UNCONSOLIDATED AFFILIATES

12 Months Ended

Aug. 31, 2024

UNCONSOLIDATED AFFILIATES [Abstract]

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 the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance and has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The reporting entity that consolidates a VIE is called the primary beneficiary of that VIE.

In 2008, the Company entered into real estate joint ventures to jointly own and operate separate commercial retail centers adjacent to warehouse clubs in Panama (GolfPark Plaza, S.A.) and Costa Rica (Price Plaza Alajuela PPA, S.A.). Due to the initial nature of the joint ventures and the continued commitments for additional financing, the Company determined these joint ventures are VIEs. Since all rights, obligations and the power to direct the activities of a VIE that most significantly impact the VIE's economic performance is shared equally by both parties within each joint venture, 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. In the fourth quarter of fiscal year 2024, the Company dissolved its joint venture with Price Plaza Alajuela PPA, S.A in order to exert control over property tied to its adjacent warehouse club. As a result of this dissolution, the Company recognized a loss of approximately $80,000 in Other income (expense) on the consolidated statements of income for the quarter ended August 31, 2024. The Company used a market-based valuation model to determine the fair value of the two plots of land received at $1.9 million and an income-based valuation model to determine the fair value of the building received at $1.3 million. The Company also received cash and other assets of approximately $490,000.

On December 12, 2013, the Company entered into a lease agreement for approximately 17,976 square feet (1,670 square meters) of land with Golf Park Plaza, S.A. upon which the Company constructed its central offices in Panama. Construction of the offices was completed in October 2014. The lease term is for 15 years with three options to renew for five years each at the Company's discretion. On July 14, 2017, the Company entered into a lease agreement for approximately 2,992 square feet (278 square meters) of a building with Golf Park Plaza, S.A. for warehouse storage space. The agreement was recently renewed for an additional five years during fiscal year 2022. Combined, the Company recognized $140,000 in rent expense for each of the fiscal years ended August 31, 2024, and August 31, 2023, and $149,000 in rent expense for the fiscal year ended August 31, 2022.

The table below summarizes the Company’s interest in these VIEs and the Company’s maximum exposure to loss as a result of its involvement with these VIEs as of August 31, 2024 (in thousands):


Entity	% Ownership		Initial Investment		Additional Investments		Net Income (Loss) Inception to Date		Dissolution of Joint Venture(1)		Company’s Variable Interest in Entity		Commitment to Future Additional Investments(2)		Company's Maximum Exposure to Loss in Entity(3)
GolfPark Plaza, S.A.	50	%	$	4,616	$	2,402	$	(136)	$	—	$	6,882	$	99	$	6,981
Price Plaza Alajuela PPA, S.A.	—	%	2,193		1,236		234		(3,663)		—		—		—
Total			$	6,809	$	3,638	$	98	$	(3,663)	$	6,882	$	99	$	6,981

(1)In the fourth quarter of fiscal year 2024, the Company dissolved its joint venture with Price Plaza Alajuela PPA, S.A.

(2)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.

(3)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.

The summarized financial information of the unconsolidated affiliates is as follows (in thousands):


	August 31, 2024		August 31, 2023
Current assets	$	1,641	$	1,654
Non-current assets	$	3,009	$	10,324
Current liabilities	$	151	$	158
Non-current liabilities	$	—	$	9


	Years Ended August 31,
	2024		2023		2022
PriceSmart’s share of the net gain (loss) of unconsolidated affiliates	$	66	$	(55)	$	(10)