
Added
In order to mitigate the significant price increase to our Members that would be required to maintain our target margins, we absorbed the increase in the costs of goods resulting from the devaluation and we took pricing actions on certain product categories that reduced our Total gross margin during that period until the exchange rate normalized and we were able to return to a more normalized margin profit.
Removed
As a result, beginning later in the second quarter of fiscal year 2023, we strategically held pricing steady across several product categories of our U.S. merchandise imported into Colombia instead of increasing the prices to reflect the rising costs of these items.
Added
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.
Removed
This action adversely impacted our Total Gross Margin percentage for our Colombia segment and our Company overall during the third quarter of fiscal year 2023. In the fourth quarter of fiscal year 2023, the Colombian peso began to strengthen; however, we continued to hold pricing steady which resulted in margins improving from the results of the third quarter.
Added
This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar.
Removed
Our business depends heavily on the uninterrupted operation of our distribution facilities located in Miami, Florida and San Jose, Costa Rica, our warehouse clubs located in Colombia, Central America and the Caribbean, and our headquarters and buying operations in San Diego, California.
Added
Sales of food and groceries are especially sensitive to general changes in economic conditions.
Removed
The operation of all of our facilities is highly dependent on our employees who staff these locations, and the coronavirus, or similar pandemics, could directly threaten the health of our employees and Members. It also resulted in delays or difficulty sourcing products, which negatively affected our business and financial results.
Added
Although we have seen recent inflationary pressures subsiding, substantial product cost increases and 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. Please see Part II. “Item 7.
Removed
Similar unrest happened in Nicaragua and Honduras in 2019; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018. 10 Table of Contents We face significant competition. Our international warehouse club business competes with exporters, importers, wholesalers, local retailers and trading companies in various international markets.
Added
Some of our competitors have greater resources, buying power and name recognition than we have.
Removed
In the countries in which we operate, we do not currently face direct competition from U.S. membership warehouse club operators.

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Item 2. Properties

Properties — owned and leased real estate

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Our corporate headquarters is located in San Diego, California, and we maintain other regional offices in the Miami distribution facility and our international locations. We own our regional distribution facility in Miami, Florida, but we otherwise lease most non-warehouse club facilities and expect to continue to lease these types of facilities as we expand.
Our corporate headquarters is located in San Diego, California, and we maintain other regional offices in the Miami distribution facility and our international locations. We own our regional dry merchandise distribution facility in Miami, Florida, but we otherwise lease most non-warehouse club facilities and expect to continue to lease these types of facilities as we expand.
The term on these leases generally run for 20 to 30 years and contain options to renew from 5 to 20 years. We actively seek to secure lease extensions or find suitable replacement properties before our leases expire.
The term on these leases for our warehouse clubs generally run for 20 to 30 years and contain options to renew from 5 to 20 years. We actively seek to secure lease extensions or find suitable replacement properties before our leases expire.
For instance, we've recently entered into a lease agreement to relocate our Miraflores, Guatemala club, for which the current lease was due to expire on December 31, 2025, to a new location adjacent to the current club location. We expect to relocate our Miraflores club to this new location during fiscal year 2025.
For instance, we've recently entered into a lease agreement to relocate our Miraflores, Guatemala club, for which the current lease was due to expire on December 31, 2025, to a new location adjacent to the current club location. We expect to relocate our Miraflores club to this new location in fiscal year 2026.
As current leases expire, we believe that we will be able to obtain lease renewals, if desired, for these present locations, or to obtain leases for equivalent or better locations in the same general area. 21 Table of Contents
As current leases expire, we believe that we will be able to obtain lease renewals, if desired, for these present locations, or to obtain leases for equivalent or better locations in the same general area.
Properties At August 31, 2023, PriceSmart operated 51 membership warehouse clubs, as detailed below: Location Own land and building Lease land and/or building COLOMBIA SEGMENT Colombia (1) 8 1 CENTRAL AMERICA SEGMENT Costa Rica 8 — El Salvador (1) 3 — Guatemala (2) 3 2 Honduras 2 1 Nicaragua 2 — Panama 5 2 CARIBBEAN SEGMENT Aruba — 1 Barbados 1 — Dominican Republic 5 — Jamaica 2 — Trinidad 3 1 USVI — 1 Total 42 9 (1) In September 2023, we opened a warehouse club in Medellín, Colombia and are currently constructing and plan to open a warehouse club in Santa Ana, El Salvador in early 2024.
Properties At August 31, 2024, PriceSmart operated 54 membership warehouse clubs, as detailed below: Location Own land and building Lease land and/or building COLOMBIA SEGMENT Colombia 9 1 CENTRAL AMERICA SEGMENT Costa Rica (1) 8 — El Salvador 4 — Guatemala (2) 3 3 Honduras 2 1 Nicaragua 2 — Panama (3) 6 1 CARIBBEAN SEGMENT Aruba — 1 Barbados 1 — Dominican Republic 5 — Jamaica 2 — Trinidad 3 1 USVI — 1 Total 45 9 (1) The Company purchased land located in Cartago, Costa Rica, where we plan to open our ninth warehouse club in Costa Rica in the spring of 2025.
We operate two large regional distribution centers, one in Miami, Florida and the other in San Jose, Costa Rica, along with several smaller local distribution centers for the consolidation and distribution of merchandise shipments to our warehouse clubs.
As of August 31, 2024, sales floors of the Company’s warehouse club buildings occupied a total of approximately 2,646,130 square feet, of which 400,191 square feet were on leased property. 24 Table of Contents We operate two large regional distribution centers, one in Miami, Florida and the other in San Jose, Costa Rica, along with several smaller local distribution centers for the consolidation and distribution of merchandise shipments to our warehouse clubs.
Removed
We own the land for each and expect to own each of the buildings upon its completion. (2) We are currently constructing and plan to open a warehouse club in Escuintla, Guatemala on November 30, 2023. We have entered into a lease for the land on which we are constructing the warehouse club.
Added
(2) The Company expects to formalize a land lease in the first quarter of fiscal year 2025 for land in Quetzaltenango, Guatemala, where we plan to open our seventh warehouse club in Guatemala in the summer of 2025. (3) In January 2024, the Company purchased one of its club's buildings and land, which was previously leased, in Panama City, Panama.
Removed
As of August 31, 2023, sales floors of the Company’s warehouse club buildings occupied a total of approximately 2,524,276 square feet, of which 430,588 square feet were on leased property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 – Commitments and Contingencies” for additional information regarding our legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 22 Table of Contents PART II
Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 – Commitments and Contingencies” for additional information regarding our legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 25 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company's common stock has been quoted and traded on the NASDAQ Global Select Market under the symbol “PSMT” since September 2, 1997. As of October 25, 2023, there were approximately 385 holders of record of the common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company's common stock has been quoted and traded on the NASDAQ Global Select Market under the symbol “PSMT” since September 2, 1997. As of October 25, 2024, there were approximately 385 holders of record of the common stock.
We do not expect to continue repurchases or adopt a new repurchase plan at this time. However, the Board of Directors could choose to commence another program in the future, at its discretion, after its review of the Company’s financial performance and anticipated capital requirements.
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.
Dates Stock Price From To High Low 2023 FISCAL QUARTERS First Quarter 9/1/2022 11/30/2022 $ 73.76 $ 56.29 Second Quarter 12/1/2022 2/28/2023 75.92 60.01 Third Quarter 3/1/2023 5/31/2023 79.55 66.54 Fourth Quarter 6/1/2023 8/31/2023 82.63 69.08 2022 FISCAL QUARTERS First Quarter 9/1/2021 11/30/2021 $ 86.16 $ 70.10 Second Quarter 12/1/2021 2/28/2022 76.13 66.77 Third Quarter 3/1/2022 5/31/2022 88.30 69.53 Fourth Quarter 6/1/2022 8/31/2022 74.74 63.14 Recent Sales of Unregistered Securities In September 2022, the Company issued restricted stock awards (RSAs) and performance stock units (PSUs) covering 156,225 shares of the Company’s common stock, $0.0001 par value per share.
Dates Stock Price From To High Low 2024 FISCAL QUARTERS First Quarter 9/1/2023 11/30/2023 $ 81.41 $ 61.82 Second Quarter 12/1/2023 2/29/2024 84.93 67.48 Third Quarter 3/1/2024 5/31/2024 87.99 77.86 Fourth Quarter 6/1/2024 8/31/2024 92.76 77.51 2023 FISCAL QUARTERS First Quarter 9/1/2022 11/30/2022 $ 73.76 $ 56.29 Second Quarter 12/1/2022 2/28/2023 75.92 60.01 Third Quarter 3/1/2023 5/31/2023 79.55 66.54 Fourth Quarter 6/1/2023 8/31/2023 82.63 69.08 Recent Sales of Unregistered Securities In September 2022, the Company issued restricted stock awards (RSAs) and performance stock units (PSUs) covering 156,225 shares of the Company’s common stock, $0.0001 par value per share.
The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10(b)5-1 under the Securities Exchange Act of 1934, as amended, which permits common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions.
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.
Dividends Declared Amount First Payment Second Payment Record Date Date Paid Amount Record Date Date Paid Amount 2/3/2023 $ 0.92 2/16/2023 2/28/2023 $ 0.46 8/15/2023 8/31/2023 $ 0.46 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 2/4/2021 $ 0.70 2/15/2021 2/26/2021 $ 0.35 8/15/2021 8/31/2021 $ 0.35 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. 23 Table of Contents Repurchase of Equity Securities 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.
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. 26 Table of Contents Repurchase of Equity Securities 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.
The following table sets forth information on our common stock repurchase activity for the fiscal year 2023 (dollars in thousands, except per share data): Period Total 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 September 1, 2022 - September 30, 2022 — $ — — — October 1, 2022 - October 31, 2022 20,621 63.05 — — November 1, 2022 - November 30, 2022 — — — — December 1, 2022 - December 31, 2022 — — — — January 1, 2023 - January 31, 2023 20,329 71.42 — — February 1, 2023 - February 28, 2023 40,895 75.00 — — March 1, 2023 - March 31, 2023 774 70.15 — — April 1, 2023 - April 30, 2023 526 74.90 — — May 1, 2023 - May 31, 2023 1,094 73.52 — — June 1, 2023 - June 30, 2023 — — — — July 1, 2023 - July 31, 2023 2,650 78.61 — — August 1, 2023 - August 31, 2023 84,639 78.71 71,530 $ 69,382 Total 171,528 $ 74.99 71,530 Item 6.
The following table sets forth information on our common stock repurchase activity for fiscal year 2024 (dollars in thousands, except per share data): Period Total 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 September 1, 2023 - September 30, 2023 221,272 $ 75.57 221,272 $ 52,655 October 1, 2023 - October 31, 2023 722,797 73.67 714,391 — November 1, 2023 - November 30, 2023 — — — — December 1, 2023 - December 31, 2023 — — — — January 1, 2024 - January 31, 2024 23,106 76.44 — — February 1, 2024 - February 29, 2024 — — — — March 1, 2024 - March 31, 2024 615 84.00 — — April 1, 2024 - April 30, 2024 764 81.58 — — May 1, 2024 - May 31, 2024 — — — — June 1, 2024 - June 30, 2024 — — — — July 1, 2024 - July 31, 2024 1,437 87.02 — — August 1, 2024 - August 31, 2024 10,085 88.96 — — Total 980,076 $ 74.36 935,663 Item 6.
Additionally, we announced in July 2023 that the Board of Directors authorized a program to repurchase up to $75 million of our common stock. Subsequent to our fiscal year that ended on August 31, 2023, we successfully completed the share repurchase program. We purchased a total of approximately 1,007,000 shares of our common stock under the program.
In addition, in July 2023 we announced a program authorized by our Board of Directors to repurchase up to $75 million of our common stock. We began repurchases in the fourth quarter of fiscal year 2023 and successfully completed the share repurchase program in the first quarter of fiscal year 2024.
Added
Dividends Declared Amount First Payment Second Payment Record Date Date Paid Amount Record Date Date Paid Amount 4/3/2024 $ 1.00 4/19/2024 4/30/2024 $ 1.00 N/A N/A N/A 2/1/2024 $ 1.16 2/15/2024 2/29/2024 $ 0.58 8/15/2024 8/30/2024 $ 0.58 2/3/2023 $ 0.92 2/16/2023 2/28/2023 $ 0.46 8/15/2023 8/31/2023 $ 0.46 2/3/2022 $ 0.86 2/15/2022 2/28/2022 $ 0.43 8/15/2022 8/31/2022 $ 0.43 On April 3, 2024, the Company's Board of Directors declared a one-time $1.00 per share special dividend paid on April 30, 2024 to stockholders of record on April 19, 2024 to distribute excess cash to stockholders.
Added
The $1.00 per share special dividend was in addition to the Company’s annual cash dividend in the total amount of $1.16 per share, with $0.58 per share paid on February 29, 2024 to stockholders of record as of February 15, 2024 and $0.58 per share paid on August 30, 2024 to stockholders of record as of August 15, 2024.
Added
We purchased a total of approximately 1,007,000 shares of our common stock under the program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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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.
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 of net merchandise sales at the time of the sales transaction.
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 sale of our Aeropost subsidiary, the write-off of certain Aeropost receivables, the write-off of certain VAT receivables following unfavorable court rulings, asset impairment on our assets held for sale and closure costs, the gain on the acquisition of a building, and the tax impact of the foregoing adjustments on net income.
We define adjusted net income as net income, as reported, adjusted for: separation costs associated with the departure of our former Chief Executive Officer, the write-off of certain Aeropost receivables, the write-off of certain VAT receivables following unfavorable court rulings, asset impairment on our assets held for sale and closure costs, the gain on the acquisition of a building, and the tax impact of the foregoing adjustments on net income.
In addition to relevant GAAP measures, we also provide non-GAAP measures including adjusted net income, adjusted net income per diluted share, adjusted EBITDA and net merchandise sales - constant currency because management believes these metrics are useful to investors and analysts by excluding items that we do not believe are indicative of our core operating performance.
In addition to relevant GAAP measures, we also provide non-GAAP measures including adjusted net income, 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 excluding items that we do not believe are indicative of our core operating performance.
Of this amount, $1.0 million is a reserve we recorded against an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million is an accrual for the unpaid years of the dispute in which we made tax payments using the original computation based on taxable income.
Of this amount, $1.0 million is a reserve we recorded against an income tax receivable for one of the tax years for which we sought a refund and the remaining $6.2 million is for the unpaid years of the dispute in which we made tax payments using the original computation based on taxable income.
We conduct ourselves in a socially responsible manner as we endeavor to improve the quality of the lives of our Members and their businesses, while respecting the environment and the laws of all the countries in which we operate. We also believe in facilitating philanthropic contributions to communities in which we do business.
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. We also believe in facilitating philanthropic contributions to the communities in which we do business.
(3) Reflects $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023 and $660,000 of a receivable written-off in connection with the settlement in the third quarter of fiscal year 2023 of a claim for indemnification from the buyer of the Aeropost business.
(2) Reflects $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023 and $660,000 of a receivable written-off in connection with the settlement in the third quarter of fiscal year 2023 of a claim for indemnification from the buyer of the Aeropost business.
(5) Reflects $5.7 million of impairment charges primarily related to the write down of assets in connection with our decision in the fourth quarter of fiscal year 2023 to seek to sell our Trinidad sustainable packaging plant.
(4) Reflects $5.7 million of impairment charges primarily related to the write down of assets in connection with our decision in the fourth quarter of fiscal year 2023 to seek to sell our Trinidad sustainable packaging plant.
As of August 31, 2023, we evaluated our deferred tax assets and liabilities and determined that a valuation allowance was necessary for certain deferred tax asset balances, primarily because of the existence of significant negative objective evidence, such as the fact that certain subsidiaries are in a cumulative loss position for the past three years, indicating that certain net operating loss carry-forward periods are not sufficient to realize the related deferred tax assets.
As of August 31, 2024, we evaluated our deferred tax assets and liabilities and determined that a valuation allowance was necessary for certain deferred tax asset balances, primarily because of the existence of significant negative objective evidence, such as the fact that certain subsidiaries are in a cumulative loss position for the past three years, indicating that certain net operating loss carry-forward periods are not sufficient to realize the related deferred tax assets.
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.
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 complex tax issues.
The periods are established at the beginning of the fiscal year to provide as close a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher warehouse club sales on the weekends.
The periods are established at the beginning of the fiscal year to provide as close 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.
An allowance is provided against VAT and income tax receivable balances in dispute when we do not expect to eventually prevail in our recovery of such balances. We do not currently have any allowances provided against VAT and income tax receivables. Long-lived Assets We periodically evaluate our long-lived assets for indicators of impairment.
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.
Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradable currencies. We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradable currencies.
For instance, since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradable currencies. We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradable currencies.
“Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” 44 Table of Contents Critical Accounting Estimates Our financial statements are prepared in accordance with GAAP in the United States.
“Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” 48 Table of Contents Critical Accounting Estimates Our financial statements are prepared in accordance with GAAP in the United States.
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.
We believe adjusted net income and adjusted net incom e 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.
Loss on disposal of assets recorded during the years reported resulted from improvements to operations and normal preventive maintenance. Seasonality and Quarterly Fluctuations Historically, our merchandising businesses have experienced holiday retail seasonality in their markets.
Loss on disposal of assets recorded during the years reported resulted from improvements to operations and normal preventive maintenance. Seasonality Historically, our merchandising businesses have experienced holiday retail seasonality in their markets.
(6) Reflects a $950,000 gain related to a building we acquired upon the early termination of a lease in which we were the lessor of the land on which the building was constructed by and abandoned by one of our tenants.
(5) Reflects a $950,000 gain related to a building we acquired upon the early termination of a lease in which we were the lessor of the land on which the building was constructed by and abandoned by one of our tenants.
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.
Additionally, during 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.
Once these two new clubs are open, we will operate 54 warehouse clubs. Our corporate headquarters, U.S. buying operations and regional distribution centers are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia. All intercompany balances and transactions have been eliminated in consolidation.
Once these two new clubs are open, we will operate 56 warehouse clubs in total. Our corporate headquarters, U.S. buying operations and regional distribution centers are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia. All intercompany balances and transactions have been eliminated in consolidation.
These charges were recorded in the Warehouse club and other expenses line item under the Selling, general and administrative caption within the consolidated statements of income. 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.
These charges were recorded in the Warehouse club and other expenses line item under the Selling, general and administrative caption within the consolidated statements of income. 50 Table of Contents 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.
(7) Reflects the tax effect of the above-mentioned adjustments. 29 Table of Contents 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; asset impairment and closure costs; Aeropost write-offs; the write-off of certain VAT receivables following unfavorable court rulings .
(6) Reflects the tax effect of the above-mentioned adjustments. 33 Table of Contents 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; asset impairment and closure costs; Aeropost write-offs; and the write-off of certain VAT receivables following unfavorable court rulings .
For a comparison of the fiscal years ended August 31, 2022 and 2021, please see Part II. “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2022 filed with the SEC on October 31, 2022.
For a comparison of the fiscal years ended August 31, 2023 and 2022, please see Part II. “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition” in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2023 filed with the SEC on October 30, 2023.
In the fourth quarter of fiscal year 2023, we recorded $5.7 million of asset impairment and closure costs primarily related to the write down of the assets held for sale of our Trinidad sustainable packaging plant to their estimated fair value upon our decision to seek to sell the plant.
Additionally, in fiscal year 2023, we recorded $5.7 million of asset impairment and closure costs primarily related to the write down of the assets held for sale of our Trinidad sustainable packaging plant to their estimated fair value upon our decision to seek to sell the plant.
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.
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. 51 Table of Contents
We face difficulties in the shipment of, and the risks inherent in the importation of, merchandise to our warehouse clubs. One of those difficulties is possible governmental restrictions on the importation of merchandise.
At times we face difficulties in the shipment of, and the risks inherent in the importation of, merchandise to our warehouse clubs. One of those difficulties is possible governmental restrictions on the importation of merchandise.
The Company expects this practice going forward. 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.
The Company expects to continue this practice going forward. 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.
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 and may not be comparable to similarly titled measures used by other companies in our industry or across different industries. 28 Table of Contents Adjusted Net Income and Adjusted Net Income per Diluted Share The adjusted net income and adjusted net income per diluted share metrics are important measures used by management to compare the performance of core operating results between periods.
However, 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 and may not be comparable to similarly titled measures used by other companies in our industry or across different industries. 32 Table of Contents Adjusted Net Income and Adjusted Net Income per Diluted Share Adjusted net income and adjusted net income per diluted share metrics are important measures used by management to compare the performance of our core operations results between periods.
However, the most recent delay in obtaining importation clearance, resulted in us being unable to import merchandise into Nicaragua for several weeks in June.
However, the most recent delay in obtaining importation clearance, resulted in us being unable to import merchandise into Nicaragua for several weeks in June of 2023.
We did not record any other impairment charges during fiscal year 2023 related to the loss of legal ownership or title to assets; significant changes in the Company's strategic business objectives or utilization of assets; or the impact of significant negative industry or economic trends.
We did not record any impairment charges during fiscal year 2024 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.
Reconciliations between net merchandise sales - constant currency and comparable net merchandise sales - constant currency and the most directly comparable GAAP measure are included where applicable. 30 Table of Contents Comparison of Fiscal Year 2023 to 2022 The following discussion and analysis compares the results of operations for the fiscal years ended August 31, 2023 and 2022 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report.
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. 34 Table of Contents Comparison of Fiscal Year 2024 to 2023 The following discussion and analysis compares the results of operations for the fiscal years ended August 31, 2024 and 2023 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report.
We also have returned cash to stockholders through a semiannual dividend and by repurchasing shares of our common 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 also have returned cash to stockholders through a semiannual dividend, a one-time special dividend in the third quarter of fiscal year 2024, and by repurchasing shares of our common 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 operate 51 warehouse clubs in 12 countries and one U.S. territory (nine in Colombia; eight in Costa Rica ; seven in Panama ; five in the Dominican Republic and Guatemala ; four in Trinidad ; three each in in Honduras and El Salvador, two each in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands).
We operate 54 warehouse clubs in 12 countries and one U.S. territory (ten in Colombia; eight in Costa Rica ; seven in Panama ; six in Guatemala; five in Dominican Republic ; four each in Trinidad and El Salvador; three in Honduras; two each in Nicaragua and Jamaica; and one each in Aruba, Barbados and the United States Virgin Islands).
After evaluating the merits of the Company’s arguments, the court’s decision, and probability that the other related refund appeals would receive the same judgment, the Company concluded that a total of $2.3 million of related VAT receivable would not be recoverable and this amount was written-off in the third quarter of fiscal year 2023.
After evaluating the merits of the Company’s arguments, the court’s decision, and probability that the other related refund appeals would receive the same judgment, the Company concluded that a total of $2.3 million of related VAT receivable would not be recoverable and wrote this amount off in fiscal year 2023.
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.
Additionally, during 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.
If we decide to repatriate cash through the payment of cash dividends by our foreign subsidiaries to our domestic operations, we will accrue taxes if and when appropriate.
If we decide to repatriate cash through the payment of a cash dividend by our foreign subsidiaries to our domestic operations, we will accrue taxes if and when appropriate.
Net cash used in financing activities totaled $41.1 million and $12.2 million for the twelve months ended August 31, 2023 and 2022, respectively. We use cash flows provided by financing primarily to fund our working capital needs, our warehouse club and distribution center acquisitions and expansions, and investments in technology to support our omni-channel initiatives.
Net cash used in financing activities totaled $150.0 million and $41.1 million for the twelve months ended August 31, 2024 and 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 investments in technology to support our omni-channel initiatives.
In one of the countries with a significant VAT receivable balance, the Company received unfavorable rulings at the supreme court level of that country denying a portion of the Company’s appeals for refund of over-withholdings of VAT.
In one of the countries where we had a significant VAT receivable balance, the Company received unfavorable rulings at the supreme court level of that country denying a portion of the Company’s appeals for refund of over-withholdings of VAT.
Shifts in consumer preferences contributed to the changes in category mix. 32 Table of Contents Comparable Merchandise Sales We report comparable warehouse club sales on a “same week” basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday.
Shifts in consumer preferences contributed to the changes in category mix. 36 Table of Contents Comparable Net 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.
We do not expect to continue repurchases or adopt a new repurchase plan at this time. However, the Board of Directors could choose to commence another program in the future at its discretion after its review of the Company’s financial performance and anticipated capital requirements.
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.
We will make a payment of $6.2 million to resolve amounts due for tax years in which we made tax payments using the original computation based on taxable income rather than the percentage of sales method.
We also made payments of $6.2 million to resolve amounts due for tax years in which we made tax payments using the original computation based on taxable income rather than the percentage of sales method.
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 percentage growth for the fifty-two week period ended September 3, 2023: Fifty-Two Weeks Ended September 3, 2023 Comparable Net Merchandise Sales Growth/ (Decline) Comparable Net Merchandise Sales - Constant Currency Growth % Impact of Foreign Currency Exchange Central America 10.9 % 7.3 % 3.6 % Caribbean 5.9 5.5 0.4 Colombia (9.2) 3.9 (13.1) Consolidated comparable net merchandise sales 7.1 % 6.3 % 0.8 % Overall, the mix of currency fluctuations within our markets had an 80 basis point (0.8%) positive impact on comparable net merchandise sales for the fifty-two week period ended September 3, 2023.
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 percentage growth for the 52-week period ended September 1, 2024: Fifty-Two Weeks Ended September 1, 2024 Comparable Net Merchandise Sales Growth Comparable Net Merchandise Sales - Constant Currency Growth/ (Decline) % Impact of Foreign Currency Exchange Central America 7.7 % 4.7 % 3.0 % Caribbean 6.0 8.4 (2.4) Colombia 12.9 (0.8) 13.7 Consolidated comparable net merchandise sales 7.7 % 5.2 % 2.5 % Overall, the mix of currency fluctuations within our markets had 250 basis points (2.5%) of positive impact on comparable net merchandise sales for the 52-week period ended September 1, 2024.
Net merchandise sales - constant currency increased 8.3% 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 52 weeks ended September 3, 2023 increased 7.1%.
Net merchandise sales - constant currency increased 8.6% over the prior year period. • Comparable net merchandise sales (that is, sales in the 51 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 52 weeks ended September 1, 2024 increased 7.7%.
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 the remaining 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.
While the rules related to refunds of income tax receivables in these countries are unclear and complex, 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.
In two countries where the Company operates, minimum income tax rules require the Company 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 (AMT).
Minimum tax rules, applicable in some of the countries where the Company operates, require the Company 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").
Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands): Years Ended August 31, 2023 August 31, 2022 Number of common shares acquired 71,530 — Average price per common share acquired $ 78.54 $ — Total cost of common share acquired $ 5,618 $ — For further information, refer to Part II.
Share repurchase activity under the Company’s repurchase programs for the periods indicated was as follows (total cost in thousands): Years Ended August 31, 2024 August 31, 2023 Number of common shares acquired 935,663 71,530 Average price per common share acquired $ 74.13 $ 78.54 Total cost of common share acquired $ 69,362 $ 5,618 For further information, refer to Part II.
Years Ended August 31, 2023 August 31, 2022 Amount Change Amount Other expense, net $ (14,156) $ (10,921) $ (3,235) 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.
Years Ended August 31, 2024 August 31, 2023 Amount Change Amount Other expense, net $ (17,607) $ (3,451) $ (14,156) 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.
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. Impact of foreign currency is the effect of currency fluctuations on our net merchandise sales.
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.
(4) Reflects $2.3 million of VAT receivables related to prior periods deemed not recoverable and written-off in the third quarter of fiscal year 2023 following unfavorable court rulings.
(3) Reflects $2.3 million of VAT receivables deemed not recoverable and written-off in the third quarter of fiscal year 2023 following unfavorable court rulings.
As of August 31, 2023 , our Honduran subsidiary had approximately $19.6 million of cash and cash equivalents denominated in lempiras, which cannot be readily converted to U.S. dollars for general use within the Company. We are actively working with our banking partners and government authorities to address this situation.
As of August 31, 2024 , our Honduran subsidiary had approximately $22.3 million of cash and cash equivalents and short-term investments denominated in 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.
Our mission is to serve as a model company, which operates profitably and provides a good return to our investors, by providing Members in emerging and developing markets with exciting, high-quality merchandise sourced from around the world and valuable services at compelling prices in safe U.S. style clubs and through PriceSmart.com.
We 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-quality merchandise sourced from around the world and valuable services at compelling prices in safe U.S.-style clubs and through PriceSmart.com. We prioritize the well-being and safety of our Members and employees.
Our balance as of August 31, 2023 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $18.2 million, a decrease of $82.3 million from the peak of $100.5 million as of November 30, 2020.
Our balance as of August 31, 2024 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $60.2 million, a decrease of $40.3 mill ion from the peak of $100.5 million as of November 30, 2020.
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, including both our regional suppliers and those from around the world.
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, including both our regional suppliers and those from around the world.
Financial highlights for the fourth quarter of fiscal year 2023 included: • Total revenues increased 9.5% over the comparable prior year period. • Net merchandise sales increased 10.0% over the comparable prior year period. We ended the quarter with 51 warehouse clubs compared to 50 warehouse clubs at the end of the fourth quarter of fiscal year 2022.
Financial highlights for the fourth quarter of fiscal year 2024 included: • Total revenues increased 9.6% over the prior year period. • Net merchandise sales increased 9.5% over the prior year period. We ended the quarter with 54 warehouse clubs compared to 51 warehouse clubs at the end of the fourth quarter of fiscal year 2023.
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 fifty-two week period ended September 3, 2023, compared to the same fifty-two week period of the prior year and the fifty-three week period ended September 4, 2022 compared to the fifty-three week period of the prior year: % Increase/(Decrease) in Comparable Net Merchandise Sales Fifty-Two Weeks Ended Fifty-Three Weeks Ended September 3, 2023 September 4, 2022 Central America 10.9 % 10.4 % Caribbean 5.9 12.7 Colombia (9.2) 4.5 Consolidated comparable net merchandise sales 7.1 % 10.4 % Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the fifty-two week period ended September 3, 2023 increased 7.1%.
The following table indicates 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 52-week periods ended September 1, 2024 and September 3, 2023 compared to the prior year: 52 Weeks Ended September 1, 2024 September 3, 2023 % Increase in Comparable Net Merchandise Sales % Increase/(Decrease) in Comparable Net Merchandise Sales Central America 7.7 % 10.9 % Caribbean 6.0 5.9 Colombia 12.9 (9.2) Consolidated comparable net merchandise sales 7.7 % 7.1 % Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the 52-week period ended September 1, 2024 increased 7.7%.
Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt.” for further discussion. 43 Table of Contents Future Lease 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.
“Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - 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.
Comparable net merchandise sales - constant currency for the 13 weeks ended September 3, 2023 increased 5.2%. • Membership income for the fourth quarter of fiscal year 2023 increased 10.6% to $17.2 million over the comparable prior year period. • Total gross margins (net merchandise sales less associated cost of goods sold) increased 10.6% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.6%, an increase of 10 basis points or 0.1% from the same period in the prior year. • Selling, general and administrative expenses increased $25.2 million or 18.8% compared to the fourth quarter of fiscal year 2022, primarily due to $9.2 million of costs associated with the reserve for the AMT settlement and $5.7 million of asset impairment and closure costs as well as higher compensation, depreciation, and professional fees. • Operating income for the fourth quarter of fiscal year 2023 was $32.1 million, a decrease of 17.5%, or $6.9 million, compared to the fourth quarter of fiscal year 2022, primarily due to costs associated with the reserve for the AMT settlement and asset impairment and closure costs. • We recorded a $1.5 million net loss in total other expense, net in the fourth quarter of fiscal year 2023 compared to a $3.5 million net loss in total other expense, net in the same period last year primarily due to an increase in interest income of $3.0 million, comparatively, because of significantly more investments of surplus cash at higher yields, and partially offset by an increase in other expense of $1.0 million, primarily due to an increase in total foreign currency transaction losses. • Our effective tax rate increased in the fourth quarter of fiscal year 2023 to 49.9% from 34.2% in the fourth quarter of fiscal year 2022.
Comparable net merchandise sales - constant currency for the 13 weeks ended September 1, 2024 increased 6.0%. • Membership income for the fourth quarter of fiscal year 2024 increased 14.1% to $19.7 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 15.7%, an increase of 10 basis points or 0.1% from the same period in the prior year. • Selling, general and administrative expenses increased $3.4 million or 2.2% compared to the fourth quarter of fiscal year 2023, primarily due to higher compensation costs, professional fees, depreciation expense and bank fees which were partially offset by costs associated with the reserve for the AMT settlement and asset impairment and closure costs which occurred during the fourth quarter of fiscal year 2023. • Operating income for the fourth quarter of fiscal year 2024 was $49.2 million, an increase of 53.1%, or $17.1 million, compared to the fourth quarter of fiscal year 2023. • We recorded a $7.4 million net loss in total other expense, net in the fourth quarter of fiscal year 2024 compared to a $1.5 million net loss in total other expense, net in the same period last year primarily due to an increase in other expense of $4.2 million, primarily driven by an increase in total foreign currency transaction losses and a decrease of $1.2 million in interest income. • Our effective tax rate decreased in the fourth quarter of fiscal year 2024 to 30.4% from 49.9% in the fourth quarter of fiscal year 2023.
The repurchases were made on the open market pursuant to a trading plan established pursuant to Rule 10(b)5-1 under the Securities Exchange Act of 1934, as amended, which permits common stock to be repurchased at a time that we might otherwise be precluded from doing so under insider trading laws or self-imposed trading restrictions.
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.
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. We evaluate our accounting policies and significant estimates on an ongoing basis, including those related to contingencies and litigation, income taxes, value added taxes, and long-lived assets.
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.
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.
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. Our operations are subject to volatile weather conditions and natural disasters.
We, together with our tax and legal advisers, appealed these interpretations and litigated our cases in the country’s court system. However, in the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle the AMT payment dispute in this country.
We, together with our tax and legal advisers, appealed these interpretations and litigated our cases in the country’s court system. Nevertheless, in fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute.
We generate cash from operations primarily through net merchandise sales and membership fees. Cash used in operations generally consist of payments to our merchandise vendors, warehouse club and distribution center operating costs (including payroll, employee benefits and utilities), as well as payments for income taxes.
Cash used in operations generally consist of payments to our merchandise vendors, warehouse club and distribution center operating costs (including payroll, employee benefits and utilities), as well as payments for income taxes.
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.
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.
Currency fluctuations had a $5.2 million, or 50 basis point (0.5%), positive impact on net merchandise sales in our Caribbean segment for the twelve months ended August 31, 2023. These currency fluctuations contributed approximately 10 basis points (0.1%) of positive impact on total net merchandise sales growth for the current fiscal year period.
Currency fluctuations had a $65.2 million, or 1,520 basis point (15.2%), positive impact on net merchandise sales in our Colombia segment for the twelve months ended August 31, 2024. These currency fluctuations contributed approximately 150 basis points (1.5%) of positive impact on total net merchandise sales for the current fiscal year period.
Net Merchandise Sales by Category The following table indicates the approximate percentage of net sales accounted for by each major category of items sold during the fiscal years ended August 31, 2023 and 2022: Years Ended August 31, 2023 2022 Foods & Sundries 50 % 49 % Fresh Foods 29 29 Hardlines 11 11 Softlines 5 6 Other Business 5 5 Net Merchandise Sales 100 % 100 % The mix of sales by major category changed slightly.
Net Merchandise Sales by Category The following table indicates the approximate percentage of net sales accounted for by each major category of items sold during the fiscal years ended August 31, 2024 and 2023: Years Ended August 31, 2024 2023 Foods & Sundries 49 % 50 % Fresh Foods 30 29 Hardlines 11 11 Softlines 5 5 Food Service and Bakery 4 4 Health Services 1 1 Net Merchandise Sales 100 % 100 % The mix of sales by major category changed slightly.
Three Months Ended Years Ended August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 Net income attributable to PriceSmart as reported $ 15,381 $ 23,304 $ 109,205 $ 104,534 Adjustments: Separation costs associated with Chief Executive Officer departure (1) — — 7,747 — Gain on sale of Aeropost subsidiary (2) — — — (2,736) Aeropost-related write-offs (3) — — 2,786 — VAT receivable write-off (4) — — 2,309 — Asset impairment and closure costs (5) 5,658 — 5,658 — Gain on acquisition of building (6) (948) — (948) — Tax impact of adjustments to net income (7) 266 — (284) 1,280 Adjusted net income attributable to PriceSmart $ 20,357 $ 23,304 $ 126,473 $ 103,078 Net income attributable to PriceSmart per diluted share $ 0.49 $ 0.75 $ 3.50 $ 3.38 Separation costs associated with Chief Executive Officer departure — — 0.23 — Gain on sale of Aeropost subsidiary — — — (0.05) Aeropost-related write-offs — — 0.09 — VAT receivable write-off — — 0.08 — Asset impairment and closure costs 0.18 — 0.18 — Gain on acquisition of building (0.02) — (0.02) — Adjusted net income attributable to PriceSmart per diluted share $ 0.65 $ 0.75 $ 4.06 $ 3.33 (1) Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer in February 2023.
Three Months Ended Years Ended (Amounts in thousands, except per share data) August 31, 2024 August 31, 2023 August 31, 2024 August 31, 2023 Net income as reported $ 29,068 $ 15,381 $ 138,875 $ 109,205 Adjustments: Separation costs associated with Chief Executive Officer departure (1) — — — 7,747 Aeropost-related write-offs (2) — — — 2,786 VAT receivable write-off (3) — — — 2,309 Asset impairment and closure costs (4) — 5,658 — 5,658 Gain on acquisition of building (5) — (948) — (948) Tax impact of adjustments to net income (6) — 266 — (284) Adjusted net income $ 29,068 $ 20,357 $ 138,875 $ 126,473 Net income per diluted share $ 0.94 $ 0.49 $ 4.57 $ 3.50 Separation costs associated with Chief Executive Officer departure — — — 0.23 Aeropost-related write-offs — — — 0.09 VAT receivable write-off — — — 0.08 Asset impairment and closure costs — 0.18 — 0.18 Gain on acquisition of building — (0.02) — (0.02) Adjusted net income per diluted share $ 0.94 $ 0.65 $ 4.57 $ 4.06 (1) Reflects $7.7 million of separation costs associated with the departure of our former Chief Executive Officer in February 2023.
For example, roadblocks were set up in Guatemala in October 2023 due to election results, limiting access to certain of our warehouse clubs. In addition, roadblocks also arose in Panama in October 2023 disrupting traffic to our clubs throughout most of the market as a reaction to an agreement between the Panamanian government and a mining company.
For example, protestors set up roadblocks in Panama during October and November 2023 as a reaction to an agreement between the Panamanian government and a mining company, disrupting traffic to our clubs throughout most of the market. Roadblocks in Guatemala in October 2023 relating to election protests also limited access to certain of our warehouse clubs.
As a result, sales related to one of our warehouse clubs opened during fiscal year 2023 will not be used in the calculation of comparable sales until they have been open for at least 13 ½ months. Therefore, comparable net merchandise sales include 50 warehouse clubs for the fifty-two week period ended September 3, 2023 .
As a result, sales related to three of our clubs opened during fiscal year 2024 will not be used in the calculation of comparable sales until they have been open for at least 13 ½ months. Therefore, comparable net merchandise sales includes 51 warehouse clubs for the 52- week period ended September 1, 2024 .
The following table summarizes the equity securities repurchased as part of the Company's stock-based compensation programs during fiscal years 2023, 2022 and 2021: Years Ended August 31, 2023 August 31, 2022 August 31, 2021 Shares repurchased 99,998 88,415 62,282 Cost of repurchase of shares (in thousands) $ 7,245 $ 6,259 $ 5,542 We reissued 6,333 treasury shares as part of our stock-based compensation programs during fiscal year 2023, 8,300 treasury shares during fiscal year 2022 and 96,400 treasury shares during fiscal year 2021.
The following table summarizes the equity securities repurchased as part of the Company's stock-based compensation programs during fiscal years 2024, 2023 and 2022: Years Ended August 31, 2024 August 31, 2023 August 31, 2022 Shares repurchased 44,413 99,998 88,415 Cost of repurchase of shares (in thousands) $ 3,512 $ 7,245 $ 6,259 We reissued 3,000 treasury shares as part of our stock-based compensation programs during fiscal year 2024, 6,333 treasury shares during fiscal year 2023 and 8,314 treasury shares during fiscal year 2022.
We had 51 clubs in operation as of August 31, 2023 compared to 50 clubs as of August 31, 2022. Net merchandise sales in our Central America segment increased 12.1% during fiscal year 2023. This increase had a 720 basis point (7.2%) positive impact on total net merchandise sales growth.
We had 54 clubs in operation as of August 31, 2024 compared to 51 clubs as of August 31, 2023. Net merchandise sales in our Central America segment increased 11.0% during fiscal year 2024. This increase had a 670 basis point (6.7%) positive impact on total net merchandise sales growth.
Currency fluctuations within our Central America segment accounted for approximately 240 basis points (2.4%) of the positive impact on total comparable net merchandise sales for the fifty-two week period ended September 3, 2023. 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 Central America segment accounted for approximately 180 basis points (1.8%) of positive impact on total comparable merchandise sales for the 52-week period ended September 1, 2024. Our Costa Rica market was the main contributor as the market experienced currency appreciation when compared to the same period last year.
Currency fluctuations had a $85.0 million, or 360 basis point (3.6%), positive impact on net merchandise sales in our Central America segment for the twelve months ended August 31, 2023. These currency fluctuations contributed approximately 220 basis points (2.2%) of positive impact on total net merchandise sales for fiscal year 2023.
Currency fluctuations had a $78.4 million, or 300 basis point (3.0%), positive impact on net merchandise sales in our Central America segment for the twelve months ended August 31, 2024. These currency fluctuations contributed approximately 180 basis points (1.8%) of positive impact on total net merchandise sales for fiscal year 2024.
In the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle the AMT payment dispute in one of the aforementioned countries.
In fiscal year 2023, we recorded a $7.2 million charge to settle the AMT payment dispute in another one of our markets.
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.
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. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar.
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.
Interest Income 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.
The year-to-date decrease is primarily due to the foreign currency devaluation. 33 Table of Contents 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.
The current year increase is primarily due to the appreciation of the Colombian peso for most of the year. 37 Table of Contents 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.
As a result, the Company is making AMT payments substantially in excess of those it would expect to pay based on taxable income.
This can result in AMT payments substantially in excess of those the Company would expect to pay based on taxable income.
Interest Expense Years Ended August 31, 2023 August 31, 2022 Amount Change Amount Interest expense on loans $ 11,898 $ 4,258 $ 7,640 Interest expense related to hedging activity 1,205 (2,029) 3,234 Less: Capitalized interest (2,083) (820) (1,263) Net interest expense $ 11,020 $ 1,409 $ 9,611 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 club and other operations, and ongoing working capital requirements.
Interest Expense Years Ended August 31, 2024 August 31, 2023 Amount Change Amount Interest expense on loans $ 11,544 $ (354) $ 11,898 Interest expense related to hedging activity 2,354 1,149 1,205 Less: Capitalized interest (939) 1,144 (2,083) Interest expense $ 12,959 $ 1,939 $ 11,020 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 club and other operations, and ongoing working capital requirements.
As of August 31, 2023, we have signed one lease agreement which has not yet commenced. Refer to Part II. "Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 - Commitments and Contingencies" for further discussion.
As of August 31, 2024, we have signed one lease agreement for a facility to be built by the lessor on which construction has not yet commenced. Refer to Part II. "Item 8. Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 9 - Commitments and Contingencies" for further discussion. Derivatives Please refer to Part II. “Item 8.
In total, Selling, general and administrative expenses increased $60.7 million compared to the prior year and increased 40 basis points (0.4%) to 13.0% of total revenue for fiscal year 2023 compared to 12.6% of total revenues for fiscal year 2022 offset, in part, by our Interim Chief Executive Officer's election not to receive compensation.
In total, selling, general and administrative expenses increased $51.2 million compared to the prior year, and decreased as a percentage of total revenues 30 basis points (0.3%) to 12.7% of total revenues for fiscal year 2024 compared to 13.0% of total revenues for fiscal year 2023 offset, in part, by our Interim Chief Executive Officer's election not to receive compensation.
During fiscal year 2023, approximately 78.8% of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 48.4% consisted of sales of products we purchased in U.S. dollars.
During fiscal year 2024, approximately 79.5% of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 49.0% consisted of sales of products we purchased in U.S. dollars.
Net merchandise sales - constant currency increased 6.4% 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 13 weeks ended September 3, 2023 increased 8.8%.
Net merchandise sales - constant currency increased 9.3% over the prior year period. 30 Table of Contents • Comparable net merchandise sales (that is, sales in the 51 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 13 weeks ended September 1, 2024 increased 6.2%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 13 - 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 twelve-month period ended August 31, 2023 is disclosed in “Item 7.
Financial Statements and Supplementary Data: Notes to Consolidated Financial Statements, Note 13 - 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 twelve-month period ended August 31, 2024 is disclosed in “Item 7.
Therefore, the total annual commitments reflects these obligations, including the effect of the cross-currency interest rate swaps on the total-long term debt as disclosed on the consolidated balance sheet. 48 Table of Contents (2) The derivative obligations of the interest rate swaps and cross-currency interest rate swaps are included in the Total long-term debt section of this table.
Therefore, the total annual commitments reflects these obligations, including the effect of the cross-currency interest rate swaps on the total-long term debt as disclosed on the consolidated balance sheet. (2) The derivative obligations of the interest rate swaps and cross-currency interest rate swaps are included in the Total long-term debt section of this table.
We may enter into additional foreign countries in the future or open additional locations in existing countries, which may increase the percentage of net merchandise sales denominated in foreign currencies. Currency exchange rate changes either increase or decrease the cost of imported products that we purchase in U.S. dollars and price in local currency.
We may enter into additional foreign countries in the future or open additional locations in existing countries, which may increase the percentage of net merchandise sales denominated in foreign currencies. 53 Table of Contents Currency exchange rate changes either increase or decrease the cost of imported products that we purchase in U.S. dollars and price in local currency.
Information about the financial impact of foreign currency exchange rate fluctuations for the twelve months ended August 31, 2023 is disclosed in Part II. “Item 7.
Information about the financial impact of foreign currency exchange rate fluctuations for the twelve months ended August 31, 2024 is disclosed in Part II. “Item 7.
We have local-currency-denominated long-term loans in Barbados, Honduras and Guatemala; we have cross-currency interest rate swaps in Colombia; and we have interest rate swaps in the United States. Turbulence in the currency markets can have a significant impact on the value of the foreign currencies within the countries in which we operate.
We have local-currency-denominated long-term loans in Barbados, Honduras, Guatemala, and Trinidad and we have cross-currency interest rate swaps in Colombia. Turbulence in the currency markets can have a significant impact on the value of the foreign currencies within the countries in which we operate.
Management’s Discussion & Analysis – Other Comprehensive Loss.” 47 Table of Contents Each market risk sensitivity analysis presented below is based on hypothetical scenarios used to calibrate potential risk and do not represent our view of future market changes. The effect of a change in a particular assumption is calculated without adjusting any other assumption.
Management’s Discussion & Analysis – Other Comprehensive Income (Loss).” Each market risk sensitivity analysis presented below is based on hypothetical scenarios used to calibrate potential risk and do not represent our view of future market changes. The effect of a change in a particular assumption is calculated without adjusting any other assumption.
The following tables summarize by country, for those countries with functional currencies other than the U.S. dollar, the weakening of the countries' currency against the U.S. dollar (devaluation) or the strengthening of their currencies (revaluation): Country Revaluation/(Devaluation) Twelve Months Ended August 31, 2023 2022 % Change % Change Colombia 7.15 % (15.58) % Costa Rica 18.30 (5.25) Dominican Republic (7.06) 6.87 Guatemala (1.72) (0.11) Honduras (0.48) (2.37) Jamaica (2.29) 0.40 Nicaragua (1.42) (2.00) Trinidad (0.09) % 0.67 % We seek to manage foreign exchange risk by (1) adjusting prices on goods acquired in U.S. dollars on a periodic basis to maintain our target margins after taking into account changes in exchange rates; (2) obtaining local currency loans from banks within certain markets where it is economical to do so and where management believes the risk of devaluation and the level of U.S. dollar denominated liabilities warrants this action; (3) reducing the time between the acquisition of product in U.S. dollars and the settlement of that purchase in local currency; (4) maintaining a balance between assets held in local currency and in U.S. dollars; and (5) by entering into cross-currency interest rate swaps and forward currency derivatives.
The following tables summarize by country, for those countries with functional currencies other than the U.S. dollar, the weakening of the countries' currency against the U.S. dollar (devaluation) or the strengthening of their currencies (revaluation): Country Revaluation/(Devaluation) Twelve Months Ended August 31, 2024 2023 % Change % Change Colombia (1.84) % 7.15 % Costa Rica 3.25 18.30 Dominican Republic (5.23) (7.06) Guatemala 1.81 (1.72) Honduras (0.62) (0.48) Jamaica (2.11) (2.29) Nicaragua (0.33) (1.42) Trinidad (0.01) % (0.09) % We seek to manage foreign exchange risk by (1) adjusting prices on goods acquired in U.S. dollars on a periodic basis to maintain our target margins after taking into account changes in exchange rates; (2) obtaining local currency loans from banks within certain markets where it is economical to do so and where management believes the risk of devaluation and the level of U.S. dollar denominated liabilities warrants this action; (3) reducing the time between the acquisition of product in U.S. dollars and the settlement of that purchase in local currency; (4) maintaining a balance between assets held in local currency and in U.S. dollars; and (5) entering into cross-currency interest rate swaps and forward currency derivatives.
Foreign Currency Risk We have foreign currency risks related to sales, operating expenses and financing transactions in currencies other than the U.S. dollar. As of August 31, 2023, we had a total of 51 consolidated warehouse clubs operating in 12 foreign countries and one U.S. territory, 40 of which operate under currencies other than the U.S. dollar.
Foreign Currency Risk We have foreign currency risks related to sales, operating expenses and financing transactions in currencies other than the U.S. dollar. As of August 31, 2024, we had a total of 54 consolidated warehouse clubs operating in 12 foreign countries and one U.S. territory, 42 of which operate under currencies other than the U.S. dollar.
As part of the adoption of the new leasing standard, we recorded several monetary liabilities on the consolidated balance sheet that are exposed to foreign exchange movements. These monetary liabilities arise from leases denominated in a currency that is not the functional currency of the Company’s local subsidiary.
As part of the adoption of the Accounting Standard Codification (ASC) 842 - Leases, we recorded several monetary liabilities on the consolidated balance sheet that are exposed to foreign exchange movements. These monetary liabilities arise from leases denominated in a currency that is not the functional currency of the Company’s local subsidiary.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risk from changes in interest rates, foreign currency exchange rates and commodity price risk. These market risks arise in the normal course of business. We do not engage in speculative trading activities.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risk from changes in interest rates, foreign currency exchange rates and commodity price risk. These market risks arise in the normal course of business.
A hypothetical 10% increase in the currency exchange rates underlying these swaps from the market rates at August 31, 2023 would have resulted in a further increase in the value of the swaps of approximately $3.3 million.
A hypothetical 10% devaluation in the currency exchange rates underlying these swaps from the market rates at August 31, 2024 would have resulted in a further increase in the value of the swaps of approximately $4.4 million.
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 tradable currencies.
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. For instance, since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradable currencies.
Management’s Discussion and Analysis – Other Expense, net.” Examples of where we have significant U.S. dollar net asset positions subjecting us to exchange rate losses if the local currency strengthens against the U.S. dollar are our Trinidad, Costa Rica, and Nicaragua subsidiaries, with balances of $35.7 million, $35.5 million, and $30.3 million, respectively, as of August 31, 2023.
Management’s Discussion and Analysis – Other Expense, net.” Examples of where we have significant U.S. dollar net asset positions subjecting us to exchange rate losses if the local currency strengthens against the U.S. dollar are our Costa Rica and Nicaragua subsidiaries, with balances of $73.5 million, and $36.9 million, respectively, as of August 31, 2024.
The aggregate fair value of these swaps was in a net asset position of approximately $2.3 million at August 31, 2023 and approximately $12.9 million at August 31, 2022.
The aggregate fair value of these swaps was in a net asset position of approximately $1.3 million at August 31, 2024 and approximately $2.3 million at August 31, 2023.
Approximately 48.4% of our net merchandise sales are comprised of products we purchased in U.S. dollars that were sold in countries whose currencies were other than the U.S. dollar. Approximately 78.8% of our net merchandise sales are in markets whose functional currency is other than the U.S. dollar.
Approximately 49.0% of our net merchandise sales are comprised of products we purchased in U.S. dollars that were sold in countries whose currencies were other than the U.S. dollar. Approximately 79.5% of our net merchandise sales are in markets whose functional currency is other than the U.S. dollar.
Examples where we have significant U.S. dollar net liability positions subjecting us to exchange rate losses if the local currency weakens against the U.S. dollar are our Honduras, Guatemala, and Dominican Republic subsidiaries, with balances of $26.3 million, $24.8 million, and $12.1 million, respectively, as of August 31, 2023.
Examples where we have significant U.S. dollar net liability positions subjecting us to exchange rate losses if the local currency weakens against the U.S. dollar are our Honduras, Guatemala, Dominican Republic, and Trinidad subsidiaries, with balances of $28.3 million, $23.9 million, $13.0 million, and $11.0 million, respectively, as of August 31, 2024.
We are working with our banks in Trinidad to source tradable 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. W e are actively working with our banking partners and government authorities to address this situation.
We are working with our banks in Trinidad and government officials to convert all of our Trinidad dollars into tradable currencies. Additionally, during 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.
The following table discloses the net effect on other comprehensive loss for these local currency denominated accounts relative to hypothetical simultaneous currency devaluation in all the countries listed in the table above, based on balances as of August 31, 2023: Overall weighted negative currency movement Other comprehensive loss on the decline in local currency denominated cash and cash equivalents and restricted cash (in thousands) Other comprehensive gain on the decline in foreign currency denominated debt obligations (in thousands) Other comprehensive loss on the decline in all other foreign currency denominated current assets net of current liabilities (in thousands) Other comprehensive loss on the decline in all other foreign currency denominated long-term assets net of long-term liabilities (in thousands) 5% $ 3,078 $ (4,904) $ 5,772 $ 31,741 10% $ 6,156 $ (9,807) $ 11,544 $ 63,482 20% $ 12,313 $ (19,614) $ 23,089 $ 126,965 50 Table of Contents In addition, we are exposed to foreign currency exchange rate fluctuations associated with our U.S. dollar-denominated debt obligations that we hedge.
The following table discloses the net effect on other comprehensive loss for these local currency denominated accounts relative to hypothetical simultaneous currency devaluation in all the countries listed in the table above, based on balances as of August 31, 2024: Overall weighted negative currency movement Other comprehensive loss on the decline in local currency denominated cash and cash equivalents and restricted cash (in thousands) Other comprehensive gain on the decline in foreign currency denominated debt obligations (in thousands) Other comprehensive loss on the decline in all other foreign currency denominated current assets net of current liabilities (in thousands) Other comprehensive loss on the decline in all other foreign currency denominated long-term assets net of long-term liabilities (in thousands) 5% $ 4,642 $ (3,812) $ 7,610 $ 32,469 10% $ 9,284 $ (7,625) $ 15,219 $ 64,939 20% $ 18,568 $ (15,249) $ 30,438 $ 129,877 In addition, we are exposed to foreign currency exchange rate fluctuations associated with our U.S. dollar-denominated debt obligations that we hedge.
Foreign currencies in most of the countries where we operate have historically devalued against the U.S. dollar and are expected to continue to devalue.
The gain or loss associated with this revaluation, net of reserves, is recorded in Other income (expense) in the consolidated statements of income. Foreign currencies in most of the countries where we operate have historically devalued against the U.S. dollar and are expected to continue to devalue.
However, there is no way to accurately forecast how currencies may trade in the future and, as a result, we cannot accurately project the impact of the change in rates on our future demand for imported products, reported sales, or financial results. 49 Table of Contents We are exposed to foreign exchange risks related to U.S. dollar-denominated and other foreign-denominated cash, cash equivalents and restricted cash, to U.S. dollar-denominated intercompany debt balances and to other U.S. dollar-denominated debt/asset balances (excluding U.S. dollar-denominated debt obligations for which we hedge a portion of the currency risk inherent in the interest and principal payments), within entities whose functional currency is not the U.S. dollar.
We are exposed to foreign exchange risks related to U.S. dollar-denominated and other foreign-denominated cash, cash equivalents and restricted cash, to U.S. dollar-denominated intercompany debt balances and to other U.S. dollar-denominated debt/asset balances (excluding U.S. dollar-denominated debt obligations for which we hedge a portion of the currency risk inherent in the interest and principal payments), within entities whose functional currency is not the U.S. dollar.
The following table discloses the net effect on other expense, net for U.S. dollar-denominated and other foreign-denominated accounts relative to a hypothetical simultaneous currency revaluation based on balances as of August 31, 2023 (in thousands) including the lease-related monetary liabilities described above: Overall weighted negative currency movement Losses based on change in U.S. dollar denominated and other foreign denominated cash, cash equivalents and restricted cash balances Gains based on change in U.S. dollar denominated inter-company balances Gains based on change in U.S. dollar denominated other asset/liability balances Net Loss (1) 5% $ (2,477) $ 1,201 $ 508 $ (768) 10% $ (4,955) $ 2,402 $ 1,016 $ (1,537) 20% $ (9,909) $ 4,803 $ 2,031 $ (3,075) (1) Amounts are before consideration of income taxes.
Due to the mix of foreign currency exchange rate fluctuations during fiscal year 2024, the impact to the consolidated statements of income of revaluing the monetary liabilities for these leases was immaterial. 54 Table of Contents The following table discloses the net effect on other expense, net for U.S. dollar-denominated and other foreign-denominated accounts relative to a hypothetical simultaneous currency revaluation based on balances as of August 31, 2024 (in thousands) including the lease-related monetary liabilities described above: Overall weighted negative currency movement Losses based on change in U.S. dollar denominated and other foreign denominated cash, cash equivalents and restricted cash balances Gains based on change in U.S. dollar denominated inter-company balances Gains based on change in U.S. dollar denominated other asset/liability balances Net Loss (1) 5% $ (372) $ 1,616 $ (1,680) $ (436) 10% $ (744) $ 3,232 $ (3,360) $ (872) 20% $ (1,488) $ 6,463 $ (6,721) $ (1,746) (1) Amounts are before consideration of income taxes.
Higher oil prices can negatively impact the economic growth of the countries in which we operate, thereby reducing the buying power of our Members. Higher oil prices can also increase our operating costs, particularly utilities and merchandise transportation expenses. Inflationary pressures on various commodities also may impact consumer spending. We do not currently seek to hedge commodity price risk.
Higher oil prices can also increase our operating costs, particularly utilities and merchandise transportation expenses. Inflationary pressures on various commodities also may impact consumer spending. We do not currently seek to hedge commodity price risk. Item 8. Financial Statements and Supplementary Data See the list of financial statements filed with this report under Part IV. Item 15 below. Item 9.
From time to time, we use non-deliverable forward foreign exchange contracts primarily to address exposure to U.S. dollar merchandise inventory expenditures made by our international subsidiaries whose functional currency is other than the U.S. dollar.
Conversely, a hypothetical 10% appreciation in the currency exchange rates underlying these swaps from the market rates at August 31, 2024 would have resulted in a net decrease in the value of the swaps of approximately $3.3 million. 55 Table of Contents From time to time, we use non-deliverable forward foreign exchange contracts primarily to address exposure to U.S. dollar merchandise inventory expenditures made by our international subsidiaries whose functional currency is other than the U.S. dollar.
To manage the risk arising from these exposures, we utilize interest rate swaps, cross-currency interest rate swaps, non-deliverable foreign currency forward contracts and loans denominated in foreign currencies. Information about the change in the fair value of our hedges and the financial impact thereof for the twelve-month period ended August 31, 2023 is disclosed in Part II. “Item 8.
Information about the change in the fair value of our hedges and the financial impact thereof for the twelve-month period ended August 31, 2024 is disclosed in Part II. “Item 8.
Annual maturities of long-term debt and derivatives are as follow (in thousands): Twelve Months Ended August 31, (Amounts in thousands) 2024 2025 2026 2027 2028 Thereafter Total Long-Term Debt (Unhedged): Long-term debt with fixed interest rate $ 12,869 $ 13,263 $ 10,199 $ 6,944 $ 17,512 $ 14,186 $ 74,973 (1) Weighted-average interest rate 6.50 % 6.50 % 6.50 % 6.20 % 6.20 % 6.60 % 6.40 % Long-term debt with variable interest rate $ 7,324 $ 22,888 $ 8,251 $ 26,244 $ — $ — $ 64,707 Weighted-average interest rate 6.00 % 6.00 % 4.90 % 3.70 % — % — % 5.40 % Total long-term debt $ 20,193 $ 36,151 $ 18,450 $ 33,188 $ 17,512 $ 14,186 $ 139,680 (1) Derivatives: Interest Rate Swaps: Variable to fixed interest $ 1,275 $ 1,275 $ 1,275 $ 26,244 $ — $ — $ 30,069 (2) Weighted-average pay rate 3.65 % 3.65 % 3.65 % 3.65 % — % — % 3.65 % Weighted-average receive rate 7.02 % 7.02 % 7.02 % 7.02 % — % — % 7.02 % Cross-Currency Interest Rate Swaps: Variable to fixed interest $ 3,329 $ 19,770 $ — $ — $ — $ — $ 23,099 (2) Weighted-average pay rate 7.92 % 7.92 % — % — % — % — % 7.92 % Weighted-average receive rate 7.80 % 7.79 % — % — % — % — % 7.79 % Long-Term Debt Payments with Fixed Interest or Subject to Financial Derivatives: Long-term debt with fixed interest rate or with variable to fixed interest rate swaps $ 17,473 $ 34,308 $ 11,474 $ 33,188 $ 17,512 $ 14,186 $ 128,141 Portion of long-term debt with fixed interest rate or with variable to fixed interest rate swaps 86.5 % 94.9 % 62.2 % 100.0 % 100.0 % 100.0 % 91.7 % Portion of long-term debt with variable interest rates and no swaps 13.5 % 5.1 % 37.8 % — % — % — % 8.3 % (1) The Company has disclosed the future annual maturities of long-term debt, for which it has entered into cross-currency interest rate swaps by using the derivative obligation as of August 31, 2023 to estimate the future commitments.
The weighted-average variable rates are based upon prevailing market interest rates and the outstanding balances as of August 31, 2024. 52 Table of Contents Annual maturities of long-term debt and derivatives are as follow (in thousands): Twelve Months Ended August 31, (Amounts in thousands) 2025 2026 2027 2028 2029 Thereafter Total Long-Term Debt (Unhedged): Long-term debt with fixed interest rate $ 12,786 $ 9,681 $ 6,386 $ 13,176 $ 3,770 $ 10,677 $ 56,476 (1) Weighted-average interest rate 6.40 % 6.40 % 6.20 % 6.20 % 6.70 % 6.70 % 6.40 % Long-term debt with variable interest rate $ 23,131 $ 8,781 $ 26,818 $ 620 $ 676 $ 13,858 $ 73,884 Weighted-average interest rate 5.60 % 4.70 % 3.90 % 4.40 % 4.40 % 4.40 % 4.80 % Total long-term debt $ 35,917 $ 18,462 $ 33,204 $ 13,796 $ 4,446 $ 24,535 $ 130,360 (1) Derivatives: Interest Rate Swaps: Variable to fixed interest $ 1,518 $ 1,804 $ 26,818 $ 620 $ 676 $ 13,858 $ 45,294 (2) Weighted-average pay rate 3.78 % 3.88 % 3.67 % 4.43 % 4.43 % 4.43 % Weighted-average receive rate 6.72 % 6.50 % 6.94 % 5.34 % 5.34 % 5.34 % Cross-Currency Interest Rate Swaps: Variable to fixed interest $ 19,770 $ — $ — $ — $ — $ — $ 19,770 (2) Weighted-average pay rate 7.92 % — % — % — % — % — % Weighted-average receive rate 7.59 % — % — % — % — % — % Long-Term Debt Payments with Fixed Interest or Subject to Financial Derivatives: Long-term debt with fixed interest rate or with variable to fixed interest rate swaps $ 34,074 $ 11,485 $ 33,204 $ 13,796 $ 4,446 $ 24,535 $ 121,540 Portion of long-term debt with fixed interest rate or with variable to fixed interest rate swaps 94.9 % 62.2 % 100.0 % 100.0 % 100.0 % 100.0 % 93.2 % Portion of long-term debt with variable interest rates and no swaps 5.1 % 37.8 % — % — % — % — % 6.8 % (1) The Company has disclosed the future annual maturities of long-term debt, for which it has entered into cross-currency interest rate swaps by using the derivative obligation as of August 31, 2024 to estimate the future commitments.
These assets and liabilities include, but are not limited to, excess cash permanently reinvested offshore and the value of items shipped from the U.S. to our foreign markets. The gain or loss associated with this revaluation, net of reserves, is recorded in other income (expense).
In addition, we revalue all U.S. dollar denominated assets and liabilities within those markets that do not use the U.S. dollar as the functional currency. These assets and liabilities include, but are not limited to, excess cash permanently reinvested offshore and the value of items shipped from the U.S. to our foreign markets.
Price changes can impact the demand for those products in the market. Currency exchange rates also affect the reported sales of the consolidated company when local currency-denominated sales are translated to U.S. dollars. In addition, we revalue all U.S. dollar denominated assets and liabilities within those markets that do not use the U.S. dollar as the functional currency.
If the local currency devalues against the U.S. dollar, we may elect to increase prices in the local currency to maintain our target margins, making these products more expensive for our Members. Currency exchange rates also affect the reported sales of the consolidated company when local currency-denominated sales are translated to U.S. dollars.
The monetary liability for these leases as of August 31, 2023 was $32.5 million. Due to the mix of foreign currency exchange rate fluctuations during fiscal year 2023, the impact to the consolidated statements of income of revaluing this liability was immaterial.
The monetary liability for these leases as of August 31, 2024 was $31.5 million.
Item 8. Financial Statements and Supplementary Data See the list of financial statements filed with this report under Part IV. Item 15 below. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Refer to “Item 7. Management’s Discussion & Analysis – Factors Affecting Our Business” and “Item 7. Management’s Discussion & Analysis – Liquidity: Financial Position and Cash Flow” for our quantitative analysis and discussion. Commodity Price Risk The increasing price of oil and certain commodities could have a negative effect on our operating costs and sales.
Commodity Price Risk The increasing price of oil and certain commodities could have a negative effect on our operating costs and sales. Higher oil prices can negatively impact the economic growth of the countries in which we operate, thereby reducing the buying power of our Members.
Removed
The weighted-average variable rates are based upon prevailing market interest rates and the outstanding balances as of August 31, 2023.
Added
To manage the risk arising from these exposures, we utilize interest rate swaps, cross-currency interest rate swaps, non-deliverable foreign currency forward contracts and loans denominated in foreign currencies. We do not engage in speculative trading activities.
Removed
Conversely, a hypothetical 10% decrease in the currency exchange rates underlying these swaps from the market rates at August 31, 2023 would have resulted in a net decrease in the value of the swaps of approximately $4.1 million.
Added
However, there is no way to accurately forecast how currencies may trade in the future and, as a result, we cannot accurately project the impact of the change in rates on our future demand for imported products, reported sales, or financial results.
Added
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 “Item 7. Management’s Discussion & Analysis – Factors Affecting Our Business” and “Item 7. Management’s Discussion & Analysis – Liquidity: Financial Position and Cash Flow” for our quantitative analysis and discussion.

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