10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended November 30, 2019

OR

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

For the transition period from                to 

COMMISSION FILE NUMBER 0-22793

PriceSmart, Inc.

(Exact name of registrant as specified in its charter)

Delaware	33-0628530
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

(858) 404-8800

(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value	PSMT	NASDAQ Global Select Market

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

Yes  x No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  x No  ¨

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

Large accelerated filer  x	Accelerated filer  ¨
Non-accelerated filer  ¨	Smaller Reporting Company  ¨
	Emerging growth company  ¨

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

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

Yes  ¨ No  x

The registrant had 30,612,511 shares of its common stock, par value $0.0001 per share, outstanding at December 31, 2019. 

PRICESMART, INC.

INDEX TO FORM 10-Q

		Page
PART I - FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	1
	CONSOLIDATED BALANCE SHEETS AS OF NOVEMBER 30, 2019 (UNAUDITED) AND AUGUST 31, 2019	2
	CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED NOVEMBER 30, 2019 AND 2018 - UNAUDITED	4
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED NOVEMBER 30, 2019 AND 2018 - UNAUDITED	5
	CONSOLIDATED STATEMENTS OF EQUITY FOR THE THREE MONTHS ENDED NOVEMBER 30, 2019 AND 2018 - UNAUDITED	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED NOVEMBER 30, 2019 AND 2018 - UNAUDITED	7
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	48
ITEM 4.	CONTROLS AND PROCEDURES	49
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	50
ITEM 1A.	RISK FACTORS	50
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	50
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	50
ITEM 4.	MINE SAFETY DISCLOSURES	50
ITEM 5.	OTHER INFORMATION	50
ITEM 6.	EXHIBITS	51

i

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PriceSmart, Inc.’s (“PriceSmart,” “we” or the “Company”) unaudited consolidated balance sheet as of November 30, 2019 and the consolidated balance sheet as of August 31, 2019, the unaudited consolidated statements of income for the three months ended November 30, 2019 and 2018, the unaudited consolidated statements of comprehensive income for the three months ended November 30, 2019 and 2018, the unaudited consolidated statements of equity for the three months ended November 30, 2019 and 2018, and the unaudited consolidated statements of cash flows for the three months ended November 30, 2019 and 2018 are included herein. Also included herein are the notes to the unaudited consolidated financial statements.

 
‎

1

PRICESMART, INC.

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

	November 30,
	2019		August 31,
	(Unaudited)		2019
ASSETS
Current Assets:
Cash and cash equivalents	$	111,359	$	102,653
Short-term restricted cash		65		54
Short-term investments		25,098		17,045
Receivables, net of allowance for doubtful accounts of $125 as of November 30, 2019 and $144 as of August 31, 2019, respectively		10,293		9,872
Merchandise inventories		388,072		331,273
Prepaid expenses and other current assets (includes $2,747 and $2,736 as of November 30, 2019 and August 31, 2019, respectively, for the fair value of derivative instruments)		36,990		30,999
Total current assets		571,877		491,896
Long-term restricted cash		3,689		3,529
Property and equipment, net		693,275		671,151
Operating lease right-of-use assets, net		118,203		—
Goodwill		45,425		46,101
Other intangibles, net		11,977		12,576
Deferred tax assets		17,790		15,474
Other non-current assets (includes $436 and $0 as of November 30, 2019 and August 31, 2019, respectively, for the fair value of derivative instruments)		51,226		44,987
Investment in unconsolidated affiliates		10,649		10,697
Total Assets	$	1,524,111	$	1,296,411
LIABILITIES AND EQUITY
Current Liabilities:
Short-term borrowings	$	23,018	$	7,540
Accounts payable		328,585		286,219
Accrued salaries and benefits		24,131		25,401
Deferred income		25,147		25,340
Income taxes payable		6,640		4,637
Other accrued expenses and other current liabilities (includes $127 and $0 as of November 30, 2019 and August 31, 2019, respectively, for the fair value of foreign currency forward contracts)		40,519		32,442
Operating lease liabilities, current portion		8,310		—
Long-term debt, current portion		13,726		25,875
Total current liabilities		470,076		407,454
Deferred tax liability		1,829		2,015
Long-term portion of deferred rent		—		11,198
Long-term income taxes payable, net of current portion		5,346		5,069
Long-term operating lease liabilities		121,698		—
Long-term debt, net of current portion		98,084		63,711
Other long-term liabilities (includes $3,259 and $2,910 for the fair value of derivative instruments and $5,675 and $5,421 for post-employment plans as of November 30, 2019 and August 31, 2019, respectively)		9,306		8,685
Total Liabilities		706,339		498,132

 
‎

2

Stockholders' Equity:
Common stock $0.0001 par value, 45,000,000 shares authorized; 31,474,818 and 31,461,359 shares issued and 30,612,511 and 30,538,788 shares outstanding (net of treasury shares) as of November 30, 2019 and August 31, 2019, respectively		3		3
Additional paid-in capital		440,756		443,084
Tax benefit from stock-based compensation		11,486		11,486
Accumulated other comprehensive loss		(147,524)		(144,339)
Retained earnings		545,532		525,804
Less: treasury stock at cost, 862,307 shares as of November 30, 2019 and 924,332 shares as of August 31, 2019		(33,424)		(38,687)
Total stockholders' equity attributable to PriceSmart, Inc. stockholders		816,829		797,351
Noncontrolling interest in consolidated subsidiaries		943		928
Total stockholders' equity		817,772		798,279
Total Liabilities and Equity	$	1,524,111	$	1,296,411

See accompanying notes. 
‎

3

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF INCOME

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

	Three Months Ended
	November 30,		November 30,
	2019		2018
Revenues:
Net merchandise sales	$	778,728	$	747,443
Export sales		8,274		8,189
Membership income		13,746		12,740
Other revenue and income		11,193		11,265
Total revenues		811,941		779,637
Operating expenses:
Cost of goods sold:
Net merchandise sales		662,724		641,155
Export sales		7,971		7,778
Non-merchandise		4,251		4,247
Selling, general and administrative:
Warehouse club and other operations		79,373		74,222
General and administrative		25,884		27,335
Pre-opening expenses		953		15
Loss on disposal of assets		71		215
Total operating expenses		781,227		754,967
Operating income		30,714		24,670
Other income (expense):
Interest income		293		391
Interest expense		(862)		(1,033)
Other expense, net		(985)		(1,819)
Total other income (expense)		(1,554)		(2,461)
Income before provision for income taxes and loss of unconsolidated affiliates		29,160		22,209
Provision for income taxes		(9,403)		(7,540)
Loss of unconsolidated affiliates		(48)		(24)
Net income		19,709		14,645
Less: net (income) loss attributable to noncontrolling interest		19		(33)
Net income attributable to PriceSmart, Inc.	$	19,728	$	14,612
Net income attributable to PriceSmart, Inc. per share available for distribution:
Basic	$	0.64	$	0.48
Diluted	$	0.64	$	0.48
Shares used in per share computations:
Basic		30,277		30,172
Diluted		30,284		30,189
Dividends per share	$	—	$	—

See accompanying notes. 
‎

4

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED—AMOUNTS IN THOUSANDS)

	Three Months Ended
	November 30,		November 30,
	2019		2018
Net income	$	19,709	$	14,645
Less: net (income) loss attributable to noncontrolling interest		19		(33)
Net income attributable to PriceSmart, Inc.	$	19,728	$	14,612
Other Comprehensive Income, net of tax:
Foreign currency translation adjustments (1)		(3,724)		(13,397)
Defined benefit pension plan:
Net gain arising during period		7		9
Amortization of prior service cost and actuarial gains included in net periodic pensions cost		19		19
Total defined benefit pension plan		26		28
Derivative instruments: (2)
Unrealized losses on change in derivative obligations		(432)		(306)
Unrealized gains on change in fair value of interest rate swaps		941		429
Amounts reclassified from accumulated other comprehensive loss to other expense, net for settlement of derivatives		4		—
Total derivative instruments		513		123
Other comprehensive loss		(3,185)		(13,246)
Comprehensive income		16,543		1,366
Less: comprehensive income attributable to noncontrolling interest		34		1
Comprehensive income attributable to PriceSmart, Inc. to stockholders	$	16,509	$	1,365

⁽¹⁾Translation adjustments arising in translating the financial statements of a foreign entity have no effect on the income taxes of that foreign entity. They may, however, affect: (a) the amount, measured in the parent entity's reporting currency, of withholding taxes assessed on dividends paid to the parent entity and (b) the amount of taxes assessed on the parent entity by the government of its country. The Company has determined that the reinvestment of earnings of its foreign subsidiaries are indefinite because of the long-term nature of the Company's foreign investment plans. Therefore, deferred taxes are not provided for on translation adjustments related to non-remitted earnings of the Company's foreign subsidiaries.

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

See accompanying notes. 

5

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED—AMOUNTS IN THOUSANDS)

	Three Months Ended
																Total
						Tax Benefit		Accumulated								Stockholder's
				Additional		From		Other								Equity
	Common Stock			Paid-in		Stock Based		Comprehensive		Retained		Treasury Stock				Attributable to		Noncontrolling	Total
	Shares	Amount		Capital		Compensation		Loss		Earnings		Shares	Amount			PriceSmart, Inc.		Interest	Equity
Balance at August 31, 2018	31,373	$	3	$	432,882	$	11,486	$	(121,216)	$	473,954	912	$	(39,107)	$	758,002	$	636	$	758,638
Issuance of restricted stock award	32		—		—		—		—		—	—		—		—		—		—
Stock-based compensation	—		—		6,046		—		—		—	—		—		6,046		—		6,046
Net income	—		—		—		—		—		14,612	—		—		14,612		33		14,645
Other comprehensive income (loss)	—		—		—		—		(13,246)		—	—		—		(13,246)		1		(13,245)
Balance at November 30, 2018	31,405	$	3	$	438,928	$	11,486	$	(134,462)	$	488,566	912	$	(39,107)	$	765,414	$	670	$	766,084
Balance at August 31, 2019	31,461	$	3	$	443,084	$	11,486	$	(144,339)	$	525,804	924	$	(38,687)	$	797,351	$	928	$	798,279
Purchase of treasury stock	—		—		—		—		—		—	7		(461)		(461)		—		(461)
Issuance of treasury stock	(69)		—		(5,724)		—		—		—	(69)		5,724		—		—		—
Issuance of restricted stock award	85		—		—		—		—		—	—		—		—		—		—
Forfeiture of restricted stock awards	(2)		—		—		—		—		—	—		—		—		—		—
Stock-based compensation	—		—		3,396		—		—		—	—		—		3,396		—		3,396
Net income	—		—		—		—		—		19,728	—		—		19,728		(19)		19,709
Other comprehensive income (loss)	—		—		—		—		(3,185)		—	—		—		(3,185)		34		(3,151)
Balance at November 30, 2019	31,475	$	3	$	440,756	$	11,486	$	(147,524)	$	545,532	862	$	(33,424)	$	816,829	$	943	$	817,772

See accompanying notes.

6

PRICESMART, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED—AMOUNTS IN THOUSANDS)

	Three Months Ended
	November 30,		November 30,
	2019		2018
Operating Activities:
Net income	$	19,709	$	14,645
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,814		13,723
Allowance for doubtful accounts		(19)		7
Loss on sale of property and equipment		71		215
Deferred income taxes		(1,234)		316
Equity in losses of unconsolidated affiliates		48		24
Stock-based compensation		3,396		6,046
Change in operating assets and liabilities:
Receivables, prepaid expenses and other current assets, non-current assets, accrued salaries and benefits, deferred membership income and other accruals		(9,762)		(6,200)
Merchandise inventories		(56,799)		(59,054)
Accounts payable		45,880		55,985
Net cash provided by operating activities		16,104		25,707
Investing Activities:
Additions to property and equipment		(37,582)		(35,673)
Short-term investments		(10,184)		(6,190)
Proceeds from settlements of short-term investments		2,066		12,406
Proceeds from disposal of property and equipment		13		93
Net cash used in investing activities		(45,687)		(29,364)
Financing Activities:
Proceeds from long-term bank borrowings		25,000		—
Repayment of long-term bank borrowings		(2,836)		(3,463)
Proceeds from short-term bank borrowings		81,202		—
Repayment of short-term bank borrowings		(65,581)		—
Other financing activities		19		(33)
Purchase of treasury stock		(461)		—
Net cash provided by (used in) financing activities		37,343		(3,496)
Effect of exchange rate changes on cash and cash equivalents and restricted cash		1,117		(1,375)
Net increase (decrease) in cash, cash equivalents		8,877		(8,528)
Cash, cash equivalents and restricted cash at beginning of period		106,236		96,914
Cash, cash equivalents and restricted cash at end of period	$	115,113	$	88,386
Supplemental disclosure of noncash investing activities:
Capital expenditures incurred but not yet paid	$	10,282	$	2,148

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

	Three Months Ended
	November 30,		November 30,
	2019		2018
Cash and cash equivalents	$	111,359	$	81,047
Short-term restricted cash		65		4,164
Long-term restricted cash	$	3,689	$	3,175
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	115,113	$	88,386

See accompanying notes. 

7

PRICESMART, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

November 30, 2019

NOTE 1 – COMPANY OVERVIEW AND BASIS OF PRESENTATION

PriceSmart, Inc.’s (“PriceSmart,” the “Company,” or "we") business consists primarily of international membership shopping warehouse clubs similar to, but smaller in size than, warehouse clubs in the United States. As of November 30, 2019, the Company had 45 warehouse clubs in operation in 12 countries and one U.S. territory (seven each in Colombia, Costa Rica, and Panama; five in the Dominican Republic, four each in Trinidad and Guatemala; three in Honduras; two each in El Salvador and Nicaragua; and one each in Aruba, Barbados, Jamaica and the United States Virgin Islands), of which the Company owns 100% of the corresponding legal entities (see Note 2 - Summary of Significant Accounting Policies). The Company is currently constructing and plans to open warehouse clubs in Liberia, Costa Rica in the summer of 2020 and Bogota, Colombia in the fall of 2020. The Company also plans to build new warehouse clubs in Portmore, Jamaica and Bucaramanga, Colombia and open them in the fall of 2020. Once these four new clubs are open, the Company will operate 49 warehouse clubs. The Company continues to explore and negotiate for other potential sites for future warehouse clubs in Central America, the Caribbean and Colombia.

PriceSmart is investing in technology to increase efficiencies and to enable omni-channel capabilities, including e-commerce, to enhance the member experience. PriceSmart also operates a legacy (casillero and marketplace) Aeropost business in 38 countries in Latin America and the Caribbean, many of which overlap with markets where we operate warehouse clubs.

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

Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the consolidated balance sheet as of November 30, 2019 is not comparable, in this respect, with that as of August 31, 2019.

These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2019 (the “2019 Form 10-K”). The interim consolidated financial statements include the accounts of PriceSmart, Inc., a Delaware corporation, and its subsidiaries. Inter-company transactions between the Company and its subsidiaries have been eliminated in consolidation.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The interim consolidated financial statements of the Company included herein include the assets, liabilities and results of operations of the Company’s wholly owned subsidiaries, subsidiaries in which it has a controlling interest, and the Company’s joint ventures for which the Company has determined that it is the primary beneficiary. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. The Company’s net income excludes income attributable to its noncontrolling interests. Additionally, the consolidated financial statements also include the Company's investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. All significant inter-company accounts and transactions have been eliminated in consolidation. The interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the SEC and reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows for the periods presented. The results for interim periods are not necessarily indicative of the results for the year.

8

The Company determines whether any of the joint ventures in which it has made investments is a Variable Interest Entity (“VIE”) at the start of each new venture and if a reconsideration event has occurred. At this time, the Company also considers whether it must consolidate a VIE and/or disclose information about its involvement in a VIE. A reporting entity must consolidate a VIE if that reporting entity has a variable interest (or combination of variable interests) that will absorb a majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. A reporting entity must consider the rights and obligations conveyed by its variable interests and the relationship of its variable interests with variable interests held by other parties to determine whether its variable interests will absorb a majority of a VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. If the Company determines that it is not the primary beneficiary of the VIE, then the Company records its investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. Due to the nature of the joint ventures that the Company participates in and the continued commitments for additional financing, the Company determined these joint ventures are VIEs.

The Company has determined that for its ownership interest in store-front joint ventures within its marketplace and casillero business, the Company has the power to direct the activities that most significantly impact the economic performance of these VIEs. Therefore, the Company has determined that it is the primary beneficiary of these VIEs and has consolidated these entities within its consolidated financial statements. The Company's ownership interest in store-front joint ventures for which the Company has consolidated their financial statements as of November 30, 2019 are listed below:

Marketplace and Casillero Store-front Joint Ventures	Countries	Ownership		Basis of ‎Presentation
Guatemala	Guatemala	60.0	%	Consolidated
Tortola	British Virgin Islands	50.0	%	Consolidated
Trinidad	Trinidad	50.0	%	Consolidated

In the case of the Company's ownership interest in real estate development joint ventures, both parties to each joint venture share all rights, obligations and the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. As a result, the Company has determined that it is not the primary beneficiary of the VIEs and, therefore, has accounted for these entities under the equity method. Under the equity method, the Company's investments in unconsolidated affiliates are initially recorded as an investment in the stock of an investee at cost and are adjusted for the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of the initial investment. The Company's ownership interest in real estate development joint ventures the Company has recorded under the equity method as of November 30, 2019 are listed below:

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

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

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

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

9

Restricted Cash – The changes in restricted cash are disclosed within the consolidated statement of cash flows based on the nature of the restriction. The following table summarizes the restricted cash reported by the Company (in thousands):

	November 30,		August 31,
	2019		2019
Short-term restricted cash:
Restricted cash for land purchase option agreements	$	50	$	50
Other short-term restricted cash		15		4
Total short-term restricted cash	$	65	$	54
Long-term restricted cash:
Other long-term restricted cash (1)	$	3,689	$	3,529
Total long-term restricted cash	$	3,689	$	3,529
Total restricted cash	$	3,754	$	3,583

⁽¹⁾Other long-term restricted cash consists mainly of cash deposits held within banking institutions in compliance with federal regulatory requirements in Costa Rica and Panama.

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

Goodwill and Other Intangibles, net – Goodwill and other intangibles totaled $57.4 million as of November 30, 2019 and $58.7 million as of August 31, 2019.  The Company reviews reported goodwill and other intangibles at the cash-generating unit level for impairment. The Company tests Goodwill for impairment at least annually or when events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

Tax Receivables – The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of the Company’s business in most of the countries in which the Company operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, then the difference is remitted to the government, usually on a monthly basis. If the input VAT exceeds the output VAT, this creates a VAT receivable. In most countries where the Company operates, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit card directly to the government as advance payments of VAT and/or income tax. In the case of VAT, these procedures alter the natural offset of input and output VAT and generally leave us with a net VAT receivable, forcing us to process significant refund claims on a recurring basis. With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due, this creates an income tax receivable. The Company either requests a refund of these tax receivables or applies the balance to expected future tax payments. These refund or offset processes can take anywhere from several months to several years to complete.

In most countries where the Company operates, there are defined and structured processes to recover VAT receivables via refunds or offsets. However, in one country without a clearly defined refund process, the Company is actively engaged with the local government to recover VAT receivables totaling $6.2 million and $5.1 million as of November 30, 2019 and August 31, 2019, respectively. In two other countries, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.7 million and $7.8 million and deferred tax assets of $2.7 million as of November 30, 2019 and August 31, 2019 in these countries. While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

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

Short-term VAT and Income tax receivables, recorded as Other current assets: This classification is used for any countries where the Company’s subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. The Company also classifies as short-term any approved refunds or credit notes to the extent that the Company expects to receive the refund or use the credit notes within one year.

Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where the Company’s subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when the Company does not expect to eventually prevail in its recovery. The Company does not currently have any allowances provided against VAT and income tax receivables.

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

	November 30,		August 31,
	2019		2019
Prepaid expenses and other current assets	$	3,068	$	1,639
Other non-current assets		24,990		22,691
Total amount of VAT receivables reported	$	28,058	$	24,330

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

	November 30,		August 31,
	2019		2019
Prepaid expenses and other current assets	$	10,065	$	9,009
Other non-current assets		19,654		16,381
Total amount of Income tax receivables reported	$	29,719	$	25,390

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

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

The Company measures Right-of-use (“ROU”) assets based on the corresponding lease liabilities, adjusted for any initial direct costs and prepaid lease payments made to the lessor before or at the commencement date (net of lease incentives). The lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are not included in the calculation of the ROU asset and the related lease liability and are recognized as this lease expense is incurred. The Company’s variable lease payments generally relate to amounts the Company pays for additional contingent rent based on a contractually stipulated percentage of sales.

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Merchandise Inventories – Merchandise inventories, which include merchandise for resale, are valued at the lower of cost (average cost) or net realizable value. The Company provides for estimated inventory losses and obsolescence between physical inventory counts on the basis of a percentage of sales. The provision is adjusted periodically to reflect the trend of actual physical inventory count results, with physical inventories occurring primarily in the second and fourth fiscal quarters. In addition, the Company may be required to take markdowns below the carrying cost of certain inventory to expedite the sale of such merchandise.

Stock Based Compensation – The Company utilizes three types of equity awards: restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance based restricted stock units (“PSUs”). Compensation related to RSAs, RSUs and PSUs is based on the fair market value at the time of grant. The Company recognizes the compensation cost related to RSAs and RSUs over the requisite service period as determined by the grant, amortized ratably or on a straight-line basis over the life of the grant. The Company also recognizes compensation cost for PSUs over the performance period. The Company assesses the probability of vesting for awards with performance conditions and adjusts compensation cost based on the probability that performance metrics will be achieved. If the Company determines that an award is unlikely to vest, any previously recorded expense is then reversed.

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

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

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

Treasury Stock – Shares of common stock repurchased by the Company are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in the Company’s consolidated balance sheets.  The Company may reissue these treasury shares as part of its stock-based compensation programs.  When treasury shares are reissued, the Company uses the first in/first out (“FIFO”) cost method for determining cost of the reissued shares.  If the issuance price is higher than the cost, the excess of the issuance price over the cost is credited to additional paid-in capital (“APIC”).  If the issuance price is lower than the cost, the difference is first charged against any credit balance in APIC from treasury stock and the balance is charged to retained earnings. During the three months ended November 30, 2019, the Company reissued approximately 69,000 treasury shares.

Fair Value Measurements – The Company measures the fair value for all financial and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring or nonrecurring basis. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor.

The Company has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring and revaluing fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company was not required to revalue any assets or liabilities utilizing Level 1 or Level 3 inputs at the balance sheet dates. The Company's Level 2 assets and liabilities revalued at the balance sheet dates, on a recurring basis, consisted of cash flow hedges (interest rate swaps and cross-currency interest rate swaps), written foreign currency call options, and forward foreign exchange contracts. In addition, the Company utilizes Level 2 inputs in determining the fair value of long-term debt. The Company did not make any significant transfers in and out of Level 1 and Level 2 fair value tiers during the periods reported on herein.

Non-financial assets and liabilities are revalued and recognized at fair value subsequent to initial recognition when there is evidence of impairment. For the periods reported, no impairment of such non-financial assets was recorded.

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The Company’s current and long-term financial assets and liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums and debt issuance costs. There have been no significant changes in fair market value of the Company’s current and long-term financial assets, and there have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities as disclosed in the Company’s 2019 Form 10-K.

Derivatives Instruments and Hedging Activities – The Company uses derivative financial instruments for hedging and non-trading purposes to manage its exposure to changes in interest and currency exchange rates. In using derivative financial instruments for the purpose of hedging the Company’s exposure to interest and currency exchange rate risks, the contractual terms of a hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts that are effective at meeting the risk reduction and correlation criteria (effective hedge) are recorded using hedge accounting. If a derivative financial instrument is an effective hedge, changes in the fair value of the instrument will be reported in accumulated other comprehensive loss until the hedged item completes its contractual term. Instruments that do not meet the criteria for hedge accounting, or contracts for which the Company has not elected hedge accounting, are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company did not change valuation techniques utilized in the fair value measurement of assets and liabilities presented on the Company’s consolidated balance sheets from previous practice during the reporting period. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance, however, that this practice effectively mitigates counterparty risk.

Cash Flow Instruments. The Company is a party to receive floating interest rate, pay fixed-rate interest rate swaps to hedge the interest rate risk of certain U.S. dollar denominated debt within its international subsidiaries. The swaps are designated as cash flow hedges of interest expense risk. These instruments are considered effective hedges and are recorded using hedge accounting. The Company is also a party to receive variable interest rate, pay fixed interest rate cross-currency interest rate swaps to hedge the interest rate and currency exposure associated with the expected payments of principal and interest of U.S. denominated debt within its international subsidiaries whose functional currency is other than the U.S. dollar. The swaps are designated as cash flow hedges of the currency risk and interest-rate risk related to payments on the U.S. denominated debt. These instruments are also considered to be effective hedges and are recorded using hedge accounting. Under cash flow hedging, the entire gain or loss of the derivative, calculated as the net present value of the future cash flows, is reported on the consolidated balance sheets in accumulated other comprehensive loss. Amounts recorded in accumulated other comprehensive loss are released to earnings in the same period that the hedged transaction impacts consolidated earnings. See Note 8 - Derivative Instruments and Hedging Activities for information on the fair value of interest rate swaps and cross-currency interest rate swaps as of November 30, 2019 and August 31, 2019.

Fair Value Instruments. The Company is exposed to foreign currency exchange rate fluctuations in the normal course of business. This includes exposure to foreign currency exchange rate fluctuations on U.S. dollar denominated liabilities within the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts that are intended to offset changes in cash flows attributable to currency exchange movements. The contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. Currently, these contracts are treated for accounting purposes as fair value instruments and do not qualify for derivative hedge accounting, and as such the Company does not apply derivative hedge accounting to record these transactions. As a result, these contracts are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company seeks to mitigate foreign currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features and are limited to less than one year in duration.

Other Instruments. Other derivatives not designated as hedging instruments consist primarily of written call options in which the Company receives a premium that it uses to reduce the costs associated with its hedging activities. For derivative instruments not designated as hedging instruments, the Company recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Other expense, net in the consolidated statements of income in the period of change.

Revenue Recognition – The accounting policies and other disclosures such as the disclosure of disaggregated revenues are described in Note 3 – Revenue Recognition.

Insurance Reimbursements – Receipts from insurance reimbursements up to the amount of the losses recognized are considered recoveries. These recoveries are accounted for when they are probable of receipt. Insurance recoveries are not

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recognized prior to the recognition of the related cost. Anticipated proceeds in excess of the amount of loss recognized are considered gains and are subject to gain contingency guidance. Anticipated proceeds in excess of a loss recognized in the financial statements are not recognized until all contingencies related to the insurance claim are resolved.

Self-Insurance – The Company changed health insurance providers and is no longer self-insured as of October 1, 2019. The remaining accrued liability for potential health care claims is immaterial as of November 30, 2019.

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

For export sales, the Company includes the cost of merchandise and external and internal distribution and handling costs for supplying merchandise in cost of goods sold, exports.

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

Vendor consideration consists primarily of volume rebates, time-limited product promotions, slotting fees, demonstration reimbursements and prompt payment discounts. Volume rebates that are not threshold based are incorporated into the unit cost of merchandise reducing the inventory cost and cost of goods sold. Volume rebates that are threshold based are recorded as a reduction to cost of goods sold when the Company achieves established purchase levels that are confirmed by the vendor in writing or upon receipt of funds. On a quarterly basis, the Company calculates the amount of rebates recorded in cost of goods sold that relates to inventory on hand and this amount is reclassified as a reduction to inventory, if significant. Slotting fees are related to consideration received by the Company from vendors for preferential "end cap" placement of the vendor's products within the warehouse club. Demonstration reimbursements are related to consideration received by the Company from vendors for the in store promotion of the vendors' products. The Company records the reduction in cost of goods sold on a transactional basis for these programs. Prompt payment discounts are taken in substantially all cases and therefore are applied directly to reduce the acquisition cost of the related inventory, with the resulting effect recorded to cost of goods sold when the inventory is sold.

Selling, General and Administrative – Selling, general and administrative costs are comprised primarily of expenses associated with operating warehouse clubs and freight forwarding operations. These operations include the operating costs of the Company’s warehouse clubs and freight forwarding activities, including payroll and related costs, utilities, consumable supplies, repair and maintenance, rent expense, building and equipment depreciation, bank, credit card processing fees, and amortization of intangibles. Also included in selling, general and administrative expenses are the payroll and related costs for the Company’s U.S. and regional management and purchasing centers.

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

Contingencies and Litigation – The Company records and reserves for loss contingencies if (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can be reasonably estimated. If one or both criteria for accrual are not met, but there is at least a reasonable possibility that a material loss will occur, the Company does not record and reserve for a loss contingency but describes the contingency within a note and provides detail, when possible, of the estimated potential loss or range of loss. If an estimate cannot be made, a statement to that effect is made.

Foreign Currency Translation – The assets and liabilities of the Company’s foreign operations are translated to U.S. dollars when the functional currency in the Company’s international subsidiaries is the local currency and not U.S. dollars. Assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the exchange rate on the balance sheet date, and revenue, costs and expenses are translated at average rates of exchange in effect during the period. The corresponding translation gains and losses are recorded as a component of accumulated other comprehensive income or loss. These adjustments will affect net income upon the sale or liquidation of the underlying investment.

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The following table discloses the net effect of translation into the reporting currency on other comprehensive loss for these local currency denominated accounts for the three months ended November 30, 2019 and 2018:

	Three Months Ended
	November 30,			November 30,
	2019			2018
Effect on other comprehensive loss due to foreign currency translation	$	(3,724)	$	(13,397)

Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains (losses), including transactions recorded involving these monetary assets and liabilities, are recorded as Other income (expense) in the consolidated statements of income.

	Three Months Ended
	November 30,		November 30,
	2019		2018
Currency loss	$	(1,657)	$	(1,819)

Recent Accounting Pronouncements – Not Yet Adopted

FASB ASC 810 ASU 2018-15 – Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As such, the amendment in this ASU requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in subtopic 350-40 in order to determine which implementation costs to capitalize as an asset and which costs to expense.

Additionally, the amendments in this ASU require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU are effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted. The Company expects to adopt ASU No. 2018-15 on September 1, 2020, the first quarter of fiscal year 2021. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

FASB ASC 715 ASU 2018-14 – Compensation—Retirement Benefits—Defined Benefit Plans--General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement benefits (Topic 715-20). The standard amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This ASU is effective for fiscal years ending after December 15, 2020 and must be applied on a retrospective basis. The Company expects to adopt ASU No. 2018-14 on September 1, 2021, the first quarter of fiscal year 2022. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

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FASB ASC 820 ASU 2018-13 – Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The standard eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. ASU No. 2018-13 adds new disclosure requirements for Level 3 measurements. The amendments in this ASU are effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt ASU No. 2018-13 on September 1, 2020, the first quarter of fiscal year 2021. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

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

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under the amendments in this ASU, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, ASU No. 2017-04 requires any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt ASU No. 2017-04 on September 1, 2020, the first quarter of fiscal year 2021. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

FASB ASC 326 ASU 2016-13 – Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which amends the FASB’s guidance on the impairment of financial instruments. This standard requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company expects to adopt ASU No. 2016-13 on September 1, 2020, the first quarter of fiscal year 2021. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Adopted

FASB ASC 815 ASU 2018-16 – Derivatives and Hedging — Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

In October 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-16, Derivatives and Hedging—Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which expands the list of United States benchmark interest rates permitted in the application of hedge accounting. The amendments in this ASU allow use of the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, Derivatives and Hedging. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

FASB ASC 718 ASU 2018-07 - Compensation—Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope to include share-based payment transactions for acquiring goods and services from non-employees. The amendments in this ASU apply to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations by issuing share-based payment awards. The amendments in this ASU are effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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

In February 2016, the FASB issued guidance codified in ASC 842, Leases, which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments.

The Company adopted ASU 2016 - 02 using the modified retrospective transition method in the first quarter of fiscal year 2020. In accordance with ASC 842, the Company did not restate comparative periods in transition to ASC 842 and instead reported comparative periods under ASC 840. Adoption of the standard resulted in the initial recognition of $120.6 million of operating lease right-of-use (“ROU”) assets and $132.1 million of short-term and long-term operating lease liabilities as of September 1, 2019. The difference between the assets and liabilities primarily represents the deferred rent recorded as of August 31, 2019, which was eliminated upon adoption. No cumulative-effect adjustments were recorded to retained earnings, and there was no material impact to the Company’s interim consolidated statements of income, consolidated statements of comprehensive income, or consolidated statements of cash flows. However, several of the Company’s leases are denominated in a currency that is not the functional currency of the Company’s local subsidiary, which results in additional potential foreign currency exchange rate fluctuation exposure. The exposure for the period ended November 30, 2019 was a $34.1 million liability. Due to the mix of foreign currency exchange rate fluctuations during the first quarter of fiscal year 2020, the impact to the interim consolidated statements of income and comprehensive income was immaterial.

The Company elected the transition package of practical expedients permitted within the new standard which, among other things, allowed it to carry-forward the historical lease classification. The Company also elected the practical expedient to carry forward the accounting treatment for land easements and the practical expedient allowing the Company not to apply the recognition requirements of ASC 842 to short-term leases. However, the Company did not elect to combine lease and non-lease components. Please refer to Note 10 – Leases for further discussion on the Company's leases.

NOTE 3 – REVENUE RECOGNITION

Performance Obligations

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

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

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

Membership Fee Revenue. Membership income represents annual membership fees paid by the Company’s warehouse club members, which are recognized ratably over the 12-month term of the membership.  Membership refunds are prorated over the remaining term of the membership; accordingly, no refund reserve is required to be established for the periods presented. Membership fee revenue is included in membership income in the Company's consolidated statements of income. The deferred membership fee is included in deferred income in the Company's consolidated balance sheets.

Platinum Points Reward Programs. The Company currently offers Platinum memberships in nine of its thirteen countries.  The annual fee for a Platinum membership is approximately $75. The Platinum membership provides members with a 2% rebate on most items, up to an annual maximum of $500. The rebate is issued annually to Platinum members on March 1 and expires August 31.  Platinum members can apply this rebate to future purchases at the warehouse club during the redemption period.  The Company records this 2% rebate as a reduction of revenue at the time of the sales transaction.  Accordingly, the Company has reduced warehouse sales and has accrued a liability within other accrued expenses and other current liabilities,

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platinum rewards. The Company has determined that breakage revenue is 5% of the awards issued; therefore, it records 95% of the Platinum membership liability at the time of sale. Annually, the Company reviews for expired unused rebates outstanding, and the expired unused rebates are recognized as “Other revenue and income” on the consolidated statements of income.

Co-branded Credit Card Points Reward Programs.  Most of the Company’s subsidiaries have points reward programs related to Co-branded Credit Cards. These points reward programs provide incremental points that can be used at a future time to acquire merchandise within the Company’s warehouse clubs.  This results in two performance obligations, the first performance obligation being the initial sale of the merchandise or services purchased with the co-branded credit card and the second performance obligation being the future use of the points rewards to purchase merchandise or services.  As a result, upon the initial sale, the Company allocates the transaction price to each performance obligation with the amount allocated to the future use points rewards recorded as a contract liability within other accrued expenses and other current liabilities on the consolidated balance sheet. The portion of the selling price allocated to the reward points is recognized as Net merchandise sales when the points are used or when the points expire. The Company reviews on an annual basis expired points rewards outstanding, and the expired rewards are recognized as Net merchandise sales on the consolidated statements of income within markets where the co-branded credit card agreement allows for such treatment.   

Gift Cards. Members’ purchases of gift cards to be utilized at the Company's warehouse clubs are not recognized as sales until the card is redeemed and the customer purchases merchandise using the gift card. The outstanding gift cards are reflected as other accrued expenses and other current liabilities in the consolidated balance sheets. These gift cards generally have a one-year stated expiration date from the date of issuance and are generally redeemed prior to expiration.  However, the absence of a large volume of transactions for gift cards impairs the Company's ability to make a reasonable estimate of the redemption levels for gift certificates; therefore, the Company assumes a 100% redemption rate prior to expiration of the gift certificate. The Company periodically reviews unredeemed outstanding gift certificates, and the gift certificates that have expired are recognized as “Other revenue and income” on the consolidated statements of income.

Co-branded Credit Card Revenue Sharing Agreements. As part of the co-branded credit card agreements that the Company has entered into with financial institutions within its markets, the Company often enters into revenue sharing agreements. As part of these agreements, in some countries, the Company receives a portion of the interest income generated from the average outstanding balances on the co-branded credit cards from these financial institutions (“interest generating portfolio” or “IGP”).   The Company recognizes its portion of interest received as revenue.  As a result of the adoption of ASC 606, the Company has determined that this revenue should be recognized as “Other revenue and income” on the consolidated statements of income.

Contract Performance Liabilities

Contract performance liabilities as a result of transactions with customers primarily consist of deferred membership income, other deferred income, deferred gift card revenue, Platinum points programs, and liabilities related to co-branded credit card points rewards programs which are included in deferred income and other accrued expenses and other current liabilities in the Company’s consolidated balance sheets. The following table provides these contract balances from transactions with customers as of the dates listed (in thousands):

	Contract Liabilities
	November 30, 2019		August 31, 2019
Deferred membership income	$	24,599	$	24,901
Other contract performance liabilities	$	6,397	$	4,048

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Disaggregated Revenues

In the following table, net merchandise sales are disaggregated by merchandise category (in thousands):

		Three Months Ended
		November 30, 2019		November 30, ‎2018
Foods & Sundries	$	392,805	$	376,328
Fresh Foods		215,238		200,705
Hardlines		90,804		92,154
Softlines		40,324		40,481
Other Business		39,557		37,775
Net Merchandise Sales	$	778,728	$	747,443

NOTE 4 – EARNINGS PER SHARE

The Company presents basic net income per share using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders and that determines basic net income per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings that would have been available to common stockholders. A participating security is defined as a security that may participate in undistributed earnings with common stock. The Company’s capital structure includes securities that participate with common stock on a one-for-one basis for distribution of dividends. These are the restricted stock awards and restricted stock units issued pursuant to the 2013 Equity Incentive Award Plan. The Company determines the diluted net income per share by using the more dilutive of the two class-method or the treasury stock method and by including the basic weighted average of outstanding performance stock units in the calculation of diluted net income per share under the two-class method and including all potential common shares assumed issued in the calculation of diluted net income per share under the treasury stock method.

The following table sets forth the computation of net income per share for the three months ended November 30, 2019 and 2018 (in thousands, except per share amounts):

	Three Months Ended
	November 30,		November 30,
	2019		2018
Net income attributable to PriceSmart, Inc.	$	19,728	$	14,612
Less: Allocation of income to unvested stockholders		(258)		(193)
Net income attributable to PriceSmart, Inc. per share available for distribution	$	19,470	$	14,419
Basic weighted average shares outstanding		30,277		30,172
Add dilutive effect of performance stock units (two-class method)		7		17
Diluted average shares outstanding		30,284		30,189
Basic net income per share	$	0.64	$	0.48
Diluted net income per share	$	0.64	$	0.48

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NOTE 5 – STOCKHOLDERS’ EQUITY

Dividends

No dividends were declared by the Company’s Board of Directors during the first three months of fiscal year 2020. The following table summarizes the dividends declared and paid during fiscal year 2019.

			First Payment				Second Payment
Declared	Amount		Record ‎Date	Date ‎Paid	Amount		Record ‎Date	Date ‎Paid	Amount
1/30/2019	$	0.70	2/15/2019	2/28/2019	$	0.35	8/15/2019	8/30/2019	$	0.35

The Company anticipates the ongoing payment of semi-annual dividends in subsequent periods, although the actual declaration of future dividends, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements.

Comprehensive Income and Accumulated Other Comprehensive Loss

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

	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2019	$	(144,339)	$	20	$	(144,319)
Foreign currency translation adjustments		(3,724)		34		(3,690)
Defined benefit pension plans		26		—		26
Derivative instruments (1)		513		—		513
Ending balance, November 30, 2019	$	(147,524)	$	54	$	(147,470)

	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2018	$	(121,216)	$	(1)	$	(121,217)
Foreign currency translation adjustments		(13,397)		(1)		(13,398)
Defined benefit pension plans		28		—		28
Derivative Instruments (1)		123		—		123
Ending balance, November 30, 2018	$	(134,462)	$	(2)	$	(134,464)

	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2018	$	(121,216)	$	(1)	$	(121,217)
Foreign currency translation adjustments		(19,717)		21		(19,696)
Defined benefit pension plans		(112)		—		(112)
Derivative Instruments (1)		(3,369)		—		(3,369)
Amounts reclassified from accumulated other comprehensive income (loss) (2)		75		—		75
Ending balance, August 31, 2019	$	(144,339)	$	20	$	(144,319)

⁽¹⁾See Note 8 - Derivative Instruments and Hedging Activities.

⁽²⁾Amounts reclassified from accumulated other comprehensive loss related to the minimum pension liability are included in warehouse club and other operations in the Company's consolidated statements of income.

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Retained Earnings Not Available for Distribution

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

	November 30,		August 31,
	2019		2019
Retained earnings not available for distribution	$	7,926	$	7,843

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

The Company establishes an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and adjusts the amount as appropriate. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable. If it is at least a reasonable possibility that a material loss will occur, the Company will provide disclosure regarding the contingency.

On May 22, 2019, a class action complaint was filed against PriceSmart, Inc., as well as certain former and current officers in the United States District Court for the Southern District of California. On October 7, 2019, the Court granted Public Employees Retirement Association of New Mexico’s (PERA’s) Motion for Appointment as Lead Plaintiff. On January 3, 2020, PERA filed a consolidated class action complaint, which alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Company intends to vigorously defend itself against any obligations or liability to the plaintiffs with respect to such claims. The Company believes the claims are without merit.

Taxes

Income Taxes – For interim reporting, the Company uses an estimated annual effective tax rate (AETR), pursuant to ASC 740-279, to calculate income tax expense. Income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating its ability to recover deferred tax assets in the jurisdictions from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporates assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of cumulative operating income (loss).

The Company is required to file federal and state tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation of these tax returns requires the Company to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by the Company. The Company, in consultation with its tax advisors, bases its tax returns on interpretations that are believed to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various taxing authorities in the jurisdictions in which the Company files its returns. As part of these reviews, a taxing authority may disagree with the interpretations the Company used to calculate its tax liability and therefore require the Company to pay additional taxes.

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The Company accrues an amount for its estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. There were no significant changes in the Company's uncertain income tax positions since August 31, 2019.

In evaluating the exposure associated with various non-income tax filing positions, the Company accrues for probable and estimable exposures for non-income tax related tax contingencies.  As of November 30, 2019 and August 31, 2019, the Company has recorded within other accrued expenses and other current liabilities a total of $3.2 million for various non-income tax related tax contingencies.

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

In two other countries where the Company operates, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.7 million and $7.8 million and deferred tax assets of $2.7 million as of November 30, 2019 and August 31, 2019 in these countries. While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

Other Commitments

In January 2017, the Company purchased a distribution center in Medley, Miami-Dade County, Florida. The Company transferred its Miami dry distribution center activities that were previously in the leased facility to the new facility during the third quarter of fiscal year 2017. As of November 30, 2019, all of the vacated space has been subleased (and/or returned to the landlord). As part of the subleases, the Company provided the landlord of the leased facility a letter of credit (“LOC”) for the initial amount of $500,000 which entitled the landlord to draw on the LOC based on a decreasing scale over four years if certain conditions were to occur related to nonpayment by the new tenant. The balance of this LOC decreases at an annual rate of $125,000 starting in August 2018. As of November 30, 2019, the remaining balance of the LOC was $250,000. Although this agreement is considered a guarantee, in measuring the fair value, the Company considers the risk and probability of default by the third party tenant as not likely nor probable based on the Company’s review of the third party tenant’s financial position as well as the third party’s considerable capital investment into the leased facility. Therefore, the Company has not recorded a liability for this guarantee.

The Company is also committed to non-cancelable construction service obligations for various warehouse club developments and expansions. As of November 30, 2019 and August 31, 2019, the Company had approximately $15.1 million and $14.9 million, respectively, in contractual obligations for construction services not yet rendered.

The Company has entered into general land purchase and land purchase option agreements. The Company’s land purchase agreements are typically subject to various conditions, including, but not limited to, the ability to obtain necessary governmental permits or approvals. A deposit under an agreement is typically returned to the Company if all permits or approvals are not obtained. Generally, the Company has the right to cancel any of our agreements to purchase land without cause by forfeiture of some or all of the deposits we have made pursuant to the agreement. The Company does not have a timetable of when or if it will exercise its land purchase options or complete its other land purchase agreements, due to the uncertainty related to the completion of the Company's due diligence reviews or required governmental permits or approvals. The Company's due diligence reviews include evaluations of the legal status of each property, the zoning and permitting issues related to acquiring approval for the construction and operation of a warehouse club and any other issues related to the property itself that could render the property unsuitable or limit the property's economic viability as a warehouse club site. If all land purchase agreements were completed, the cash use would be approximately $6.7 million.

22

The table below summarizes the Company’s interest in real estate joint ventures, commitments to additional future investments and the Company’s maximum exposure to loss as a result of its involvement in these joint venture as of November 30, 2019 (in thousands):

Entity	% ‎Ownership		Initial ‎Investment		Additional ‎Investments		Net Income Inception to Date		Company’s ‎Variable ‎Interest ‎in Entity		Commitment ‎to Future ‎Additional ‎Investments(1)		Company's ‎Maximum ‎Exposure ‎to Loss in ‎Entity(2)
GolfPark Plaza, S.A.	50	%	$	4,616	$	2,402	$	132	$	7,150	$	99	$	7,249
Price Plaza Alajuela PPA, S.A.	50	%		2,193		1,236		70		3,499		785		4,284
Total			$	6,809	$	3,638	$	202	$	10,649	$	884	$	11,533

⁽¹⁾The parties intend to seek alternate financing for the project, which could reduce the amount of investments each party would be required to provide. The parties may mutually agree on changes to the project, which could increase or decrease the amount of contributions each party is required to provide.

⁽²⁾The maximum exposure is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company to provide additional financial support.

NOTE 7 – DEBT

Short-term borrowings consist of unsecured lines of credit. The following table summarizes the balances of total facilities, facilities used and facilities available (in thousands):

			Facilities Used
	Total Amount		Short-term		Letters of		Facilities		Weighted average
	of Facilities		Borrowings		Credit		Available		interest rate
November 30, 2019	$	69,000	$	23,018	$	534	$	45,448	4.8	%
August 31, 2019	$	69,000	$	7,540	$	486	$	60,974	6.1	%

As of November 30, 2019 and August 31, 2019, the Company had approximately $40.0 million of short-term facilities in the U.S. that require compliance with certain quarterly financial covenants. As of November 30, 2019 and August 31, 2019, the Company was in compliance with respect to these covenants. Each of the facilities expires annually except for the U.S. facility, which expires bi-annually. The facilities are normally renewed.

The following table provides the changes in long-term debt for the three-months ended November 30, 2019:

(Amounts in thousands)	Current ‎portion of ‎long-term debt		Long-term ‎debt (net of current portion)		Total
Balances as of August 31, 2019	$	25,875	$	63,711	$	89,586	(1)
Proceeds from long-term debt incurred during the period:
Colombia subsidiary		—		25,000		25,000
Regularly scheduled loan payments		(947)		(1,889)		(2,836)
Reclassifications of short-term debt		(11,253)		11,253		(0)
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar (2)		51		9		60
Balances as of November 30, 2019	$	13,726	$	98,084	$	111,810	(1)

⁽¹⁾The carrying amount of non-cash assets assigned as collateral for these loans was $111.3 million. No cash assets were assigned as collateral for these loans.

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

23

As of November 30, 2019, the Company had approximately $105.9 million of long-term loans in several foreign subsidiaries that require these subsidiaries to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. As of November 30, 2019, the Company was in compliance with all covenants or amended covenants.

As of August 31, 2019, the Company had approximately $83.1 million of long-term loans in several foreign subsidiaries that require these subsidiaries to comply with certain annual or quarterly financial covenants.

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

Twelve Months Ended November 30,	Amount
2020	$	13,726
2021		13,348
2022		10,211
2023		21,341
2024		20,771
Thereafter		32,413
Total	$	111,810

NOTE 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

In addition, the Company is exposed to foreign currency and interest rate cash flow exposure related to non-functional currency long-term debt of three of its wholly owned subsidiaries. To manage this foreign currency and interest rate cash flow exposure, the Company’s subsidiaries entered into cross-currency interest rate swaps that convert their U.S. dollar denominated floating interest payments to functional currency fixed interest payments during the life of the hedging instrument.  As changes in foreign exchange and interest rates impact the future cash flow of interest payments, the hedges are intended to offset changes in cash flows attributable to interest rate and foreign exchange movements.

These derivative instruments (cash flow hedging instruments) are designated and qualify as cash flow hedges, with the entire gain or loss on the derivative reported as a component of other comprehensive loss. Amounts are deferred in other comprehensive loss and reclassified into earnings in the same income statement line item that is used to present earnings effect of the hedged item when the hedged item affects earnings.

The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business, including foreign-currency exchange-rate fluctuations on U.S. dollar denominated liabilities within its international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts (NDFs) that are intended to offset changes in cash flow attributable to currency exchange movements. These contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. Currently, these contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate foreign-currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features.

The Company uses other derivatives not designated as hedging instruments that consist primarily of written call options in which the Company receives a premium from the holder. This premium lowers the cost of the Company’s hedging activities. The Company recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Other expense, net in the consolidated statements of income in the period of change.

Cash Flow Hedges

As of November 30, 2019, all of the Company’s interest rate swap and cross-currency interest rate swap derivative financial instruments are designated and qualify as cash flow hedges. The Company formally documents the hedging relationships for its derivative instruments that qualify for hedge accounting.

24

The following table summarizes agreements for which the Company has recorded cash flow hedge accounting for the three months ended November 30, 2019:

Subsidiary	Date ‎Entered ‎into	Derivative ‎Financial ‎Counter- ‎party	Derivative ‎Financial ‎Instruments	Initial ‎US$ ‎Notional ‎Amount		Bank ‎US$ ‎loan  ‎Held ‎with	Floating Leg ‎(swap ‎counter-party)	Fixed Rate ‎for PSMT ‎Subsidiary		Settlement ‎Dates	Effective ‎Period of swap
Colombia	27-Nov-19	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	25,000,000	Citibank, N.A.	Variable rate 3-month Libor plus 2.45%	7.93	%	27th day of November, February, May and August beginning February 27, 2020	November 27, 2019 - ‎November 27, 2024
Colombia	24-Sep-19	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	12,500,000	PriceSmart, Inc.	Variable rate 3-month Libor plus 2.50%	7.09	%	24th day of December, March, June and September beginning December 24, 2019	September 24, 2019 - ‎September 26, 2022
Panama	25-Jun-18	Bank of Nova Scotia ("Scotiabank")	Interest rate swap	$	14,625,000	Bank of Nova Scotia	Variable rate 3-month Libor plus 3.0%	5.99	%	23rd day of each month beginning on July 23, 2018	June 25, 2018 - ‎March 23, 2023
Honduras	26-Feb-18	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	13,500,000	Citibank, N.A.	Variable rate 3-month Libor plus 3.00%	9.75	%	29th day of May, August, November and February beginning May 29, 2018	February 26, 2018 - ‎February 24, 2024
PriceSmart, Inc	7-Nov-16	MUFG Union Bank, N.A. ("Union Bank")	Interest rate swap	$	35,700,000	Union Bank	Variable rate 1-month Libor plus 1.7%	3.65	%	1st day of each month beginning on April 1, 2017	March 1, 2017 - ‎March 1, 2027
Costa Rica	28-Aug-15	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	7,500,000	Citibank, N.A.	Variable rate 3-month Libor plus 2.50%	7.65	%	28th day of August, November, February, and May beginning on November 30, 2015	August 28, 2015 - ‎August 28, 2020
Colombia	10-Dec-14	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	15,000,000	Citibank, N.A.	Variable rate 3-month Libor plus 2.8%	8.25	%	4th day of March, June, Sept, Dec. beginning on March 4, 2015	December 4, 2014 - ‎December 3, 2019

For the three months ended November 30, 2019 and 2018, the Company included the gain or loss on the hedged items (that is, variable-rate borrowings) in the same line item—interest expense—as the offsetting gain or loss on the related interest rate swaps as follows (in thousands):

Income Statement Classification	Interest ‎expense on ‎borrowings(1)		Cost of ‎swaps (2)		Total
Interest expense for the three months ended November 30, 2019	$	1,014	$	261	$	1,275
Interest expense for the three months ended November 30, 2018	$	1,160	$	167	$	1,327

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

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

The total notional balance of the Company’s pay-fixed/receive-variable interest rate swaps and cross-currency interest rate swaps was as follows (in thousands):

	Notional Amount as of
	November 30,		August 31,
Floating Rate Payer (Swap Counterparty)	2019		2019
Union Bank	$	34,850	$	35,169
Citibank N.A.		60,825		24,225
Scotiabank		17,750		18,375
Total	$	113,425	$	77,769

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

		November 30, 2019						August 31, 2019
Derivatives designated as cash flow hedging instruments	Balance Sheet Classification	Fair ‎Value		Net Tax ‎Effect		Net ‎OCI		Fair ‎Value		Net Tax ‎Effect		Net ‎OCI
Cross-currency interest rate swaps	Other non-current assets	$	436	$	(144)	$	292	$	—	$	—	$	—
Cross-currency interest rate swaps	Other current assets		2,747		(906)		1,841		2,736		(903)		1,833
Interest rate swaps	Other long-term liabilities		(1,429)		344		(1,085)		(2,178)		517		(1,661)
Cross-currency interest rate swaps	Other long-term liabilities		(580)		174		(406)		(732)		220		(512)
Cross-currency interest rate swaps	Other current liabilities		(60)		18		(42)		—		—		—
Net fair value of derivatives designated as hedging instruments		$	1,114	$	(514)	$	600	$	(174)	$	(166)	$	(340)

Fair Value Instruments

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

November 30, 2019, the Company did not have any material non-deliverable forward foreign-exchange contracts.

Other Instruments

Other derivatives not designated as hedging instruments consist primarily of written call options in which the Company receives a premium that it uses to reduce the costs associated with its hedging activities.

The following table summarizes the fair value of the Company’s other contracts not designated as hedging instruments:

	November 30, 2019			August 31, 2019
Non-designated derivative contracts	Balance Sheet ‎Location	Fair Value		Balance Sheet ‎Location	Fair Value
Net fair value of other non-designated derivative contracts that do not qualify for hedge accounting	Other long-term liabilities	$	(1,250)	Other long-term liabilities	$	—

For the three months ended November 30, 2019, the Company included in its consolidated statements of income the loss of its other non-designated derivative contracts as follows (in thousands):

		Three Months Ended
		November 30,	November 30,
Income Statement Classification		2019	2018
Other expense, net	$	(1,270)	$	—

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NOTE 9 – SEGMENTS

The Company and its subsidiaries are principally engaged in the international operation of membership shopping in 45 warehouse clubs located in 12 countries and one U.S. territory that are located in Central America, the Caribbean and Colombia. In addition, the Company operates distribution centers and corporate offices in the United States. The Company has aggregated its warehouse clubs, distribution centers and corporate offices into reportable segments. The Company’s reportable segments are based on management’s organization of these locations into operating segments by general geographic location, used by management and the Company's chief operating decision maker in setting up management lines of responsibility, providing support services, and making operational decisions and assessments of financial performance. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations. Certain revenues, operating costs and inter-company charges included in the United States segment are not allocated to the segments within this presentation, as it is impractical to do so, and they appear as reconciling items to reflect the amount eliminated on consolidation of intersegment transactions. From time to time, the Company revises the measurement of each segment's operating income and net income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by the Company's chief operating decision maker. When the Company does so, the previous period amounts and balances are reclassified to conform to the current period's presentation.

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

	United ‎States ‎Operations		Central ‎American ‎Operations		Caribbean ‎ Operations (1)		Colombia Operations		Reconciling ‎Items(2)		Total
Three Months Ended November 30, 2019
Revenue from external customers	$	17,339	$	466,802	$	235,017	$	92,783	$	—	$	811,941
Intersegment revenues		349,950		4,045		1,202		536		(355,733)		—
Depreciation, Property and equipment		1,348		6,882		3,966		2,018		—		14,214
Amortization, Intangibles		599		—		—				—		599
Operating income		2,587		31,700		11,810		4,524		(19,907)		30,714
Net income (loss) attributable to PriceSmart, Inc.		(724)		26,751		10,318		3,271		(19,888)		19,728
Long-lived assets (other than deferred tax assets) (3)		84,117		471,366		177,742		143,818		—		877,043
Intangibles, net		11,977		—		—		—		—		11,977
Goodwill		10,695		24,532		10,198		—		—		45,425
Total assets		168,375		754,364		369,575		231,797		—		1,524,111
Capital expenditures, net		629		15,243		4,520		20,834		—		41,226
Three Months Ended November 30, 2018
Revenue from external customers	$	17,339	$	439,806	$	225,009	$	97,483	$	—	$	779,637
Intersegment revenues		350,719		437		1,093		278		(352,527)		—
Depreciation, Property and equipment		1,960		5,870		3,191		2,103		—		13,124
Amortiazation, Intangibles		599		—		—		—		—		599
Operating income (loss)		(1,050)		28,792		12,027		3,416		(18,515)		24,670
Net income (loss) attributable to PriceSmart, Inc.		(3,825)		24,185		9,985		2,815		(18,548)		14,612
Long-lived assets (other than deferred tax assets)(3)		90,061		320,136		149,823		110,969		—		670,989
Intangibles, net		14,381		—		—		—		—		14,381
Goodwill		11,230		24,726		10,292		—		—		46,248
Total assets		158,591		592,114		346,397		180,141		—		1,277,243
Capital expenditures, net		1,686		22,771		10,495		1,387		—		36,339
As of August 31, 2019
Long-lived assets (other than deferred tax assets)	$	65,278	$	383,665	$	165,584	$	115,838	$	—	$	730,365
Intangibles, net		12,576		—		—		—		—		12,576
Goodwill		11,315		24,593		10,193		—		—		46,101
Total assets		161,583		614,579		340,216		180,033		—		1,296,411

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

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

⁽³⁾Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the Long-lived assets (other than deferred tax assets) as of November 30, 2019 is not comparable with that as of November 30, 2018 and August 31, 2019.

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NOTE 10 – LEASES

The Company adopted ASC 842 as of September 1, 2019, using the modified retrospective method and applying transitional relief allowing entities to initially apply the requirements at the adoption date by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, results and disclosures for the reporting periods beginning September 1, 2019 are reported and presented under ASC 842, while prior period amounts and disclosures are not adjusted and continue to be reported and presented under ASC 840.

As part of the adoption, the Company elected the following practical expedients:

A package of practical expedients allowing the Company to: a) carry forward its historical lease classification; b) avoid reassessing whether any expired or existing contracts are or contain leases; and c) avoid reassessing initial direct costs for any existing lease.

A practical expedient related to land easements, allowing the Company to carry forward the accounting treatment for land easements on existing agreements and eliminating the need to reassess existing lease contracts to determine if land easements are separate leases under ASC 842.

A practical expedient allowing the Company not to apply the recognition requirements of ASC 842 to short-term leases (12 months or less).

The Company did not elect the following practical expedients:

A practical expedient that would allow the Company to use hindsight in determining the lease term and to assess impairment of the entity’s right-of use (“ROU”) assets, since election of this expedient could make adoption more complex given that reevaluation of the lease term.

A practical expedient allowing the Company to not separate lease components from nonlease components (e.g., common area maintenance costs), since the Company does not combine lease and nonlease components for any of its real estate leases.

In accordance with ASC 842, the Company determines if an arrangement is a lease at inception or modification of a contract and classifies each lease as either operating or finance lease at commencement. The Company only reassesses lease classification subsequent to commencement upon a change to the expected lease term or the contract being modified. As of November 30, 2019, the Company only has operating leases for its clubs, distribution centers, office space, and land. Operating leases, net of accumulated amortization, are included in operating lease ROU assets, and current and non-current operating lease liabilities, on the Company’s consolidated balance sheets. Lease expense for operating leases is included in selling general and administrative expense on the Company’s consolidated statements of income. Leases with an initial term of twelve months or less are not recorded on the Company’s consolidated balance sheet.

The Company is generally obligated for the cost of property taxes, insurance, and maintenance relating to its leases, which are often variable lease payments. Such costs are included in selling, general and administrative expense on the interim unaudited consolidated statements of income.

Certain of the Company's lease agreements provide for lease payments based on future sales volumes at the leased location, or include rental payments adjusted periodically for inflation or based on an index, which are not measurable at the inception of the lease. The Company expenses such variable amounts in the period incurred, which is the period in which it becomes probable that the specified target that triggers the variable lease payments will be achieved. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the reasonably certain lease term. The operating lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option or if an economic penalty may be incurred if the option is not exercised. The initial lease term of the Company’s operating leases range from two to 30 years.

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Where the Company's leases do not provide an implicit rate, a collateralized incremental borrowing rate ("IBR") is used to determine the present value of lease payments. The IBR is based on a yield curve derived by publicly traded bond offerings for companies with similar credit characteristics that approximate the Company's market risk profile. In addition, we adjust the IBR for jurisdictional risk derived from quoted interest rates from financial institutions to reflect the cost of borrowing in the Company’s local markets.

Adoption of the standard resulted in the initial recognition of $120.6 million of operating lease ROU assets and $132.1 million of short-term and long-term operating lease liabilities as of September 1, 2019. The difference between the newly recorded assets and liabilities is $11.5 million, which was recorded against our deferred rent balance of $11.2 million as of August 31, 2019. The difference of $0.3 million was expensed in the first quarter of fiscal year 2020. No cumulative-effect adjustments were recorded to retained earnings, and there was no material impact to the Company’s interim consolidated statements of income, consolidated statements of comprehensive income, or consolidated statements of cash flows.

The following table is a summary of the Company’s components of total lease costs for the first quarter of fiscal year 2020 (in thousands):

	Three Months Ended
	November 30,
	2019
Operating lease cost	$	4,221
Short-term lease cost		53
Variable lease cost		1,081
Sublease income		(289)
Total lease costs	$	5,066

The weighted average remaining lease term and weighted average discount rate for operating leases as of November 30, 2019 were as follows:

	Operating leases
Weighted average remaining lease term in years	19.2
Weighted average discount rate percentage	6.5%

Supplemental cash flow information related to leases under which the Company is the lessee was as follows (amounts in thousands):

	Three Months Ended
	November 30,
	2019
Operating cash flows paid for operating leases	$	3,805

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

	Leased
Years Ended November 30,	Locations(1)
2020	$	14,318
2021		13,403
2022		13,231
2023		13,129
2024		12,438
Thereafter		179,042
Total future lease payments		245,561
Less imputed interest		(115,553)
Total operating lease liabilities	$	130,008	(2)

⁽¹⁾Operating lease obligations have been reduced by approximately $2.0 million to reflect expected sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased.

⁽²⁾Future minimum lease payments include $1.5 million of lease payment obligations for the prior leased Miami distribution center. For purposes of calculating the minimum lease payments, a reduction is reflected for the actual sub-lease income the Company expects to receive during the remaining lease term. This sub-lease income was also considered for the purposes of calculating the exit obligation, which was immaterial as of November 30, 2019.

NOTE 11 – SUBSEQUENT EVENTS

The Company has evaluated all events subsequent to the balance sheet date of November 30, 2019 through the date of issuance of these consolidated financial statements and has determined that, except as set forth below, there are no subsequent events that require disclosure.

Financing Transactions

On December 3, 2019, the Company’s Colombia subsidiary refinanced its existing balloon payment on the original $15.0 million U.S. dollar denominated contractual debt. Upon refinance, the Colombia subsidiary entered into a five year cross currency interest rate swap. The swap contract states that the Company will receive interest based on the three-month LIBOR rate plus 2.45% on a quarterly amortizing initial notional value of $7.9 million and pay fixed interest of approximately 7.9% on a quarterly amortizing initial notional value of $7.9 million.

On December 6, 2019, the Company's Guatemala subsidiary entered into a long-term loan agreement for 160.0 million Guatemalan quetzales, or approximately $20.0 million in U.S. dollars, which is to be repaid in ten years with monthly interest and principal payments beginning in the second year of the loan. The interest rate is fixed at 7.0% for the first five year period and the loan was funded on December 10, 2019.

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PRICESMART, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements concerning PriceSmart, Inc.'s ("PriceSmart", the "Company" or "we") anticipated future revenues and earnings, adequacy of future cash flows, proposed warehouse club openings, the Company's performance relative to competitors and related matters. These forward-looking statements include, but are not limited to, statements containing the words “expect,” “believe,” “will,” “may,” “should,” “project,” “estimate,” “anticipated,” “scheduled,” and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to: adverse changes in economic conditions in the Company's markets, natural disasters, compliance risks, volatility in currency exchange rates, competition, consumer and small business spending patterns, political instability, increased costs associated with the integration of online commerce with our traditional business, whether the Company can successfully execute strategic initiatives, breaches of security or privacy of member or business information, cost increases from product and service providers, interruption of supply chains, exposure to product liability claims and product recalls, recoverability of moneys owed to PriceSmart from governments, and other important factors discussed under the captions "Item 1A. Risk Factors" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019 filed with the United States Securities and Exchange Commission ("SEC") on October 29, 2019. Forward-looking statements speak only as of the date that they are made, and the Company does not undertake to update them, except as required by law.

The following discussion and analysis compares the results of operations for the three months ended November 30, 2019 and 2018 and should be read in conjunction with the consolidated financial statements and the accompanying notes included therein.

Overview

PriceSmart began operations in 1996 in San Diego, California. We own and operate U.S. style membership shopping warehouse clubs in Central America, the Caribbean and Colombia.  We also function as a wholesale supplier to a retailer in the Philippines.  We sell high quality brand name and private label consumer products and provide services at low prices to individuals and businesses.  Historically, our typical no-frills standard warehouse buildings have ranged in sales floor size from approximately 40,000 to 60,000 square feet and are located primarily in and around the major cities in our markets to take advantage of dense populations and relatively higher levels of disposable income. However, starting in fiscal year 2019, we also began opening smaller format clubs, with sales floors ranging from approximately 30,000 to 40,000 square feet. These smaller format clubs are intended to serve markets where the population is likely to support a smaller club or densely populated urban areas where it is challenging to secure sufficient real estate at a reasonable cost for a larger club. This smaller format has the potential to expand our geographic reach in existing markets and provide more convenience for our members.

As warehouse club operators, we believe that our business success depends on our ability to be the lowest cost operators in our markets and, in turn, to offer the lowest prices on high quality products and services in our markets.  Lower prices on products and services should drive sales volume, which increases the Company’s buying leverage, which in turn leads to better pricing that can be offered to our members, validating the membership investment that our customers make. 

Our warehouse clubs operate in emerging markets that historically have had higher growth rates and lower warehouse club market penetration than the U.S. market. In the countries in which we operate, we do not currently face direct competition from U.S. membership warehouse club operators. However, we do face competition from various retail formats such as hypermarkets, supermarkets, cash and carry, home improvement centers, electronic retailers, specialty stores, convenience stores, traditional wholesale distribution and growing online sales.

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The numbers of warehouse clubs in operation as of November 30, 2019 for each country or territory were as follows:

	Number of		Number of		Anticipated		Anticipated
	Warehouse Clubs		Warehouse Clubs		Warehouse		Warehouse
	in Operation as of		in Operation as of		Club Openings		Club Openings
Country/Territory	November 30, 2018		November 30, 2019		In Fiscal Year 2020		In Fiscal Year 2021
Colombia		7		7		—		2
Costa Rica		7		7		1		—
Panama		5		7		—		—
Dominican Republic		4		5		—		—
Trinidad		4		4		—		—
Guatemala		3		4		—		—
Honduras		3		3		—		—
El Salvador		2		2		—		—
Nicaragua		2		2		—		—
Aruba		1		1		—		—
Barbados		1		1		—		—
U.S. Virgin Islands		1		1		—		—
Jamaica		1		1		—		1
Totals		41		45		1		3

Our warehouse clubs and local distribution centers are located in Latin America and the Caribbean, and 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.

The table below shows when the newest clubs will open. Once these four clubs are open, the Company will operate 49 warehouse clubs.

Country	City/Neighborhood	Purchased	Expected Opening	Format
Costa Rica	Liberia	July 2019	Summer 2020	Smaller
Colombia	Bogota	August 2019	Fall 2020	Standard
Jamaica	Portmore	September 2019	Fall 2020	Standard
Colombia	Bucaramanga	October 2019	Fall 2020	Smaller

We are investing in technology to increase efficiencies and to enable omni-channel capabilities, including e-commerce, to enhance the member experience.

We also operate a legacy (casillero and marketplace) Aeropost business in 38 countries in Latin America and the Caribbean, many of which overlap with markets where we operate warehouse clubs.

Factors Affecting Our Business

Our sales and profits vary from market to market depending on general economic factors, including GDP growth; consumer spending patterns; foreign currency exchange rates; political policies and social conditions; local demographic characteristics (such as population growth); the number of years we have operated in a particular market; and the level of retail and wholesale competition in that market.

Currency fluctuations can be one of the largest variables affecting our overall sales and profit performance, as we have experienced in prior fiscal years, because many of our markets are susceptible to foreign currency exchange rate volatility. During the first three months of fiscal year 2020 and fiscal year 2019, approximately 77% and 78%, respectively, of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 52% were comprised of sales of products we purchased in U.S. dollars.

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A devaluation of local currency reduces the value of sales and membership income that is generated in that country when translated to U.S. dollars for our consolidated results. In addition, when a 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. Information about the effect of local currency devaluations is discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales.”

From time to time, one or more markets in which we operate may experience economic slowdowns, which can negatively impact our business. Most countries in our Central America segment experienced adverse market conditions that resulted in a difficult operating environment during the first three months of fiscal year 2020. Increasing foreign currency exchange volatility, slowing global economy activity and trade, decreasing levels of public investment and tax reform stalled economic growth for most of our countries in this region.

Our capture of total retail and wholesale sales can vary from market to market due to competition and the availability of other shopping options for our members. Our business in the U.S. Virgin Islands, where Hurricanes Irma and Maria had a severe impact on the infrastructure of the island in September 2017 and October 2017, initially benefitted from the difficulty other retailers had in becoming fully operational, but those same retailers have rebuilt restoring competition in that market. Additionally, in more developed countries, such as Costa Rica, Dominican Republic, Guatemala, Panama and Colombia, customers may have more alternatives available to them to satisfy their shopping needs, compared to smaller countries, such as Jamaica and Nicaragua, where consumers have a limited number of shopping options.

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

Political and other factors in each of our markets may have significant effects on our business. U.S. foreign policy can also have an impact on social and economic stability in the countries where we operate. For example, the U.S. State Department has announced varying strategies regarding if, when and how it would authorize disbursement of foreign aid that had been previously approved by the U.S. Congress, to Guatemala, Honduras and El Salvador. Changes in U.S. policies regarding financial assistance could cause political or financial instability in the countries we serve.

In the past, 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, increasing our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar.  We continued to experience this situation in Trinidad (“TT”) during the start of fiscal year 2020.  We are working with our banks in Trinidad to source tradeable currencies (including Euros, British Pounds, and Canadian dollars), but until the central bank in Trinidad makes more U.S. dollars available, this illiquidity condition is likely to continue. As of November 30, 2019, our Trinidad subsidiary had a net Trinidad dollar denominated asset position measured in U.S dollars of approximately $21.9 million, a decrease of $3.0 million from August 31, 2019 when our Trinidad subsidiary had net Trinidad dollar denominated asset position of approximately $24.9 million. We are carefully monitoring the situation, which may require us to limit future shipments from the U.S. to Trinidad in line with our ability to exchange Trinidad dollars for tradeable currencies to manage our exposure to any potential devaluation.

Mission and Business Strategy

Our mission is to improve the quality of life for our end-consumer and business members. To do this, we make available a wide range of high quality merchandise sourced from around the world at value prices. The annual membership fee enables us to operate our business, offer a curated selection of products and services, with lower margins than traditional retail stores.  Through the use of technology and the development of an omni-channel platform, we are pursuing opportunities to satisfy our members’ shopping expectations, create additional efficiencies in the supply chain and increase our significance in our members’ lives. We are working to create a shopping experience that blends the attributes and appeal of our brick and mortar business with the conveniences associated with technology-supported transactions, services and online shopping. 

Growth

We measure our growth primarily by the amount of the period-over-period activity in our net merchandise sales, our comparable store net merchandise sales and our membership income. Our investments are focused on the long-term growth of the Company. These investments can impact near-term results, such as when we incur fixed costs in advance of achieving full

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projected sales, negatively impacting near-term operating profit and net income. When we open a new warehouse club in an existing market, which may reduce reported comparable net merchandise sales due to the transfer of sales from existing warehouse clubs, we do so to protect the member experience, grow membership and support long-term sales growth and profitability.

Current and Future Management Actions

Logistics and distribution efficiencies are fundamental to delivering high quality merchandise at low prices to our members. We continue to explore ways to improve efficiency, reduce costs and ensure a flow of high quality, curated merchandise to our warehouse clubs. As we continue to refine our logistics and distribution infrastructure, we explore ways to improve our supply chain effectiveness through regional distribution centers that place our merchandise closer to our members.

Purchasing land and constructing warehouse clubs is generally our largest ongoing capital investment. Securing land for warehouse club locations is challenging in several of our markets because suitable sites at economically feasible prices are difficult to find. We believe real estate ownership provides a number of advantages as compared to leasing, including lower operating expenses, flexibility to expand or otherwise enhance our buildings, long-term control over the use of the property and the residual value that the real estate may have in future years. While our preference is to own rather than lease real estate, we have entered into real estate leases in certain cases and will likely do so in the future.

We are investing in technology to increase efficiencies and to enable omni-channel capabilities, including e-commerce, to enhance the member experience.

Financial highlights for the first quarter of fiscal year 2020 included:

Total revenues increased 4.1% over the comparable prior year period.

Net merchandise sales increased 4.2% over the comparable prior year period. We ended the quarter with 45 warehouse clubs compared to 41 warehouse clubs at the end of the first quarter of fiscal year 2019. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 1.6%.

Comparable net merchandise sales (that is, sales in the 41 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 13 weeks ended December 1, 2019 increased 1.0%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 1.5%.

Membership income increased 7.9% to $13.7 million membership over the comparable prior-year period primarily driven by new member sign-ups for the four club openings in Panama, Dominican Republic, and Guatemala in calendar year 2019.

Merchandise gross profits (net merchandise sales less associated cost of goods sold) increased 9.1% over the comparable prior year period and warehouse gross profits as a percent of net merchandise club sales were 14.9%, an increase of 70 basis points (0.7%) from the same period last year.

Operating income was $30.7 million, an increase of 24.5% or $6.0 million compared to the first quarter of fiscal year 2019.

We recorded a $1.7 million net currency loss from currency transactions in the current quarter compared to a $1.8 million net loss in the same period last year.

The effective tax rate for the first quarter of fiscal year 2020 was 32.2%, as compared to the effective tax rate for the first quarter of fiscal year 2019 of 33.9%.

Net income attributable to PriceSmart, Inc. for the first quarter of fiscal year 2020 was $19.7 million, or $0.64 per diluted share, compared to $14.6 million, or $0.48 per diluted share, in the comparable prior year period. 

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COMPARISON OF THE three months ended November 30, 2019 and 2018

The following discussion and analysis compares the results of operations for the three-month period ended on November 30, 2019 with the three-month period ended on November 30, 2018 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. Unless otherwise noted, all tables on the following pages present U.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding.

Net Merchandise Sales

The following tables indicate the net merchandise club sales in the segments in which we operate and the percentage growth in net merchandise sales by segment during the three months ended November 30, 2019 and 2018.

	Three Months Ended
	November 30, 2019								November 30, 2018
	Amount		% of net ‎sales		Increase/ ‎(decrease) ‎from ‎prior year		Change		Amount		% of net ‎sales
Central America	$	456,751	58.6	%	$	26,367	6.1	%	$	430,384	57.6	%
Caribbean		231,151	29.7			9,656	4.4			221,495	29.6
Colombia		90,826	11.7			(4,738)	(5.0)			95,564	12.8
Net merchandise sales	$	778,728	100.0	%	$	31,285	4.2	%	$	747,443	100.0	%

Comparison of Three Months Ended November 30, 2019 and 2018

Overall, total net merchandise sales grew 4.2% for the first quarter ended November 30, 2019. The first quarter increase resulted from a 3.8% increase in transactions and a 0.4% increase in average ticket. In addition, we had 45 clubs in operation as of November 30, 2019 compared to 41 clubs as of November 30, 2018.

Net merchandise sales in our Central America segment increased 6.1% for the first quarter ended November 30, 2019, when compared to the same period last year. These increases had a 350 basis point (3.5%) positive impact on total net merchandise sales growth. All markets within this segment showed increased net merchandise sales year-on-year. We added three new clubs to the segment when compared to the period ended November 30, 2018. In Panama, we opened our sixth club in May 2019 and seventh club in October 2019, and in Guatemala, we opened our fourth club in November 2019.

Net merchandise sales in our Caribbean segment grew 4.4% for the first quarter ended November 30, 2019, when compared to the same period last year. These increases had a 130 basis point (1.3%) positive impact on total net merchandise sales growth. Our Dominican Republic and Jamaica markets led the way in this segment with 14.6% and 12.3% growth, respectively. In the Dominican Republic, we launched our fifth club in June 2019, while in Jamaica, investments we made contributed to growth of 12.3%.

Net merchandise sales in our Colombia segment decreased 5.0% for the first quarter ended November 30, 2019, when compared to the same period last year. The decrease for the three-month period had a 60 basis point (0.6%) negative impact on total net merchandise sales growth. The decline for the first quarter is primarily due to unfavorable foreign currency devaluation during the current period.

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Comparison of Three Months Ended November 30, 2019 and 2018 in Constant Currency

In discussing our operating results, the term “currency exchange rates” refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. dollar into U.S. dollars. We calculate the effect of changes in currency exchange rates as the difference between current period activities translated using the current period's currency exchange rates, and the comparable prior year period's currency exchange rates. The disclosure of constant currency amounts or results permits investors to better understand our underlying performance without the effects of currency exchange rate fluctuations. The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage change from the three-month period ended November 30, 2019.

	Currency exchange rate fluctuations for the
	Three Months Ended
	November 30, 2019
	Amount		% change
Central America	$	1,595	0.3	%
Caribbean		(4,760)	(2.1)
Colombia		(9,029)	(9.9)
Net merchandise sales	$	(12,194)	(1.6)	%

Overall, the effects of currency fluctuations within our markets had an approximate $12.2 million, or 160 basis point (1.6%), negative constant currency impact on net merchandise sales for the first quarter ended November 30, 2019.

Currency fluctuations had a $1.6 million, or 30 basis point (0.3%), positive constant currency impact on net merchandise sales in our Central America segment for the three months ended November 30, 2019. The currency fluctuations contributed approximately 20 basis points (0.2%) of the total positive impact on total net merchandise sales. This is reflective of the mix of currency movements within the markets in this segment when compared to the same period a year ago.

Currency devaluations had a $4.7 million, or 210 basis point (2.1%), negative constant currency impact on reported net merchandise sales in our Caribbean segment for the three months ended November 30, 2019. The currency devaluations contributed approximately 70 basis points (0.7%) of the total negative impact on total net merchandise sales for the quarter. Jamaica and the Dominican Republic markets both experienced currency devaluation when compared to the same period last year.

Currency devaluations had a $9.0 million, or 990 basis point (9.9%), negative constant currency impact on net merchandise sales in our Colombia segment for the three months ended November 30, 2019. The currency devaluations contributed approximately 110 basis points (1.1%) to the total negative impact on total net merchandise sales.

Comparable Merchandise Sales

We report comparable net merchandise sales on a “same week” basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close of a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher merchandise club sales on the weekends. Each of the warehouse clubs used in the calculations was open for at least 13 ½ calendar months before its results for the current period were compared with its results for the prior period. As a result, sales related to our four warehouse clubs opened during calendar year 2019 will not be used in the calculation of comparable sales until they have been open for at least the 13 ½ months. Therefore, comparable net merchandise sales includes only 41 warehouse clubs for the thirteen week period ended December 1, 2019.

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The following table indicates the comparable net merchandise sales in the reportable segments in which we operate and the percentage growth in net merchandise sales by segment during the thirteen weeks ended December 1, 2019 and December 2, 2018.

	Thirteen Weeks Ended
	December 1, 2019		December 2, 2018
	% Increase/(decrease) in comparable net merchandise sales		% Increase/(decrease) in comparable net merchandise sales
Central America	1.8	%	(4.5)	%
Caribbean	2.1		(0.2)
Colombia	(5.2)		5.4
Consolidated segments	1.0	%	(2.1)	%

Comparison of Thirteen Week Periods Ended December 1, 2019 and December 2, 2018

Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the thirteen week period ended December 1, 2019 increased 1.0%.

Comparable net merchandise sales in our Central America segment increased 1.8% for the thirteen week period ended December 1, 2019. This increase contributed approximately 110 basis points (1.1%) of the increase in total comparable merchandise sales.

For the thirteen weeks ended December 1, 2019, significant foreign currency appreciation within our Costa Rica market as well as strong performance in our Guatemala, Honduras, El Salvador and Nicaragua markets, contributed approximately 190 basis points (1.9%) of the increase, which was offset by a 80 basis point (0.8%) decrease in Panama primarily due to cannibalization by the Company’s two recent club openings in that country.

Comparable net merchandise sales in our Caribbean segment increased 2.1% for the thirteen week period ended December 1, 2019. This increase contributed approximately 60 basis points (0.6%) of positive impact in total comparable merchandise sales.

For the thirteen weeks ended December 1, 2019, all markets in our Caribbean segment, with the exception of U.S. Virgin Islands, showed strong growth compared to the same period in the prior year. Notably, investments we made in our Jamaica market contributed to growth of 11.8% in comparable net merchandise sales for the thirteen week period ended December 1, 2019. In our U.S. Virgin Islands market, net merchandise sales experienced a slight decline when compared to the same period in prior year. Hurricanes Irma and Maria had a severe impact on the infrastructure of the islands in September 2017 and October 2017. During fiscal year 2018 and 2019, the Company benefitted from the difficulty other retailers had in becoming fully operational, but those same retailers have rebuilt, contributing to increased competition in that market.

Comparable net merchandise sales in our Colombia segment decreased 5.2% for the thirteen week period ended December 1, 2019. The decrease contributed approximately 70 basis points (0.7%) of negative impact in total comparable sales for the respective period. The decline was largely due to the significantly unfavorable devaluation of the Colombian peso relative to the U.S. dollar.

The following table illustrates the impact that changes in foreign currency exchange rates had on our comparable merchandise sales in dollars and the percentage change from the thirteen week period ended December 1, 2019.

	Currency Exchange Rate Fluctuations for the
	Thirteen Weeks Ended
	December 1, 2019
	Amount		% change
Central America	$	1,815	0.4	%
Caribbean		(4,367)	(1.9)
Colombia		(8,763)	(9.7)
Comparable merchandise sales	$	(11,315)	(1.5)	%

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Overall, the mix of currency fluctuations within our markets had an approximate $11.3 million, or 150 basis point (1.5%), negative constant currency impact on comparable net merchandise sales for the thirteen week period ended December 1, 2019.

Currency fluctuations within our Central America segment accounted for approximately 20 basis points (0.2%) of positive impact in total comparable merchandise sales for the thirteen week period. This is reflective of the offsetting devaluation and appreciation of the mix of currencies within the markets in this segment when compared to the same period a year ago.

Currency devaluations within our Caribbean segment accounted for approximately 60 basis points (0.6%) of the negative impact of currency devaluations on total comparable merchandise sales for the thirteen week period ended December 1, 2019. Our Dominican Republic and Jamaica markets experienced currency devaluation when compared to the same period last year.

Currency devaluations within our Colombia segment accounted for approximately 110 basis points (1.1%) of the negative impact of currency devaluations on total comparable merchandise sales for the thirteen week period ended December 1, 2019. This reflects the devaluation of the Colombian peso when compared to the same period a year ago.

Membership Income

Membership income is recognized ratably over the one-year life of the membership. The increase in membership income primarily reflects a growth in membership accounts. The table below represents the change in membership income by segment and as a percentage of net merchandise club sales of each segment:

	Three Months Ended
	November 30,								November 30,
	2019								2018
	Amount		Increase ‎(decrease) ‎from ‎prior year		% Change		Membership income % to net merchandise club sales		Amount
Membership income - Central America	$	8,296	$	627	8.2	%	1.8	%	$	7,669
Membership income - Caribbean		3,677		345	10.4		1.6			3,332
Membership income - Colombia		1,773		34	2.0		2.0			1,739
Membership income - Total	$	13,746	$	1,006	7.9	%	1.8	%	$	12,740
Number of accounts - Central America		869,673		29,389	3.5	%				840,284
Number of accounts - Caribbean		436,093		16,143	3.8					419,950
Number of accounts - Colombia		338,023		1,052	0.3					336,971
Number of accounts - Total		1,643,789		46,584	2.9	%				1,597,205

Comparison of Three Months Ended November 30, 2019 and 2018

The number of member accounts during the first three months of fiscal year 2019 was 2.9% higher than the year before. Membership income increased 7.9% over the same period.

The growth in membership accounts and income during fiscal year 2020 in our Central America segment is primarily the result of the opening of three new warehouse clubs – Santiago de Veraguas and Metropark in Panama and San Cristobal in Guatemala. In our Caribbean market, membership account and income growth was primarily attributable to the opening of the new Bolivar warehouse club in the Dominican Republic in June 2019. In Colombia, the Diamond membership fee was increased from 75,000 (COP) to 90,000 (COP) (including VAT) beginning in April 2019, providing a converted membership price of approximately $26, which has contributed to the increase in membership income as a percentage of merchandise sales during the first quarter of fiscal year 2020 compared to the same prior year period. Additionally, we continued expanding our Platinum membership program. During the first quarter of fiscal year 2020, we began offering Platinum memberships in Guatemala starting in November 2019. We expect to expand our Platinum membership program to additional markets this year. The annual fee for a Platinum membership in most markets is approximately $75, which is also contributing to the increase in membership income as a percentage of merchandise club sales in our Central America segment where our penetration is the greatest.

Lastly, our twelve-month renewal rate was 86.1% and 85.0% for the periods ended November 30, 2019 and November 30, 2018.

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Other Revenue

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

	Three Months Ended
	November 30, 2019						November 30, 2018
	Amount		Increase (decrease) from ‎prior year		% Change		Amount
Non-merchandise revenue	$	8,845	$	(274)	(3.0)	%	$	9,119
Miscellaneous income		1,609		246	18.0			1,363
Rental income		739		(44)	(5.6)			783
Other revenue	$	11,193	$	(72)	(0.6)	%	$	11,265

Comparison of Three Months Ended November 30, 2019 and 2018

Non-merchandise revenue from our marketplace and casillero operations decreased by $274,000 primarily due to an unfavorable decline in traffic attributable to Cyber Monday promotions that occurred in December 2019 this year compared to November in the prior year. The net increase of $246,000 in Miscellaneous income was primarily due to a $189,000 increase in income earned on the co-branded credit card program interest-generating portfolios (“IGP”).

Results of Operations

	Three Months Ended
Results of Operations Consolidated		November 30, 2019			November 30, 2018			Increase/(Decrease)
(Amounts in thousands, except percentages and number of warehouse clubs)
Net merchandise sales
Net merchandise sales	$	778,728		$	747,443		$	31,285
Merchandise sales gross margin	$	116,004		$	106,288		$	9,716
Merchandise sales gross margin percentage		14.9	%		14.2	%		0.7	%
Revenues
Total revenues	$	811,941		$	779,637		$	32,304
Percentage change from comparable period								4.1	%
Comparable merchandise sales
Total calendar comparable merchandise sales increase (decrease)		1.0	%		(2.1)	%		3.1	%
Gross margin
Total gross margin	$	136,995		$	126,457		$	10,538
Gross margin percentage to total revenues		16.9	%		16.2	%		0.7	%
Selling, general and administrative
Selling, general and administrative	$	106,281		$	101,787		$	4,494
Selling, general and administrative percentage of total revenues		13.1	%		13.1	%		0.0	%

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	Three Months Ended
		November 30,	% of			November 30,	% of
Results of Operations Consolidated		2019	Total Revenue			2018	Total Revenue
Operating income- by segment
Central America	$	31,700	3.9	%	$	28,792	3.7	%
Caribbean		11,810	1.5			12,027	1.5
Colombia		4,524	0.6			3,416	0.5
United States		2,587	0.3			(1,050)	(0.1)
Reconciling Items (1)		(19,907)	(2.5)			(18,515)	(2.4)
Operating income - Total	$	30,714	3.8	%	$	24,670	3.2	%

Warehouse clubs
Warehouse clubs at period end	45	41	4
Warehouse club sales square feet at period end	2,244	2,087	157

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

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

	Three Months Ended
		November 30,	% of			November	% of
		2019	Total Revenue			2018	Total Revenue
Warehouse club and other operations	$	79,373	9.8	%	$	74,222	9.5	%
General and administrative		25,884	3.2			27,335	3.5
Pre-opening expenses		953	0.1			15	—
Loss on disposal of assets		71	—			215	—
Total Selling, general and administrative	$	106,281	13.1	%	$	101,787	13.1	%

Comparison of Three Months Ended November 30, 2019 and 2018

On a consolidated basis, net merchandise sales gross margin for the first quarter of fiscal year 2020 as a percentage of total net merchandise sales was 14.9%, 70 basis points (0.7%) higher than the first quarter of fiscal year 2019. Net merchandise margins increased across all segments with the Central America segment contributing 40 basis points (0.4%), the Caribbean segment contributing 20 basis points (0.2%), and the Colombia segment contributing 10 basis points (0.1%) to the overall increase.

Total gross margin to total revenues increased 70 basis points (0.7%) for the three-month period presented, which is the result of the increase in total net merchandise sales gross margin explained previously. Gross margin during the three months ended November 30, 2019 increased primarily due to improved product margins, attributable to more focused merchandising strategies and inventory management.

Selling, general, and administrative expenses consist of warehouse club and other operations, general and administrative expenses, pre-opening expenses, and loss/(gain) on disposal of assets. In total, selling, general and administrative expenses increased $4.5 million for the three-month period ended November 30, 2019 compared to the same prior year period. Both periods had 13.1% selling, general, and administrative expenses to total revenues.

Warehouse club and other operations expense increased to 9.8% of total revenues compared to 9.5% for the first quarter of fiscal year 2020. This increase was primarily attributable to operating an additional four warehouse clubs compared to the prior year period. These four new clubs had not reached sales maturity as of November 30, 2019, thus increasing operational expenses by 20 basis points (0.2%) as a percentage of total revenues.

General and administrative expenses decreased to 3.2% compared to 3.5% of total revenues for the comparable period. This decrease is mainly driven by approximately $3.8 million, or 50 basis points (0.5%), recorded in the first quarter of fiscal year 2019 for separation and other related termination benefits for our former Chief Executive Officer and President who resigned in October 2018 by mutual agreement with the Board of Directors. These costs, net of tax, negatively impacted earnings per share for the three months ended November 30, 2018, by $0.13 per share. This decrease related to the separation costs of our former Chief Executive Officer was partially offset by an increase of $1.7 million, or 20 basis points (0.2%) in general and administrative expenses primarily due to net labor-related investments.

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Pre-opening expense increased to $953,000 or 0.1% of total revenues compared to the prior year period. This increase is attributable to costs incurred to open our 44^th and 45^th warehouse clubs and for four additional warehouse clubs in our real estate pipeline.

Operating income for the three months ended November 30, 2019 increased to $30.7 million (3.8% of total revenue) compared to $24.7 million (3.2% of total revenue) for the same period last year. As described above, higher merchandise margins as a percent of sales, offset by higher general and administrative expenses were the primary factors for the increase in operating income.

Interest Expense

	Three Months Ended
	November 30,				November 30,
	2019				2018
	Amount		Increase/ ‎(decrease) ‎from prior ‎year		Amount
Interest expense on loans	$	1,265	$	(139)	$	1,404
Interest expense related to hedging activity		261		94		167
Less: Capitalized interest		(664)		(126)		(538)
Net interest expense	$	862	$	(171)	$	1,033

Comparison of Three Months Ended November 30, 2019 and 2018

Net interest expense reflects borrowings by PriceSmart, Inc. and our wholly owned foreign subsidiaries to finance new land acquisition and construction for new warehouse clubs, warehouse club expansions and distribution centers, the capital requirements of warehouse club and other operations and ongoing working capital requirements.

Net interest expense decreased for the three-month period ended November 30, 2019 primarily due to lower average loan balances. Interest expense related to hedging activity increased due to an increase in hedging activity as we seek to mitigate our exposure to interest rate risk on our recently executed loan agreements to finance our anticipated warehouse club openings in fiscal year 2020 and 2021. A greater portion of our total interest was capitalized for the first quarter of fiscal year 2020 compared to the first quarter of fiscal year 2019 because of higher levels of construction activities during the period.

Other Expense, net

Other expense, net consists of currency gains or losses, as well as net benefit costs related to our defined benefit plans and the one time settlement of a business combination escrow account.

	Three Months Ended
	November 30,						November 30,
	2019						2018
	Amount		Increase ‎from ‎prior year		%Change		Amount
Other expense, net	$	(985)	$	834	45.8	%	$	(1,819)

Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains (losses) are recorded as currency gains or losses. Additionally, gains or losses from transactions denominated in currencies other that the functional currency of the respective entity also generate currency gains or losses.

Comparison of Three Months Ended November 30, 2019 and 2018

For the three months ended November 30, 2019 Other expense, net consisted primarily of $1.7 million net expense associated with foreign currency transactions and the revaluation of monetary assets and liabilities. The primary driver for this net expense was the $1.3 million unfavorable impact resulting from the decrease in the fair value of several of our written call options that we executed during the period to reduce the interest cost associated with hedging U.S. dollar denominated financing

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transactions in our Colombian subsidiary. Our Jamaican subsidiary recorded $300,000 of net expense due to unfavorable foreign currency exchange rate fluctuations during the three-month period ended November 30, 2019 compared to a $1.5 million net expense due to more significant unfavorable foreign currency exchange rate fluctuations in the comparable prior-year period. The $1.7 million of net expense from foreign currency transactions and revaluations of monetary assets and liabilities was offset by a $705,000 net income resulting from the settlement of outstanding claims related to the acquisition of the business that we purchased in March of 2018.

Provision for Income Taxes

	Three Months Ended
	November 30,					November 30,
	2019					2018
	Amount			Increase ‎ from ‎prior year		Amount
Provision for income taxes	$	9,403		$	1,863	$	7,540
Effective tax rate		32.3	%				33.9	%

Comparison of Three Months Ended November 30, 2019 and 2018

For the three months ended November 30, 2019, the effective tax rate was 32.3%. The decrease in the effective tax rate versus the prior year was primarily attributable to the following factors:

A comparably unfavorable net impact of 4.5% in the current period resulting from the loss of benefit of foreign tax credits, which are no longer recoverable as a result of U.S. Tax Reform;

The comparably favorable impact of 3.8% resulting from non-deductible separation costs, in the prior period, associated with the departure of our former C.E.O; and

The comparatively favorable impact of 1.2% in the current period from the effect of changes in foreign currency value.

Other Comprehensive Loss

	Three Months Ended
	November 30,						November 30,
	2019						2018
	Amount		Increase from prior year		% Change		Amount
Other comprehensive loss	$	(3,185)	$	10,061	(76.0)	%	$	(13,246)

Comparison of Three Months Ended November 30, 2019 and 2018

Our other comprehensive loss of approximately $3.2 million for the first quarter of fiscal year 2020 resulted primarily from the comprehensive loss of approximately $3.7 million from foreign currency translation adjustments related to assets and liabilities and the translation of revenue, costs and expenses on the statements of income of our subsidiaries whose functional currency is not the U.S. dollar, partially offset by comprehensive income of approximately $513,000 related to unrealized gains on changes in derivative obligations.

The improvement in other comprehensive loss in the first quarter of fiscal year 2020 compared to the first quarter of fiscal year 2019 is primarily due to lower foreign currency translation adjustments of $9.7 million and gains on our derivative instruments of $390,000. During first quarter of fiscal year 2020, the largest translation adjustments were related to the translation of the Colombia, Dominican Republic, Jamaica and Nicaragua subsidiaries’ balance sheets and statements of income that required us to record additional losses, when compared to the same period in the prior year, to comprehensive net income on translation of approximately $17.7 million. These additional losses recorded were offset by translation adjustments related to the translation of the Costa Rica subsidiary’s balance sheets and statements of income that required us to record additional gains of $8.4 million.

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LIQUIDITY AND CAPITAL RESOURCES

Financial Position and Cash Flow

Our operations have historically supplied us with a significant source of liquidity. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have generally been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations and to pay dividends on our common stock. We evaluate our funding requirements on a regular basis to cover any shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity when necessary.

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

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

	November 30,		August 31,
	2019		2019
Amounts held by foreign subsidiaries	$	107,493	$	98,964
Amounts held domestically		7,620		7,272
Total cash and cash equivalents, including restricted cash	$	115,113	$	106,236

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. Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradeable currencies in Trinidad.  We are working with our banks in Trinidad to source tradeable currencies. We expect the illiquid market conditions in Trinidad to continue.

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

	Three Months Ended
	November 30,		November 30,		Increase/
	2019		2018		(Decrease)
Net cash provided by operating activities	$	16,104	$	25,707	$	(9,603)
Net cash (used in) investing activities		(45,687)		(29,364)		(16,323)
Net cash provided by (used in) financing activities		37,343		(3,496)		40,839
Effect of exchange rates		1,117		(1,375)		2,492
Net increase (decrease) in cash and cash equivalents	$	8,877	$	(8,528)	$	17,405

Net cash provided by operating activities totaled $16.1 million and $25.7 million for the three months ended November, 2019 and 2018, respectively. Our cash flow provided by operations is primarily derived from net merchandise sales and membership fees. Cash flows used in operations generally consists of payments to our merchandise vendors, warehouse operating costs (including payroll, employee benefits and utilities), as well as payments for income taxes.  The $9.6 million decrease in net cash provided by operating activities was primarily due to an increase of accounts payable of $45.9 million in the first quarter of fiscal year 2020 compared to an increase in accounts payable of $56.0 million in the first quarter of fiscal year 2019, which resulted in a $10.1 million decrease year-over-year. The accounts payable year over year net decrease resulted primarily from a shift in the timing of inventory purchases to earlier in anticipation of the holiday season versus a year ago.

Net cash used in investing activities totaled $45.7 million and $29.4 million for the three months ended November 30, 2019 and 2018, respectively.  Our cash used in investing activities is primarily for the construction of and improvements to our warehouse clubs. The $16.3 million decrease in investing activities is the result of a net $14.3 million increase in certificate of deposits purchases and fewer settlements compared to a year-ago.  We also had $1.9 million of additional construction expenditures made for our expected future warehouse club openings.

Net cash provided by financing activities totaled $37.3 million and net cash used in financing activities were $3.5 million for the three months ended November 30, 2019 and 2018, respectively. Our cash flows provided or used for financing activities are used primarily to fund our working capital needs and our warehouse club expansions and investments. The $40.8 million

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increase in cash provided by financing activities is primarily the result of a net increase of proceeds from long-term borrowings of $25.0 million compared to a year ago, as we did not have any additional long-term borrowings in fiscal year 2019. We also received $15.6 million of net proceeds from short-term borrowings to fund our working capital and capital investment needs.

The following table summarizes the dividends declared and paid during fiscal year 2019. No dividends have been declared or paid during the first three months of fiscal year 2020. 

			First Payment				Second Payment
Declared	Amount		Record ‎Date	Date ‎Paid	Amount		Record ‎Date	Date ‎Paid	Amount
1/30/2019	$	0.70	2/15/2019	2/28/2019	$	0.35	8/15/2019	8/30/2019	$	0.35

We anticipate the ongoing payment of semi-annual dividends in subsequent periods, although the actual declaration of future dividends, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements.

Short-Term Borrowings and Long-Term Debt

Our financing strategy is to ensure liquidity and access to capital markets while minimizing our borrowing costs. The proceeds of these borrowings were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, acquisitions, and repayment of existing debt. Please see Note 7 – Debt for further discussion.

Derivatives

Please see Note 8 – Derivative Instruments and Hedging Activities for further discussion.

Off-Balance Sheet Arrangements

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

Repurchase of Equity Securities and Reissuance of Treasury Shares

At the vesting dates for restricted stock awards to our employees, we repurchase a portion of the shares that have vested at the prior day's closing price per share and apply the proceeds to pay the employees' minimum statutory tax withholding requirements related to the vesting of restricted stock awards. We do not currently have a stock repurchase program. 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.

We have reissued treasury shares as part of our stock-based compensation programs.  During the three months ended November 30, 2019 the Company reissued 69,000 treasury shares. We did not reissue any treasury shares during the first three months of fiscal year 2019.

Critical Accounting Estimates

The preparation of our consolidated financial statements requires that management make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require management to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Management continues to review its accounting policies and evaluate its estimates, including those related to business acquisitions, contingencies and litigation, income taxes, value added taxes, and long-lived assets. We base our estimates on historical experience and on other assumptions that management believes to be reasonable under the present circumstances. Using different estimates could have a material impact on our financial condition and results of operations.

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Income Taxes

For interim reporting, we estimate an annual effective tax rate (AETR) pursuant to ASC 740-279, to calculate income tax expense. Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income (loss).

We are required to file federal and state income tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation of these tax returns requires us to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax we pay. We, in consultation with our tax advisors, base our tax returns on interpretations that we believe to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various taxing authorities in the jurisdictions in which we file our tax returns. As part of these reviews, a taxing authority may disagree with respect to the interpretations we used to calculate our tax liability and, therefore, require us to pay additional taxes.

We accrue an amount for our estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. This requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. There were no material changes in our uncertain income tax positions as of November 30, 2019 and August 31, 2019.

Tax Receivables

We pay a Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of our business in most of the countries in which we operate related to the procurement of merchandise and/or services we acquires and/or on sales and taxable income. We also collect VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services we sell. If the output VAT exceeds the input VAT, then the difference is remitted to the government, usually on a monthly basis. If the input VAT exceeds the output VAT, this creates a VAT receivable. In most countries where we operate, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit card directly to the government as advance payments of VAT and/or income tax. In the case of VAT, these procedures alter the natural offset of input and output VAT and generally leave us with a net VAT receivable, forcing us to process significant refund claims on a recurring basis. With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due this creates an income tax receivable. We either request a refund of these tax receivables or apply the balance to expected future tax payments. These refund or offset processes can take anywhere from several months to several years to complete.

In most countries where the Company operates, there are defined and structured processes to recover VAT receivables via regular refunds or offsets. However, in one country without a clearly defined refund process, the Company is actively engaged with the local government to recover VAT receivables totaling $6.2 million and $5.1 million as of November 30, 2019 and August 31, 2019, respectively. In two other countries, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.7 million and $7.8 million and deferred tax assets of $2.7 million as of November 30, 2019 and August 31, 2019 in these countries. While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

46

Our policy for classification and presentation of VAT receivables, income tax receivables and other tax receivables is as follows:

Short-term VAT and Income tax receivables, recorded as Other current assets: This classification is used for any countries where our subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. We also classify as short-term any approved refunds or credit notes to the extent that we expect to receive the refund or use the credit notes within one year.

Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where our subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when we do not expect to eventually prevail in its recovery of such balances. We do not currently have any allowances provided against VAT and income tax receivables.

Long-lived Assets

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

the asset's inability to continue to generate income from operations and positive cash flow in future periods;

loss of legal ownership or title to the asset;

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

the impact of significant negative industry or economic trends.

Management's judgments are based on market and operational conditions at the time of the evaluation and can include management's best estimate of future business activity, which in turn drives estimates of future cash flows from these assets. These periodic evaluations could cause management to conclude that impairment factors exist, requiring an adjustment of these assets to their then-current fair market value. Loss/(gain) on disposal of assets recorded during the years reported resulted from improvements to operations and normal preventive maintenance.

Goodwill and Other Indefinite-Lived Intangibles

Goodwill and other indefinite-lived acquired intangible assets are not amortized, but are evaluated for impairment annually or whenever events or changes in circumstances indicate that the value of a certain asset may be impaired. Generally, this evaluation begins with a qualitative assessment to determine whether a quantitative impairment test is necessary. If we determine, after performing an assessment based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative impairment test would be performed. The quantitative test for impairment requires management to make judgments relating to future cash flows, growth rates and economic and market conditions. These evaluations are based on determining the fair value of a reporting unit or asset using a valuation method such as discounted cash flow or a relative, market-based approach. Historically, our reporting units and other indefinite-lived acquired intangible assets have generated sufficient returns to recover the cost of goodwill and other indefinite-lived acquired intangible assets. Because of the nature of the factors used in these tests, if different conditions occur in future periods, future operating results could be materially impacted. For approximately $45.4 million of certain acquired indefinite-lived intangible assets, the fair value approximated the carrying value; any deterioration in the fair value may result in an impairment charge.

Seasonality

Historically, our merchandising businesses have experienced holiday retail seasonality in their markets. In addition to seasonal fluctuations, our operating results fluctuate quarter-to-quarter as a result of economic and political events in markets that we serve, the timing of holidays, weather, the timing of shipments, product mix, and currency effects on the cost of U.S.-sourced products which may make these products more or less expensive in local currencies and therefore more or less affordable. Because of such fluctuations, the results of operations of any quarter are not indicative of the results that may be achieved for a full fiscal year or any future quarter. In addition, there can be no assurance that our future results will be consistent with past results or the projections of securities analysts.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to our operations result primarily from changes in interest rates and changes in currency exchange rates. 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. The monetary liability for these leases as of November 30, 2019 was $34.1 million. Due to the mix of foreign currency exchange rate fluctuations during the first quarter of fiscal year 2020, the impact to the interim consolidated statements of income and comprehensive income from these monetary liabilities was immaterial.

The following table discloses the net effect on other expense, net for U.S. dollar-denominated and other foreign-denominated accounts relative to hypothetical simultaneous currency devaluation based on balances as of November 30, 2019 (in thousands) including the new lease-related monetary liabilities described above:

Overall weighted negative currency movement	Gains based on change in U.S. dollar denominated and other foreign denominated cash, cash equivalents and restricted cash balances		Losses based on change in U.S. dollar denominated inter-company balances		Losses based on change in U.S. dollar denominated other asset/liability balances		Net loss(1)
5%	$	1,235	$	(2,356)	$	(1,844)	$	(2,965)
10%	$	2,471	$	(4,711)	$	(3,688)	$	(5,928)
20%	$	4,942	$	(9,423)	$	(7,376)	$	(11,857)

⁽¹⁾Amounts are before consideration of income taxes.

Information about the financial impact of foreign currency exchange rate fluctuations for the three months ended November 30, 2019 is disclosed in Item 2 “Management’s Discussion and Analysis – Other Expense, net”.

The following table discloses the net effect on other expense, net, before consideration of income taxes, for non-designated derivative contracts that do not qualify for hedge accounting relative to hypothetical Colombian peso currency movements (in thousands):

Hypothetical Currency Movement		Gains based on appreciation of foreign currency		Losses based on devaluation of foreign currency
5%	$	514	$	(697)
10%	$	1,042	$	(1,373)
20%	$	1,948	$	(3,072)

Information about the change in the fair value of our hedges and the financial impact thereof for the period and three months ended November 30, 2019 is disclosed in the Notes to Consolidated Financial Statements – Note 8 – Derivative Instruments and Hedging Activities.

Information about the movements in currency exchange rates and the related impact on the translation of the balance sheets of our subsidiaries whose functional currency is not the U.S. dollar for the period and three months ended November 30, 2019 is disclosed in Item 2 “Management’s Discussion and Analysis – Other Comprehensive Loss”.

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ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

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

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

During the first quarter of fiscal year 2020, we finished the implementation of a new lease management and accounting system and updated our accounting policies and internal controls to support the adoption of the new lease accounting standard ASU 2016-02, Leases (Topic 842), effective September 1, 2019.

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

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

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

On May 22, 2019, a class action complaint was filed against PriceSmart, Inc., as well as certain former and current officers in the United States District Court for the Southern District of California. On October 7, 2019, the Court granted Public Employees Retirement Association of New Mexico’s (PERA’s) Motion for Appointment as Lead Plaintiff. On January 3, 2020, PERA filed a consolidated class action complaint, which alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Company intends to vigorously defend itself against any obligations or liability to the plaintiffs with respect to such claims. The Company believes the claims are without merit.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended August 31, 2019. There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2019.

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

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a) Exhibits:

3.1(1)	Amended and Restated Certificate of Incorporation of the Company.
3.2(2)	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company.
3.3(3)	Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company.
3.4(4)	Amended and Restated Bylaws of the Company.
10.1(5)*	Separation Agreement and Waiver and Release of Claims dated October 29, 2019 between Maarten Jager and the Company.
10.2*	Amendment to 2002 Equity Participation Plan of PriceSmart, Inc.
10.3*	Second Amendment to 2013 Equity Incentive Award Plan of PriceSmart, Inc.
10.4*	Form of Restricted Stock Grant Notice and Restricted Stock Agreement under the 2013 Equity Incentive Award Plan of PriceSmart, Inc.
10.5*	Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement under the 2013 Equity Incentive Award Plan of PriceSmart, Inc. for Employees of Foreign Subsidiaries.
10.6*	Form of Performance Stock Unit Grant Notice and Performance Stock Unit Agreement under the 2013 Equity Incentive Award Plan of PriceSmart, Inc.
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*	Identifies management contract or compensatory plan or arrangement.
**	These certifications are being furnished solely to accompany this Report pursuant to 18 U.S.C. 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of PriceSmart, Inc., whether made before or after the date hereof, regardless of any general incorporation language in such filing.

⁽¹⁾Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 1997 filed with the Commission on November 26, 1997.

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

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

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

⁽⁵⁾Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on October 29, 2019.

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SIGNATURES

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

		PRICESMART, INC.
Date:	January 9, 2020	By:	/s/ SHERRY S. BAHRAMBEYGUI
			Sherry S. Bahrambeygui
			Chief Executive Officer
			(Principal Executive Officer)
Date:	January 9, 2020	By:	/s/ MICHAEL MCCLEARY
			Michael McCleary
			Senior Vice President and Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

52

EX-10.2

EXHIBIT 10.2

AMENDMENT NO. 1TO THE

2002EQUITY PARTICIPATION PLAN

OF PRICESMART, INC.

This Amendment No. 1to the 2002 Equity Participation Plan of PriceSmart, Inc. (the “Plan”), is effective as of July 16, 2019.

1.    A new Section 1.41 is hereby added to the Plan:

“1.41Disability.  The term “disability” shall meanthat the Holder is either (a) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, or (b) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve months, receiving income replacement benefits for a period of not less than three months under a long-term disability income plan, if any, covering employees of the Company. For purposes of the Plan, a Holder shall be deemed to have incurred a “disability” if the Holder is determined to be totally disabled by the Social Security Administration or in accordance with the applicable disability insurance program of the Company; provided that the definition of “disability” applied under such disability insurance program complies with the requirements of this definition. Any determination of “disability” under this Plan shall be made by the Committee.”

2.    Section 5.3(a) of the Plan is hereby amended by adding the following sentence at the end of the Section:

“The Option shall vest in full upon the Optionee’s death or upon a Termination of Employment or Termination of Consultancy that occurs as a result of the Optionee’sdisability, so long as theOptionee(i) received the Option in his or her capacity as an Employee or consultant, and (ii) was in good standing as of the date of the Termination of Employment or Termination of Consultancy and wasemployed byor providing services to the Company or a Subsidiary for at least one year prior to the date of the Termination of Employment or Termination of Consultancy.”

3.    Section 7.4 of the Plan is hereby amended by deleting the last sentence of the Section and replacing it with the following:

“If no consideration was paid by the Restricted Stockholder upon issuance, a Restricted Stockholder’s rights in unvested Restricted Stock shall lapse upon Termination of Employment or, if applicable, upon a  Termination of

Consultancy with the Company; provided,  however, that (a) the rights shall not lapse upon the Restricted Stockholder’s death, or a  Termination of Employment or a Termination of Consultancy due to the Restricted Stockholder’s disability, so long as theRestricted Stockholder(i) received the Restricted Stock in his or her capacity as an Employee or consultant, and (ii) was in good standing as of the date of the Termination of Employment or Termination of Consultancy and wasemployed by or providing services to the Company or a Subsidiary for at least one year prior to the date of the Termination of Employment or Termination of Consultancy; (b) the Committee in its sole and absolute discretion may provide that such rights shall not lapse in the event of a Termination of Employment following a “change of ownership or control” (within the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company; and (c) except with respect to shares of Restricted Stock granted to Section 162(m) Participants, the Committee in its sole and absolute discretion may provide that no such right of repurchase shall exist in the event of a Termination of Employment, or a Termination of Consultancy, without cause or following any Change in Control of the Company or because of the Restricted Stockholder’s retirement, or otherwise.”

4.    Section 7.5 of the Plan is hereby amended by deleting it in its entirety and replacing it with the following: 

“Section 7.5 Repurchase of Restricted Stock.  The Committee shall provide in the terms of each individual Award Agreement that the Company shall have the right to repurchase from the Restricted Stockholder the Restricted Stock then subject to restrictions under the Award Agreement immediately upon a Termination of Employment or, if applicable, upon a Termination of Consultancy between the Restricted Stockholder and the Company, at a cash price per share equal to the price paid by the Restricted Stockholder for such Restricted Stock; provided,  however, that (a) no such right of repurchase shall exist in the event of the Restricted Stockholder’s death or a  Termination of Employment or a Termination of Consultancy due to the Restricted Stockholder’s disability, so long as theRestricted Stockholder(i) received the Restricted Stock in his or her capacity as an Employee or consultant, and (ii) was in good standing as of the date of the Termination of Employment or Termination of Consultancy and wasemployed by or providing services to the Company or a Subsidiary for at least one year prior to the date of the Termination of Employment or Termination of Consultancy; (b) the Committee in its sole and absolute discretion may provide that no such right of repurchase shall exist in the event of a Termination of Employment following a “change of ownership or control” (within the meaning of Treasury Regulation Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company; and (c) except with respect to shares of Restricted Stock granted to Section 162(m) Participants,

2

the Committee in its sole and absolute discretion may provide that no such right of repurchase shall exist in the event of a Termination of Employment or a Termination of Consultancy without cause or following any Change in Control of the Company or because of the Restricted Stockholder’s retirement, or otherwise.”

5.    Section 8.8 of the Plan is hereby amended is hereby amended by deleting it in its entirety and replacing it with the following:

“8.8 Exercise Upon Termination of Employment or Termination of Consultancy.  A Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment is exercisable or payable only while the Holder is an Employee or consultant; provided,  however, that (a) the Committee in its sole and absolute discretion may provide that the Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or paid subsequent to a Termination of Employment following a “change of control or ownership” (within the meaning of Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company; (b) except with respect to Performance Awards granted to Section 162(m) Participants, the Committee in its sole and absolute discretion may provide that the Performance Awards may be exercised or paid following a Termination of Employment or a Termination of Consultancy without cause, or following a Change in Control of the Company because of the Grantee’s retirement, or otherwise; and (c) the Performance Awards shall be exercisable or paid following a Termination of Employment or a Termination of Consultancy of the Grantee because of the Grantee’s death or disability, so long as theGrantee (i) received the Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment in his or her capacity as an Employee or consultant, and (ii) was in good standing as of the date of the Termination of Employment or Termination of Consultancy and wasemployed by or providing services to the Company or a Subsidiary for at least one year prior to the date of the Termination of Employment or Termination of Consultancy;provided,  however, that this sub-section (c) shall not be given any effect if doing so would result in the imposition of any excise tax under Section 409A of the Code.”

6.    Section 9.3(a) of the Plan is hereby amended by deleting the last sentence of the Section and replacing it with the following:

“An ISAR is exercisable only while the Grantee is an Employee or consultant; provided that (i) the Committee may determine that the ISAR may be exercised subsequent to Termination of Employment or Termination of Consultancy without cause, or following a Change in Control of the Company, or because of the Grantee’s retirement, or otherwise, and (ii) the ISAR shall be exercisable subsequent to

3

Termination of Employment or Termination of Consultancy because of the Grantee’s death or disability, so long as theGrantee (i) received the ISAR in his or her capacity as an Employee or consultant, and (ii) was in good standing as of the date of the Termination of Employment or Termination of Consultancy and wasemployed by or providing services to the Company or a Subsidiary for at least one year prior to the date of the Termination of Employment or Termination of Consultancy;provided,  however, that this clause (ii) shall not be given any effect if doing so would result in the imposition ofany excise tax under Section 409A of the Code.”

7.    Except as expressly amended hereby, the Plan shall remain in full force and effect.

4

IN WITNESS WHEREOF, the Executive Vice President, General Counsel and Secretary of PriceSmart, Inc. has duly executed this Amendment No. 1to be effective as of July 16, 2019.

PRICESMART, INC.
By:	/s/ FRANCISCO VELASCO
Name:	Francisco Velasco
Title:	Executive Vice President, General Counsel and Secretary

[Amendment No. 1 to 2002Equity Participation Plan]

5

EX-10.3

EXHIBIT 10.3

AMENDMENT NO. 2 TO THE

2013 EQUITY INCENTIVE AWARD PLAN

OF PRICESMART, INC.

This Amendment No. 2 to the PriceSmart, Inc. 2013 Equity Award Plan (the “Plan”), is effective as of July 16, 2019.

1.    Section 6.3 of the Plan is hereby amended by adding the following new sub-section (c):

“(c)The Option shall vest in full upon the Holder’s death or upon a Termination of Service due to the Holder’s Disability, so long as theHolder (i) received the Option in his or her capacity as an Employee or Consultant, and (ii) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service.”

2.    Section 7.3 of the Plan is hereby amended by adding the following sentence at the end of the Section:

“The Restricted Stock shall become fully vested upon the Holder’s death or upon a Termination of Service due to the Holder’s Disability, so long as theHolder (i) received the Award of Restricted Stock in his or her capacity as an Employee or Consultant, and (ii) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service.”

3.    Section 8.3 of the Plan is hereby amended by adding the following sentence at the end of the Section: 

“The Restricted Stock Units shall become fully vested upon the Holder’s death or upon a Termination of Service due to the Holder’s Disability, so long as theHolder (i) received the Award of Restricted Stock Units in his or her capacity as an an Employee or Consultant, and (ii) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service; provided,  however, that the Restricted Stock Units shall not become fully vested accordance with the last sentence of this Section 8.3 if doing so would result in the imposition of any excise tax under Section 409A of the Code.”

4.    Article 9 of the Plan is hereby amended by adding the following new Section 9.6:

“9.6Accelerated Vesting.  To the extent that any Performance Award, Dividend Equivalent award and/or Stock Payment award includes service based vesting criteria, such service based vesting criteria shall be deemed achieved upon the Holder’s death or upon a Termination of Service due to the Holder’s Disability, so long as theHolder (i) received such Award in his or her capacity as Employee or Consultant, and (ii) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service.”

5.    Section 10.2 of the Plan is hereby amended by adding the following new sub-section (c):

“(c)The Stock Appreciation Right shall vest in full upon the Holder’s death or upon a Termination of Service due to the Holder’s Disability, so long as theHolder (i) received the Award of such Stock Appreciation Right in his or her capacity as an Employee or Consultant, and (ii) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service.”

6.    Except as expressly amended hereby, the Plan shall remain in full force and effect.

[Signature page follows]

2

IN WITNESS WHEREOF, the Executive Vice President, General Counsel and Secretary of PriceSmart, Inc. has duly executed this Amendment No. 1 to be effective as of July 16, 2019.

PRICESMART, INC.
By:	/s/ FRANCISCO VELASCO
Name:	Francisco Velasco
Title:	Executive Vice President, General Counsel and Secretary

[Amendment No. 2 to 2013 Equity Incentive Award Plan]

EX-10.4

EXHIBIT 10.4

PRICESMART, INC.

2013 EQUITY INCENTIVE AWARD PLAN

RESTRICTED STOCK GRANT NOTICE AND
RESTRICTED STOCK AGREEMENT

PriceSmart, Inc., a Delaware corporation (the “Company”), pursuant to the PriceSmart, Inc. 2013 Equity Incentive Award Plan (the “Plan”), hereby grants to the holder listed below (“Holder”), the number of shares of the Company’s Common Stock (the “Shares”) indicated below.  This Restricted Stock award (this “Award”) is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Agreement attached hereto as Exhibit A (the “Restricted Stock Agreement”) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Restricted Stock Agreement.

Holder:

Grant Date:

Number of Shares of Restricted Stock:

Vesting Schedule:

The Shares shall vest and be released from the Forfeiture Restriction (as defined in the Restricted Stock Agreement) as follows:

Shares   Vest Date

In addition, the Shares shall vest immediately (i) prior to the occurrence of a Change in Control; and (ii) upon Termination of Service due to Holder’s death or Disability, so long as the Holder (A) received this Award in his or her capacity as an Employee or Consultant, and (B) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service.

SIGNATURE PAGE TO RESTRICTED STOCK GRANT NOTICE

Instructions:  Print this page, sign Part I, have your spouse sign and date Part II and return the completed page to the office of the Company’s general counsel.

PART I:  SIGNATURES OF COMPANY AND HOLDER

By his or her signature below, Holder agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Agreement and the Restricted Stock Grant Notice to which this signature page is attached. Holder has reviewed the Restricted Stock Agreement, the Plan and the Restricted Stock Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this signature page and fully understands all provisions of the Restricted Stock Grant Notice, the Restricted Stock Agreement and the Plan.  Holder has been provided with a copy or electronic access to a copy of the prospectus for the Plan.  Holder hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Restricted Stock Grant Notice or the Restricted Stock Agreement. If Holder is married, his or her spouse has signed the Consent of Spouse set forth below.

PRICESMART, INC.				HOLDER
Print Name:				By:
Title:			Chief Executive Officer	Print Name:
Address:		9740 Scranton Road San Diego, CA  92121

PART II:  CONSENT OF SPOUSE

If Holder is married, his or her spouse must sign the Consent of Spouse set forth below:

I, ________________________, spouse of Holder, have read and approve the Restricted Stock Grant Notice and the Restricted Stock Agreement.  In consideration of issuing to my spouse the shares of the Common Stock of the Company as set forth in above, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Award and agree to be bound by the provisions of the Restricted Stock Grant Notice and the Restricted Stock Agreement insofar as I may have any rights in said agreements or any shares of the Common Stock of the Company issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of my signature below.

Dated: ________________________

EXHIBIT A

TO RESTRICTED STOCK GRANT NOTICE

PRICESMART, INC.

RESTRICTED STOCK AGREEMENT

Pursuant to the Restricted Stock Award Grant Notice (“Grant Notice”)to which this Restricted Stock Agreement (this “Agreement”) isattached, the Company has granted to Holder the number of shares of Restricted Stock set forth in the Grant Notice, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.  The Grant Notice and this Agreement are subject to the Plan, the terms and conditions of which are incorporated herein by reference.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE I.

GRANT OF RESTRICTED STOCK

1.1Grant of Restricted Stock.  In consideration of Holder’s past service to the Company or any Subsidiary thereof or Holder’s agreement to remain in the service of the Company or any Subsidiary thereof, and for other good and valuable consideration that exceeds the aggregate par value of the Shares, effective on the Grant Date, the Company hereby grants to Holder the Shares, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.  The Shares, when issued in accordance with the terms hereof, shall be fully paid and nonassessable.

1.2Issuance of Shares.  On the Grant Date, the Company shall issue the Shares to Holder and shall (a) cause a stock certificate or certificates representing the Shares to be registered in the name of Holder, or (b) cause such Shares to be held in book entry form.  If a stock certificate is issued, it shall be delivered to and held in custody by the Company and shall bear the restrictive legends required by Section 4.6 below.  If the Shares are held in book entry form, then such entry will reflect that the Shares are subject to the restrictions of this Agreement. 

ARTICLE II.

RESTRICTIONS ON SHARES

2.1Forfeiture Restriction.  Subject to the provisions of Section 2.2 below, in the event of Holder’s Termination of Service for any reason, other than as a result of Holder’s death or Disability, all of the Shares which, from time to time, have not yet been released from the Forfeiture Restriction (the “UnreleasedShares”) shall thereupon be forfeited immediately and without any further action by the Company (the “Forfeiture Restriction”).  Upon the occurrence of such forfeiture, the Company shall become the legal and beneficial owner of the Unreleased Shares and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Unreleased Shares being forfeited by Holder.  The Unreleased Shares shall be held by the Company in accordance with Section 2.3 until the Shares are forfeited as provided in this Section 2.1, until such Unreleased Shares are fully released from the Forfeiture Restriction, or until such time as this Agreement no longer is in effect.  Holder hereby authorizes and directs the Secretary of the Company, or such other person designated by the Administrator, to transfer the Unreleased Shares which have been forfeited pursuant to this Section 2.1 from Holder to the Company.  The Shares shall vest immediately upon Termination of Service due to Holder’s death or Disability, so long as the Holder (A) received this

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Award in his or her capacity as an Employee or Consultant, and (B) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service.

2.2    Release of Shares from Forfeiture Restriction.  The Shares shall be released from the Forfeiture Restriction in accordance with the Vesting Schedule set forth in the Grant Notice.  As soon as administratively practicable following the release of any Shares from the Forfeiture Restriction, the Company shall, as applicable, either deliver to Holder the certificate or certificates representing such released Shares in the Company’s possession belonging to Holder, or, if the released Shares are held in book entry form, then the Company shall remove the notations on the book form relating to the Forfeiture Restriction.  Holder (or the beneficiary or personal representative of Holder in the event of Holder’s death or incapacity, as the case may be) shall deliver to the Company any representations or other documents or assurances as the Company or its representatives deem necessary or advisable in connection with any such delivery.

2.3Escrow of Shares.  The Unreleased Shares shall be held by the Company until the Shares are forfeited as provided in Section 2.1, until such Unreleased Shares are fully released from the Forfeiture Restriction, or until such time as this Agreement no longer is in effect.  In such event, Holder shall not retain physical custody of any certificates representing Unreleased Shares issued to Holder.  Holder, by acceptance of this Award, shall be deemed to appoint, and does so appoint, the Company and each of its authorized representatives as Holder’s attorney(s)-in-fact to effect any transfer of forfeited Unreleased Shares to the Company as may be required pursuant to the Plan or this Agreement, and to execute such representations or other documents or assurances as the Company or such representatives deem necessary or advisable in connection with any such transfer.  The Company, or its designee, shall not be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.

ARTICLE III.

TAXATION AND TAX WITHHOLDING

3.1Representation.  Holder has reviewed with Holder’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Grant Notice and this Agreement.  Holder is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.  Holder understands that Holder (and not the Company) shall be responsible for Holder’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 

3.2Section 83.  Holder understands that Holder will recognize ordinary income for federal income tax purposes under Section 83 of the Code as and when the Forfeiture Restriction lapses.  Holder understands that Holder may elect to be taxed for federal income tax purposes at the time the Shares are issued to Holder rather than as and when the Forfeiture Restriction lapses by filing an election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days from the date of purchase.

Holder ACKNOWLEDGES THAT IT IS Holder’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b), AND THE COMPANY AND ITS REPRESENTATIVES SHALL HAVE NO OBLIGATION OR AUTHORITY TO MAKE THIS FILING ON Holder’S BEHALF.

3.3Tax Withholding. 

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(a)Notwithstanding anything to the contrary in this Agreement, the Company and its Subsidiaries have the authority to deduct or withhold, or require Holder to remit to the Company or the applicable Subsidiary, an amount sufficient to satisfy applicable federal, state, local and foreign taxes (including the employee portion of any FICA obligation) required by law to be withheld with respect to any taxable event arising pursuant to this Agreement.  The Company and its Subsidiaries may withhold or Holder may make such payment in one or more of the forms specified below:

(i)by cash or check made payable to the Company or the Subsidiary with respect to which the withholding obligation arises;

(ii)by the deduction of such amount from other compensation payable to Holder;

(iii)with respect to any withholding taxes arising in connection with the vesting of the Shares, with the consent of the Administrator, by requesting that the Company and its Subsidiaries withhold a net number of vested Shares having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company and its Subsidiaries based on the minimum applicable statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes;

(iv)with respect to any withholding taxes arising in connection with the vesting of the Shares, with the consent of the Administrator, by tendering to the Company vested shares of Common Stock having a then current Fair Market Value not exceeding the amount necessary to satisfy the withholding obligation of the Company and its Subsidiaries based on the minimum applicable statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes;

(v)with respect to any withholding taxes arising in connection with the vesting of the Shares, through the delivery of a notice that Holder has placed a market sell order with a broker acceptable to the Company with respect to those Shares that are then becoming vested and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company or the Subsidiary with respect to which the withholding obligation arises in satisfaction of such withholding taxes; provided that payment of such proceeds is then made to the Company or the applicable Subsidiary at such time as may be required by the Administrator, but in any event not later the settlement of such sale; or

(vi)in any combination of the foregoing.

(b)With respect to any withholding taxes arising in connection with the Shares, in the event Holder fails to provide timely payment of all sums required pursuant to Section 3.3(a), the Company shall treat such failure as an election by Participant to satisfy all or any portion of Holder’s required payment obligation pursuant to Section 3.3(a)(ii) or Section 3.3(a)(iii) above, or any combination of the foregoing as the Company may determine to be appropriate. The Company shall not be obligated to deliver any certificate representing the Shares to Holder or his or her legal representative unless and until Holder or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Holder resulting from the vesting of the Shares or any other taxable event related to the Shares.

(c)In the event any tax withholding obligation arising in connection with the Shares will be satisfied under Section 3.3(a)(iii), then the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Holder’s behalf a whole number of shares of Common Stock from those Shares that are then becoming vested as the Company determines to

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be appropriate to generate cash proceeds sufficient to satisfy the tax withholding obligation and to remit the proceeds of such sale to the Company or the Subsidiary with respect to which the withholding obligation arises.  Holder’s acceptance of this Award constitutes Holder’s instruction and authorization to the Company and such brokerage firm to complete the transactions described in this Section 3.3, including the transactions described in the previous sentence, as applicable. 

(d)In the event of any broker-assisted sale of Shares in connection with the payment of withholding taxes as provided in Section 3.3(a)(iii) or Section 3.3(a)(v): (i) any Shares to be sold through a broker-assisted sale will be sold on the day the tax withholding obligation arises or as soon thereafter as practicable; (ii) such Shares may be sold as part of a block trade with other participants in the Plan in which all participants receive an average price; (iii) Holder will be responsible for all broker’s fees and other costs of sale, and Holder agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (iv) to the extent the proceeds of such sale exceed the applicable tax withholding obligation, the Company agrees to pay such excess in cash to Holder as soon as reasonably practicable; (v) Holder acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation; and (vi) in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation, Holder agrees to pay immediately upon demand to the Company or its Subsidiary with respect to which the withholding obligation arises an amount in cash sufficient to satisfy any remaining portion of the Company’s or the applicable Subsidiary’s withholding obligation.

(e)Holder is ultimately liable and responsible for all taxes owed in connection with the Shares, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the Shares.  Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the Shares or the subsequent sale of the Shares.  The Company and the Subsidiaries do not commit and are under no obligation to structure this Award to reduce or eliminate Holder’s tax liability.

ARTICLE IV.

OTHER PROVISIONS

4.1Restrictions on Transfer.   No Unreleased Shares or any interest or right therein or part thereof, may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution. This Award and the rights and privileges conferred hereby, including the Unreleased Shares, shall not be liable for the debts, contracts or engagements of Holder or his or her successors in interest and shall not be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

4.2Rights as Stockholder.  Except as otherwise provided herein, upon issuance of the Shares by the Company to Holder, Holder shall have all the rights of a stockholder with respect to said Shares, subject to the restrictions herein, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares.

4.3Forfeiture and Claw-Back Provisions.  Holder hereby acknowledges and agrees that the Shares are subject to the provisions of Section 11.5 of the Plan.

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4.4Adjustments.  Holder acknowledges that the Shares are subject to adjustment in the discretion of the Administrator upon the occurrence of certain events as provided in this Agreement and Section 13.2 of the Plan. 

4.5No Right to Continued Service or Awards; Not a Contract of Employment or Service. 

(a)Nothing in the Plan, the Grant Notice, or this Agreement shall confer upon Holder any right to continue in the employ or service of the Company or any Subsidiary, shall form part of any contract of employment or service between the Company or any Subsidiary and Holder, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge or terminate the services of Holder at any time for any reason whatsoever, except to the extent expressly provided otherwise in a written agreement between the Company or any Subsidiary and Holder.  No services are requested nor required, from Holder to the Company, for the purposes of this Award.

(b)The grant of the Shares is a one-time benefit and does not create any contractual or other right or interest to receive a grant of Awards or benefits in lieu of Awards in the future or otherwise.  Future grants, if any, will be at the sole discretion of the Company.  In addition, the value of the Shares is an extraordinary item of compensation outside the scope of any employment contract.  As such, the Shares are not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. The future value of the underlying Common Stock is unknown and cannot be predicted with certainty.

(c)The rights or opportunity granted to Holder to receive the Shares shall not give Grantee any rights or additional rights and if Grantee ceases to be employed by Holder’s employer, Holder shall not be entitled to compensation for the loss of any right or benefit or prospective right or benefit under the Plan (including, in particular but not by way of limitation, any Awards held by him or her which lapse or are forfeited by reason of his or her ceasing to be employed by Holder’s employer) whether by way of damages for unfair dismissal, wrongful dismissal, breach of contract or otherwise. 

(d)Holder shall not be entitled to any compensation or damages for any loss or potential loss which he or she may suffer by reason of being unable to acquire or retain the Shares, or any interest therein, in consequence of the loss or Termination of Service with Holder’s employer for any reason whatsoever (whether or not the termination is ultimately held to be wrongful or unfair).

(e)Holder acknowledges that a fundamental purpose of the Award represented by this Agreement is to provide an incentive for Holder to maintain continued employment with Holder’s employer (as to which the Company has an interest in maintaining management stability).

(f)By accepting the grant of the Shares and not renouncing it, Holder is deemed to have agreed to the provisions of this Section 4.5.

4.6Restrictive Legends and Stop-Transfer Orders.

(a)Any share certificate(s) evidencing the Shares issued hereunder shall be endorsed with the following legend and any other legends that may be required by state or federal securities laws:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN FORFEITURE RESTRICTIONS AND RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE

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STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.

(b)Holder agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.

(c)The Company shall not be required: (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement, or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such shares shall have been so transferred.

4.7Governing Law; Severability; Venue.   The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.  Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.  Any suit brought with respect to the Award, the Grant Notice, the Plan or this Agreement shall be brought in the state or federal courts sitting in San Diego County, California, the parties hereby waiving any claim or defense that such forum is not convenient or proper.  The jurisdiction agreement contained in this Section 4.7 is made for the benefit of the Company only, and the Company retains the right to bring proceedings in any other court of competent jurisdiction.  By signing the Grant Notice, Holder is deemed to have agreed to submit to such jurisdiction.  THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.

4.8Conformity to Securities Laws.  Holder acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated thereunder by the U.S. Securities and Exchange Commission, including, without limitation, Rule 16b-3 under the Exchange Act.  Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Awards are granted, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

4.9Limitations Applicable to Section 16 Persons.  Notwithstanding any other provision of the Plan or this Agreement, if Holder is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Shares shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule.  To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

4.10Amendment, Suspension and Termination.  To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator, provided, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall impair any rights or obligations under the Award in any material way without the prior written consent of Holder.

4.11Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s corporate

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headquarters or to the then-current email address for the Secretary of the Company, and any notice to be given to Holder shall be addressed to Holder at the most recent physical or email address for Holder listed in the Company’s personnel records. By a notice given pursuant to this Section 4.11, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

4.12Successors and Assigns.  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Holder and his or her heirs, executors, administrators, successors and assigns.

4.13Paperless Administration.  By accepting this Award, Holder hereby agrees to receive documentation related to the Award by electronic delivery, such as a system using an internet website or interactive voice response, maintained by the Company or a third party designated by the Company.

4.14Entire Agreement.  The Plan, the Grant Notice and this Agreement constitute the entire agreement of the parties and supersede in their entirety all oral, implied or written promises, statements, understandings, undertakings and agreements between the Company and Holder with respect to the subject matter hereof, including without limitation, the provisions of any employment agreement or offer letter regarding equity awards to be awarded to Holder by the Company, or any other oral, implied or written promises, statements, understandings, undertakings or agreements by the Company or any of its representatives regarding equity awards to be awarded to Holder by the Company.

4.15Data Protection.Holder hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Holder’s “Data” (as defined below) by and among, as applicable, the Company and its Subsidiaries (the “Company Group”) for the purpose of administering his or her participation in the Plan.  For purposes of this Section 4.15, “Data” means Holder’s personal information, including, but not limited to, Holder’s name, home address and telephone number, date of birth, social security number, “cedula” or other identification number, salary, nationality, job title, any Shares of stock or directorships held in the Company and details of all Awards held by Holder.  Holder understands that Data will be transferred to such stock plan service providers as may be selected by the Company, which are assisting the Company with the implementation, administration and management of the Plan.  Holder understands that the recipients of the Data may be subject to different data privacy laws and protections than those in Holder’s country.  Holder authorizes the Company Group and any other possible recipients which may assist the Company with administering the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of administering Holder’s participation in the Plan. Holder understands that he or she may, at any time, request additional information about this consent (including a list with the names and addresses of all recipients of the Data), or withdraw this consent, by contacting in writing Holder’s local human resources representative.  Withdrawal of this consent may affect Holder’s ability to participate in the Plan.

4.16Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

4.17Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

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EX-10.5

EXHIBIT 10.5

Employee of Foreign Subsidiary

PRICESMART, INC.

2013 EQUITY INCENTIVE AWARD PLAN

RESTRICTED STOCK UNIT GRANT NOTICE AND
RESTRICTED STOCK UNIT AGREEMENT

PriceSmart, Inc., a Delaware corporation (the “Company”), pursuant to the PriceSmart, Inc. 2013 Equity Incentive Award Plan (the “Plan”), hereby grants to the holder listed below (“Holder”), an award of restricted stock units (“Restricted Stock Units” or “RSUs”) with respect to the number of shares of the Company’s Common Stock (the “Shares”) indicated below.  Each RSU is hereby granted in tandem with a corresponding dividend equivalent, as further described in Article II of the Restricted Stock Unit Agreement (the “Dividend Equivalents”).  This award for Restricted Stock Units and Dividend Equivalents (this “Award”) is subject to all of the terms and conditions as set forth herein and in the Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Restricted Stock Unit Agreement”) and the Plan, each of which are incorporated herein by reference.  Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Restricted Stock Unit Agreement.

Holder:

Grant Date:

Total Number of RSUs

Subject to Award:

Vesting Schedule          The RSUs shall vest as follows:

Shares   Vest Date

In addition, the RSUs shall vest immediately (i) prior to the occurrence of a Change in Control, and (ii) upon Termination of Service due to Holder’s death or Disability, so long as the Holder (A) received this Award in his or her capacity as an Employee or Consultant, and (B) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service.

Distribution Schedule:The RSUs shall be distributable as they vest pursuant to the Vesting Schedule.

Holder’s Employer:Holder is an employee of

SIGNATURE PAGE TO RESTRICTED STOCK UNIT GRANT NOTICE TO EMPLOYEE OF FOREIGN SUBSIDIARY

Instructions:  Print this page, sign below and return the completed page to the office of the Company’s general counsel.

By his or her signature below, Holder agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Unit Agreement and the Restricted Stock Unit Grant Notice to which this signature page is attached.  Holder has reviewed the Restricted Stock Unit Agreement, the Plan and the Restricted Stock Unit Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this signature page and fully understands all provisions of the Restricted Stock Unit Grant Notice, the Restricted Stock Unit Agreement and the Plan.  Holder has been provided with a copy or electronic access to a copy of the prospectus for the Plan.  Holder hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Restricted Stock Unit Grant Notice or the Restricted Stock Unit Agreement. 

PRICESMART, INC.			HOLDER
By: Print Name:			By:
Title:		Chief Executive Officer	Print Name:
Address:		9740 Scranton Road
		San Diego, CA  92121

EXHIBIT A
TO RESTRICTED STOCK UNIT GRANT NOTICE

PRICESMART, INC.
RESTRICTED STOCK UNIT AGREEMENT

Pursuant to the Restricted Stock Unit Grant Notice (the “Grant Notice”) to which this Restricted Stock Unit Agreement (this “Agreement”) is attached, the Company has granted to Holder the right to receive the number of RSUs set forth in the Grant Notice, and their corresponding Dividend Equivalents pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.  The Grant Notice and this Agreement are subject to the Plan, the terms and conditions of which are incorporated herein by reference.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE I.

AWARD OF RESTRICTED STOCK UNITS

1.1Award of Restricted Stock Units. 

(a)Award.  The Company recognizes that the members of each of its Subsidiaries’ management team have unique knowledge and experience which is important for the operational success of the Company’s business, and which competitors in the retail industry, locally and internationally, may find desirable to obtain.  The Company therefore believes that it is important to encourage and protect continuity among the management of its Subsidiaries, so as to help ensure the Company’s success.  To promote the management continuity in its Subsidiaries, the Company offers incentives, additional to those offered to Holder by the Subsidiary of the Company that employs Holder, as reflected in the Grant Notice.  In consideration of Holder’s past service to the Subsidiary that employs Holder or agreement to remain in the service of the Subsidiary that employs Holder, and for other good and valuable consideration, the Company hereby grants to Holder the right to receive the number of RSUs set forth in the Grant Notice and their corresponding Dividend Equivalents pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.  Each RSU represents the right to receive one Share.  Prior to actual issuance of any Shares, the Award, including the RSUs and the Dividend Equivalents conferred hereby, represents an unsecured obligation of the Company, payable only from the general assets of the Company.

(b)Vesting; Effect of Termination of Service.  The RSUs subject to the Award shall vest in accordance with the Vesting Schedule set forth in the Grant Notice.  Unless and until the RSUs have vested in accordance with the Vesting Schedule set forth in the Grant Notice, Holder will have no right to any distribution with respect to such RSUs.  In the event of Holder’s Termination of Service to a Subsidiary prior to the vesting of all of the RSUs (other than a Termination of Service due to death or Disability), any unvested RSUs will terminate automatically without any further action by the Company and be forfeited without further notice and at no cost to the Company. The RSUs shall vest immediately upon Termination of Service due to Holder’s death or Disability, so long as the Holder (A) received the RSUs in his or her capacity as an Employee or Consultant, and (B) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service. . 

(c)Distribution of Shares.  

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(i)Shares of Common Stock, to which the Holder is entitled, shall be distributed to Holder (or in the event of Holder’s death, to his or her estate) with respect to such Holder’s vested RSUs within ten (10) days following the date on which such RSUs vest pursuant to the Vesting Schedule set forth in the Grant Notice, subject to the terms and provisions of the Plan and this Agreement. 

(ii)All distributions shall be made by the Company in the form of whole shares of Common Stock.  Fractional Shares issuable upon vesting of the RSUs shall be rounded down to the nearest whole Share.

(iii)Neither the time nor form of distribution of Common Stock with respect to the RSUs may be changed, except as may be permitted by the Administrator in accordance with the Plan and Section 409A of the Code and the Treasury Regulations thereunder.

(d)Generally. Shares issued under the Award shall be issued to Holder (or in the event of Holder’s death, to his or her estate) in either (a) uncertificated form, with the Shares recorded in the name of Holder in the books and records of the Company’s transfer agent with appropriate notations regarding the restrictions on transfer imposed pursuant to this Agreement; or (b) certificate form.

1.2Taxes. 

(a)Representation.  Holder has reviewed with Holder’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Grant Notice and this Agreement.  Holder is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Holder understands that Holder (and not the Company) shall be responsible for Holder’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

(b)Tax Withholding.  Notwithstanding anything to the contrary in this Agreement, the Company and its Subsidiary that is Holder’s employer have the authority to deduct or withhold, or require Holder to remit to the Company or Holder’s employer, an amount sufficient to satisfy any Tax Liability (as defined below) with respect to any taxable event arising pursuant to this Agreement.  Holder hereby authorizes either the Company or Holder’s employer to satisfy Holder’s obligations with regard to the Tax Liability by one or a combination of the following, in the Company’s or Holder’s employer’s discretion:

(i)Withholding from the number of Shares otherwise issuable upon vesting of the RSUs or pursuant to payment of Dividend Equivalents in shares of Common Stock such number of shares of Common Stock having a Fair Market Value equal to the Tax Liability;

(ii)Deducting the amount of such Tax Liability from any Dividend Equivalent to be paid in cash;

(iii)Deducting the amount of such Tax Liability from other compensation payable to Holder; or 

(iv)Electing to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Holder’s behalf a whole number of shares of Common Stock from those Shares issuable to Holder upon settlement of the RSUs or the Dividend Equivalents as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy Holder’s Tax Liability (and any broker’s fees and other costs of sale) and to remit the proceeds of such sale to the Company or the Subsidiary with respect to which the Tax Liability arises; or

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(v)Any combination of the foregoing.

(c)In the event of any broker-assisted sale of Shares in connection with the payment of withholding taxes as provided in Section 1.2(b)(iv) above: (i) any Shares to be sold through a broker-assisted sale will be sold on the day the Tax Liability arises or as soon thereafter as practicable; (ii) such Shares may be sold as part of a block trade with other participants in the Plan in which all participants receive an average price; (iii) Holder will be responsible for all broker’s fees and other costs of sale, and Holder agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (iv) to the extent the proceeds of such sale exceed the applicable tax withholding obligation, the Company agrees to pay such excess in cash to Holder as soon as reasonably practicable; (v) Holder acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation; and (vi) in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation, Holder agrees to pay immediately upon demand to the Company or its Subsidiary with respect to which the withholding obligation arises an amount in cash sufficient to satisfy any remaining portion of the Tax Liability.  Holder’s acceptance of this Award constitutes Holder’s instruction and authorization to the Company and such brokerage firm to complete the transactions described above. 

(d)Holder is ultimately liable and responsible for any Tax Liability owed in connection with the RSUs or the Dividend Equivalents, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the RSUs or the Dividend Equivalents.  Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the RSUs or the Dividend Equivalents or the subsequent sale of the Shares.  The Company and the Subsidiaries do not commit and are under no obligation to structure this Award to reduce or eliminate Holder’s tax liability.

(e)For purposes of this Agreement, the “Tax Liability” shall mean (i) all U.S. federal, state, local and any non-U.S. withholding or other taxes applicable to the taxable income of Holder, plus (ii) if permitted under the laws of the jurisdiction in which Holder resides,any liability of Holder’s employing company, if different, for income tax, withholding tax and any other employment related taxes or social security contributions in any jurisdiction, in each case resulting from the grant of Shares or the lapse or removal of the restrictions set forth in this Agreement or otherwise pursuant to this Agreement.  To avoid negative accounting treatment, the Company shall withhold for the Tax Liability by considering applicable minimum statutory withholding amounts or other applicable withholding rates in the Holder’s country of residence.

1.3Conditions to Issuance of Stock Certificates.  The Company shall not be required to issue or deliver any Shares upon settlement of the RSUs prior to fulfillment of all of the conditions set forth in Section 11.4 of the Plan.

ARTICLE II.

DIVIDEND EQUIVALENTS

2.1Dividend Equivalents.  Notwithstanding Section 3.2 hereof, for so long as unvested RSUs are outstanding under this Agreement, Holder shall have the right specifically described herein and no others, to receive distributions (the “Dividend Equivalents”) from the Company equal to any dividends or other distributions (cash or securities) that would have been distributed to Holder if each then-unvested

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RSU were instead an outstanding Share owned by Holder.  The Dividend Equivalents shall be paid at the same time, in the same form and in the same manner as dividends are paid to the holders of Shares of the Company, subject to any applicable tax withholding as provided in Section 1.2, but in no event shall such Dividend Equivalents be paid later than the March 15 of the calendar year following the year in which the related dividend or distribution is declared.

2.2Termination of Eligibility for Dividend Equivalents.  In no event shall Holder be eligible for a Dividend Equivalent (i) with respect to any dividend or distribution the record date for which is after Holder’s Termination of Service, or (ii) with respect to any RSU that has been terminated prior to the applicable record date of the dividend or distribution for any reason, whether due to payment pursuant to Section 1.1(c), forfeiture or otherwise.

2.3No Adjustments.  Notwithstanding anything to the contrary contained in Section 13.2 of the Plan, no adjustment shall be made to any unvested RSUs pursuant to Section 13.2 of the Plan with respect to any dividend or distribution to the extent that Dividend Equivalents are paid to Holder in connection therewith.

2.4Separate Payments.  Dividend Equivalents and any amounts that may become distributable in respect thereof shall be treated separately from the RSUs and the rights arising in connection therewith for purposes of the designation of time and form of payments required by Section 409A of the Code.

ARTICLE III.

OTHER PROVISIONS

3.1Award and Interests Not Transferable.  This Award, including the RSUs awarded hereunder and the corresponding Dividend Equivalents awarded hereunder, and the rights and privileges conferred hereby, may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares issuable pursuant to the Award have been issued, and all restrictions applicable to such Shares have lapsed. This Award and the rights and privileges conferred hereby, including the RSUs and the corresponding Dividend Equivalents awarded hereunder, shall not be liable for the debts, contracts or engagements of Holder or his or her successors in interest and shall not be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

3.2Rights as Stockholder.  Neither Holder nor any person claiming under or through Holder shall have any of the rights or privileges of a stockholder of the Company in respect of any Shares issuable hereunder unless and until certificates representing such Shares (which may be in uncertificated form) will have been issued and recorded on the books and records of the Company or its transfer agents or registrars, and delivered to Holder (including through electronic delivery to a brokerage account).   After such issuance, recordation and delivery, Holder shall have all the rights of a stockholder of the Company, including with respect to the right to vote the Shares and the right to receive any cash or share dividends or other distributions paid to or made with respect to the Shares.

3.3Forfeiture and Claw-Back Provisions.  Holder hereby acknowledges and agrees that the RSUs and any Shares issuable upon distribution thereof are subject to the provisions of Section 11.5 of the Plan.

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3.4Adjustments.  Holder acknowledges that the RSUs, including the vesting of the RSUs and the number of Shares issuable upon distribution thereof, are subject to adjustment in the discretion of the Administrator upon the occurrence of certain events as provided in this Agreement and Section 13.2 of the Plan.

3.5No Right to Continued Service or Awards; Not a Contract of Employment or Service. 

(a)Nothing in the Plan, the Grant Notice, or this Agreement shall confer upon Holder any right to continue in the employ or service of the Company or any Subsidiary, shall form part of any contract of employment or service between the Company or any Subsidiary and Holder, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which rights are hereby expressly reserved, to discharge or terminate the services of Holder at any time for any reason whatsoever, except to the extent expressly provided otherwise in a written agreement between the Company or any Subsidiary and Holder.  No services are requested nor required, from Holder to the Company, for the purposes of this Award.

(b)The grant of the RSUs is a one-time benefit and does not create any contractual or other right or interest to receive a grant of Awards or benefits in lieu of Awards in the future or otherwise.  Future grants, if any, will be at the sole discretion of the Company.  In addition, the value of the RSUs and the Shares issuable upon distribution thereof is an extraordinary item of compensation outside the scope of any employment contract.  As such, neither the RSUs, the Dividend Equivalents nor the Shares issuable upon distribution thereof are part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. The future value of the underlying Common Stock is unknown and cannot be predicted with certainty.

(c)The rights or opportunity granted to Holder to receive an Award of RSUs or Dividend Equivalents shall not give Holder any rights or additional rights and if Holder ceases to be employed by Holder’s employer, Holder shall not be entitled to compensation for the loss of any right or benefit or prospective right or benefit under the Plan (including, in particular but not by way of limitation, any Awards held by him or her which lapse or are forfeited by reason of his or her ceasing to be employed by Holder’s employer) whether by way of damages for unfair dismissal, wrongful dismissal, breach of contract or otherwise. 

(d)Holder shall not be entitled to any compensation or damages for any loss or potential loss which he or she may suffer by reason of being unable to acquire or retain the RSUs, the Dividend Equivalents or the Shares issuable upon distribution thereon, or any interest in the RSUs, Dividend Equivalents or Shares in consequence of the loss or Termination of Service with Holder’s employer for any reason whatsoever (whether or not the termination is ultimately held to be wrongful or unfair).

(e)Holder acknowledges that a fundamental purpose of the Award of RSUs and Dividend Equivalents represented by this Agreement is to provide an incentive for Holder to maintain continued employment with Holder’s employer (as to which the Company has an interest in maintaining management stability).

(f)By accepting the grant of the RSUs and Dividend Equivalents and not renouncing it, Holder is deemed to have agreed to the provisions of this Section 3.5.

3.6Governing Law; Severability; Venue.   The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement

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regardless of the law that might be applied under principles of conflicts of laws.  Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.  Any suit brought with respect to the Award, the Grant Notice, the Plan or this Agreement shall be brought in the state or federal courts sitting in San Diego County, California, the parties hereby waiving any claim or defense that such forum is not convenient or proper.  The jurisdiction agreement contained in this Section 3.6 is made for the benefit of the Company only, and the Company retains the right to bring proceedings in any other court of competent jurisdiction.  By signing the Grant Notice, Holder is deemed to have agreed to submit to such jurisdiction.  THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.

3.7Conformity to Securities Laws.  Holder acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated thereunder by the U.S. Securities and Exchange Commission, including, without limitation, Rule 16b-3 under the Exchange Act.  Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Awards are granted, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

3.8Limitations Applicable to Section 16 Persons.  Notwithstanding any other provision of the Plan or this Agreement, if Holder is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Award shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule.  To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

3.9Amendment, Suspension and Termination.  To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator, provided, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall impair any rights or obligations under the Award in any material way without the prior written consent of Holder.

3.10Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s corporate headquarters or to the then-current email address for the Secretary of the Company, and any notice to be given to Holder shall be addressed to Holder at the most recent physical or email address for Holder listed in the Company’s personnel records. By a notice given pursuant to this Section 3.10, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

3.11Successors and Assigns.  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Holder and his or her heirs, executors, administrators, successors and assigns.

3.12Section 409A.  This Agreement is not intended to provide for any deferral of compensation subject to Section 409A of the Code, and, accordingly, the Shares issuable pursuant to the

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RSUs and the Dividend Equivalents corresponding thereto shall be distributed to Holder no later than the later of:  (a) the fifteenth (15th) day of the third month following Executive’s first taxable year in which such RSUs or Dividend Equivalents, as applicable, are no longer subject to a substantial risk of forfeiture, and (b) the fifteenth (15th) day of the third month following first taxable year of the Company in which such severance benefit is no longer subject to substantial risk of forfeiture, as determined in accordance with Section 409A of the Code and any Treasury Regulations and other guidance issued thereunder.  To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder.  Each payment under this Agreement shall be considered a separate and distinct payment for purposes of Section 409A of the Code. 

3.13Paperless Administration.  By accepting this Award, Holder hereby agrees to receive documentation related to the Award by electronic delivery, such as a system using an internet website or interactive voice response, maintained by the Company or a third party designated by the Company.

3.14Entire Agreement.  The Plan, the Grant Notice and this Agreement constitute the entire agreement of the parties and supersede in their entirety all oral, implied or written promises, statements, understandings, undertakings and agreements between the Company and Holder with respect to the subject matter hereof, including without limitation, the provisions of any employment agreement or offer letter regarding equity awards to be awarded to Holder by the Company, or any other oral, implied or written promises, statements, understandings, undertakings or agreements by the Company or any of its representatives regarding equity awards to be awarded to Holder by the Company.

3.15Data Protection.Holder hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Holder’s “Data” (as defined below) by and among, as applicable, the Company and its Subsidiaries (the “Company Group”) for the purpose of administering his or her participation in the Plan.  For purposes of this Section 3.15, “Data” means Holder’s personal information, including, but not limited to, Holder’s name, home address and telephone number, date of birth, social security number, “cedula” or other identification number, salary, nationality, job title, any Shares of stock or directorships held in the Company and details of all Awards held by Holder.  Holder understands that Data will be transferred to such stock plan service providers as may be selected by the Company, which are assisting the Company with the implementation, administration and management of the Plan.  Holder understands that the recipients of the Data may be subject to different data privacy laws and protections than those in Holder’s country.  Holder authorizes the Company Group and any other possible recipients which may assist the Company with administering the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of administering Holder’s participation in the Plan. Holder understands that he or she may, at any time, request additional information about this consent (including a list with the names and addresses of all recipients of the Data), or withdraw this consent, by contacting in writing Holder’s local human resources representative.  Withdrawal of this consent may affect Holder’s ability to participate in the Plan.

3.16Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.17Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

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EX-10.6

EXHIBIT 10.6

PRICESMART, INC.

2013 EQUITY INCENTIVE AWARD PLAN

PERFORMANCE STOCK UNIT GRANT NOTICE AND
PERFORMANCE STOCK UNIT AGREEMENT

PriceSmart, Inc., a Delaware corporation (the “Company”), pursuant to the PriceSmart, Inc. 2013 Equity Incentive Award Plan (the “Plan”), hereby grants to the holder listed below (“Holder”), an award of performance stock units (“Performance Stock Units” or “PSUs”) with respect to the number of shares of the Company’s Common Stock (the “Shares”) indicated below.  Each PSU is hereby granted in tandem with a corresponding dividend equivalent, as further described in Article II of the Performance Stock Unit Agreement (the “Dividend Equivalents”).  This award for Performance Stock Units and Dividend Equivalents (this “Award”) is subject to all of the terms and conditions as set forth herein and in the Performance Stock Unit Agreement attached hereto as Exhibit A (the “Performance Stock Unit Agreement”) and the Plan, each of which are incorporated herein by reference.  Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Performance Stock Unit Agreement.

Holder:
Grant Date:
Total Number of PSUs Awarded:
Vesting Schedule:	[Specify vesting schedule and Performance Metrics] In addition, (i) if [the/either/any] Performance Metric has been achieved, then upon the occurrence of a Change in Control, the unvested PSUs shall vest as of immediately prior to the occurrence of a Change in Control, and (ii) in the event of a Termination of Service due to Holder’s death or Disability, the vesting contingent on continued service or employment shall be deemed achieved and the PSUs will remain eligible to vest if and when [the/either/any] Performance Metric has been achieved so long as theHolder (A) received this Award in his or her capacity as an Employee or Consultant, and (B) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service.
Distribution Schedule:	The PSUs shall be distributable as they vest pursuant to the Vesting Schedule.

SIGNATURE PAGE TO PERFORMANCE STOCK UNIT GRANT NOTICE

Instructions:  Print this page, sign below and return the completed page to the office of the Company’s general counsel.

By his or her signature below, Holder agrees to be bound by the terms and conditions of the Plan, the Performance Stock Unit Agreement and the Performance Stock Unit Grant Notice to which this signature page is attached.  Holder has reviewed the Performance Stock Unit Agreement, the Plan and the Performance Stock Unit Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this signature page and fully understands all provisions of the Performance Stock Unit Grant Notice, the Performance Stock Unit Agreement and the Plan.  Holder has been provided with a copy or electronic access to a copy of the prospectus for the Plan.  Holder hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Performance Stock Unit Grant Notice or the Performance Stock Unit Agreement. 

PRICESMART, INC.		HOLDER
By:		By:
Print Name:		Print Name:
Title:
Address:	9740 Scranton Road
	San Diego, CA  92121

EXHIBIT A
TO PERFORMANCE STOCK UNIT GRANT NOTICE

PRICESMART, INC.
PERFORMANCE STOCK UNIT AGREEMENT

Pursuant to the Performance Stock Unit Grant Notice (the “Grant Notice”) to which this Performance Stock Unit Agreement (this “Agreement”) is attached, the Company has granted to Holder the right to receive the number of PSUs set forth in the Grant Notice, and their corresponding Dividend Equivalents pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.  The Grant Notice and this Agreement are subject to the Plan, the terms and conditions of which are incorporated herein by reference.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE I.

AWARD OF PERFORMANCE STOCK UNITS

1.1    Award of Performance Stock Units. 

(a)    Award.  In consideration of Holder’s service to the Company or any Affiliate thereof, and for other good and valuable consideration, the Company hereby grants to Holder the right to receive the number of PSUs set forth in the Grant Notice and their corresponding Dividend Equivalents pursuant to Article II, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.  Each PSU represents the right to receive one Share.  Prior to actual issuance of any Shares, the Award, including the PSUs and the Dividend Equivalents conferred hereby, represents an unsecured obligation of the Company, payable only from the general assets of the Company.

(b)    Vesting; Effect of Termination of Service.  The PSUs subject to the Award shall vest in accordance with the Vesting Schedule set forth in the Grant Notice.  Unless and until the PSUs have vested in accordance with the Vesting Schedule set forth in the Grant Notice, Holder will have no right to any distribution with respect to such PSUs.  In the event of Holder’s Termination of Service prior to the vesting of all of the PSUs (other than a Termination of Service due to death or Disability), any unvested PSUs will terminate automatically without any further action by the Company and be forfeited without further notice and at no cost to the Company.  In the event of a Termination of Service due to Holder’s death or Disability, the vesting contingent on continued service or employment shall be deemed achieved and the PSUs will remain eligible to vest if and when [the/either/any] Performance Metric has been achieved so long as theHolder (i) received the Award in his or her capacity as an Employee or Consultant, and (ii) was in good standing as of the date of Termination of Service and was employed by or providing services to the Company or an Affiliate for at least one year prior to the date of the Termination of Service.  

(c)    Distribution of Shares.  

(i)    Shares of Common Stock, to which the Holder is entitled, shall be distributed to Holder (or in the event of Holder’s death, to his or her estate) with respect to such Holder’s vested PSUs within ten (10) days following the date on which such PSUs vest pursuant to the Vesting Schedule set forth in the Grant Notice, subject to the terms and provisions of the Plan and this Agreement. 

(ii)    All distributions shall be made by the Company in the form of whole shares of Common Stock.  Fractional Shares issuable upon vesting of the PSUs shall be rounded down to the nearest whole Share.

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(iii)    Neither the time nor form of distribution of Common Stock with respect to the PSUs may be changed, except as may be permitted by the Administrator in accordance with the Plan and Section 409A of the Code and the Treasury Regulations thereunder.

(d)    Generally. Shares issued under the Award shall be issued to Holder (or in the event of Holder’s death, to his or her estate) in either (a) uncertificated form or (b) certificate form.

1.2    Taxes. 

(a)    Representation.  Holder has reviewed with Holder’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Grant Notice and this Agreement.  Holder is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Holder understands that Holder (and not the Company) shall be responsible for Holder’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

(b)    Tax Withholding.  Notwithstanding anything to the contrary in this Agreement, the Company or its Affiliate, as applicable, shall have the authority to deduct or withhold, or require Holder to remit to the Company or Holder’s employer, an amount sufficient to satisfy any Tax Liability (as defined below) with respect to any taxable event arising pursuant to this Agreement.  Holder hereby authorizes either the Company or its Affiliate, as applicable, to satisfy Holder’s obligations with regard to the Tax Liability by one or a combination of the following, in the Company’s or its Affiliate’s, as applicable, discretion:

(i)    Withholding from the number of Shares otherwise issuable upon vesting of the PSUs or pursuant to payment of Dividend Equivalents in shares of Common Stock such number of shares of Common Stock having a Fair Market Value equal to the Tax Liability;

(ii)    Deducting the amount of such Tax Liability from any Dividend Equivalent to be paid in cash;

(iii)    Deducting the amount of such Tax Liability from other compensation payable to Holder;

(iv)    Electing to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Holder’s behalf a whole number of shares of Common Stock from those Shares issuable to Holder upon settlement of the PSUs or the Dividend Equivalents as the Company determines to be appropriate to generate cash proceeds sufficient to satisfy Holder’s Tax Liability (and any broker’s fees and other costs of sale) and to remit the proceeds of such sale to the Company or its Affiliate, as applicable, with respect to which the Tax Liability arises; or

(v)    Any combination of the foregoing.

(c)    In the event of any broker-assisted sale of Shares in connection with the payment of withholding taxes as provided in Section 1.2(b)(iv) above: (i) any Shares to be sold through a broker-assisted sale will be sold on the day the Tax Liability arises or as soon thereafter as practicable; (ii) such Shares may be sold as part of a block trade with other participants in the Plan in which all participants receive an average price; (iii) Holder will be responsible for all broker’s fees and other costs of sale, and Holder agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (iv) to the extent the proceeds of such sale exceed the applicable tax withholding obligation, the Company agrees to pay such excess in cash to Holder as soon as reasonably practicable;

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(v) Holder acknowledges that the Company or its designee is under no obligation to arrange for such sale at any particular price, and that the proceeds of any such sale may not be sufficient to satisfy the applicable tax withholding obligation; and (vi) in the event the proceeds of such sale are insufficient to satisfy the applicable tax withholding obligation, Holder agrees to pay immediately upon demand to the Company or its Affiliate with respect to which the withholding obligation arises an amount in cash sufficient to satisfy any remaining portion of the Tax Liability.  Holder’s acceptance of this Award constitutes Holder’s instruction and authorization to the Company and such brokerage firm to complete the transactions described above. 

(d)    Holder is ultimately liable and responsible for any Tax Liability owed in connection with the PSUs or the Dividend Equivalents, regardless of any action the Company or any Affiliate takes with respect to any tax withholding obligations that arise in connection with the PSUs or the Dividend Equivalents.  Neither the Company nor any Affiliate makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the PSUs or the Dividend Equivalents or the subsequent sale of the Shares.  The Company and its Affiliates do not commit and are under no obligation to structure this Award to reduce or eliminate Holder’s tax liability.

(e)    For purposes of this Agreement, the “Tax Liability” shall mean all U.S. federal, state, local and any non-U.S. withholding or other taxes applicable to the taxable income of Holderresulting from the grant of Shares or the lapse or removal of the restrictions set forth in this Agreement or otherwise pursuant to this Agreement.  To avoid negative accounting treatment, the Company shall withhold for the Tax Liability by considering applicable minimum statutory withholding amounts or other applicable withholding rates.

1.3    Conditions to Issuance of Stock Certificates.  The Company shall not be required to issue or deliver any Shares upon settlement of the PSUs prior to fulfillment of all of the conditions set forth in Section 11.4 of the Plan.

ARTICLE II.

Dividend EquivalentS

2.1Dividend Equivalents.  Notwithstanding Section 3.2 hereof, for so long as unvested PSUs are outstanding under this Agreement, Holder shall have the right specifically described herein and no others, to receive distributions (the “Dividend Equivalents”) from the Company equal to any dividends or other distributions (cash or securities) that would have been distributed to Holder if each then-unvested PSU were instead an outstanding Share owned by Holder; provided, however, that such Dividend Equivalents will only be payable upon the satisfaction of the Performance Metrics.  The Dividend Equivalents shall be paid on the vest date once the Performance Metrics have been deemed by the Compensation Committee to be achieved pursuant to the Vesting Schedule set forth in the Grant Notice, subject to any applicable tax withholding as provided in Section 1.2, but in no event shall such Dividend Equivalents be paid later than the March 15 of the calendar year following the year in which the related dividend or distribution is declared.

2.2Termination of Eligibility for Dividend Equivalents.  In no event shall Holder be eligible for a Dividend Equivalent (i) with respect to any dividend or distribution the record date for which is after Holder’s Termination of Service, or (ii) with respect to any PSU that has been terminated prior to the applicable record date of the dividend or distribution for any reason.

2.3    No Adjustments.  Notwithstanding anything to the contrary contained in Section 13.2 of the Plan, no adjustment shall be made to any unvested PSUs pursuant to Section 13.2 of the Plan with

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respect to any dividend or distribution to the extent that Dividend Equivalents are paid to Holder in connection therewith.

2.4Separate Payments.  Dividend Equivalents and any amounts that may become distributable in respect thereof shall be treated separately from the PSUs and the rights arising in connection therewith for purposes of the designation of time and form of payments required by Section 409A of the Code.

ARTICLE III.
OTHER PROVISIONS

3.1    Award and Interests Not Transferable.  This Award, including the PSUs awarded hereunder and the corresponding Dividend Equivalents awarded hereunder, and the rights and privileges conferred hereby, may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares issuable pursuant to the Award have been issued, and all restrictions applicable to such Shares have lapsed. This Award and the rights and privileges conferred hereby, including the PSUs and the corresponding Dividend Equivalents awarded hereunder, shall not be liable for the debts, contracts or engagements of Holder or his or her successors in interest and shall not be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

3.2    Rights as Stockholder.  Neither Holder nor any person claiming under or through Holder shall have any of the rights or privileges of a stockholder of the Company in respect of any Shares issuable hereunder unless and until certificates representing such Shares (which may be in uncertificated form) will have been issued and recorded on the books and records of the Company or its transfer agents or registrars, and delivered to Holder (including through electronic delivery to a brokerage account).   After such issuance, recordation and delivery, Holder shall have all the rights of a stockholder of the Company, including with respect to the right to vote the Shares and the right to receive any cash or share dividends or other distributions paid to or made with respect to the Shares.

3.3    Forfeiture and Claw-Back Provisions.  Holder hereby acknowledges and agrees that the PSUs and any Shares issuable upon distribution thereof are subject to the provisions of Section 11.5 of the Plan.

3.4    Adjustments.  Holder acknowledges that the PSUs, including the vesting of the PSUs and the number of Shares issuable upon distribution thereof, are subject to adjustment in the discretion of the Administrator upon the occurrence of certain events as provided in this Agreement and Section 13.2 of the Plan.

3.5    No Right to Continued Service or Awards; Not a Contract of Employment or Service. 

(a)    Nothing in the Plan, the Grant Notice, or this Agreement shall confer upon Holder any right to continue in the employ or service of the Company or any Affiliate, shall form part of any contract of employment or service between the Company or any Affiliate and Holder, or shall interfere with or restrict in any way the rights of the Company and any Affiliate, which rights are hereby expressly reserved, to discharge or terminate the services of Holder at any time for any reason whatsoever, except to the extent expressly provided otherwise in a written agreement between the Company or any Affiliate and Holder.

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(b)    The grant of the PSUs is a one-time benefit and does not create any contractual or other right or interest to receive a grant of Awards or benefits in lieu of Awards in the future or otherwise.  Future grants, if any, will be at the sole discretion of the Company.  In addition, the value of the PSUs and the Shares issuable upon distribution thereof is an extraordinary item of compensation outside the scope of any employment contract.  As such, neither the PSUs, the Dividend Equivalents nor the Shares issuable upon distribution thereof are part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. The future value of the underlying Common Stock is unknown and cannot be predicted with certainty.

(c)    The rights or opportunity granted to Holder to receive an Award of PSUs or Dividend Equivalents shall not give Holder any rights or additional rights and if Holder ceases to be employed by Holder’s employer, Holder shall not be entitled to compensation for the loss of any right or benefit or prospective right or benefit under the Plan (including, in particular but not by way of limitation, any Awards held by him or her which lapse or are forfeited by reason of his or her ceasing to be employed by Holder’s employer) whether by way of damages for unfair dismissal, wrongful dismissal, breach of contract or otherwise. 

(d)    Holder shall not be entitled to any compensation or damages for any loss or potential loss which he or she may suffer by reason of being unable to acquire or retain the PSUs, the Dividend Equivalents or the Shares issuable upon distribution thereon, or any interest in the PSUs, Dividend Equivalents or Shares in consequence of the loss or Termination of Service with Holder’s employer for any reason whatsoever (whether or not the termination is ultimately held to be wrongful or unfair).

(e)    Holder acknowledges that a fundamental purpose of the Award of PSUs and Dividend Equivalents represented by this Agreement is to provide an incentive for Holder to maintain continued employment with Holder’s employer (as to which the Company has an interest in maintaining management stability).

(f)    By accepting the grant of the PSUs and Dividend Equivalents and not renouncing it, Holder is deemed to have agreed to the provisions of this Section 3.5.

3.6    Governing Law; Severability; Venue.   The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.  Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.  Any suit brought with respect to the Award, the Grant Notice, the Plan or this Agreement shall be brought in the state or federal courts sitting in San Diego County, California, the parties hereby waiving any claim or defense that such forum is not convenient or proper.  The jurisdiction agreement contained in this Section 3.6 is made for the benefit of the Company only, and the Company retains the right to bring proceedings in any other court of competent jurisdiction.  By signing the Grant Notice, Holder is deemed to have agreed to submit to such jurisdiction.  THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING.

3.7    Conformity to Securities Laws.  Holder acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, and any and all regulations and rules promulgated thereunder by the U.S. Securities and Exchange Commission, including, without limitation, Rule 16b-3 under the Exchange Act.  Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Awards are granted, only in such a manner as to conform to such laws, rules and regulations.  To the extent permitted by applicable law, the Plan, the

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Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

3.8    Limitations Applicable to Section 16 Persons.  Notwithstanding any other provision of the Plan or this Agreement, if Holder is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement and the Award shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule.  To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

3.9    Amendment, Suspension and Termination.  To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator, provided, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall impair any rights or obligations under the Award in any material way without the prior written consent of Holder.

3.10    Notices.  Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s corporate headquarters or to the then-current email address for the Secretary of the Company, and any notice to be given to Holder shall be addressed to Holder at the most recent physical or email address for Holder listed in the Company’s personnel records. By a notice given pursuant to this Section 3.10, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

3.11    Successors and Assigns.  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Holder and his or her heirs, executors, administrators, successors and assigns.

3.12    Section 409A.  This Agreement is not intended to provide for any deferral of compensation subject to Section 409A of the Code, and, accordingly, the Shares issuable pursuant to the PSUs and the Dividend Equivalents corresponding thereto shall be distributed to Holder no later than the later of:  (a) the fifteenth (15th) day of the third month following Executive’s first taxable year in which such PSUs or Dividend Equivalents, as applicable, are no longer subject to a substantial risk of forfeiture, and (b) the fifteenth (15th) day of the third month following first taxable year of the Company in which such benefit is no longer subject to substantial risk of forfeiture, as determined in accordance with Section 409A of the Code and any Treasury Regulations and other guidance issued thereunder.  To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder.  Each payment under this Agreement shall be considered a separate and distinct payment for purposes of Section 409A of the Code. 

3.13    Paperless Administration.  By accepting this Award, Holder hereby agrees to receive documentation related to the Award by electronic delivery, such as a system using an internet website or interactive voice response, maintained by the Company or a third party designated by the Company.

3.14    Entire Agreement.  The Plan, the Grant Notice and this Agreement constitute the entire agreement of the parties and supersede in their entirety all oral, implied or written promises, statements, understandings, undertakings and agreements between the Company and Holder with respect to the subject

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matter hereof, including without limitation, the provisions of any employment agreement or offer letter regarding equity awards to be awarded to Holder by the Company, or any other oral, implied or written promises, statements, understandings, undertakings or agreements by the Company or any of its representatives regarding equity awards to be awarded to Holder by the Company.

3.15    Data Protection.Holder hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Holder’s “Data” (as defined below) by and among, as applicable, the Company and its Affiliates (the “Company Group”) for the purpose of administering his or her participation in the Plan.  For purposes of this Section 3.15, “Data” means Holder’s personal information, including, but not limited to, Holder’s name, home address and telephone number, date of birth, social security number, or other identification number, salary, nationality, job title, any Shares of stock or directorships held in the Company and details of all Awards held by Holder.  Holder understands that Data will be transferred to such stock plan service providers as may be selected by the Company, which are assisting the Company with the implementation, administration and management of the Plan.  Holder understands that the recipients of the Data may be subject to different data privacy laws and protections than those in Holder’s country.  Holder authorizes the Company Group and any other possible recipients which may assist the Company with administering the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of administering Holder’s participation in the Plan. Holder understands that he or she may, at any time, request additional information about this consent (including a list with the names and addresses of all recipients of the Data), or withdraw this consent, by contacting in writing Holder’s local human resources representative.  Withdrawal of this consent may affect Holder’s ability to participate in the Plan.

3.16    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.17Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

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EX-31.1

Exhibit 31.1

Certification

I, Sherry S. Bahrambeygui, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of PriceSmart, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	January 9,2020	/s/SHERRY S. BAHRAMBEYGUI
		Sherry S. Bahrambeygui
		ChiefExecutiveOfficer
		(PrincipalExecutiveOfficer)

EX-31.2

Exhibit 31.2

Certification

I, Michael McCleary, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of PriceSmart, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	January9,2020	/s/MICHAEL MCCLEARY
		Michael McCleary
		SeniorVicePresidentandInterimChiefFinancialOfficer
		(PrincipalFinancialOfficerandPrincipalAccountingOfficer)

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of PriceSmart, Inc. (the “Company”) hereby certifies, to such officer's knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended November 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	January9,2020	/s/SHERRY S. BAHRAMBEYGUI
		Sherry S. Bahrambeygui
		ChiefExecutiveOfficer
		(PrincipalExecutiveOfficer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of PriceSmart, Inc. (the “Company”) hereby certifies, to such officer's knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period November 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	January 9,2020	/s/MICHAEL MCCLEARY
		Michael McCleary
		SeniorVicePresidentandInterim ChiefFinancialOfficer
		(PrincipalFinancialOfficerandPrincipalAccountingOfficer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
Current Assets:
Cash and cash equivalents	$ 111,359	$ 102,653
Short-term restricted cash	65	54
Short-term investments	25,098	17,045
Receivables, net of allowance for doubtful accounts of $125 as of November 30, 2019 and $144 as of August 31, 2019, respectively	10,293	9,872
Merchandise inventories	388,072	331,273
Prepaid expenses and other current assets (includes $2,747 and $2,736 as of November 30, 2019 and August 31, 2019, respectively, for the fair value of derivative instruments)	36,990	30,999
Total current assets	571,877	491,896
Long-term restricted cash	3,689	3,529
Property and equipment, net	693,275	671,151
Operating lease right-of-use assets, net	118,203
Goodwill	45,425	46,101
Other intangibles, net	11,977	12,576
Deferred tax assets	17,790	15,474
Other non-current assets (includes $436 and $0 as of November 30, 2019 and August 31, 2019, respectively, for the fair value of derivative instruments)	51,226	44,987
Investment in unconsolidated affiliates	10,649	10,697
Total Assets	1,524,111	1,296,411
Current Liabilities:
Short-term borrowings	23,018	7,540
Accounts payable	328,585	286,219
Accrued salaries and benefits	24,131	25,401
Deferred income	25,147	25,340
Income taxes payable	6,640	4,637
Other accrued expenses and other current liabilities (includes $127 and $0 as of November 30, 2019 and August 31, 2019, respectively, for the fair value of foreign currency forward contracts)	40,519	32,442
Operating lease liabilities, current portion	8,310
Long-term debt, current portion	13,726	25,875
Total current liabilities	470,076	407,454
Deferred tax liability	1,829	2,015
Long-term portion of deferred rent		11,198
Long-term income taxes payable, net of current portion	5,346	5,069
Long-term operating lease liabilities	121,698
Long-term debt, net of current portion	98,084	63,711
Other long-term liabilities (includes $3,259 and $2,910 for the fair value of derivative instruments and $5,675 and $5,421 for post-employment plans as of November 30, 2019 and August 31, 2019, respectively)	9,306	8,685
Total Liabilities	706,339	498,132
Stockholders' Equity:
Common stock, $0.0001 par value, 45,000,000 shares authorized; 31,474,818 and 31,461,359 shares issued and 30,612,511 and 30,538,788 shares outstanding (net of treasury shares) as of November 30, 2019 and August 31, 2019, respectively	3	3
Additional paid-in capital	440,756	443,084
Tax benefit from stock-based compensation	11,486	11,486
Accumulated other comprehensive loss	(147,524)	(144,339)
Retained earnings	545,532	525,804
Less: treasury stock at cost, 862,307 shares as of November 30, 2019 and 924,332 shares as of August 31, 2019	(33,424)	(38,687)
Total stockholders' equity attributable to PriceSmart, Inc. stockholders	816,829	797,351
Noncontrolling interest in consolidated subsidiaries	943	928
Total stockholders' equity	817,772	798,279
Total Liabilities and Equity	$ 1,524,111	$ 1,296,411

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CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Tax Benefit From Stock Based Compensation [Member]	Accumulated Other Comprehensive Loss [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Total Stockholders' Equity Attributable To PriceSmart, Inc. [Member]	Noncontrolling Interest [Member]	Total
Balance at Aug. 31, 2018	$ 3	$ 432,882	$ 11,486	$ (121,216)	$ 473,954	$ (39,107)	$ 758,002	$ 636	$ 758,638
Balance (in shares) at Aug. 31, 2018	31,373,000					912,000
Issuance of restricted stock award (in shares)	32,000
Stock-based compensation		6,046					6,046		6,046
Net income					14,612		14,612	33	14,645
Other comprehensive income (loss)				(13,246)			(13,246)	1	(13,245)
Balance at Nov. 30, 2018	$ 3	438,928	11,486	(134,462)	488,566	$ (39,107)	765,414	670	766,084
Balance (in shares) at Nov. 30, 2018	31,405,000					912,000
Balance at Aug. 31, 2018	$ 3	432,882	11,486	(121,216)	473,954	$ (39,107)	758,002	636	758,638
Balance (in shares) at Aug. 31, 2018	31,373,000					912,000
Balance at Aug. 31, 2019	$ 3	443,084	11,486	(144,339)	525,804	$ (38,687)	797,351	928	$ 798,279
Balance (in shares) at Aug. 31, 2019	31,461,000					924,000			30,538,788
Purchase of treasury stock						$ (461)	(461)		$ (461)
Purchase of treasury stock (in shares)						7,000
Issuance of treasury stock		(5,724)				$ 5,724
Issuance of treasury stock (in shares)	(69,000)					(69,000)
Issuance of restricted stock award (in shares)	85,000
Forfeiture of restricted stock awards (in shares)	(2,000)
Stock-based compensation		3,396					3,396		3,396
Net income					19,728		19,728	(19)	19,709
Other comprehensive income (loss)				(3,185)			(3,185)	34	(3,151)
Balance at Nov. 30, 2019	$ 3	$ 440,756	$ 11,486	$ (147,524)	$ 545,532	$ (33,424)	$ 816,829	$ 943	$ 817,772
Balance (in shares) at Nov. 30, 2019	31,475,000					862,000			30,612,511

XML

DEBT (Summary of Changes in Long-Term Debt) (Details)	3 Months Ended
	Nov. 30, 2019 USD ($)
Debt Instrument [Line Items]
Current portion of long-term debt	$ 25,875,000
Long-term debt (net of current portion)	63,711,000
Total	89,586,000	[1]
Regularly scheduled loan payments, Current	(947,000)
Regularly scheduled loan payments, Noncurrent	(1,889,000)
Regularly scheduled loan payments total	(2,836,000)
Reclassification of long-term debt, Current	(11,253,000)
Reclassification of long-term debt, Noncurrent	11,253,000
Reclassification of long-term debt total	0
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar, Current	51,000	[2]
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar, Noncurrent	9,000	[2]
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar total	60,000	[2]
Current portion of long-term debt	13,726,000
Long-term debt (net of current portion)	98,084,000
Total	111,810,000	[1]
Colombia Subsidiary [Member]
Debt Instrument [Line Items]
Proceeds from long-term debt incurred during the period, Noncurrent	25,000,000
Total	25,000,000
Cash Asset [Member]
Debt Instrument [Line Items]
Debt Instrument, Collateral amount	0
NonCash Asset [Member]
Debt Instrument [Line Items]
Debt Instrument, Collateral amount	$ 111,300,000

[1] The carrying amount of non-cash assets assigned as collateral for these loans was $111.3 million. No cash assets were assigned as collateral for these loans.

[2] These foreign currency translation adjustments are recorded within Other comprehensive income.

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Schedule of Notional Amounts of Outstanding Derivative Positions) (Details) - Cash Flow Hedging [Member] - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
Derivative [Line Items]
Derivative Liability, Notional Amount	$ 113,425	$ 77,769
Union Bank [Member]
Derivative [Line Items]
Derivative Liability, Notional Amount	34,850	35,169
Citibank N.A. [Member]
Derivative [Line Items]
Derivative Liability, Notional Amount	60,825	24,225
Scotiabank [Member]
Derivative [Line Items]
Derivative Liability, Notional Amount	$ 17,750	$ 18,375

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Summary of Value Added Tax Receivables) (Details) - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Value Added Tax, Prepaid expenses and other current assets	$ 3,068	$ 1,639
Value Added Tax, Other non-current assets	24,990	22,691
Total amount of VAT receivables reported	$ 28,058	$ 24,330

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Fair Value Measurements) (Narrative) (Details)	3 Months Ended
	Nov. 30, 2019 USD ($)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Non-financial asset impairment	$ 0

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REVENUE RECOGNITION

3 Months Ended

Nov. 30, 2019

REVENUE RECOGNITION [Abstract]

Revenue Recognition

NOTE 3 – REVENUE RECOGNITION

Performance Obligations

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

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

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

Membership Fee Revenue. Membership income represents annual membership fees paid by the Company’s warehouse club members, which are recognized ratably over the 12-month term of the membership.  Membership refunds are prorated over the remaining term of the membership; accordingly, no refund reserve is required to be established for the periods presented. Membership fee revenue is included in membership income in the Company's consolidated statements of income. The deferred membership fee is included in deferred income in the Company's consolidated balance sheets.

Platinum Points Reward Programs. The Company currently offers Platinum memberships in nine of its thirteen countries.  The annual fee for a Platinum membership is approximately $75. The Platinum membership provides members with a 2% rebate on most items, up to an annual maximum of $500. The rebate is issued annually to Platinum members on March 1 and expires August 31.  Platinum members can apply this rebate to future purchases at the warehouse club during the redemption period.  The Company records this 2% rebate as a reduction of revenue at the time of the sales transaction.  Accordingly, the Company has reduced warehouse sales and has accrued a liability within other accrued expenses and other current liabilities,

platinum rewards. The Company has determined that breakage revenue is 5% of the awards issued; therefore, it records 95% of the Platinum membership liability at the time of sale. Annually, the Company reviews for expired unused rebates outstanding, and the expired unused rebates are recognized as “Other revenue and income” on the consolidated statements of income.

Co-branded Credit Card Points Reward Programs.  Most of the Company’s subsidiaries have points reward programs related to Co-branded Credit Cards. These points reward programs provide incremental points that can be used at a future time to acquire merchandise within the Company’s warehouse clubs.  This results in two performance obligations, the first performance obligation being the initial sale of the merchandise or services purchased with the co-branded credit card and the second performance obligation being the future use of the points rewards to purchase merchandise or services.  As a result, upon the initial sale, the Company allocates the transaction price to each performance obligation with the amount allocated to the future use points rewards recorded as a contract liability within other accrued expenses and other current liabilities on the consolidated balance sheet. The portion of the selling price allocated to the reward points is recognized as Net merchandise sales when the points are used or when the points expire. The Company reviews on an annual basis expired points rewards outstanding, and the expired rewards are recognized as Net merchandise sales on the consolidated statements of income within markets where the co-branded credit card agreement allows for such treatment.   

Gift Cards. Members’ purchases of gift cards to be utilized at the Company's warehouse clubs are not recognized as sales until the card is redeemed and the customer purchases merchandise using the gift card. The outstanding gift cards are reflected as other accrued expenses and other current liabilities in the consolidated balance sheets. These gift cards generally have a one-year stated expiration date from the date of issuance and are generally redeemed prior to expiration.  However, the absence of a large volume of transactions for gift cards impairs the Company's ability to make a reasonable estimate of the redemption levels for gift certificates; therefore, the Company assumes a 100% redemption rate prior to expiration of the gift certificate. The Company periodically reviews unredeemed outstanding gift certificates, and the gift certificates that have expired are recognized as “Other revenue and income” on the consolidated statements of income.

Co-branded Credit Card Revenue Sharing Agreements. As part of the co-branded credit card agreements that the Company has entered into with financial institutions within its markets, the Company often enters into revenue sharing agreements. As part of these agreements, in some countries, the Company receives a portion of the interest income generated from the average outstanding balances on the co-branded credit cards from these financial institutions (“interest generating portfolio” or “IGP”).   The Company recognizes its portion of interest received as revenue.  As a result of the adoption of ASC 606, the Company has determined that this revenue should be recognized as “Other revenue and income” on the consolidated statements of income.

Contract Performance Liabilities

Contract performance liabilities as a result of transactions with customers primarily consist of deferred membership income, other deferred income, deferred gift card revenue, Platinum points programs, and liabilities related to co-branded credit card points rewards programs which are included in deferred income and other accrued expenses and other current liabilities in the Company’s consolidated balance sheets. The following table provides these contract balances from transactions with customers as of the dates listed (in thousands):

	Contract Liabilities
	November 30, 2019		August 31, 2019
Deferred membership income	$	24,599	$	24,901
Other contract performance liabilities	$	6,397	$	4,048

Disaggregated Revenues

In the following table, net merchandise sales are disaggregated by merchandise category (in thousands):

		Three Months Ended
		November 30, 2019		November 30, ‎2018
Foods & Sundries	$	392,805	$	376,328
Fresh Foods		215,238		200,705
Hardlines		90,804		92,154
Softlines		40,324		40,481
Other Business		39,557		37,775
Net Merchandise Sales	$	778,728	$	747,443

 

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DEBT

3 Months Ended

Nov. 30, 2019

DEBT [Abstract]

DEBT

NOTE 7 – DEBT

Short-term borrowings consist of unsecured lines of credit. The following table summarizes the balances of total facilities, facilities used and facilities available (in thousands):

			Facilities Used
	Total Amount		Short-term		Letters of		Facilities		Weighted average
	of Facilities		Borrowings		Credit		Available		interest rate
November 30, 2019	$	69,000	$	23,018	$	534	$	45,448	4.8	%
August 31, 2019	$	69,000	$	7,540	$	486	$	60,974	6.1	%

As of November 30, 2019 and August 31, 2019, the Company had approximately $40.0 million of short-term facilities in the U.S. that require compliance with certain quarterly financial covenants. As of November 30, 2019 and August 31, 2019, the Company was in compliance with respect to these covenants. Each of the facilities expires annually except for the U.S. facility, which expires bi-annually. The facilities are normally renewed.

The following table provides the changes in long-term debt for the three-months ended November 30, 2019:

(Amounts in thousands)	Current ‎portion of ‎long-term debt		Long-term ‎debt (net of current portion)		Total
Balances as of August 31, 2019	$	25,875	$	63,711	$	89,586	(1)
Proceeds from long-term debt incurred during the period:
Colombia subsidiary		—		25,000		25,000
Regularly scheduled loan payments		(947)		(1,889)		(2,836)
Reclassifications of short-term debt		(11,253)		11,253		(0)
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar (2)		51		9		60
Balances as of November 30, 2019	$	13,726	$	98,084	$	111,810	(1)

⁽¹⁾The carrying amount of non-cash assets assigned as collateral for these loans was $111.3 million. No cash assets were assigned as collateral for these loans.

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

As of November 30, 2019, the Company had approximately $105.9 million of long-term loans in several foreign subsidiaries that require these subsidiaries to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. As of November 30, 2019, the Company was in compliance with all covenants or amended covenants.

As of August 31, 2019, the Company had approximately $83.1 million of long-term loans in several foreign subsidiaries that require these subsidiaries to comply with certain annual or quarterly financial covenants.

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

Twelve Months Ended November 30,	Amount
2020	$	13,726
2021		13,348
2022		10,211
2023		21,341
2024		20,771
Thereafter		32,413
Total	$	111,810

 

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SUBSEQUENT EVENTS

3 Months Ended

Nov. 30, 2019

SUBSEQUENT EVENTS [Abstract]

SUBSEQUENT EVENTS

NOTE 11 – SUBSEQUENT EVENTS

The Company has evaluated all events subsequent to the balance sheet date of November 30, 2019 through the date of issuance of these consolidated financial statements and has determined that, except as set forth below, there are no subsequent events that require disclosure.

Financing Transactions

On December 3, 2019, the Company’s Colombia subsidiary refinanced its existing balloon payment on the original $15.0 million U.S. dollar denominated contractual debt. Upon refinance, the Colombia subsidiary entered into a five year cross currency interest rate swap. The swap contract states that the Company will receive interest based on the three-month LIBOR rate plus 2.45% on a quarterly amortizing initial notional value of $7.9 million and pay fixed interest of approximately 7.9% on a quarterly amortizing initial notional value of $7.9 million.

On December 6, 2019, the Company's Guatemala subsidiary entered into a long-term loan agreement for 160.0 million Guatemalan quetzales, or approximately $20.0 million in U.S. dollars, which is to be repaid in ten years with monthly interest and principal payments beginning in the second year of the loan. The interest rate is fixed at 7.0% for the first five year period and the loan was funded on December 10, 2019.

 

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EARNINGS PER SHARE (Tables)

3 Months Ended

Nov. 30, 2019

EARNINGS PER SHARE [Abstract]

Schedule of the Computation of Net Income Per Share

	Three Months Ended
	November 30,		November 30,
	2019		2018
Net income attributable to PriceSmart, Inc.	$	19,728	$	14,612
Less: Allocation of income to unvested stockholders		(258)		(193)
Net income attributable to PriceSmart, Inc. per share available for distribution	$	19,470	$	14,419
Basic weighted average shares outstanding		30,277		30,172
Add dilutive effect of performance stock units (two-class method)		7		17
Diluted average shares outstanding		30,284		30,189
Basic net income per share	$	0.64	$	0.48
Diluted net income per share	$	0.64	$	0.48

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables)

3 Months Ended

Nov. 30, 2019

Cash Flow Hedging [Member]

Derivative [Line Items]

Schedule of Interest Rate Derivatives

Subsidiary	Date ‎Entered ‎into	Derivative ‎Financial ‎Counter- ‎party	Derivative ‎Financial ‎Instruments	Initial ‎US$ ‎Notional ‎Amount		Bank ‎US$ ‎loan  ‎Held ‎with	Floating Leg ‎(swap ‎counter-party)	Fixed Rate ‎for PSMT ‎Subsidiary		Settlement ‎Dates	Effective ‎Period of swap
Colombia	27-Nov-19	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	25,000,000	Citibank, N.A.	Variable rate 3-month Libor plus 2.45%	7.93	%	27th day of November, February, May and August beginning February 27, 2020	November 27, 2019 - ‎November 27, 2024
Colombia	24-Sep-19	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	12,500,000	PriceSmart, Inc.	Variable rate 3-month Libor plus 2.50%	7.09	%	24th day of December, March, June and September beginning December 24, 2019	September 24, 2019 - ‎September 26, 2022
Panama	25-Jun-18	Bank of Nova Scotia ("Scotiabank")	Interest rate swap	$	14,625,000	Bank of Nova Scotia	Variable rate 3-month Libor plus 3.0%	5.99	%	23rd day of each month beginning on July 23, 2018	June 25, 2018 - ‎March 23, 2023
Honduras	26-Feb-18	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	13,500,000	Citibank, N.A.	Variable rate 3-month Libor plus 3.00%	9.75	%	29th day of May, August, November and February beginning May 29, 2018	February 26, 2018 - ‎February 24, 2024
PriceSmart, Inc	7-Nov-16	MUFG Union Bank, N.A. ("Union Bank")	Interest rate swap	$	35,700,000	Union Bank	Variable rate 1-month Libor plus 1.7%	3.65	%	1st day of each month beginning on April 1, 2017	March 1, 2017 - ‎March 1, 2027
Costa Rica	28-Aug-15	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	7,500,000	Citibank, N.A.	Variable rate 3-month Libor plus 2.50%	7.65	%	28th day of August, November, February, and May beginning on November 30, 2015	August 28, 2015 - ‎August 28, 2020
Colombia	10-Dec-14	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	15,000,000	Citibank, N.A.	Variable rate 3-month Libor plus 2.8%	8.25	%	4th day of March, June, Sept, Dec. beginning on March 4, 2015	December 4, 2014 - ‎December 3, 2019

Interest Rate Swaps [Member] | Cash Flow Hedging [Member]

Derivative [Line Items]

Schedule of Notional Amounts of Outstanding Derivative Positions

	Notional Amount as of
	November 30,		August 31,
Floating Rate Payer (Swap Counterparty)	2019		2019
Union Bank	$	34,850	$	35,169
Citibank N.A.		60,825		24,225
Scotiabank		17,750		18,375
Total	$	113,425	$	77,769

Derivative Swaps [Member] | Cash Flow Hedging [Member]

Derivative [Line Items]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

		November 30, 2019						August 31, 2019
Derivatives designated as cash flow hedging instruments	Balance Sheet Classification	Fair ‎Value		Net Tax ‎Effect		Net ‎OCI		Fair ‎Value		Net Tax ‎Effect		Net ‎OCI
Cross-currency interest rate swaps	Other non-current assets	$	436	$	(144)	$	292	$	—	$	—	$	—
Cross-currency interest rate swaps	Other current assets		2,747		(906)		1,841		2,736		(903)		1,833
Interest rate swaps	Other long-term liabilities		(1,429)		344		(1,085)		(2,178)		517		(1,661)
Cross-currency interest rate swaps	Other long-term liabilities		(580)		174		(406)		(732)		220		(512)
Cross-currency interest rate swaps	Other current liabilities		(60)		18		(42)		—		—		—
Net fair value of derivatives designated as hedging instruments		$	1,114	$	(514)	$	600	$	(174)	$	(166)	$	(340)

Derivative Swaps [Member] | Cash Flow Hedging [Member] | Interest Expense [Member]

Derivative [Line Items]

Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location

Income Statement Classification	Interest ‎expense on ‎borrowings(1)		Cost of ‎swaps (2)		Total
Interest expense for the three months ended November 30, 2019	$	1,014	$	261	$	1,275
Interest expense for the three months ended November 30, 2018	$	1,160	$	167	$	1,327

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

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

Not Designated as Hedging Instrument [Member] | Other Instruments [Member]

Derivative [Line Items]

Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location

		Three Months Ended
		November 30,	November 30,
Income Statement Classification		2019	2018
Other expense, net	$	(1,270)	$	—

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

	November 30, 2019			August 31, 2019
Non-designated derivative contracts	Balance Sheet ‎Location	Fair Value		Balance Sheet ‎Location	Fair Value
Net fair value of other non-designated derivative contracts that do not qualify for hedge accounting	Other long-term liabilities	$	(1,250)	Other long-term liabilities	$	—

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LEASES (Summary of Components of Total Lease Costs) (Details) $ in Thousands	3 Months Ended
	Nov. 30, 2019 USD ($)
LEASES [Abstract]
Operating lease cost	$ 4,221
Short-term lease cost	53
Variable lease cost	1,081
Sublease income	(289)
Total lease costs	$ 5,066

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SUBSEQUENT EVENTS (Narrative) (Details) Q in Millions		Dec. 06, 2019 USD ($)	Dec. 06, 2019 GTQ (Q)	Dec. 03, 2019 USD ($)	Nov. 30, 2019 USD ($)	Aug. 31, 2019 USD ($)
Subsequent Event [Line Items]
Total long-term loans	[1]				$ 111,810,000	$ 89,586,000
Subsequent Event [Member] | Guatemala Subsidiary [Member]
Subsequent Event [Line Items]
Total long-term loans		$ 20,000,000.0	Q 160.0
Debt term		10 years
Interest rate		7.00%	7.00%
Subsequent Event [Member] | First Period Of Loan [Member] | Guatemala Subsidiary [Member]
Subsequent Event [Line Items]
Debt term		5 years
Cash Flow Hedging [Member] | Colombia $15M Cross Currency Interest Rate Swap [Member]
Subsequent Event [Line Items]
Derivative, Notional amount					$ 15,000,000
Debt instrument, Basis spread on variable rate					2.80%
Derivative, Fixed interest rate					8.25%
Cash Flow Hedging [Member] | Subsequent Event [Member] | Colombia 5 Year Cross Currency Interest Rate Swap [Member]
Subsequent Event [Line Items]
Derivative, Notional amount				$ 7,900,000
Debt instrument, Basis spread on variable rate				2.45%
Derivative, Fixed interest rate				7.90%

[1] The carrying amount of non-cash assets assigned as collateral for these loans was $111.3 million. No cash assets were assigned as collateral for these loans.

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STOCKHOLDERS' EQUITY (Summary of Retained Earnings Not Available for Distribution) (Details) - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
STOCKHOLDERS' EQUITY [Abstract]
Retained earnings not available for distribution	$ 7,926	$ 7,843

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REVENUE RECOGNITION (Disaggregated Revenues) (Details) - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Disaggregation of Revenue [Line Items]
Net Merchandise Sales	$ 778,728	$ 747,443
Foods And Sundries [Member]
Disaggregation of Revenue [Line Items]
Net Merchandise Sales	392,805	376,328
Fresh Foods [Member]
Disaggregation of Revenue [Line Items]
Net Merchandise Sales	215,238	200,705
Hardlines [Member]
Disaggregation of Revenue [Line Items]
Net Merchandise Sales	90,804	92,154
Softlines [Member]
Disaggregation of Revenue [Line Items]
Net Merchandise Sales	40,324	40,481
Other Business [Member]
Disaggregation of Revenue [Line Items]
Net Merchandise Sales	$ 39,557	$ 37,775

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STOCKHOLDERS' EQUITY (Tables)

3 Months Ended

Nov. 30, 2019

STOCKHOLDERS' EQUITY [Abstract]

Schedule of Dividends

			First Payment				Second Payment
Declared	Amount		Record ‎Date	Date ‎Paid	Amount		Record ‎Date	Date ‎Paid	Amount
1/30/2019	$	0.70	2/15/2019	2/28/2019	$	0.35	8/15/2019	8/30/2019	$	0.35

Schedule of Components of Other Comprehensive Income (Loss)

	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2019	$	(144,339)	$	20	$	(144,319)
Foreign currency translation adjustments		(3,724)		34		(3,690)
Defined benefit pension plans		26		—		26
Derivative instruments (1)		513		—		513
Ending balance, November 30, 2019	$	(147,524)	$	54	$	(147,470)

	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2018	$	(121,216)	$	(1)	$	(121,217)
Foreign currency translation adjustments		(13,397)		(1)		(13,398)
Defined benefit pension plans		28		—		28
Derivative Instruments (1)		123		—		123
Ending balance, November 30, 2018	$	(134,462)	$	(2)	$	(134,464)

	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2018	$	(121,216)	$	(1)	$	(121,217)
Foreign currency translation adjustments		(19,717)		21		(19,696)
Defined benefit pension plans		(112)		—		(112)
Derivative Instruments (1)		(3,369)		—		(3,369)
Amounts reclassified from accumulated other comprehensive income (loss) (2)		75		—		75
Ending balance, August 31, 2019	$	(144,339)	$	20	$	(144,319)

⁽¹⁾See Note 8 - Derivative Instruments and Hedging Activities.

⁽²⁾Amounts reclassified from accumulated other comprehensive loss related to the minimum pension liability are included in warehouse club and other operations in the Company's consolidated statements of income.

Summary of Retained Earnings Not Available for Distribution

	November 30,		August 31,
	2019		2019
Retained earnings not available for distribution	$	7,926	$	7,843

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SEGMENTS (Tables)

3 Months Ended

Nov. 30, 2019

SEGMENTS [Abstract]

Summary of Segment Revenues, Operating Costs and Balance Sheet Items

	United ‎States ‎Operations		Central ‎American ‎Operations		Caribbean ‎ Operations (1)		Colombia Operations		Reconciling ‎Items(2)		Total
Three Months Ended November 30, 2019
Revenue from external customers	$	17,339	$	466,802	$	235,017	$	92,783	$	—	$	811,941
Intersegment revenues		349,950		4,045		1,202		536		(355,733)		—
Depreciation, Property and equipment		1,348		6,882		3,966		2,018		—		14,214
Amortization, Intangibles		599		—		—				—		599
Operating income		2,587		31,700		11,810		4,524		(19,907)		30,714
Net income (loss) attributable to PriceSmart, Inc.		(724)		26,751		10,318		3,271		(19,888)		19,728
Long-lived assets (other than deferred tax assets) (3)		84,117		471,366		177,742		143,818		—		877,043
Intangibles, net		11,977		—		—		—		—		11,977
Goodwill		10,695		24,532		10,198		—		—		45,425
Total assets		168,375		754,364		369,575		231,797		—		1,524,111
Capital expenditures, net		629		15,243		4,520		20,834		—		41,226
Three Months Ended November 30, 2018
Revenue from external customers	$	17,339	$	439,806	$	225,009	$	97,483	$	—	$	779,637
Intersegment revenues		350,719		437		1,093		278		(352,527)		—
Depreciation, Property and equipment		1,960		5,870		3,191		2,103		—		13,124
Amortiazation, Intangibles		599		—		—		—		—		599
Operating income (loss)		(1,050)		28,792		12,027		3,416		(18,515)		24,670
Net income (loss) attributable to PriceSmart, Inc.		(3,825)		24,185		9,985		2,815		(18,548)		14,612
Long-lived assets (other than deferred tax assets)(3)		90,061		320,136		149,823		110,969		—		670,989
Intangibles, net		14,381		—		—		—		—		14,381
Goodwill		11,230		24,726		10,292		—		—		46,248
Total assets		158,591		592,114		346,397		180,141		—		1,277,243
Capital expenditures, net		1,686		22,771		10,495		1,387		—		36,339
As of August 31, 2019
Long-lived assets (other than deferred tax assets)	$	65,278	$	383,665	$	165,584	$	115,838	$	—	$	730,365
Intangibles, net		12,576		—		—		—		—		12,576
Goodwill		11,315		24,593		10,193		—		—		46,101
Total assets		161,583		614,579		340,216		180,033		—		1,296,411

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

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

⁽³⁾Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the Long-lived assets (other than deferred tax assets) as of November 30, 2019 is not comparable with that as of November 30, 2018 and August 31, 2019.

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LEASES (Weighted Average Remaining Lease Term and Weighted Average Discount Rate) (Details)	Nov. 30, 2019
LEASES [Abstract]
Weighted average remaining lease term in years	19 years 2 months 12 days
Weighted average discount rate percentage	6.50%

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STOCKHOLDERS' EQUITY (Schedule of Components of Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands		3 Months Ended		12 Months Ended
		Nov. 30, 2019	Nov. 30, 2018	Aug. 31, 2019
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance, Attributable to PriceSmart		$ 797,351
Other comprehensive income (loss), Attributable to PriceSmart		(3,151)	$ (13,245)
Balance, Attributable to PriceSmart		816,829		$ 797,351
Balance		798,279	758,638	758,638
Other comprehensive income (loss)		(3,185)	(13,246)
Balance		817,772	766,084	798,279
Accumulated Other Comprehensive Loss [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance, Attributable to PriceSmart		(144,339)	(121,216)	(121,216)
Other comprehensive income (loss), Attributable to PriceSmart		(3,185)	(13,246)
Balance, Attributable to PriceSmart		(147,524)	(134,462)	(144,339)
Balance		(144,339)	(121,216)	(121,216)
Balance		(147,524)	(134,462)	(144,339)
Foreign Currency Translation Adjustments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss), Attributable to PriceSmart		(3,724)	(13,397)	(19,717)
Defined Benefit Pension Plans [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss), Attributable to PriceSmart		26	28	(112)
Derivative Instruments [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss), Attributable to PriceSmart	[1]	513	123	(3,369)
Reclassification From Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Amount reclassified from accumulated other comprehensive income (loss), Attributable to PriceSmart	[2]			75
AOCI Attributable to Noncontrolling Interest [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance		20	(1)	(1)
Balance		54	(2)	20
Accumulated Foreign Currency Adjustment Attributable to Noncontrolling Interest [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss)		34	(1)	21
AOCI Including Portion Attributable to Noncontrolling Interest [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance		(144,319)	(121,217)	(121,217)
Balance		(147,470)	(134,464)	(144,319)
Accumulated Foreign Currency Adjustment Including Portion Attributable to Noncontrolling Interest [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss)		(3,690)	(13,398)	(19,696)
Accumulated Defined Benefit Plans Adjustment Including Portion Attributable to Noncontrolling Interest [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss)		26	28	(112)
Accumulated Derivative Instruments Including Portion Attributable To Noncontrolling Interest [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other comprehensive income (loss)	[1]	$ 513	$ 123	(3,369)
Reclassification From Other Comprehensive Income (Loss) Including Portion Attributable To Noncontrolling Interest [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Amounts reclassified from accumulated other comprehensive income (loss)	[2]			$ 75

[1] See Note 8 - Derivative Instruments and Hedging Activities.

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

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REVENUE RECOGNITION (Contract Performance Liabilities) (Details) - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
Deferred Membership Income [Member]
Contract with Customer, Asset and Liability [Line Items]
Contract Liabilities	$ 24,599	$ 24,901
Other Contract Performance Liabilities [Member]
Contract with Customer, Asset and Liability [Line Items]
Contract Liabilities	$ 6,397	$ 4,048

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DEBT (Schedule of Annual Maturities of Long-Term Debt) (Details) - USD ($) $ in Thousands		Nov. 30, 2019	Aug. 31, 2019
DEBT [Abstract]
2020		$ 13,726
2021		13,348
2022		10,211
2023		21,341
2024		20,771
Thereafter		32,413
Total	[1]	$ 111,810	$ 89,586

[1] The carrying amount of non-cash assets assigned as collateral for these loans was $111.3 million. No cash assets were assigned as collateral for these loans.

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Schedule of Derivative Instruments in Statement of Financial Position, Fair Value) (Details) - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
Derivative [Line Items]
Derivative Asset, Noncurrent	$ 436	$ 0
Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative Asset, Noncurrent	1,114
Derivative Liability, Noncurrent		(174)
Net Tax Effect	(514)	(166)
Net OCI	600	(340)
Cross Currency Interest Rate Swaps [Member] | Other Non-current Assets [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative Asset, Noncurrent	436
Net Tax Effect	(144)
Net OCI	292
Cross Currency Interest Rate Swaps [Member] | Other Current Assets [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative Asset, Current	2,747	2,736
Net Tax Effect	(906)	(903)
Net OCI	1,841	1,833
Cross Currency Interest Rate Swaps [Member] | Other Long-term Liabilities [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative Liability, Noncurrent	(580)	(732)
Net Tax Effect	174	220
Net OCI	(406)	(512)
Cross Currency Interest Rate Swaps [Member] | Other Current Liabilities [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative Liability, Current	(60)
Net Tax Effect	18
Net OCI	(42)
Interest Rate Swaps [Member] | Other Long-term Liabilities [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative Liability, Noncurrent	(1,429)	(2,178)
Net Tax Effect	344	517
Net OCI	(1,085)	$ (1,661)
Other Instruments [Member] | Other Long-term Liabilities [Member] | Not Designated as Hedging Instrument [Member]
Derivative [Line Items]
Net OCI	$ (1,250)

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
CONSOLIDATED BALANCE SHEETS [Abstract]
Receivables, net of allowance for doubtful accounts	$ 125	$ 144
Prepaid expenses and other current assets, fair value of derivative instruments	2,747	2,736
Other non-current assets, fair value of derivative instruments	436	0
Other non-current assets, fair value of foreign currency forward contracts	127	0
Other long-term liabilities, fair value of derivative instruments	3,259	2,910
Other long-term liabilities, post-employment plans	$ 5,675	$ 5,421
Common stock, par value per share	$ 0.0001	$ 0.0001
Common stock, shares authorized	45,000,000	45,000,000
Common stock, shares issued	31,474,818	31,461,359
Common stock, shares outstanding	30,612,511	30,538,788
Treasury stock, shares	862,307	924,332

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Operating Activities:
Net income	$ 19,709	$ 14,645
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,814	13,723
Allowance for doubtful accounts	(19)	7
Loss on sale of property and equipment	71	215
Deferred income taxes	(1,234)	316
Equity in losses of unconsolidated affiliates	48	24
Stock-based compensation	3,396	6,046
Change in operating assets and liabilities:
Receivables, prepaid expenses and other current assets, non-current assets, accrued salaries and benefits, deferred membership income and other accruals	(9,762)	(6,200)
Merchandise inventories	(56,799)	(59,054)
Accounts payable	45,880	55,985
Net cash provided by operating activities	16,104	25,707
Investing Activities:
Additions to property and equipment	(37,582)	(35,673)
Short-term investments	(10,184)	(6,190)
Proceeds from settlements of short-term investments	2,066	12,406
Proceeds from disposal of property and equipment	13	93
Net cash used in investing activities	(45,687)	(29,364)
Financing Activities:
Proceeds from long-term bank borrowings	25,000
Repayment of long-term bank borrowings	(2,836)	(3,463)
Proceeds from short-term bank borrowings	81,202
Repayment of short-term bank borrowings	(65,581)
Other financing activities	19	(33)
Purchase of treasury stock	(461)
Net cash provided by (used in) financing activities	37,343	(3,496)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	1,117	(1,375)
Net increase (decrease) in cash, cash equivalents	8,877	(8,528)
Cash, cash equivalents, and restricted cash at beginning of period	106,236	96,914
Cash, cash equivalents, and restricted cash at end of period	115,113	88,386
Supplemental disclosure of noncash investing activities:
Capital expenditures incurred but not yet paid	10,282	2,148
Reconciliation of cash, cash equivalents, and restricted cash:
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$ 115,113	$ 88,386

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Summary of Restricted Cash) (Details) - USD ($) $ in Thousands		Nov. 30, 2019	Aug. 31, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Restricted cash for land purchase option agreements		$ 50	$ 50
Other short-term restricted cash		15	4
Total short-term restricted cash		65	54
Other long-term restricted cash	[1]	3,689	3,529
Total long-term restricted cash		3,689	3,529
Total restricted cash		$ 3,754	$ 3,583

[1] Other long-term restricted cash consists mainly of cash deposits held within banking institutions in compliance with federal regulatory requirements in Costa Rica and Panama.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Treasury Stock) (Narrative) (Details)	3 Months Ended
	Nov. 30, 2019 shares
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Reissued treasury shares	69,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy)

3 Months Ended

Nov. 30, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Principles of Consolidation

Principles of Consolidation – The interim consolidated financial statements of the Company included herein include the assets, liabilities and results of operations of the Company’s wholly owned subsidiaries, subsidiaries in which it has a controlling interest, and the Company’s joint ventures for which the Company has determined that it is the primary beneficiary. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. The Company’s net income excludes income attributable to its noncontrolling interests. Additionally, the consolidated financial statements also include the Company's investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. All significant inter-company accounts and transactions have been eliminated in consolidation. The interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the SEC and reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows for the periods presented. The results for interim periods are not necessarily indicative of the results for the year.

The Company determines whether any of the joint ventures in which it has made investments is a Variable Interest Entity (“VIE”) at the start of each new venture and if a reconsideration event has occurred. At this time, the Company also considers whether it must consolidate a VIE and/or disclose information about its involvement in a VIE. A reporting entity must consolidate a VIE if that reporting entity has a variable interest (or combination of variable interests) that will absorb a majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. A reporting entity must consider the rights and obligations conveyed by its variable interests and the relationship of its variable interests with variable interests held by other parties to determine whether its variable interests will absorb a majority of a VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. If the Company determines that it is not the primary beneficiary of the VIE, then the Company records its investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. Due to the nature of the joint ventures that the Company participates in and the continued commitments for additional financing, the Company determined these joint ventures are VIEs.

The Company has determined that for its ownership interest in store-front joint ventures within its marketplace and casillero business, the Company has the power to direct the activities that most significantly impact the economic performance of these VIEs. Therefore, the Company has determined that it is the primary beneficiary of these VIEs and has consolidated these entities within its consolidated financial statements. The Company's ownership interest in store-front joint ventures for which the Company has consolidated their financial statements as of November 30, 2019 are listed below:

Marketplace and Casillero Store-front Joint Ventures	Countries	Ownership		Basis of ‎Presentation
Guatemala	Guatemala	60.0	%	Consolidated
Tortola	British Virgin Islands	50.0	%	Consolidated
Trinidad	Trinidad	50.0	%	Consolidated

In the case of the Company's ownership interest in real estate development joint ventures, both parties to each joint venture share all rights, obligations and the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. As a result, the Company has determined that it is not the primary beneficiary of the VIEs and, therefore, has accounted for these entities under the equity method. Under the equity method, the Company's investments in unconsolidated affiliates are initially recorded as an investment in the stock of an investee at cost and are adjusted for the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of the initial investment. The Company's ownership interest in real estate development joint ventures the Company has recorded under the equity method as of November 30, 2019 are listed below:

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

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

Use of Estimates

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

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

Restricted Cash

Restricted Cash – The changes in restricted cash are disclosed within the consolidated statement of cash flows based on the nature of the restriction. The following table summarizes the restricted cash reported by the Company (in thousands):

	November 30,		August 31,
	2019		2019
Short-term restricted cash:
Restricted cash for land purchase option agreements	$	50	$	50
Other short-term restricted cash		15		4
Total short-term restricted cash	$	65	$	54
Long-term restricted cash:
Other long-term restricted cash (1)	$	3,689	$	3,529
Total long-term restricted cash	$	3,689	$	3,529
Total restricted cash	$	3,754	$	3,583

⁽¹⁾Other long-term restricted cash consists mainly of cash deposits held within banking institutions in compliance with federal regulatory requirements in Costa Rica and Panama.

Short-Term Investments

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

Goodwill and Other Intangibles, net

Goodwill and Other Intangibles, net – Goodwill and other intangibles totaled $57.4 million as of November 30, 2019 and $58.7 million as of August 31, 2019.  The Company reviews reported goodwill and other intangibles at the cash-generating unit level for impairment. The Company tests Goodwill for impairment at least annually or when events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

Tax Receivables

Tax Receivables – The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of the Company’s business in most of the countries in which the Company operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, then the difference is remitted to the government, usually on a monthly basis. If the input VAT exceeds the output VAT, this creates a VAT receivable. In most countries where the Company operates, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit card directly to the government as advance payments of VAT and/or income tax. In the case of VAT, these procedures alter the natural offset of input and output VAT and generally leave us with a net VAT receivable, forcing us to process significant refund claims on a recurring basis. With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due, this creates an income tax receivable. The Company either requests a refund of these tax receivables or applies the balance to expected future tax payments. These refund or offset processes can take anywhere from several months to several years to complete.

In most countries where the Company operates, there are defined and structured processes to recover VAT receivables via refunds or offsets. However, in one country without a clearly defined refund process, the Company is actively engaged with the local government to recover VAT receivables totaling $6.2 million and $5.1 million as of November 30, 2019 and August 31, 2019, respectively. In two other countries, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.7 million and $7.8 million and deferred tax assets of $2.7 million as of November 30, 2019 and August 31, 2019 in these countries. While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

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

Short-term VAT and Income tax receivables, recorded as Other current assets: This classification is used for any countries where the Company’s subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. The Company also classifies as short-term any approved refunds or credit notes to the extent that the Company expects to receive the refund or use the credit notes within one year.

Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where the Company’s subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when the Company does not expect to eventually prevail in its recovery. The Company does not currently have any allowances provided against VAT and income tax receivables.

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

	November 30,		August 31,
	2019		2019
Prepaid expenses and other current assets	$	3,068	$	1,639
Other non-current assets		24,990		22,691
Total amount of VAT receivables reported	$	28,058	$	24,330

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

	November 30,		August 31,
	2019		2019
Prepaid expenses and other current assets	$	10,065	$	9,009
Other non-current assets		19,654		16,381
Total amount of Income tax receivables reported	$	29,719	$	25,390

Lease Accounting

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

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

The Company measures Right-of-use (“ROU”) assets based on the corresponding lease liabilities, adjusted for any initial direct costs and prepaid lease payments made to the lessor before or at the commencement date (net of lease incentives). The lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are not included in the calculation of the ROU asset and the related lease liability and are recognized as this lease expense is incurred. The Company’s variable lease payments generally relate to amounts the Company pays for additional contingent rent based on a contractually stipulated percentage of sales.

Merchandise Inventories

 

Merchandise Inventories – Merchandise inventories, which include merchandise for resale, are valued at the lower of cost (average cost) or net realizable value. The Company provides for estimated inventory losses and obsolescence between physical inventory counts on the basis of a percentage of sales. The provision is adjusted periodically to reflect the trend of actual physical inventory count results, with physical inventories occurring primarily in the second and fourth fiscal quarters. In addition, the Company may be required to take markdowns below the carrying cost of certain inventory to expedite the sale of such merchandise.

Stock Based Compensation

Stock Based Compensation – The Company utilizes three types of equity awards: restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance based restricted stock units (“PSUs”). Compensation related to RSAs, RSUs and PSUs is based on the fair market value at the time of grant. The Company recognizes the compensation cost related to RSAs and RSUs over the requisite service period as determined by the grant, amortized ratably or on a straight-line basis over the life of the grant. The Company also recognizes compensation cost for PSUs over the performance period. The Company assesses the probability of vesting for awards with performance conditions and adjusts compensation cost based on the probability that performance metrics will be achieved. If the Company determines that an award is unlikely to vest, any previously recorded expense is then reversed.

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

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

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

Treasury Stock

Treasury Stock – Shares of common stock repurchased by the Company are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in the Company’s consolidated balance sheets.  The Company may reissue these treasury shares as part of its stock-based compensation programs.  When treasury shares are reissued, the Company uses the first in/first out (“FIFO”) cost method for determining cost of the reissued shares.  If the issuance price is higher than the cost, the excess of the issuance price over the cost is credited to additional paid-in capital (“APIC”).  If the issuance price is lower than the cost, the difference is first charged against any credit balance in APIC from treasury stock and the balance is charged to retained earnings. During the three months ended November 30, 2019, the Company reissued approximately 69,000 treasury shares.

Fair Value Measurements

Fair Value Measurements – The Company measures the fair value for all financial and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring or nonrecurring basis. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor.

The Company has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring and revaluing fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company was not required to revalue any assets or liabilities utilizing Level 1 or Level 3 inputs at the balance sheet dates. The Company's Level 2 assets and liabilities revalued at the balance sheet dates, on a recurring basis, consisted of cash flow hedges (interest rate swaps and cross-currency interest rate swaps), written foreign currency call options, and forward foreign exchange contracts. In addition, the Company utilizes Level 2 inputs in determining the fair value of long-term debt. The Company did not make any significant transfers in and out of Level 1 and Level 2 fair value tiers during the periods reported on herein.

Non-financial assets and liabilities are revalued and recognized at fair value subsequent to initial recognition when there is evidence of impairment. For the periods reported, no impairment of such non-financial assets was recorded.

The Company’s current and long-term financial assets and liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums and debt issuance costs. There have been no significant changes in fair market value of the Company’s current and long-term financial assets, and there have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities as disclosed in the Company’s 2019 Form 10-K.

Derivatives Instruments and Hedging Activities

Derivatives Instruments and Hedging Activities – The Company uses derivative financial instruments for hedging and non-trading purposes to manage its exposure to changes in interest and currency exchange rates. In using derivative financial instruments for the purpose of hedging the Company’s exposure to interest and currency exchange rate risks, the contractual terms of a hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts that are effective at meeting the risk reduction and correlation criteria (effective hedge) are recorded using hedge accounting. If a derivative financial instrument is an effective hedge, changes in the fair value of the instrument will be reported in accumulated other comprehensive loss until the hedged item completes its contractual term. Instruments that do not meet the criteria for hedge accounting, or contracts for which the Company has not elected hedge accounting, are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company did not change valuation techniques utilized in the fair value measurement of assets and liabilities presented on the Company’s consolidated balance sheets from previous practice during the reporting period. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance, however, that this practice effectively mitigates counterparty risk.

Cash Flow Instruments. The Company is a party to receive floating interest rate, pay fixed-rate interest rate swaps to hedge the interest rate risk of certain U.S. dollar denominated debt within its international subsidiaries. The swaps are designated as cash flow hedges of interest expense risk. These instruments are considered effective hedges and are recorded using hedge accounting. The Company is also a party to receive variable interest rate, pay fixed interest rate cross-currency interest rate swaps to hedge the interest rate and currency exposure associated with the expected payments of principal and interest of U.S. denominated debt within its international subsidiaries whose functional currency is other than the U.S. dollar. The swaps are designated as cash flow hedges of the currency risk and interest-rate risk related to payments on the U.S. denominated debt. These instruments are also considered to be effective hedges and are recorded using hedge accounting. Under cash flow hedging, the entire gain or loss of the derivative, calculated as the net present value of the future cash flows, is reported on the consolidated balance sheets in accumulated other comprehensive loss. Amounts recorded in accumulated other comprehensive loss are released to earnings in the same period that the hedged transaction impacts consolidated earnings. See Note 8 - Derivative Instruments and Hedging Activities for information on the fair value of interest rate swaps and cross-currency interest rate swaps as of November 30, 2019 and August 31, 2019.

Fair Value Instruments. The Company is exposed to foreign currency exchange rate fluctuations in the normal course of business. This includes exposure to foreign currency exchange rate fluctuations on U.S. dollar denominated liabilities within the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts that are intended to offset changes in cash flows attributable to currency exchange movements. The contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. Currently, these contracts are treated for accounting purposes as fair value instruments and do not qualify for derivative hedge accounting, and as such the Company does not apply derivative hedge accounting to record these transactions. As a result, these contracts are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company seeks to mitigate foreign currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features and are limited to less than one year in duration.

Other Instruments. Other derivatives not designated as hedging instruments consist primarily of written call options in which the Company receives a premium that it uses to reduce the costs associated with its hedging activities. For derivative instruments not designated as hedging instruments, the Company recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Other expense, net in the consolidated statements of income in the period of change.

Revenue Recognition

Revenue Recognition – The accounting policies and other disclosures such as the disclosure of disaggregated revenues are described in Note 3 – Revenue Recognition.

Insurance Reimbursements

Insurance Reimbursements – Receipts from insurance reimbursements up to the amount of the losses recognized are considered recoveries. These recoveries are accounted for when they are probable of receipt. Insurance recoveries are not

recognized prior to the recognition of the related cost. Anticipated proceeds in excess of the amount of loss recognized are considered gains and are subject to gain contingency guidance. Anticipated proceeds in excess of a loss recognized in the financial statements are not recognized until all contingencies related to the insurance claim are resolved.

Self-Insurance

Self-Insurance – The Company changed health insurance providers and is no longer self-insured as of October 1, 2019. The remaining accrued liability for potential health care claims is immaterial as of November 30, 2019.

Cost of Goods Sold

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

For export sales, the Company includes the cost of merchandise and external and internal distribution and handling costs for supplying merchandise in cost of goods sold, exports.

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

Vendor consideration consists primarily of volume rebates, time-limited product promotions, slotting fees, demonstration reimbursements and prompt payment discounts. Volume rebates that are not threshold based are incorporated into the unit cost of merchandise reducing the inventory cost and cost of goods sold. Volume rebates that are threshold based are recorded as a reduction to cost of goods sold when the Company achieves established purchase levels that are confirmed by the vendor in writing or upon receipt of funds. On a quarterly basis, the Company calculates the amount of rebates recorded in cost of goods sold that relates to inventory on hand and this amount is reclassified as a reduction to inventory, if significant. Slotting fees are related to consideration received by the Company from vendors for preferential "end cap" placement of the vendor's products within the warehouse club. Demonstration reimbursements are related to consideration received by the Company from vendors for the in store promotion of the vendors' products. The Company records the reduction in cost of goods sold on a transactional basis for these programs. Prompt payment discounts are taken in substantially all cases and therefore are applied directly to reduce the acquisition cost of the related inventory, with the resulting effect recorded to cost of goods sold when the inventory is sold.

Selling, General and Administrative

Selling, General and Administrative – Selling, general and administrative costs are comprised primarily of expenses associated with operating warehouse clubs and freight forwarding operations. These operations include the operating costs of the Company’s warehouse clubs and freight forwarding activities, including payroll and related costs, utilities, consumable supplies, repair and maintenance, rent expense, building and equipment depreciation, bank, credit card processing fees, and amortization of intangibles. Also included in selling, general and administrative expenses are the payroll and related costs for the Company’s U.S. and regional management and purchasing centers.

Pre-Opening Costs

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

Contingencies and Litigation

Contingencies and Litigation – The Company records and reserves for loss contingencies if (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can be reasonably estimated. If one or both criteria for accrual are not met, but there is at least a reasonable possibility that a material loss will occur, the Company does not record and reserve for a loss contingency but describes the contingency within a note and provides detail, when possible, of the estimated potential loss or range of loss. If an estimate cannot be made, a statement to that effect is made.

Foreign Currency Translation

Foreign Currency Translation – The assets and liabilities of the Company’s foreign operations are translated to U.S. dollars when the functional currency in the Company’s international subsidiaries is the local currency and not U.S. dollars. Assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the exchange rate on the balance sheet date, and revenue, costs and expenses are translated at average rates of exchange in effect during the period. The corresponding translation gains and losses are recorded as a component of accumulated other comprehensive income or loss. These adjustments will affect net income upon the sale or liquidation of the underlying investment.

The following table discloses the net effect of translation into the reporting currency on other comprehensive loss for these local currency denominated accounts for the three months ended November 30, 2019 and 2018:

	Three Months Ended
	November 30,			November 30,
	2019			2018
Effect on other comprehensive loss due to foreign currency translation	$	(3,724)	$	(13,397)

Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains (losses), including transactions recorded involving these monetary assets and liabilities, are recorded as Other income (expense) in the consolidated statements of income.

	Three Months Ended
	November 30,		November 30,
	2019		2018
Currency loss	$	(1,657)	$	(1,819)

Recent Accounting Pronouncements - Not Yet Adopted

Recent Accounting Pronouncements – Not Yet Adopted

FASB ASC 810 ASU 2018-15 – Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As such, the amendment in this ASU requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in subtopic 350-40 in order to determine which implementation costs to capitalize as an asset and which costs to expense.

Additionally, the amendments in this ASU require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU are effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted. The Company expects to adopt ASU No. 2018-15 on September 1, 2020, the first quarter of fiscal year 2021. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

FASB ASC 715 ASU 2018-14 – Compensation—Retirement Benefits—Defined Benefit Plans--General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement benefits (Topic 715-20). The standard amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This ASU is effective for fiscal years ending after December 15, 2020 and must be applied on a retrospective basis. The Company expects to adopt ASU No. 2018-14 on September 1, 2021, the first quarter of fiscal year 2022. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

FASB ASC 820 ASU 2018-13 – Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The standard eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. ASU No. 2018-13 adds new disclosure requirements for Level 3 measurements. The amendments in this ASU are effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt ASU No. 2018-13 on September 1, 2020, the first quarter of fiscal year 2021. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

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

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under the amendments in this ASU, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, ASU No. 2017-04 requires any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt ASU No. 2017-04 on September 1, 2020, the first quarter of fiscal year 2021. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

FASB ASC 326 ASU 2016-13 – Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which amends the FASB’s guidance on the impairment of financial instruments. This standard requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company expects to adopt ASU No. 2016-13 on September 1, 2020, the first quarter of fiscal year 2021. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Adopted

Recent Accounting Pronouncements Adopted

FASB ASC 815 ASU 2018-16 – Derivatives and Hedging — Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

In October 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-16, Derivatives and Hedging—Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which expands the list of United States benchmark interest rates permitted in the application of hedge accounting. The amendments in this ASU allow use of the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, Derivatives and Hedging. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

FASB ASC 718 ASU 2018-07 - Compensation—Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope to include share-based payment transactions for acquiring goods and services from non-employees. The amendments in this ASU apply to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations by issuing share-based payment awards. The amendments in this ASU are effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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

In February 2016, the FASB issued guidance codified in ASC 842, Leases, which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments.

The Company adopted ASU 2016 - 02 using the modified retrospective transition method in the first quarter of fiscal year 2020. In accordance with ASC 842, the Company did not restate comparative periods in transition to ASC 842 and instead reported comparative periods under ASC 840. Adoption of the standard resulted in the initial recognition of $120.6 million of operating lease right-of-use (“ROU”) assets and $132.1 million of short-term and long-term operating lease liabilities as of September 1, 2019. The difference between the assets and liabilities primarily represents the deferred rent recorded as of August 31, 2019, which was eliminated upon adoption. No cumulative-effect adjustments were recorded to retained earnings, and there was no material impact to the Company’s interim consolidated statements of income, consolidated statements of comprehensive income, or consolidated statements of cash flows. However, several of the Company’s leases are denominated in a currency that is not the functional currency of the Company’s local subsidiary, which results in additional potential foreign currency exchange rate fluctuation exposure. The exposure for the period ended November 30, 2019 was a $34.1 million liability. Due to the mix of foreign currency exchange rate fluctuations during the first quarter of fiscal year 2020, the impact to the interim consolidated statements of income and comprehensive income was immaterial.

The Company elected the transition package of practical expedients permitted within the new standard which, among other things, allowed it to carry-forward the historical lease classification. The Company also elected the practical expedient to carry forward the accounting treatment for land easements and the practical expedient allowing the Company not to apply the recognition requirements of ASC 842 to short-term leases. However, the Company did not elect to combine lease and non-lease components. Please refer to Note 10 – Leases for further discussion on the Company's leases.

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EARNINGS PER SHARE

3 Months Ended

Nov. 30, 2019

EARNINGS PER SHARE [Abstract]

EARNINGS PER SHARE

NOTE 4 – EARNINGS PER SHARE

The Company presents basic net income per share using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders and that determines basic net income per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings that would have been available to common stockholders. A participating security is defined as a security that may participate in undistributed earnings with common stock. The Company’s capital structure includes securities that participate with common stock on a one-for-one basis for distribution of dividends. These are the restricted stock awards and restricted stock units issued pursuant to the 2013 Equity Incentive Award Plan. The Company determines the diluted net income per share by using the more dilutive of the two class-method or the treasury stock method and by including the basic weighted average of outstanding performance stock units in the calculation of diluted net income per share under the two-class method and including all potential common shares assumed issued in the calculation of diluted net income per share under the treasury stock method.

The following table sets forth the computation of net income per share for the three months ended November 30, 2019 and 2018 (in thousands, except per share amounts):

	Three Months Ended
	November 30,		November 30,
	2019		2018
Net income attributable to PriceSmart, Inc.	$	19,728	$	14,612
Less: Allocation of income to unvested stockholders		(258)		(193)
Net income attributable to PriceSmart, Inc. per share available for distribution	$	19,470	$	14,419
Basic weighted average shares outstanding		30,277		30,172
Add dilutive effect of performance stock units (two-class method)		7		17
Diluted average shares outstanding		30,284		30,189
Basic net income per share	$	0.64	$	0.48
Diluted net income per share	$	0.64	$	0.48

 

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Nov. 30, 2019

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

In addition, the Company is exposed to foreign currency and interest rate cash flow exposure related to non-functional currency long-term debt of three of its wholly owned subsidiaries. To manage this foreign currency and interest rate cash flow exposure, the Company’s subsidiaries entered into cross-currency interest rate swaps that convert their U.S. dollar denominated floating interest payments to functional currency fixed interest payments during the life of the hedging instrument.  As changes in foreign exchange and interest rates impact the future cash flow of interest payments, the hedges are intended to offset changes in cash flows attributable to interest rate and foreign exchange movements.

These derivative instruments (cash flow hedging instruments) are designated and qualify as cash flow hedges, with the entire gain or loss on the derivative reported as a component of other comprehensive loss. Amounts are deferred in other comprehensive loss and reclassified into earnings in the same income statement line item that is used to present earnings effect of the hedged item when the hedged item affects earnings.

The Company is exposed to foreign-currency exchange-rate fluctuations in the normal course of business, including foreign-currency exchange-rate fluctuations on U.S. dollar denominated liabilities within its international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts (NDFs) that are intended to offset changes in cash flow attributable to currency exchange movements. These contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. Currently, these contracts do not qualify for derivative hedge accounting. The Company seeks to mitigate foreign-currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features.

The Company uses other derivatives not designated as hedging instruments that consist primarily of written call options in which the Company receives a premium from the holder. This premium lowers the cost of the Company’s hedging activities. The Company recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Other expense, net in the consolidated statements of income in the period of change.

Cash Flow Hedges

As of November 30, 2019, all of the Company’s interest rate swap and cross-currency interest rate swap derivative financial instruments are designated and qualify as cash flow hedges. The Company formally documents the hedging relationships for its derivative instruments that qualify for hedge accounting.

The following table summarizes agreements for which the Company has recorded cash flow hedge accounting for the three months ended November 30, 2019:

Subsidiary	Date ‎Entered ‎into	Derivative ‎Financial ‎Counter- ‎party	Derivative ‎Financial ‎Instruments	Initial ‎US$ ‎Notional ‎Amount		Bank ‎US$ ‎loan  ‎Held ‎with	Floating Leg ‎(swap ‎counter-party)	Fixed Rate ‎for PSMT ‎Subsidiary		Settlement ‎Dates	Effective ‎Period of swap
Colombia	27-Nov-19	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	25,000,000	Citibank, N.A.	Variable rate 3-month Libor plus 2.45%	7.93	%	27th day of November, February, May and August beginning February 27, 2020	November 27, 2019 - ‎November 27, 2024
Colombia	24-Sep-19	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	12,500,000	PriceSmart, Inc.	Variable rate 3-month Libor plus 2.50%	7.09	%	24th day of December, March, June and September beginning December 24, 2019	September 24, 2019 - ‎September 26, 2022
Panama	25-Jun-18	Bank of Nova Scotia ("Scotiabank")	Interest rate swap	$	14,625,000	Bank of Nova Scotia	Variable rate 3-month Libor plus 3.0%	5.99	%	23rd day of each month beginning on July 23, 2018	June 25, 2018 - ‎March 23, 2023
Honduras	26-Feb-18	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	13,500,000	Citibank, N.A.	Variable rate 3-month Libor plus 3.00%	9.75	%	29th day of May, August, November and February beginning May 29, 2018	February 26, 2018 - ‎February 24, 2024
PriceSmart, Inc	7-Nov-16	MUFG Union Bank, N.A. ("Union Bank")	Interest rate swap	$	35,700,000	Union Bank	Variable rate 1-month Libor plus 1.7%	3.65	%	1st day of each month beginning on April 1, 2017	March 1, 2017 - ‎March 1, 2027
Costa Rica	28-Aug-15	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	7,500,000	Citibank, N.A.	Variable rate 3-month Libor plus 2.50%	7.65	%	28th day of August, November, February, and May beginning on November 30, 2015	August 28, 2015 - ‎August 28, 2020
Colombia	10-Dec-14	Citibank, N.A. ("Citi")	Cross currency interest rate swap	$	15,000,000	Citibank, N.A.	Variable rate 3-month Libor plus 2.8%	8.25	%	4th day of March, June, Sept, Dec. beginning on March 4, 2015	December 4, 2014 - ‎December 3, 2019

For the three months ended November 30, 2019 and 2018, the Company included the gain or loss on the hedged items (that is, variable-rate borrowings) in the same line item—interest expense—as the offsetting gain or loss on the related interest rate swaps as follows (in thousands):

Income Statement Classification	Interest ‎expense on ‎borrowings(1)		Cost of ‎swaps (2)		Total
Interest expense for the three months ended November 30, 2019	$	1,014	$	261	$	1,275
Interest expense for the three months ended November 30, 2018	$	1,160	$	167	$	1,327

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

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

The total notional balance of the Company’s pay-fixed/receive-variable interest rate swaps and cross-currency interest rate swaps was as follows (in thousands):

	Notional Amount as of
	November 30,		August 31,
Floating Rate Payer (Swap Counterparty)	2019		2019
Union Bank	$	34,850	$	35,169
Citibank N.A.		60,825		24,225
Scotiabank		17,750		18,375
Total	$	113,425	$	77,769

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

		November 30, 2019						August 31, 2019
Derivatives designated as cash flow hedging instruments	Balance Sheet Classification	Fair ‎Value		Net Tax ‎Effect		Net ‎OCI		Fair ‎Value		Net Tax ‎Effect		Net ‎OCI
Cross-currency interest rate swaps	Other non-current assets	$	436	$	(144)	$	292	$	—	$	—	$	—
Cross-currency interest rate swaps	Other current assets		2,747		(906)		1,841		2,736		(903)		1,833
Interest rate swaps	Other long-term liabilities		(1,429)		344		(1,085)		(2,178)		517		(1,661)
Cross-currency interest rate swaps	Other long-term liabilities		(580)		174		(406)		(732)		220		(512)
Cross-currency interest rate swaps	Other current liabilities		(60)		18		(42)		—		—		—
Net fair value of derivatives designated as hedging instruments		$	1,114	$	(514)	$	600	$	(174)	$	(166)	$	(340)

Fair Value Instruments

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

November 30, 2019, the Company did not have any material non-deliverable forward foreign-exchange contracts.

Other Instruments

Other derivatives not designated as hedging instruments consist primarily of written call options in which the Company receives a premium that it uses to reduce the costs associated with its hedging activities.

The following table summarizes the fair value of the Company’s other contracts not designated as hedging instruments:

	November 30, 2019			August 31, 2019
Non-designated derivative contracts	Balance Sheet ‎Location	Fair Value		Balance Sheet ‎Location	Fair Value
Net fair value of other non-designated derivative contracts that do not qualify for hedge accounting	Other long-term liabilities	$	(1,250)	Other long-term liabilities	$	—

For the three months ended November 30, 2019, the Company included in its consolidated statements of income the loss of its other non-designated derivative contracts as follows (in thousands):

		Three Months Ended
		November 30,	November 30,
Income Statement Classification		2019	2018
Other expense, net	$	(1,270)	$	—

 

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REVENUE RECOGNITION (Tables)

3 Months Ended

Nov. 30, 2019

REVENUE RECOGNITION [Abstract]

Contract Performance Liabilities

	Contract Liabilities
	November 30, 2019		August 31, 2019
Deferred membership income	$	24,599	$	24,901
Other contract performance liabilities	$	6,397	$	4,048

Disaggregated Revenues

		Three Months Ended
		November 30, 2019		November 30, ‎2018
Foods & Sundries	$	392,805	$	376,328
Fresh Foods		215,238		200,705
Hardlines		90,804		92,154
Softlines		40,324		40,481
Other Business		39,557		37,775
Net Merchandise Sales	$	778,728	$	747,443

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DEBT (Tables)

3 Months Ended

Nov. 30, 2019

DEBT [Abstract]

Schedule of Short-Term Borrowings

			Facilities Used
	Total Amount		Short-term		Letters of		Facilities		Weighted average
	of Facilities		Borrowings		Credit		Available		interest rate
November 30, 2019	$	69,000	$	23,018	$	534	$	45,448	4.8	%
August 31, 2019	$	69,000	$	7,540	$	486	$	60,974	6.1	%

Summary of Changes in Long-Term Debt

(Amounts in thousands)	Current ‎portion of ‎long-term debt		Long-term ‎debt (net of current portion)		Total
Balances as of August 31, 2019	$	25,875	$	63,711	$	89,586	(1)
Proceeds from long-term debt incurred during the period:
Colombia subsidiary		—		25,000		25,000
Regularly scheduled loan payments		(947)		(1,889)		(2,836)
Reclassifications of short-term debt		(11,253)		11,253		(0)
Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar (2)		51		9		60
Balances as of November 30, 2019	$	13,726	$	98,084	$	111,810	(1)

⁽¹⁾The carrying amount of non-cash assets assigned as collateral for these loans was $111.3 million. No cash assets were assigned as collateral for these loans.

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

Schedule of Annual Maturities of Long-Term Debt

Twelve Months Ended November 30,	Amount
2020	$	13,726
2021		13,348
2022		10,211
2023		21,341
2024		20,771
Thereafter		32,413
Total	$	111,810

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COMPANY OVERVIEW AND BASIS OF PRESENTATION (Narrative) (Details)	3 Months Ended
	Nov. 30, 2019 country warehouse
Company Overview And Basis Of Presentation [Line Items]
Number of stores	45
Ownership interest	100.00%
Number of stores expected in the future	49
Colombia [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	7
Costa Rica [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	7
Panama [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	7
Dominican Republic [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	5
Trinidad [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	4
Guatemala [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	4
Honduras [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	3
El Salvador [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	2
Nicaragua [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	2
Aruba [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	1
Barbados [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	1
Jamaica [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	1
United States Virgin Islands [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores	1
Costa Rica, Colombia, Jamaica [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of stores expected in the future	4
Foreign Countries [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of countries | country	12
Domestic Territories [Member] | U.S. Federal [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of countries | country	1
Aeropost, Inc [Member] | Latin America [Member]
Company Overview And Basis Of Presentation [Line Items]
Number of countries | country	38

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COMMITMENTS AND CONTINGENCIES (Narrative) (Details) - USD ($)	1 Months Ended		3 Months Ended
	Aug. 31, 2018	Jan. 31, 2017	Nov. 30, 2019	Aug. 31, 2019
Commitments And Contingencies [Line Items]
Accrual for taxes other than income taxes, Current			$ 3,200,000	$ 3,200,000
Contractual obligation			15,100,000	14,900,000
Land under purchase options, Not recorded			6,700,000
Income taxes receivable			$ 29,719,000	25,390,000
Miami-Dade County, Florida [Member]
Commitments And Contingencies [Line Items]
Letter of credit payable to the landlord		$ 500,000
Debt term			4 years
Annual decrease in LOC	$ 125,000
Remaining outstanding balance			$ 250,000
Unknown Country [Member]
Commitments And Contingencies [Line Items]
Income taxes receivable			9,700,000	7,800,000
Deferred tax assets, net			$ 2,700,000	$ 2,700,000

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EARNINGS PER SHARE (Schedule of the Computation of Net Income Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
EARNINGS PER SHARE [Abstract]
Net income attributable to PriceSmart, Inc.	$ 19,728	$ 14,612
Less: Allocation of income to unvested stockholders	(258)	(193)
Net income attributable to PriceSmart, Inc. per share available for distribution	$ 19,470	$ 14,419
Basic weighted average shares outstanding	30,277	30,172
Add dilutive effect of performance stock units (two-class method)	7	17
Diluted average shares outstanding	30,284	30,189
Basic net income per share	$ 0.64	$ 0.48
Diluted net income per share	$ 0.64	$ 0.48

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Summary of Foreign Currency Gains and Losses) (Details) - USD ($) $ in Thousands	3 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Currency loss	$ (1,657)	$ (1,819)

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LEASES (Schedule of Future Minimum Lease Commitments) (Details) - USD ($) $ in Thousands		Nov. 30, 2019		Sep. 01, 2019
Operating Leased Assets [Line Items]
2020	[1]	$ 14,318
2021	[1]	13,403
2022	[1]	13,231
2023	[1]	13,129
2024	[1]	12,438
Thereafter	[1]	179,042
Total future lease payments	[1]	245,561
Less imputed interest	[1]	(115,553)
Total operating lease liabilities		130,008	[1],[2]	$ 132,100
Sub-lease income		2,000
Miami Distribution Center [Member]
Operating Leased Assets [Line Items]
Total future lease payments		$ 1,500

[1] Operating lease obligations have been reduced by approximately $2.0 million to reflect expected sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased.

[2] Future minimum lease payments include $1.5 million of lease payment obligations for the prior leased Miami distribution center. For purposes of calculating the minimum lease payments, a reduction is reflected for the actual sub-lease income the Company expects to receive during the remaining lease term. This sub-lease income was also considered for the purposes of calculating the exit obligation, which was immaterial as of November 30, 2019.

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DEBT (Schedule of Short-Term Borrowings) (Details) - Facilities [Member] - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
Short-term Debt [Line Items]
Total Amount of Facilities	$ 69,000	$ 69,000
Facilities Available	$ 45,448	$ 60,974
Weighted average interest rate	4.80%	6.10%
Short-term Borrowings [Member]
Short-term Debt [Line Items]
Facilities Used	$ 23,018	$ 7,540
Letters of Credit [Member]
Short-term Debt [Line Items]
Facilities Used	$ 534	$ 486

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Nov. 30, 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The interim consolidated financial statements of the Company included herein include the assets, liabilities and results of operations of the Company’s wholly owned subsidiaries, subsidiaries in which it has a controlling interest, and the Company’s joint ventures for which the Company has determined that it is the primary beneficiary. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. The Company’s net income excludes income attributable to its noncontrolling interests. Additionally, the consolidated financial statements also include the Company's investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. All significant inter-company accounts and transactions have been eliminated in consolidation. The interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the SEC and reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary to fairly present the financial position, results of operations and cash flows for the periods presented. The results for interim periods are not necessarily indicative of the results for the year.

The Company determines whether any of the joint ventures in which it has made investments is a Variable Interest Entity (“VIE”) at the start of each new venture and if a reconsideration event has occurred. At this time, the Company also considers whether it must consolidate a VIE and/or disclose information about its involvement in a VIE. A reporting entity must consolidate a VIE if that reporting entity has a variable interest (or combination of variable interests) that will absorb a majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. A reporting entity must consider the rights and obligations conveyed by its variable interests and the relationship of its variable interests with variable interests held by other parties to determine whether its variable interests will absorb a majority of a VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE. If the Company determines that it is not the primary beneficiary of the VIE, then the Company records its investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. Due to the nature of the joint ventures that the Company participates in and the continued commitments for additional financing, the Company determined these joint ventures are VIEs.

The Company has determined that for its ownership interest in store-front joint ventures within its marketplace and casillero business, the Company has the power to direct the activities that most significantly impact the economic performance of these VIEs. Therefore, the Company has determined that it is the primary beneficiary of these VIEs and has consolidated these entities within its consolidated financial statements. The Company's ownership interest in store-front joint ventures for which the Company has consolidated their financial statements as of November 30, 2019 are listed below:

Marketplace and Casillero Store-front Joint Ventures	Countries	Ownership		Basis of ‎Presentation
Guatemala	Guatemala	60.0	%	Consolidated
Tortola	British Virgin Islands	50.0	%	Consolidated
Trinidad	Trinidad	50.0	%	Consolidated

In the case of the Company's ownership interest in real estate development joint ventures, both parties to each joint venture share all rights, obligations and the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. As a result, the Company has determined that it is not the primary beneficiary of the VIEs and, therefore, has accounted for these entities under the equity method. Under the equity method, the Company's investments in unconsolidated affiliates are initially recorded as an investment in the stock of an investee at cost and are adjusted for the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of the initial investment. The Company's ownership interest in real estate development joint ventures the Company has recorded under the equity method as of November 30, 2019 are listed below:

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

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

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

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

Restricted Cash – The changes in restricted cash are disclosed within the consolidated statement of cash flows based on the nature of the restriction. The following table summarizes the restricted cash reported by the Company (in thousands):

	November 30,		August 31,
	2019		2019
Short-term restricted cash:
Restricted cash for land purchase option agreements	$	50	$	50
Other short-term restricted cash		15		4
Total short-term restricted cash	$	65	$	54
Long-term restricted cash:
Other long-term restricted cash (1)	$	3,689	$	3,529
Total long-term restricted cash	$	3,689	$	3,529
Total restricted cash	$	3,754	$	3,583

⁽¹⁾Other long-term restricted cash consists mainly of cash deposits held within banking institutions in compliance with federal regulatory requirements in Costa Rica and Panama.

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

Goodwill and Other Intangibles, net – Goodwill and other intangibles totaled $57.4 million as of November 30, 2019 and $58.7 million as of August 31, 2019.  The Company reviews reported goodwill and other intangibles at the cash-generating unit level for impairment. The Company tests Goodwill for impairment at least annually or when events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

Tax Receivables – The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of the Company’s business in most of the countries in which the Company operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, then the difference is remitted to the government, usually on a monthly basis. If the input VAT exceeds the output VAT, this creates a VAT receivable. In most countries where the Company operates, the governments have implemented additional collection procedures, such as requiring credit card processors to remit a portion of sales processed via credit card directly to the government as advance payments of VAT and/or income tax. In the case of VAT, these procedures alter the natural offset of input and output VAT and generally leave us with a net VAT receivable, forcing us to process significant refund claims on a recurring basis. With respect to income taxes paid, if the estimated income taxes paid or withheld exceed the actual income tax due, this creates an income tax receivable. The Company either requests a refund of these tax receivables or applies the balance to expected future tax payments. These refund or offset processes can take anywhere from several months to several years to complete.

In most countries where the Company operates, there are defined and structured processes to recover VAT receivables via refunds or offsets. However, in one country without a clearly defined refund process, the Company is actively engaged with the local government to recover VAT receivables totaling $6.2 million and $5.1 million as of November 30, 2019 and August 31, 2019, respectively. In two other countries, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.7 million and $7.8 million and deferred tax assets of $2.7 million as of November 30, 2019 and August 31, 2019 in these countries. While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

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

Short-term VAT and Income tax receivables, recorded as Other current assets: This classification is used for any countries where the Company’s subsidiary has generally demonstrated the ability to recover the VAT or income tax receivable within one year. The Company also classifies as short-term any approved refunds or credit notes to the extent that the Company expects to receive the refund or use the credit notes within one year.

Long-term VAT and Income tax receivables, recorded as Other non-current assets: This classification is used for amounts not approved for refund or credit in countries where the Company’s subsidiary has not demonstrated the ability to obtain refunds within one year and/or for amounts which are subject to outstanding disputes. An allowance is provided against VAT and income tax receivable balances in dispute when the Company does not expect to eventually prevail in its recovery. The Company does not currently have any allowances provided against VAT and income tax receivables.

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

	November 30,		August 31,
	2019		2019
Prepaid expenses and other current assets	$	3,068	$	1,639
Other non-current assets		24,990		22,691
Total amount of VAT receivables reported	$	28,058	$	24,330

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

	November 30,		August 31,
	2019		2019
Prepaid expenses and other current assets	$	10,065	$	9,009
Other non-current assets		19,654		16,381
Total amount of Income tax receivables reported	$	29,719	$	25,390

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

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

The Company measures Right-of-use (“ROU”) assets based on the corresponding lease liabilities, adjusted for any initial direct costs and prepaid lease payments made to the lessor before or at the commencement date (net of lease incentives). The lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Variable lease payments are not included in the calculation of the ROU asset and the related lease liability and are recognized as this lease expense is incurred. The Company’s variable lease payments generally relate to amounts the Company pays for additional contingent rent based on a contractually stipulated percentage of sales.

‎

Merchandise Inventories – Merchandise inventories, which include merchandise for resale, are valued at the lower of cost (average cost) or net realizable value. The Company provides for estimated inventory losses and obsolescence between physical inventory counts on the basis of a percentage of sales. The provision is adjusted periodically to reflect the trend of actual physical inventory count results, with physical inventories occurring primarily in the second and fourth fiscal quarters. In addition, the Company may be required to take markdowns below the carrying cost of certain inventory to expedite the sale of such merchandise.

Stock Based Compensation – The Company utilizes three types of equity awards: restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance based restricted stock units (“PSUs”). Compensation related to RSAs, RSUs and PSUs is based on the fair market value at the time of grant. The Company recognizes the compensation cost related to RSAs and RSUs over the requisite service period as determined by the grant, amortized ratably or on a straight-line basis over the life of the grant. The Company also recognizes compensation cost for PSUs over the performance period. The Company assesses the probability of vesting for awards with performance conditions and adjusts compensation cost based on the probability that performance metrics will be achieved. If the Company determines that an award is unlikely to vest, any previously recorded expense is then reversed.

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

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

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

Treasury Stock – Shares of common stock repurchased by the Company are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in the Company’s consolidated balance sheets.  The Company may reissue these treasury shares as part of its stock-based compensation programs.  When treasury shares are reissued, the Company uses the first in/first out (“FIFO”) cost method for determining cost of the reissued shares.  If the issuance price is higher than the cost, the excess of the issuance price over the cost is credited to additional paid-in capital (“APIC”).  If the issuance price is lower than the cost, the difference is first charged against any credit balance in APIC from treasury stock and the balance is charged to retained earnings. During the three months ended November 30, 2019, the Company reissued approximately 69,000 treasury shares.

Fair Value Measurements – The Company measures the fair value for all financial and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring or nonrecurring basis. The fair value of an asset is the price at which the asset could be sold in an orderly transaction between unrelated, knowledgeable and willing parties able to engage in the transaction. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor in a transaction between such parties, not the amount that would be paid to settle the liability with the creditor.

The Company has established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring and revaluing fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company was not required to revalue any assets or liabilities utilizing Level 1 or Level 3 inputs at the balance sheet dates. The Company's Level 2 assets and liabilities revalued at the balance sheet dates, on a recurring basis, consisted of cash flow hedges (interest rate swaps and cross-currency interest rate swaps), written foreign currency call options, and forward foreign exchange contracts. In addition, the Company utilizes Level 2 inputs in determining the fair value of long-term debt. The Company did not make any significant transfers in and out of Level 1 and Level 2 fair value tiers during the periods reported on herein.

Non-financial assets and liabilities are revalued and recognized at fair value subsequent to initial recognition when there is evidence of impairment. For the periods reported, no impairment of such non-financial assets was recorded.

The Company’s current and long-term financial assets and liabilities have fair values that approximate their carrying values. The Company’s long-term financial liabilities consist of long-term debt, which is recorded on the balance sheet at issuance price and adjusted for any applicable unamortized discounts or premiums and debt issuance costs. There have been no significant changes in fair market value of the Company’s current and long-term financial assets, and there have been no material changes to the valuation techniques utilized in the fair value measurement of assets and liabilities as disclosed in the Company’s 2019 Form 10-K.

Derivatives Instruments and Hedging Activities – The Company uses derivative financial instruments for hedging and non-trading purposes to manage its exposure to changes in interest and currency exchange rates. In using derivative financial instruments for the purpose of hedging the Company’s exposure to interest and currency exchange rate risks, the contractual terms of a hedged instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts that are effective at meeting the risk reduction and correlation criteria (effective hedge) are recorded using hedge accounting. If a derivative financial instrument is an effective hedge, changes in the fair value of the instrument will be reported in accumulated other comprehensive loss until the hedged item completes its contractual term. Instruments that do not meet the criteria for hedge accounting, or contracts for which the Company has not elected hedge accounting, are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company did not change valuation techniques utilized in the fair value measurement of assets and liabilities presented on the Company’s consolidated balance sheets from previous practice during the reporting period. The Company seeks to manage counterparty risk associated with these contracts by limiting transactions to counterparties with which the Company has an established banking relationship. There can be no assurance, however, that this practice effectively mitigates counterparty risk.

Cash Flow Instruments. The Company is a party to receive floating interest rate, pay fixed-rate interest rate swaps to hedge the interest rate risk of certain U.S. dollar denominated debt within its international subsidiaries. The swaps are designated as cash flow hedges of interest expense risk. These instruments are considered effective hedges and are recorded using hedge accounting. The Company is also a party to receive variable interest rate, pay fixed interest rate cross-currency interest rate swaps to hedge the interest rate and currency exposure associated with the expected payments of principal and interest of U.S. denominated debt within its international subsidiaries whose functional currency is other than the U.S. dollar. The swaps are designated as cash flow hedges of the currency risk and interest-rate risk related to payments on the U.S. denominated debt. These instruments are also considered to be effective hedges and are recorded using hedge accounting. Under cash flow hedging, the entire gain or loss of the derivative, calculated as the net present value of the future cash flows, is reported on the consolidated balance sheets in accumulated other comprehensive loss. Amounts recorded in accumulated other comprehensive loss are released to earnings in the same period that the hedged transaction impacts consolidated earnings. See Note 8 - Derivative Instruments and Hedging Activities for information on the fair value of interest rate swaps and cross-currency interest rate swaps as of November 30, 2019 and August 31, 2019.

Fair Value Instruments. The Company is exposed to foreign currency exchange rate fluctuations in the normal course of business. This includes exposure to foreign currency exchange rate fluctuations on U.S. dollar denominated liabilities within the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts that are intended to offset changes in cash flows attributable to currency exchange movements. The contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. Currently, these contracts are treated for accounting purposes as fair value instruments and do not qualify for derivative hedge accounting, and as such the Company does not apply derivative hedge accounting to record these transactions. As a result, these contracts are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company seeks to mitigate foreign currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features and are limited to less than one year in duration.

Other Instruments. Other derivatives not designated as hedging instruments consist primarily of written call options in which the Company receives a premium that it uses to reduce the costs associated with its hedging activities. For derivative instruments not designated as hedging instruments, the Company recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Other expense, net in the consolidated statements of income in the period of change.

Revenue Recognition – The accounting policies and other disclosures such as the disclosure of disaggregated revenues are described in Note 3 – Revenue Recognition.

Insurance Reimbursements – Receipts from insurance reimbursements up to the amount of the losses recognized are considered recoveries. These recoveries are accounted for when they are probable of receipt. Insurance recoveries are not

recognized prior to the recognition of the related cost. Anticipated proceeds in excess of the amount of loss recognized are considered gains and are subject to gain contingency guidance. Anticipated proceeds in excess of a loss recognized in the financial statements are not recognized until all contingencies related to the insurance claim are resolved.

Self-Insurance – The Company changed health insurance providers and is no longer self-insured as of October 1, 2019. The remaining accrued liability for potential health care claims is immaterial as of November 30, 2019.

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

For export sales, the Company includes the cost of merchandise and external and internal distribution and handling costs for supplying merchandise in cost of goods sold, exports.

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

Vendor consideration consists primarily of volume rebates, time-limited product promotions, slotting fees, demonstration reimbursements and prompt payment discounts. Volume rebates that are not threshold based are incorporated into the unit cost of merchandise reducing the inventory cost and cost of goods sold. Volume rebates that are threshold based are recorded as a reduction to cost of goods sold when the Company achieves established purchase levels that are confirmed by the vendor in writing or upon receipt of funds. On a quarterly basis, the Company calculates the amount of rebates recorded in cost of goods sold that relates to inventory on hand and this amount is reclassified as a reduction to inventory, if significant. Slotting fees are related to consideration received by the Company from vendors for preferential "end cap" placement of the vendor's products within the warehouse club. Demonstration reimbursements are related to consideration received by the Company from vendors for the in store promotion of the vendors' products. The Company records the reduction in cost of goods sold on a transactional basis for these programs. Prompt payment discounts are taken in substantially all cases and therefore are applied directly to reduce the acquisition cost of the related inventory, with the resulting effect recorded to cost of goods sold when the inventory is sold.

Selling, General and Administrative – Selling, general and administrative costs are comprised primarily of expenses associated with operating warehouse clubs and freight forwarding operations. These operations include the operating costs of the Company’s warehouse clubs and freight forwarding activities, including payroll and related costs, utilities, consumable supplies, repair and maintenance, rent expense, building and equipment depreciation, bank, credit card processing fees, and amortization of intangibles. Also included in selling, general and administrative expenses are the payroll and related costs for the Company’s U.S. and regional management and purchasing centers.

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

Contingencies and Litigation – The Company records and reserves for loss contingencies if (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the consolidated financial statements and (b) the amount of loss can be reasonably estimated. If one or both criteria for accrual are not met, but there is at least a reasonable possibility that a material loss will occur, the Company does not record and reserve for a loss contingency but describes the contingency within a note and provides detail, when possible, of the estimated potential loss or range of loss. If an estimate cannot be made, a statement to that effect is made.

Foreign Currency Translation – The assets and liabilities of the Company’s foreign operations are translated to U.S. dollars when the functional currency in the Company’s international subsidiaries is the local currency and not U.S. dollars. Assets and liabilities of these foreign subsidiaries are translated to U.S. dollars at the exchange rate on the balance sheet date, and revenue, costs and expenses are translated at average rates of exchange in effect during the period. The corresponding translation gains and losses are recorded as a component of accumulated other comprehensive income or loss. These adjustments will affect net income upon the sale or liquidation of the underlying investment.

The following table discloses the net effect of translation into the reporting currency on other comprehensive loss for these local currency denominated accounts for the three months ended November 30, 2019 and 2018:

	Three Months Ended
	November 30,			November 30,
	2019			2018
Effect on other comprehensive loss due to foreign currency translation	$	(3,724)	$	(13,397)

Monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity (primarily U.S. dollars) are revalued to the functional currency using the exchange rate on the balance sheet date. These foreign exchange transaction gains (losses), including transactions recorded involving these monetary assets and liabilities, are recorded as Other income (expense) in the consolidated statements of income.

	Three Months Ended
	November 30,		November 30,
	2019		2018
Currency loss	$	(1,657)	$	(1,819)

Recent Accounting Pronouncements – Not Yet Adopted

FASB ASC 810 ASU 2018-15 – Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). As such, the amendment in this ASU requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in subtopic 350-40 in order to determine which implementation costs to capitalize as an asset and which costs to expense.

Additionally, the amendments in this ASU require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU are effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted. The Company expects to adopt ASU No. 2018-15 on September 1, 2020, the first quarter of fiscal year 2021. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

FASB ASC 715 ASU 2018-14 – Compensation—Retirement Benefits—Defined Benefit Plans--General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement benefits (Topic 715-20). The standard amends ASC 715 to add, remove and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This ASU is effective for fiscal years ending after December 15, 2020 and must be applied on a retrospective basis. The Company expects to adopt ASU No. 2018-14 on September 1, 2021, the first quarter of fiscal year 2022. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

FASB ASC 820 ASU 2018-13 – Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The standard eliminates such disclosures as the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. ASU No. 2018-13 adds new disclosure requirements for Level 3 measurements. The amendments in this ASU are effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt ASU No. 2018-13 on September 1, 2020, the first quarter of fiscal year 2021. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

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

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under the amendments in this ASU, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, ASU No. 2017-04 requires any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for annual periods beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt ASU No. 2017-04 on September 1, 2020, the first quarter of fiscal year 2021. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

FASB ASC 326 ASU 2016-13 – Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which amends the FASB’s guidance on the impairment of financial instruments. This standard requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company expects to adopt ASU No. 2016-13 on September 1, 2020, the first quarter of fiscal year 2021. The Company does not expect this guidance to have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Adopted

FASB ASC 815 ASU 2018-16 – Derivatives and Hedging — Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

In October 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-16, Derivatives and Hedging—Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which expands the list of United States benchmark interest rates permitted in the application of hedge accounting. The amendments in this ASU allow use of the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, Derivatives and Hedging. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

FASB ASC 718 ASU 2018-07 - Compensation—Stock Compensation (Topic 718) — Improvements to Nonemployee Share-Based Payment Accounting

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope to include share-based payment transactions for acquiring goods and services from non-employees. The amendments in this ASU apply to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations by issuing share-based payment awards. The amendments in this ASU are effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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

In February 2016, the FASB issued guidance codified in ASC 842, Leases, which amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than one year on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments.

The Company adopted ASU 2016 - 02 using the modified retrospective transition method in the first quarter of fiscal year 2020. In accordance with ASC 842, the Company did not restate comparative periods in transition to ASC 842 and instead reported comparative periods under ASC 840. Adoption of the standard resulted in the initial recognition of $120.6 million of operating lease right-of-use (“ROU”) assets and $132.1 million of short-term and long-term operating lease liabilities as of September 1, 2019. The difference between the assets and liabilities primarily represents the deferred rent recorded as of August 31, 2019, which was eliminated upon adoption. No cumulative-effect adjustments were recorded to retained earnings, and there was no material impact to the Company’s interim consolidated statements of income, consolidated statements of comprehensive income, or consolidated statements of cash flows. However, several of the Company’s leases are denominated in a currency that is not the functional currency of the Company’s local subsidiary, which results in additional potential foreign currency exchange rate fluctuation exposure. The exposure for the period ended November 30, 2019 was a $34.1 million liability. Due to the mix of foreign currency exchange rate fluctuations during the first quarter of fiscal year 2020, the impact to the interim consolidated statements of income and comprehensive income was immaterial.

The Company elected the transition package of practical expedients permitted within the new standard which, among other things, allowed it to carry-forward the historical lease classification. The Company also elected the practical expedient to carry forward the accounting treatment for land easements and the practical expedient allowing the Company not to apply the recognition requirements of ASC 842 to short-term leases. However, the Company did not elect to combine lease and non-lease components. Please refer to Note 10 – Leases for further discussion on the Company's leases.

 

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Schedule of Cash Flow Hedging Instruments, Statements of Financial Performance and Financial Position, Location) (Details) - USD ($) $ in Thousands		3 Months Ended
		Nov. 30, 2019	Nov. 30, 2018
Interest Expense [Member] | Cash Flow Hedging [Member]
Derivative [Line Items]
Derivative, gain (loss) on derivative, Net		$ 1,275	$ 1,327
Interest Rate Contract [Member] | Interest Expense [Member] | Cash Flow Hedging [Member]
Derivative [Line Items]
Derivative, gain (loss) on derivative, Net	[1]	1,014	1,160
Interest Rate Swaps [Member] | Interest Expense [Member] | Cash Flow Hedging [Member]
Derivative [Line Items]
Derivative, gain (loss) on derivative, Net	[2]	261	$ 167
Other Instruments [Member] | Other Expense, Net [Member]
Derivative [Line Items]
Derivative, gain (loss) on derivative, Net		$ (1,270)

[1] This amount is representative of the interest expense recognized on the underlying hedged transactions.

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

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Document And Entity Information - shares	3 Months Ended
	Nov. 30, 2019	Dec. 31, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Nov. 30, 2019
Document Transition Report	false
Entity File Number	0-22793
Entity Registrant Name	PriceSmart, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	33-0628530
Entity Address, Address Line One	9740 Scranton Road
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92121
City Area Code	858
Local Phone Number	404-8800
Entity Central Index Key	0001041803
Current Fiscal Year End Date	--08-31
Title of 12(b) Security	Common Stock, $0.0001 par value
Trading Symbol	PSMT
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		30,612,511

XML

LEASES (Narrative) (Details) - USD ($)	3 Months Ended
	Nov. 30, 2019		Sep. 01, 2019	Aug. 31, 2019
Lessee, Lease, Description [Line Items]
Operating lease right-of-use assets, net	$ 118,203,000		$ 120,600,000
Lease liability	130,008,000	[1],[2]	$ 132,100,000
Long-term portion of deferred rent				$ 11,198,000
Deferred rent accruals	300,000
Cumulative-effect adjustments on retained earnings	0
Newly recorded assets and liabilities difference	$ 11,500,000
Minimum [Member]
Lessee, Lease, Description [Line Items]
Lease term	2 years
Maximum [Member]
Lessee, Lease, Description [Line Items]
Lease term	30 years

[1] Future minimum lease payments include $1.5 million of lease payment obligations for the prior leased Miami distribution center. For purposes of calculating the minimum lease payments, a reduction is reflected for the actual sub-lease income the Company expects to receive during the remaining lease term. This sub-lease income was also considered for the purposes of calculating the exit obligation, which was immaterial as of November 30, 2019.

[2] Operating lease obligations have been reduced by approximately $2.0 million to reflect expected sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands		3 Months Ended
		Nov. 30, 2019	Nov. 30, 2018
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME [Abstract]
Net income		$ 19,709	$ 14,645
Less: net (income) loss attributable to noncontrolling interest		19	(33)
Net income attributable to PriceSmart, Inc.		19,728	14,612
Other Comprehensive Income, net of tax:
Foreign currency translation adjustments	[1]	(3,724)	(13,397)
Defined benefit pension plan:
Net gain arising during period		7	9
Amortization of prior service cost and actuarial gains included in net periodic pensions cost		19	19
Total defined benefit pension plan		26	28
Derivative instruments:
Unrealized losses on change in derivative obligations	[2]	(432)	(306)
Unrealized gains on change in fair value of interest rate swaps	[2]	941	429
Amounts reclassified from accumulated other comprehensive loss to other expense, for net settlement of derivatives	[2]	4
Total derivative instruments		513	123
Other comprehensive loss		(3,185)	(13,246)
Comprehensive income		16,543	1,366
Less: comprehensive income attributable to noncontrolling interest		34	1
Comprehensive income attributable to PriceSmart Inc. stockholders		$ 16,509	$ 1,365

[1] Translation adjustments arising in translating the financial statements of a foreign entity have no effect on the income taxes of that foreign entity. They may, however, affect: (a) the amount, measured in the parent entity's reporting currency, of withholding taxes assessed on dividends paid to the parent entity and (b) the amount of taxes assessed on the parent entity by the government of its country. The Company has determined that the reinvestment of earnings of its foreign subsidiaries are indefinite because of the long-term nature of the Company's foreign investment plans. Therefore, deferred taxes are not provided for on translation adjustments related to non-remitted earnings of the Company's foreign subsidiaries.

[2] See Note 8 - Derivative Instruments and Hedging Activities.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Nov. 30, 2019

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

The Company establishes an accrual for legal proceedings if and when those matters reach a stage where they present loss contingencies that are both probable and reasonably estimable. In such cases, there may be a possible exposure to loss in excess of any amounts accrued. The Company monitors those matters for developments that would affect the likelihood of a loss and the accrued amount, if any, thereof, and adjusts the amount as appropriate. If the loss contingency at issue is not both probable and reasonably estimable, the Company does not establish an accrual, but will continue to monitor the matter for developments that will make the loss contingency both probable and reasonably estimable. If it is at least a reasonable possibility that a material loss will occur, the Company will provide disclosure regarding the contingency.

On May 22, 2019, a class action complaint was filed against PriceSmart, Inc., as well as certain former and current officers in the United States District Court for the Southern District of California. On October 7, 2019, the Court granted Public Employees Retirement Association of New Mexico’s (PERA’s) Motion for Appointment as Lead Plaintiff. On January 3, 2020, PERA filed a consolidated class action complaint, which alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Company intends to vigorously defend itself against any obligations or liability to the plaintiffs with respect to such claims. The Company believes the claims are without merit.

Taxes

Income Taxes – For interim reporting, the Company uses an estimated annual effective tax rate (AETR), pursuant to ASC 740-279, to calculate income tax expense. Income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income tax expense. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating its ability to recover deferred tax assets in the jurisdictions from which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, the Company begins with historical results adjusted for the results of discontinued operations and incorporates assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, the Company considers three years of cumulative operating income (loss).

The Company is required to file federal and state tax returns in the United States and various other tax returns in foreign jurisdictions. The preparation of these tax returns requires the Company to interpret the applicable tax laws and regulations in effect in such jurisdictions, which could affect the amount of tax paid by the Company. The Company, in consultation with its tax advisors, bases its tax returns on interpretations that are believed to be reasonable under the circumstances. The tax returns, however, are subject to routine reviews by the various taxing authorities in the jurisdictions in which the Company files its returns. As part of these reviews, a taxing authority may disagree with the interpretations the Company used to calculate its tax liability and therefore require the Company to pay additional taxes.

The Company accrues an amount for its estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. There were no significant changes in the Company's uncertain income tax positions since August 31, 2019.

In evaluating the exposure associated with various non-income tax filing positions, the Company accrues for probable and estimable exposures for non-income tax related tax contingencies.  As of November 30, 2019 and August 31, 2019, the Company has recorded within other accrued expenses and other current liabilities a total of $3.2 million for various non-income tax related tax contingencies.

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

In two other countries where the Company operates, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.7 million and $7.8 million and deferred tax assets of $2.7 million as of November 30, 2019 and August 31, 2019 in these countries. While the rules related to refunds of income tax receivables in these countries are either unclear or complex, the Company has not placed any type of allowance on the recoverability of these tax receivables or deferred tax assets, because the Company believes that it is more likely than not that it will ultimately succeed in its refund requests.

Other Commitments

In January 2017, the Company purchased a distribution center in Medley, Miami-Dade County, Florida. The Company transferred its Miami dry distribution center activities that were previously in the leased facility to the new facility during the third quarter of fiscal year 2017. As of November 30, 2019, all of the vacated space has been subleased (and/or returned to the landlord). As part of the subleases, the Company provided the landlord of the leased facility a letter of credit (“LOC”) for the initial amount of $500,000 which entitled the landlord to draw on the LOC based on a decreasing scale over four years if certain conditions were to occur related to nonpayment by the new tenant. The balance of this LOC decreases at an annual rate of $125,000 starting in August 2018. As of November 30, 2019, the remaining balance of the LOC was $250,000. Although this agreement is considered a guarantee, in measuring the fair value, the Company considers the risk and probability of default by the third party tenant as not likely nor probable based on the Company’s review of the third party tenant’s financial position as well as the third party’s considerable capital investment into the leased facility. Therefore, the Company has not recorded a liability for this guarantee.

The Company is also committed to non-cancelable construction service obligations for various warehouse club developments and expansions. As of November 30, 2019 and August 31, 2019, the Company had approximately $15.1 million and $14.9 million, respectively, in contractual obligations for construction services not yet rendered.

The Company has entered into general land purchase and land purchase option agreements. The Company’s land purchase agreements are typically subject to various conditions, including, but not limited to, the ability to obtain necessary governmental permits or approvals. A deposit under an agreement is typically returned to the Company if all permits or approvals are not obtained. Generally, the Company has the right to cancel any of our agreements to purchase land without cause by forfeiture of some or all of the deposits we have made pursuant to the agreement. The Company does not have a timetable of when or if it will exercise its land purchase options or complete its other land purchase agreements, due to the uncertainty related to the completion of the Company's due diligence reviews or required governmental permits or approvals. The Company's due diligence reviews include evaluations of the legal status of each property, the zoning and permitting issues related to acquiring approval for the construction and operation of a warehouse club and any other issues related to the property itself that could render the property unsuitable or limit the property's economic viability as a warehouse club site. If all land purchase agreements were completed, the cash use would be approximately $6.7 million.

The table below summarizes the Company’s interest in real estate joint ventures, commitments to additional future investments and the Company’s maximum exposure to loss as a result of its involvement in these joint venture as of November 30, 2019 (in thousands):

Entity	% ‎Ownership		Initial ‎Investment		Additional ‎Investments		Net Income Inception to Date		Company’s ‎Variable ‎Interest ‎in Entity		Commitment ‎to Future ‎Additional ‎Investments(1)		Company's ‎Maximum ‎Exposure ‎to Loss in ‎Entity(2)
GolfPark Plaza, S.A.	50	%	$	4,616	$	2,402	$	132	$	7,150	$	99	$	7,249
Price Plaza Alajuela PPA, S.A.	50	%		2,193		1,236		70		3,499		785		4,284
Total			$	6,809	$	3,638	$	202	$	10,649	$	884	$	11,533

⁽¹⁾The parties intend to seek alternate financing for the project, which could reduce the amount of investments each party would be required to provide. The parties may mutually agree on changes to the project, which could increase or decrease the amount of contributions each party is required to provide.

⁽²⁾The maximum exposure is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company to provide additional financial support.

 

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LEASES

3 Months Ended

Nov. 30, 2019

LEASES [Abstract]

LEASES

NOTE 10 – LEASES

The Company adopted ASC 842 as of September 1, 2019, using the modified retrospective method and applying transitional relief allowing entities to initially apply the requirements at the adoption date by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, results and disclosures for the reporting periods beginning September 1, 2019 are reported and presented under ASC 842, while prior period amounts and disclosures are not adjusted and continue to be reported and presented under ASC 840.

As part of the adoption, the Company elected the following practical expedients:

A package of practical expedients allowing the Company to: a) carry forward its historical lease classification; b) avoid reassessing whether any expired or existing contracts are or contain leases; and c) avoid reassessing initial direct costs for any existing lease.

A practical expedient related to land easements, allowing the Company to carry forward the accounting treatment for land easements on existing agreements and eliminating the need to reassess existing lease contracts to determine if land easements are separate leases under ASC 842.

A practical expedient allowing the Company not to apply the recognition requirements of ASC 842 to short-term leases (12 months or less).

The Company did not elect the following practical expedients:

A practical expedient that would allow the Company to use hindsight in determining the lease term and to assess impairment of the entity’s right-of use (“ROU”) assets, since election of this expedient could make adoption more complex given that reevaluation of the lease term.

A practical expedient allowing the Company to not separate lease components from nonlease components (e.g., common area maintenance costs), since the Company does not combine lease and nonlease components for any of its real estate leases.

In accordance with ASC 842, the Company determines if an arrangement is a lease at inception or modification of a contract and classifies each lease as either operating or finance lease at commencement. The Company only reassesses lease classification subsequent to commencement upon a change to the expected lease term or the contract being modified. As of November 30, 2019, the Company only has operating leases for its clubs, distribution centers, office space, and land. Operating leases, net of accumulated amortization, are included in operating lease ROU assets, and current and non-current operating lease liabilities, on the Company’s consolidated balance sheets. Lease expense for operating leases is included in selling general and administrative expense on the Company’s consolidated statements of income. Leases with an initial term of twelve months or less are not recorded on the Company’s consolidated balance sheet.

The Company is generally obligated for the cost of property taxes, insurance, and maintenance relating to its leases, which are often variable lease payments. Such costs are included in selling, general and administrative expense on the interim unaudited consolidated statements of income.

Certain of the Company's lease agreements provide for lease payments based on future sales volumes at the leased location, or include rental payments adjusted periodically for inflation or based on an index, which are not measurable at the inception of the lease. The Company expenses such variable amounts in the period incurred, which is the period in which it becomes probable that the specified target that triggers the variable lease payments will be achieved. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the reasonably certain lease term. The operating lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option or if an economic penalty may be incurred if the option is not exercised. The initial lease term of the Company’s operating leases range from two to 30 years.

Where the Company's leases do not provide an implicit rate, a collateralized incremental borrowing rate ("IBR") is used to determine the present value of lease payments. The IBR is based on a yield curve derived by publicly traded bond offerings for companies with similar credit characteristics that approximate the Company's market risk profile. In addition, we adjust the IBR for jurisdictional risk derived from quoted interest rates from financial institutions to reflect the cost of borrowing in the Company’s local markets.

Adoption of the standard resulted in the initial recognition of $120.6 million of operating lease ROU assets and $132.1 million of short-term and long-term operating lease liabilities as of September 1, 2019. The difference between the newly recorded assets and liabilities is $11.5 million, which was recorded against our deferred rent balance of $11.2 million as of August 31, 2019. The difference of $0.3 million was expensed in the first quarter of fiscal year 2020. No cumulative-effect adjustments were recorded to retained earnings, and there was no material impact to the Company’s interim consolidated statements of income, consolidated statements of comprehensive income, or consolidated statements of cash flows.

The following table is a summary of the Company’s components of total lease costs for the first quarter of fiscal year 2020 (in thousands):

	Three Months Ended
	November 30,
	2019
Operating lease cost	$	4,221
Short-term lease cost		53
Variable lease cost		1,081
Sublease income		(289)
Total lease costs	$	5,066

The weighted average remaining lease term and weighted average discount rate for operating leases as of November 30, 2019 were as follows:

	Operating leases
Weighted average remaining lease term in years	19.2
Weighted average discount rate percentage	6.5%

Supplemental cash flow information related to leases under which the Company is the lessee was as follows (amounts in thousands):

	Three Months Ended
	November 30,
	2019
Operating cash flows paid for operating leases	$	3,805

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

	Leased
Years Ended November 30,	Locations(1)
2020	$	14,318
2021		13,403
2022		13,231
2023		13,129
2024		12,438
Thereafter		179,042
Total future lease payments		245,561
Less imputed interest		(115,553)
Total operating lease liabilities	$	130,008	(2)

⁽¹⁾Operating lease obligations have been reduced by approximately $2.0 million to reflect expected sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased.

⁽²⁾Future minimum lease payments include $1.5 million of lease payment obligations for the prior leased Miami distribution center. For purposes of calculating the minimum lease payments, a reduction is reflected for the actual sub-lease income the Company expects to receive during the remaining lease term. This sub-lease income was also considered for the purposes of calculating the exit obligation, which was immaterial as of November 30, 2019.

 

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Summary of Income Tax Receivables) (Details) - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Income Tax Receivable, Prepaid expenses and other current assets	$ 10,065	$ 9,009
Income Tax Receivable, Other non-current assets	19,654	16,381
Total amount of income tax receivables reported	$ 29,719	$ 25,390

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Recent Accounting Pronouncements Adopted) (Narrative) (Details) - USD ($)	3 Months Ended
	Nov. 30, 2019		Sep. 01, 2019
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lease liability	$ 130,008,000	[1],[2]	$ 132,100,000
Operating lease right-of-use assets, net	118,203,000		120,600,000
Foreign currency exposure	$ 34,100,000
Accounting Standards Update 2016-02 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lease liability			132,100,000
Operating lease right-of-use assets, net			120,600,000
Cumulative effect of accounting change for the adoption of ASU 2016-09			$ 0

[1] Future minimum lease payments include $1.5 million of lease payment obligations for the prior leased Miami distribution center. For purposes of calculating the minimum lease payments, a reduction is reflected for the actual sub-lease income the Company expects to receive during the remaining lease term. This sub-lease income was also considered for the purposes of calculating the exit obligation, which was immaterial as of November 30, 2019.

[2] Operating lease obligations have been reduced by approximately $2.0 million to reflect expected sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Goodwill and Other Intangibles) (Narrative) (Details) - USD ($) $ in Millions	Nov. 30, 2019	Aug. 31, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Goodwill and other intangibles, net	$ 57.4	$ 58.7

XML

SEGMENTS (Summary of Segment Revenues, Operating Costs and Balance Sheet Items) (Details) $ in Thousands		3 Months Ended
		Nov. 30, 2019 USD ($) warehouse country		Nov. 30, 2018 USD ($)		Aug. 31, 2019 USD ($)
Segment Reporting Information [Line Items]
Number of stores | warehouse		45
Segment Reporting Information
Revenue		$ 811,941		$ 779,637
Depreciation, Property and equipment		14,214		13,124
Amortization, Intangibles		599		599
Operating income (loss)		30,714		24,670
Net income (loss) attributable to PriceSmart Inc.		19,728		14,612
Long-lived assets (other than deferred tax assets)		877,043	[1]	670,989	[1]	$ 730,365
Intangibles, net		11,977		14,381		12,576
Goodwill		45,425		46,248		46,101
Total assets		1,524,111		1,277,243		1,296,411
Capital expenditures, net		41,226		36,339
United States Operations Segment [Member]
Segment Reporting Information
Revenue		17,339		17,339
Depreciation, Property and equipment		1,348		1,960
Amortization, Intangibles		599		599
Operating income (loss)		2,587		(1,050)
Net income (loss) attributable to PriceSmart Inc.		(724)		(3,825)
Long-lived assets (other than deferred tax assets)		84,117	[1]	90,061	[1]	65,278
Intangibles, net		11,977		14,381		12,576
Goodwill		10,695		11,230		11,315
Total assets		168,375		158,591		161,583
Capital expenditures, net		629		1,686
Central American Operations Segment [Member]
Segment Reporting Information
Revenue		466,802		439,806
Depreciation, Property and equipment		6,882		5,870
Operating income (loss)		31,700		28,792
Net income (loss) attributable to PriceSmart Inc.		26,751		24,185
Long-lived assets (other than deferred tax assets)		471,366	[1]	320,136	[1]	383,665
Goodwill		24,532		24,726		24,593
Total assets		754,364		592,114		614,579
Capital expenditures, net		15,243		22,771
Caribbean Operations Segment [Member]
Segment Reporting Information
Revenue	[2]	235,017		225,009
Depreciation, Property and equipment	[2]	3,966		3,191
Operating income (loss)	[2]	11,810		12,027
Net income (loss) attributable to PriceSmart Inc.	[2]	10,318		9,985
Long-lived assets (other than deferred tax assets)	[2]	177,742	[1]	149,823	[1]	165,584
Goodwill	[2]	10,198		10,292		10,193
Total assets	[2]	369,575		346,397		340,216
Capital expenditures, net	[2]	4,520		10,495
Colombia Operations Segment [Member]
Segment Reporting Information
Revenue		92,783		97,483
Depreciation, Property and equipment		2,018		2,103
Operating income (loss)		4,524		3,416
Net income (loss) attributable to PriceSmart Inc.		3,271		2,815
Long-lived assets (other than deferred tax assets)		143,818	[1]	110,969	[1]	115,838
Total assets		231,797		180,141		$ 180,033
Capital expenditures, net		20,834		1,387
Intersegment [Member]
Segment Reporting Information
Revenue	[3]	(355,733)		(352,527)
Intersegment [Member] | United States Operations Segment [Member]
Segment Reporting Information
Revenue		(349,950)		(350,719)
Intersegment [Member] | Central American Operations Segment [Member]
Segment Reporting Information
Revenue		(4,045)		(437)
Intersegment [Member] | Caribbean Operations Segment [Member]
Segment Reporting Information
Revenue	[2]	(1,202)		(1,093)
Intersegment [Member] | Colombia Operations Segment [Member]
Segment Reporting Information
Revenue		(536)		(278)
Reconciling Items [Member]
Segment Reporting Information
Operating income (loss)	[3]	(19,907)		(18,515)
Net income (loss) attributable to PriceSmart Inc.	[3]	$ (19,888)		$ (18,548)
Foreign Countries [Member]
Segment Reporting Information [Line Items]
Number of countries | country		12
Domestic Territories [Member] | U.S. Federal [Member]
Segment Reporting Information [Line Items]
Number of countries | country		1

[1] Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the Long-lived assets (other than deferred tax assets) as of November 30, 2019 is not comparable with that as of November 30, 2018 and August 31, 2019.

[2] Management considers its club in the U.S. Virgin Islands to be part of its Caribbean operations.

[3] The reconciling items reflect the amount eliminated on consolidation of intersegment transactions.

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CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Nov. 30, 2019	Nov. 30, 2018
Revenues:
Net merchandise sales	$ 778,728	$ 747,443
Export sales	8,274	8,189
Membership income	13,746	12,740
Other revenue and income	11,193	11,265
Total revenues	811,941	779,637
Cost of goods sold:
Net merchandise sales	662,724	641,155
Export sales	7,971	7,778
Non-merchandise	4,251	4,247
Selling, general and administrative:
Warehouse club and other operations	79,373	74,222
General and administrative	25,884	27,335
Pre-opening expenses	953	15
Loss on disposal of assets	71	215
Total operating expenses	781,227	754,967
Operating income	30,714	24,670
Other income (expense):
Interest income	293	391
Interest expense	(862)	(1,033)
Other expense, net	(985)	(1,819)
Total other income (expense)	1,554	2,461
Income before provision for income taxes and loss of unconsolidated affiliates	29,160	22,209
Provision for income taxes	(9,403)	(7,540)
Loss of unconsolidated affiliates	(48)	(24)
Net income	19,709	14,645
Less: net (income) loss attributable to noncontrolling interest	19	(33)
Net income attributable to PriceSmart, Inc.	$ 19,728	$ 14,612
Net income attributable to PriceSmart Inc. per share available for distribution:
Basic	$ 0.64	$ 0.48
Diluted	$ 0.64	$ 0.48
Shares used in per share computations:
Basic	30,277	30,172
Diluted	30,284	30,189
Dividends per share

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DEBT (Narrative) (Details) - USD ($) $ in Thousands		Nov. 30, 2019	Aug. 31, 2019
Debt Instrument [Line Items]
Total long-term loans	[1]	$ 111,810	$ 89,586
Debt With Covenants [Member]
Debt Instrument [Line Items]
Line of Credit, Current facilities used		40,000	40,000
Group of Subsidiaries [Member] | Debt With Covenants [Member]
Debt Instrument [Line Items]
Total long-term loans		$ 105,900	$ 83,100

[1] The carrying amount of non-cash assets assigned as collateral for these loans was $111.3 million. No cash assets were assigned as collateral for these loans.

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COMPANY OVERVIEW AND BASIS OF PRESENTATION	3 Months Ended
	Nov. 30, 2019
COMPANY OVERVIEW AND BASIS OF PRESENTATION [Abstract]
COMPANY OVERVIEW AND BASIS OF PRESENTATION	NOTE 1 – COMPANY OVERVIEW AND BASIS OF PRESENTATION PriceSmart, Inc.’s (“PriceSmart,” the “Company,” or "we") business consists primarily of international membership shopping warehouse clubs similar to, but smaller in size than, warehouse clubs in the United States. As of November 30, 2019, the Company had 45 warehouse clubs in operation in 12 countries and one U.S. territory (seven each in Colombia, Costa Rica, and Panama; five in the Dominican Republic, four each in Trinidad and Guatemala; three in Honduras; two each in El Salvador and Nicaragua; and one each in Aruba, Barbados, Jamaica and the United States Virgin Islands), of which the Company owns 100% of the corresponding legal entities (see Note 2 - Summary of Significant Accounting Policies). The Company is currently constructing and plans to open warehouse clubs in Liberia, Costa Rica in the summer of 2020 and Bogota, Colombia in the fall of 2020. The Company also plans to build new warehouse clubs in Portmore, Jamaica and Bucaramanga, Colombia and open them in the fall of 2020. Once these four new clubs are open, the Company will operate 49 warehouse clubs. The Company continues to explore and negotiate for other potential sites for future warehouse clubs in Central America, the Caribbean and Colombia. PriceSmart is investing in technology to increase efficiencies and to enable omni-channel capabilities, including e-commerce, to enhance the member experience. PriceSmart also operates a legacy (casillero and marketplace) Aeropost business in 38 countries in Latin America and the Caribbean, many of which overlap with markets where we operate warehouse clubs. Basis of Presentation – The interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the consolidated balance sheet as of November 30, 2019 is not comparable, in this respect, with that as of August 31, 2019. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2019 (the “2019 Form 10-K”). The interim consolidated financial statements include the accounts of PriceSmart, Inc., a Delaware corporation, and its subsidiaries. Inter-company transactions between the Company and its subsidiaries have been eliminated in consolidation.

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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Schedule of Interest Rate Derivatives) (Details) - Cash Flow Hedging [Member]	Nov. 30, 2019 USD ($)
Columbia $25M Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional amount	$ 25,000,000
Debt instrument, Basis spread on variable rate	2.45%
Derivative, Fixed interest rate	7.93%
Colombia $12.5M Cross Currency Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional amount	$ 12,500,000
Debt instrument, Basis spread on variable rate	2.50%
Derivative, Fixed interest rate	7.09%
Panama $15M Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional amount	$ 14,625,000
Debt instrument, Basis spread on variable rate	3.00%
Derivative, Fixed interest rate	5.99%
Honduras $13.5M Cross Currency Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional amount	$ 13,500,000
Debt instrument, Basis spread on variable rate	3.00%
Derivative, Fixed interest rate	9.75%
Pricesmart $35.7M Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional amount	$ 35,700,000
Debt instrument, Basis spread on variable rate	1.70%
Derivative, Fixed interest rate	3.65%
Costa Rica $7.5M Cross Currency Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional amount	$ 7,500,000
Debt instrument, Basis spread on variable rate	2.50%
Derivative, Fixed interest rate	7.65%
Colombia $15M Cross Currency Interest Rate Swap [Member]
Derivative [Line Items]
Derivative, Notional amount	$ 15,000,000
Debt instrument, Basis spread on variable rate	2.80%
Derivative, Fixed interest rate	8.25%

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STOCKHOLDERS' EQUITY

3 Months Ended

Nov. 30, 2019

STOCKHOLDERS' EQUITY [Abstract]

STOCKHOLDERS' EQUITY

NOTE 5 – STOCKHOLDERS’ EQUITY

Dividends

No dividends were declared by the Company’s Board of Directors during the first three months of fiscal year 2020. The following table summarizes the dividends declared and paid during fiscal year 2019.

			First Payment				Second Payment
Declared	Amount		Record ‎Date	Date ‎Paid	Amount		Record ‎Date	Date ‎Paid	Amount
1/30/2019	$	0.70	2/15/2019	2/28/2019	$	0.35	8/15/2019	8/30/2019	$	0.35

The Company anticipates the ongoing payment of semi-annual dividends in subsequent periods, although the actual declaration of future dividends, the amount of such dividends, and the establishment of record and payment dates is subject to final determination by the Board of Directors at its discretion after its review of the Company’s financial performance and anticipated capital requirements.

Comprehensive Income and Accumulated Other Comprehensive Loss

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

	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2019	$	(144,339)	$	20	$	(144,319)
Foreign currency translation adjustments		(3,724)		34		(3,690)
Defined benefit pension plans		26		—		26
Derivative instruments (1)		513		—		513
Ending balance, November 30, 2019	$	(147,524)	$	54	$	(147,470)

	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2018	$	(121,216)	$	(1)	$	(121,217)
Foreign currency translation adjustments		(13,397)		(1)		(13,398)
Defined benefit pension plans		28		—		28
Derivative Instruments (1)		123		—		123
Ending balance, November 30, 2018	$	(134,462)	$	(2)	$	(134,464)

	Attributable to		Noncontrolling
	PriceSmart		Interests		Total
Beginning balance, September 1, 2018	$	(121,216)	$	(1)	$	(121,217)
Foreign currency translation adjustments		(19,717)		21		(19,696)
Defined benefit pension plans		(112)		—		(112)
Derivative Instruments (1)		(3,369)		—		(3,369)
Amounts reclassified from accumulated other comprehensive income (loss) (2)		75		—		75
Ending balance, August 31, 2019	$	(144,339)	$	20	$	(144,319)

⁽¹⁾See Note 8 - Derivative Instruments and Hedging Activities.

⁽²⁾Amounts reclassified from accumulated other comprehensive loss related to the minimum pension liability are included in warehouse club and other operations in the Company's consolidated statements of income.

Retained Earnings Not Available for Distribution

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

	November 30,		August 31,
	2019		2019
Retained earnings not available for distribution	$	7,926	$	7,843

 

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SEGMENTS

3 Months Ended

Nov. 30, 2019

SEGMENTS [Abstract]

SEGMENTS

NOTE 9 – SEGMENTS

The Company and its subsidiaries are principally engaged in the international operation of membership shopping in 45 warehouse clubs located in 12 countries and one U.S. territory that are located in Central America, the Caribbean and Colombia. In addition, the Company operates distribution centers and corporate offices in the United States. The Company has aggregated its warehouse clubs, distribution centers and corporate offices into reportable segments. The Company’s reportable segments are based on management’s organization of these locations into operating segments by general geographic location, used by management and the Company's chief operating decision maker in setting up management lines of responsibility, providing support services, and making operational decisions and assessments of financial performance. Segment amounts are presented after converting to U.S. dollars and consolidating eliminations. Certain revenues, operating costs and inter-company charges included in the United States segment are not allocated to the segments within this presentation, as it is impractical to do so, and they appear as reconciling items to reflect the amount eliminated on consolidation of intersegment transactions. From time to time, the Company revises the measurement of each segment's operating income and net income, including certain corporate overhead allocations, and other measures as determined by the information regularly reviewed by the Company's chief operating decision maker. When the Company does so, the previous period amounts and balances are reclassified to conform to the current period's presentation.

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

	United ‎States ‎Operations		Central ‎American ‎Operations		Caribbean ‎ Operations (1)		Colombia Operations		Reconciling ‎Items(2)		Total
Three Months Ended November 30, 2019
Revenue from external customers	$	17,339	$	466,802	$	235,017	$	92,783	$	—	$	811,941
Intersegment revenues		349,950		4,045		1,202		536		(355,733)		—
Depreciation, Property and equipment		1,348		6,882		3,966		2,018		—		14,214
Amortization, Intangibles		599		—		—				—		599
Operating income		2,587		31,700		11,810		4,524		(19,907)		30,714
Net income (loss) attributable to PriceSmart, Inc.		(724)		26,751		10,318		3,271		(19,888)		19,728
Long-lived assets (other than deferred tax assets) (3)		84,117		471,366		177,742		143,818		—		877,043
Intangibles, net		11,977		—		—		—		—		11,977
Goodwill		10,695		24,532		10,198		—		—		45,425
Total assets		168,375		754,364		369,575		231,797		—		1,524,111
Capital expenditures, net		629		15,243		4,520		20,834		—		41,226
Three Months Ended November 30, 2018
Revenue from external customers	$	17,339	$	439,806	$	225,009	$	97,483	$	—	$	779,637
Intersegment revenues		350,719		437		1,093		278		(352,527)		—
Depreciation, Property and equipment		1,960		5,870		3,191		2,103		—		13,124
Amortiazation, Intangibles		599		—		—		—		—		599
Operating income (loss)		(1,050)		28,792		12,027		3,416		(18,515)		24,670
Net income (loss) attributable to PriceSmart, Inc.		(3,825)		24,185		9,985		2,815		(18,548)		14,612
Long-lived assets (other than deferred tax assets)(3)		90,061		320,136		149,823		110,969		—		670,989
Intangibles, net		14,381		—		—		—		—		14,381
Goodwill		11,230		24,726		10,292		—		—		46,248
Total assets		158,591		592,114		346,397		180,141		—		1,277,243
Capital expenditures, net		1,686		22,771		10,495		1,387		—		36,339
As of August 31, 2019
Long-lived assets (other than deferred tax assets)	$	65,278	$	383,665	$	165,584	$	115,838	$	—	$	730,365
Intangibles, net		12,576		—		—		—		—		12,576
Goodwill		11,315		24,593		10,193		—		—		46,101
Total assets		161,583		614,579		340,216		180,033		—		1,296,411

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

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

⁽³⁾Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the Long-lived assets (other than deferred tax assets) as of November 30, 2019 is not comparable with that as of November 30, 2018 and August 31, 2019.

 

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Schedule of Joint Ventures) (Details)	Nov. 30, 2019
Real Estate Development [Member] | Panama [Member] | Equity Method Investee [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage	50.00%	[1]
Real Estate Development [Member] | Costa Rica [Member] | Equity Method Investee [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage	50.00%	[1]
Marketplace And Casillero Store Front [Member] | Guatemala [Member] | Consolidated Entities [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage	60.00%
Marketplace And Casillero Store Front [Member] | British Virgin Islands [Member] | Consolidated Entities [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage	50.00%
Marketplace And Casillero Store Front [Member] | Trinidad [Member] | Consolidated Entities [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage	50.00%

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tax Receivables) (Narrative) (Details) - USD ($) $ in Thousands	Nov. 30, 2019	Aug. 31, 2019
Tax Receivables [Line Items]
Value added tax receivable	$ 28,058	$ 24,330
Income taxes receivable	29,719	25,390
Unknown Country [Member]
Tax Receivables [Line Items]
Value added tax receivable	6,200	5,100
Deferred tax assets, net	2,700	2,700
Income taxes receivable	$ 9,700	$ 7,800

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Net Effect of Foreign Currency Translation) (Details) - USD ($) $ in Thousands		3 Months Ended
		Nov. 30, 2019	Nov. 30, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Effect on other comprehensive loss due to foreign currency restatement	[1]	$ (3,724)	$ (13,397)

[1] Translation adjustments arising in translating the financial statements of a foreign entity have no effect on the income taxes of that foreign entity. They may, however, affect: (a) the amount, measured in the parent entity's reporting currency, of withholding taxes assessed on dividends paid to the parent entity and (b) the amount of taxes assessed on the parent entity by the government of its country. The Company has determined that the reinvestment of earnings of its foreign subsidiaries are indefinite because of the long-term nature of the Company's foreign investment plans. Therefore, deferred taxes are not provided for on translation adjustments related to non-remitted earnings of the Company's foreign subsidiaries.

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LEASES (Tables)

3 Months Ended

Nov. 30, 2019

LEASES [Abstract]

Summary of Components of Total Lease Costs

	Three Months Ended
	November 30,
	2019
Operating lease cost	$	4,221
Short-term lease cost		53
Variable lease cost		1,081
Sublease income		(289)
Total lease costs	$	5,066

Operating Lease, Weighted Average Remaining Lease Term and Weighted Average Discount Rate

	Operating leases
Weighted average remaining lease term in years	19.2
Weighted average discount rate percentage	6.5%

Supplemental Cash Flow Information Related To Leases

	Three Months Ended
	November 30,
	2019
Operating cash flows paid for operating leases	$	3,805

Schedule of Future Minimum Lease Commitments

	Leased
Years Ended November 30,	Locations(1)
2020	$	14,318
2021		13,403
2022		13,231
2023		13,129
2024		12,438
Thereafter		179,042
Total future lease payments		245,561
Less imputed interest		(115,553)
Total operating lease liabilities	$	130,008	(2)

⁽¹⁾Operating lease obligations have been reduced by approximately $2.0 million to reflect expected sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased.

⁽²⁾Future minimum lease payments include $1.5 million of lease payment obligations for the prior leased Miami distribution center. For purposes of calculating the minimum lease payments, a reduction is reflected for the actual sub-lease income the Company expects to receive during the remaining lease term. This sub-lease income was also considered for the purposes of calculating the exit obligation, which was immaterial as of November 30, 2019.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Nov. 30, 2019

Derivative Instruments, Gain (Loss) [Line Items]

Summary of Restricted Cash

	November 30,		August 31,
	2019		2019
Short-term restricted cash:
Restricted cash for land purchase option agreements	$	50	$	50
Other short-term restricted cash		15		4
Total short-term restricted cash	$	65	$	54
Long-term restricted cash:
Other long-term restricted cash (1)	$	3,689	$	3,529
Total long-term restricted cash	$	3,689	$	3,529
Total restricted cash	$	3,754	$	3,583

⁽¹⁾Other long-term restricted cash consists mainly of cash deposits held within banking institutions in compliance with federal regulatory requirements in Costa Rica and Panama.

Summary of Value Added Tax Receivables

	November 30,		August 31,
	2019		2019
Prepaid expenses and other current assets	$	3,068	$	1,639
Other non-current assets		24,990		22,691
Total amount of VAT receivables reported	$	28,058	$	24,330

Summary of Income Tax Receivables

	November 30,		August 31,
	2019		2019
Prepaid expenses and other current assets	$	10,065	$	9,009
Other non-current assets		19,654		16,381
Total amount of Income tax receivables reported	$	29,719	$	25,390

Net Effect of Foreign Currency Translation

	Three Months Ended
	November 30,			November 30,
	2019			2018
Effect on other comprehensive loss due to foreign currency translation	$	(3,724)	$	(13,397)

Summary of Foreign Currency Gains and Losses

	Three Months Ended
	November 30,		November 30,
	2019		2018
Currency loss	$	(1,657)	$	(1,819)

Real Estate Development [Member]

Derivative Instruments, Gain (Loss) [Line Items]

Schedule of Joint Ventures

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

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

Marketplace And Casillero Store Front [Member]

Derivative Instruments, Gain (Loss) [Line Items]

Schedule of Joint Ventures

Marketplace and Casillero Store-front Joint Ventures	Countries	Ownership		Basis of ‎Presentation
Guatemala	Guatemala	60.0	%	Consolidated
Tortola	British Virgin Islands	50.0	%	Consolidated
Trinidad	Trinidad	50.0	%	Consolidated

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Nov. 30, 2019

COMMITMENTS AND CONTINGENCIES [Abstract]

Schedule of Variable Interest Entities Maximum Loss Exposure

Entity	% ‎Ownership		Initial ‎Investment		Additional ‎Investments		Net Income Inception to Date		Company’s ‎Variable ‎Interest ‎in Entity		Commitment ‎to Future ‎Additional ‎Investments(1)		Company's ‎Maximum ‎Exposure ‎to Loss in ‎Entity(2)
GolfPark Plaza, S.A.	50	%	$	4,616	$	2,402	$	132	$	7,150	$	99	$	7,249
Price Plaza Alajuela PPA, S.A.	50	%		2,193		1,236		70		3,499		785		4,284
Total			$	6,809	$	3,638	$	202	$	10,649	$	884	$	11,533

⁽¹⁾The parties intend to seek alternate financing for the project, which could reduce the amount of investments each party would be required to provide. The parties may mutually agree on changes to the project, which could increase or decrease the amount of contributions each party is required to provide.

⁽²⁾The maximum exposure is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company to provide additional financial support.

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STOCKHOLDERS' EQUITY (Schedule of Dividends) (Details) - $ / shares				3 Months Ended
	Aug. 31, 2019	Feb. 28, 2019	Jan. 30, 2019	Nov. 30, 2019	Nov. 30, 2018
Dividends Payable [Line Items]
Amount
2019 Dividend Declared [Member]
Dividends Payable [Line Items]
Declared				Jan. 30, 2019
Amount			$ 0.70
2019 First Dividend Paid [Member]
Dividends Payable [Line Items]
Record Date				Feb. 15, 2019
Date Paid				Feb. 28, 2019
Payment Amount		$ 0.35
2019 Second Dividend Paid [Member]
Dividends Payable [Line Items]
Record Date				Aug. 15, 2019
Date Paid				Aug. 30, 2019
Payment Amount	$ 0.35

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REVENUE RECOGNITION (Narrative) (Details)	3 Months Ended
	Nov. 30, 2019 USD ($)
REVENUE RECOGNITION [Abstract]
Platinum membership redemption rate	100.00%
Annual membership fee	$ 75
Platinum membership rebate	2.00%
Maximum Platinum membership rebate	$ 500
Platinum membership recorded liability	95.00%
Breakage revenue percent	5.00%

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COMMITMENTS AND CONTINGENCIES (Schedule of Variable Interest Entities Maximum Loss Exposure) (Details) - USD ($) $ in Thousands		3 Months Ended
		Nov. 30, 2019	Aug. 31, 2019
Variable Interest Entity [Line Items]
Initial Investment		$ 6,809
Additional Investments		3,638
Net Income Inception to Date		202
Company's Variable Interest in Entity		10,649	$ 10,697
Commitment to Future Additional Investments	[1]	884
Company's Maximum Exposure to Loss in Entity	[2]	$ 11,533
GolfPark Plaza, S.A [Member]
Variable Interest Entity [Line Items]
Percentage Ownership		50.00%
Initial Investment		$ 4,616
Additional Investments		2,402
Net Income Inception to Date		132
Company's Variable Interest in Entity		7,150
Commitment to Future Additional Investments	[1]	99
Company's Maximum Exposure to Loss in Entity	[2]	$ 7,249
Price Plaza Alajuela , S.A. [Member]
Variable Interest Entity [Line Items]
Percentage Ownership		50.00%
Initial Investment		$ 2,193
Additional Investments		1,236
Net Income Inception to Date		70
Company's Variable Interest in Entity		3,499
Commitment to Future Additional Investments	[1]	785
Company's Maximum Exposure to Loss in Entity	[2]	$ 4,284

[1] The parties intend to seek alternate financing for the project, which could reduce the amount of investments each party would be required to provide. The parties may mutually agree on changes to the project, which could increase or decrease the amount of contributions each party is required to provide.

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

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LEASES (Supplemental Cash Flow Information Related To Leases) (Details) $ in Thousands	3 Months Ended
	Nov. 30, 2019 USD ($)
LEASES [Abstract]
Operating cash flows paid for operating leases	$ 3,805