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Dynamic quotes 
OFFON

PRICESMART, INC.

(PSMT)
  Report
Delayed Quote. Delayed Nasdaq - 11/26 01:00:00 pm
72.65 USD   -6.85%
11/26INSIDER SELL : Pricesmart
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11/10INSIDER SELL : Pricesmart
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PRICESMART : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

10/21/2021 | 04:22pm EST
The following discussion and analysis should be read in conjunction with our
audited consolidated financial statements and related notes thereto included
elsewhere in this Annual Report on Form 10-K. Forward-looking statements
concerning PriceSmart, Inc.'s ("PriceSmart", the "Company" or "we")
anticipated future revenues and earnings, adequacy of future cash flows,
omni-channel initiatives, proposed warehouse club openings, COVID-19 related
factors and challenges, and the Company's performance relative to
competitors and related matters. These forward-looking statements include, but
are not limited to, statements containing the words "expect," "believe," "will,"
"may," "should," "project," "estimate," "anticipated," "scheduled," "intend,"
and like expressions, and the negative thereof. Forward-looking statements
are only as of the date they are made, and we do not undertake to update these
statements, except as required by law. These statements are subject to risks and
uncertainties that could cause actual results to differ materially including,
but not limited to the risks detailed in this Annual Report on Form 10-K under
the heading Part I. "Item 1A. Risk Factors." These risks are not the only risks
that the Company faces. The Company could also be affected by additional factors
that apply to all companies operating globally and in the U.S., as well as other
risks that are not presently known to the Company or that the Company currently
considers to be immaterial.

Overview

PriceSmart, headquartered in San Diego, California, owns and operates U.S.-style
membership shopping warehouse clubs in Latin America and the Caribbean, selling
high quality merchandise and services at low prices to our Members. We operate
47 warehouse clubs in 12 countries and one U.S. territory (eight each in Costa
Rica and Colombia; seven in Panama; five in the Dominican Republic, four
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). The Company also plans to open new warehouse clubs
in Guatemala City, Guatemala in late October 2021, in Bucaramanga, Colombia in
November 2021, and in Portmore, Jamaica in the spring of 2022. Once these three
new clubs are open, the Company will operate 50 warehouse clubs.  Our corporate
headquarters, U.S. buying operations and regional distribution centers are
located primarily in the United States. Our operating segments are the United
States, Central America, the Caribbean and Colombia. All intercompany balances
and transactions have been eliminated in consolidation.

Factors Affecting the Business


The COVID-19 pandemic has resulted in significant challenges across our 13
markets since March 2020. Many markets imposed limitations, varying by market
and in frequency, on access to the Company's clubs and on the Company's club
operations, including in some cases frequent temporary club closures, a
reduction in the number of days during the week and hours per day the Company's
clubs were permitted to be open, restrictions on segments of the population
permitted to shop or circulate on particular days, and significant limits on the
number of people permitted to be in the club at the same time. We also
experienced product mix shifts due to changing consumer habits and/or government
imposed limitations on many non-food categories, decreases in purchases by many
business Members, particularly restaurants and hotels, and sporadic supply chain
challenges, which can impact inventory levels.

We are currently focused on these four main priorities:

?Protect the safety and well-being of our employees and our Members.

?Take proactive measures to protect, expand and create optionality for our supply chain options.

?Expand technology-related shopping and convenience for the Member.

?Apply data analytics to identify opportunities for improvement, growth and targeted marketing


We remain vigilant in adapting to the ever-evolving consumer demands emerging
from the COVID experience and the apparent desire of consumers to satisfy their
shopping and service needs in one location. The COVID-19 pandemic remains
unpredictable in duration and intensity in our markets, and we continue to see
periodic reinstatements of stay-at-home orders and other restrictions. In
addition, we expect continued uncertainty in the economies of our markets as a
result of the COVID-19 pandemic and expect volatility in employment trends,
industry and consumer confidence and demand; volatility and liquidity of foreign
currency exchange rates; volatility of commodity prices; and possible fiscal
austerity measures taken by governments in our markets, which will likely impact
our results for the foreseeable future. For additional information, refer to the
risk factors discussed in Part I. "Item 1A. Risk Factors."

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Overall economic trends, foreign currency exchange volatility, and other factors impacting the business


Our sales and profits vary from market to market depending on general economic
factors, including GDP growth; consumer preferences; foreign currency exchange
rates; political policies and social conditions; local demographic
characteristics (such as population growth); the number of years we have
operated in a particular market; and the level of retail and wholesale
competition in that market. The economies of many of our markets are dependent
on foreign trade, tourism, and foreign direct investments. The global and local
travel restrictions and general slow-down in global economic activity, as a
result of COVID-19, have significantly impacted and may continue to impact the
economies in our markets causing significant declines in GDP and employment and
devaluations of local currencies against the U.S. dollar. In general, positive
conditions in the broader economy promote Member spending in our warehouse
clubs, while economic weakness, which generally results in a reduction of
customer spending, may negatively impact spending at our clubs.

During the last half of fiscal year 2021 and continuing into fiscal 2022, we saw
several factors pressuring supply chains, including container shortages, port
delays, and truck and driver shortages. These disruptions and shortages are
impacting the timing of deliveries and leading to higher freight costs. Despite
all these issues, we continue to work in a variety of different ways to hold
down and/or mitigate the price increases passed on to the Members and maintain
sufficient inventory. One key mitigating factor has been our expanded network of
distribution centers, which has facilitated alternative routings of shipments,
increased throughput, and provided flexibility to more effectively mitigate
these challenges. In addition, we have made strategic investments in inventory
and worked with our local vendors to source alternative products, in order to
reduce future out-of-stocks on high demand items that have been impacted by
these disruptions or that have been affected by electronic part shortages. We
expect these conditions to continue throughout fiscal 2022, and we continue to
employ these and various other strategies to maintain as much in-stock inventory
and limit cost increases as much as possible. Delays in deliveries and increases
in cost of delivered merchandise could impact supply of and demand for, the
merchandise we sell, which could impact our sales.

Currency fluctuation can be a significant variable 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 fiscal 2021, approximately 78% of our net merchandise sales
were in currencies other than the U.S. dollar. Of those sales, 48% were
comprised of sales of products we purchased in U.S. dollars.

A devaluation of local currency reduces the value of sales and membership income
that is generated in that country when translated to U.S. dollars for our
consolidated results. In addition, when local currency experiences devaluation,
we may elect to increase the local currency price of imported merchandise to
maintain our target margins, which could impact demand for the merchandise
affected by the price increase. We may also modify the mix of imported versus
local merchandise and/or the source of imported merchandise to mitigate the
impact of currency fluctuations. 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."

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. Demographic characteristics within each of our markets can affect both
the overall level of sales and future sales growth opportunities. Certain island
markets, such as Aruba, Barbados and the U.S. Virgin Islands offer us limited
upside for sales growth given their overall market size.

Political and other factors in each of our markets may have significant effects
on our business. For example, the civil unrest in Colombia paralyzed significant
portions of the country's infrastructure as roadblocks and riots disrupted
normal economic activity during the third quarter of fiscal 2021. Austerity and
tax reform measures for Colombia and other Latin American countries with high
national debt levels and income disparity pose a risk for political instability.
Similar unrest happened in Nicaragua and Honduras in 2018 and 2019,
respectively; Costa Rica also had a general strike against tax reform measures
that significantly impeded regular economic activity in 2018. Events of this
sort have, and may continue to have, an adverse effect on our business.

Our operations are subject to volatile weather conditions and natural disasters.
In November 2020, Hurricanes Eta and Iota brought severe rainfall, winds, and
flooding to a significant portion of Central America, especially Honduras, which
caused significant damage to parts of that country's infrastructure. Although
our warehouse clubs were not significantly affected and we were able to manage
our supply chain to keep our warehouse clubs stocked with merchandise, these
natural disasters could adversely impact our overall sales, costs and profit
performance in the future.

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In the past, we have experienced a lack of availability of U.S. dollars in
certain markets (U.S. dollar illiquidity), particularly in Trinidad. This can
and has impeded our ability to convert local currencies obtained through
merchandise sales into U.S. dollars to settle the U.S. dollar liabilities
associated with our imported products and to otherwise redeploy these funds in
our Company and increases our foreign exchange exposure to any devaluation of
the local currency relative to the U.S. dollar. We continued to experience
significant limitations on our ability to convert Trinidad dollars to U.S.
dollars or other tradeable currencies during fiscal 2020, with a further
deterioration and the problem becoming more acute in August 2020. This U.S.
dollar illiquidity situation persisted throughout fiscal 2021 and we expect the
situation to continue. As liquidity conditions have tightened, we have
methodically raised prices on imported goods in Trinidad due to increased costs
of conversion of Trinidad dollars to U.S. dollars and risks associated with
continued illiquidity. We have also sought to shift the purchase of certain
goods to local sources where appropriate, and we are actively seeking to
exchange Trinidad dollars for tradeable currencies in order to manage our
exposure to any potential devaluation. Due to the illiquidity of the Trinidad
dollars, in the first quarter of fiscal 2021, we began limiting shipments of
goods from the U.S. to Trinidad, and subsequently, we further limited shipments
late in the third quarter of fiscal 2021 and for most of the fourth quarter due
to the government's general prohibition on sales on most non-food or
non-essential items. However, in mid-August 2021, this prohibition was
rescinded, and we were allowed to resume sales of these items; therefore, we
began increasing our merchandise shipments to Trinidad at the end of fiscal
2021.

We continue to explore and execute several options to increase our ability to
generate more reliable sources of U.S. dollars in Trinidad. These options
include, but are not limited to, sourcing locally produced goods in Trinidad
dollars and/or producing goods locally and exporting these items to our clubs
and/or third parties in other countries in exchange for U.S. dollars. While
these initiatives are being developed, we are exploring ways to finance
additional imports, even if a higher level of imports exceeds the amount of U.S.
dollars we are able to source in Trinidad. Alternatives we are considering
include new U.S. dollar denominated loans, foreign currency exchange forwards,
investing in financial instruments, and purchase and sales of commodities, which
could create immediate U.S. dollar liquidity and/or fix the exchange rate of
Trinidad dollars to U.S. dollars. During fiscal year 2021, we have executed
approximately $17.6 million of U.S. dollar and other tradeable currency
denominated loans. Some of these alternatives may not mitigate the resulting
increase in exposure to a potential devaluation of the Trinidad dollar and could
result in our being required to take a discount on the amount of U.S. dollars we
accept in exchange for Trinidad dollars relative to what we would receive upon
exchange in accordance with the official exchange rate and/or incur additional
financing costs.

As of August 31, 2021, our Trinidad subsidiary had Trinidad dollar denominated
cash and cash equivalents and short and long-term investments measured in U.S.
dollars of approximately $52.9 million, a decrease of $26.7 million from August
31, 2020 when these same balances were approximately $79.6 million. The Trinidad
central bank manages the exchange rate of the Trinidad dollar with the U.S.
dollar. While the Trinidad government has publicly stated it has no intention to
devalue the Trinidad dollar, it could in the future decide to devalue the
currency to improve market liquidity, resulting in a devaluation in the U.S.
dollar value of these cash and investments balances. If, for example, a
hypothetical 20% devaluation of the Trinidad dollar were to occur, the value of
our Trinidad dollar cash and investments position, measured in U.S. dollars,
would decrease by approximately $10.6 million, with a corresponding increase in
Accumulated other comprehensive loss reflected on our consolidated balance
sheet. Separate from the Trinidad dollar denominated cash and investments
balances described above, as of August 31, 2021, we had a U.S. dollar
denominated monetary asset position of approximately $26.6 million in Trinidad
(net of U.S. dollar denominated liabilities), which would produce a gain from a
potential devaluation of Trinidad dollars. If, for example, a hypothetical 20%
devaluation of the Trinidad dollar occurred, the net effect on Other income
(expense), net on our consolidated statement of operations of revaluing these
U.S. dollar denominated net monetary assets would be an approximate $5.3 million
gain. While we may pay premiums or enter into financial transactions at a
discount from the official government rate to convert our Trinidad dollars into
U.S. dollars, we use the official exchange rate published by the Central Bank of
Trinidad and Tobago to measure the U.S. dollar equivalent of Trinidad
dollar-based revenues, expenses, assets and liabilities and the Trinidad dollar
equivalent of U.S. dollar-based monetary assets and liabilities for financial
reporting purposes, as there are no other reliable references available to
translate or remeasure our revenues, expenses, assets and liabilities.

Our Barbados subsidiary also recently began facing a U.S. dollar illiquidity
situation in fiscal year 2020. The Barbados dollar has a conventional fixed-peg
currency arrangement, in which the Barbados dollar exchange rate is fixed to the
U.S. dollar. Thus, we do not expect a devaluation of this currency at this time.
However, as of August 31, 2021, our Barbados subsidiary had Barbados dollar
denominated cash and cash equivalents measured in U.S. dollars of approximately
$12.4 million, which cannot be readily converted to U.S. dollars for general use
within the Company.

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Mission and Business Strategy


PriceSmart exists to improve the lives and businesses of our Members, our
employees and our communities through the responsible delivery of the best
quality goods and services at the lowest possible prices. Our mission is to
serve as a model company, which operates profitably and provides a good return
to our investors, by providing Members in emerging and developing markets with
exciting, high quality merchandise sourced from around the world and valuable
services at compelling prices in safe U.S. style clubs and through
PriceSmart.com. We prioritize the well-being and safety of our Members and
employees. We provide good jobs, fair wages and benefits and the opportunity for
growth. We strive to treat our suppliers right and empower them when we can. We
conduct ourselves in a socially responsible manner as we endeavor to improve the
quality of the lives of our Members and their businesses, while respecting the
environment and the laws of all the countries in which we operate. The annual
membership fee enables us to operate our business with lower margins than
traditional retail stores. As we are increasing technological capabilities and
expanding our omni-channel shopping experience, we believe we can realize
greater efficiencies in the supply chain, enhance our ability to satisfy our
Members' shopping expectations, and play a greater role in their lives. We
believe we are well-positioned to blend the excitement and appeal of our brick
and mortar business with the convenience and additional benefits of online
shopping and services.

Growth


We measure our growth primarily by the amount of the period-over-period activity
in our net merchandise sales, our comparable club net merchandise sales, total
membership, income and total revenues. Our investments are geared toward
enhancing Member experience while creating greater efficiencies, which enable us
to offer lower prices, more services, and convenience. We believe these efforts
will support membership renewals and sustained growth for the Company. However,
these investments can impact near-term results, such as when we invest in
technology and talent that are expected to yield long-term benefits or when we
incur fixed costs in advance of achieving full 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 enhance the Member experience, grow membership and support long-term
sales growth and profitability.

Financial highlights for the fourth quarter of fiscal year 2021 included:

?Total revenues increased 12.2% over the comparable prior year period.


?Net merchandise sales increased 12.7% over the comparable prior year period. We
ended the quarter with 47 warehouse clubs compared to 46 warehouse clubs at the
end of the fourth quarter of fiscal 2020. Foreign currency exchange rate
fluctuations impacted net merchandise sales negatively by 1.3% versus the same
three-month period.

?Comparable net merchandise sales (that is, sales in the 45 warehouse clubs that have been open for greater than 13 ½


calendar months) for the 13 weeks ended August 29, 2021 increased 10.3%. Foreign
currency exchange rate fluctuations impacted comparable net merchandise sales
negatively by 1.1%.

?Membership income for the fourth quarter of fiscal 2021 increased 11.2% to $14.6 million over the comparable prior year period.


?Total gross margins (net merchandise sales less associated cost of goods sold)
increased 18.7% over the prior-year period, and merchandise gross profits as a
percent of net merchandise sales were 15.9%, an increase of 80 basis points
(0.8%) from the same period in the prior year.

?Operating income for the fourth quarter of fiscal 2021 was $32.5 million, an
increase of 12.0%, or $3.5 million, compared to the fourth quarter of fiscal
2020.

?We recorded a $1.4 million net currency loss from currency transactions in the
fourth quarter of fiscal 2021 compared to a $1.1 million net currency gain in
the same period last year.

?Our effective tax rate increased in the fourth quarter of fiscal 2021 to 35.5%
from 28.2% in the fourth quarter of fiscal 2020. The increase in the effective
tax rate is primarily related to recognition timing for the loss of benefit of
foreign tax credits, which are no longer deemed recoverable.

?Net income attributable to PriceSmart for the fourth quarter of fiscal 2021 was
$19.5 million, or $0.63 per diluted share, compared to $20.1 million, or $0.65
per diluted share, in the fourth quarter of fiscal 2020.

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Financial highlights for fiscal year 2021 included:

?Total revenues increased 8.7% over the prior year.


?Net merchandise sales increased 8.6% over the prior year. We ended the year
with 47 warehouse clubs compared to 46 warehouse clubs at the end of the fiscal
2020. Foreign currency exchange rate fluctuations impacted net merchandise sales
negatively by 2.4%.

?Comparable net merchandise sales (that is, sales in the 45 warehouse clubs that have been open for greater than 13 ½


?calendar months) for the 52 weeks ended August 29, 2021 increased 5.8%. Foreign
currency exchange rate fluctuations impacted comparable net merchandise sales
negatively by 2.3%.

?Membership income for fiscal 2021 increased 2.8% to $56.0 million.


?Total gross margins (net merchandise sales less associated cost of goods sold)
increased 18.2% over the prior year, and merchandise gross profits as a percent
of net merchandise sales were 16.0%, an increase of 130 basis points (1.3%) from
the prior year.

?Operating income for fiscal 2021 was $158.0 million, an increase of 29.0% or $35.5 million compared to fiscal 2020.

?We recorded a $5.4 million net currency loss from currency transactions in the current year compared to a $1.4 million net loss in the prior year.

?The effective tax rate for fiscal 2021 was 33.3% as compared to the effective tax rate for fiscal 2020 of 32.5%. The increase is primarily driven by the comparably less favorable impact of non-recurring changes to uncertain tax positions.

?Net income attributable to PriceSmart for fiscal year 2021 was $98.0 million, or $3.18 per diluted share, compared to $78.1 million, or $2.55 per diluted share, in the prior year.

Comparison of Fiscal Year 2021 to 2020


The following discussion and analysis compares the results of operations for
each of the three fiscal years ended August 31, 2021, 2020 and 2019 and should
be read in conjunction with the consolidated financial statements and the
accompanying notes included elsewhere in this report. For a comparison of the
fiscal years ended August 31, 2020 and 2019, please see Part II. "Item 7.
Management's Discussion and Analysis of Results of Operations and Financial
Condition" in the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2020 filed with the SEC on October 30, 2020. Unless otherwise noted,
all tables present U.S. dollar amounts in thousands. Certain percentages
presented are calculated using actual results prior to rounding. Our operations
consist of four reportable segments: Central America, the Caribbean, Colombia
and the United States. The Company's reportable segments are based on
management's organization of these locations into operating segments by general
geographic location, which are used by management 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. From time to time, we revise the
measurement of each segment's operating income, including certain corporate
overhead allocations, and other measures as determined by the information
regularly reviewed by our chief operating decision maker. When we do so, the
previous period amounts and balances are reclassified to conform to the current
period's presentation.



Net Merchandise Sales

The following tables indicate the net merchandise club sales in the reportable
segments in which we operate and the percentage growth in net merchandise sales
by segment during fiscal years 2021 and 2020.

                                                    Years Ended
                                      August 31, 2021                    August 31, 2020
                                                 Increase
                                    % of net       from                            % of net
                         Amount      ?sales     prior year   Change     Amount      ?sales
Central America        $ 2,064,553     59.6 %  $    209,015   11.3 %  $ 1,855,538     58.1 %
Caribbean                  988,468     28.5          10,447    1.1        978,021     30.7
Colombia                   412,421     11.9          54,218   15.1        358,203     11.2
Net merchandise sales  $ 3,465,442    100.0 %  $    273,680    8.6 %  $ 3,191,762    100.0 %


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Comparison of 2021 and 2020


Overall, net merchandise sales grew by 8.6% for fiscal year 2021 compared to
fiscal year 2020, driven by a 4.8% increase in average ticket and a 3.6%
increase in transactions. Transactions represent the total number of visits our
Members make to our warehouse clubs plus the number of Click & Go™ curbside
pickup and delivery service transactions. Average ticket represents the amount
our Members spend on each visit or Click & Go™ order. We had 47 clubs in
operation as of August 31, 2021 compared to 46 clubs as of August 31, 2020.

Net merchandise sales in our Central America segment increased 11.3% during
fiscal year 2021. This increase had a 660 basis point (6.6%) positive impact on
total net merchandise sales growth. All markets within this segment showed
increased net merchandise sales for the twelve-month period ended August 31,
2021. Our eighth club in Costa Rica, which opened in June 2020, had a full year
of sales in fiscal 2021 compared to three-months of sales in fiscal year 2020,
which contributed to the increase year-over-year in our Central American
segment.

Net merchandise sales in our Caribbean segment increased 1.1% during fiscal year
2021. This increase had a 30 basis point (0.3%) positive impact on total net
merchandise sales growth. Our Dominican Republic market continued its strong
performance this year, despite experiencing a significant foreign currency
devaluation, with 15.3% growth. This strong performance was offset by our
Trinidad market which had a significant decline in net merchandise sales.
Trinidad sales were adversely affected during most of fiscal year 2021 because
we began limiting merchandise shipments to the market due to the ongoing U.S.
dollar illiquidity situation and due to significant COVID-19 restrictions that
were put in place in the later part of fiscal 2021. Trinidad saw a significant
rise in COVID-19 cases during the second half of the fiscal year, and the
government responded by shutting down all non-essential business and activities.
PriceSmart was allowed to continue selling food and other essential goods, but
the government prohibited sales of most non-foods/non-essential items by
PriceSmart and other local retailers. As a result, we reduced shipments of U.S.
imports until the restrictions were eased. Partial lockdowns and other
restrictions are still in place; however, since mid-August 2021 we have been
allowed to start selling the non-foods/non-essential items again. As we
currently have no restrictions on the types of merchandise we can sell in
Trinidad, we began increasing imports again towards the end of August. However,
we generally continue to link our imports based on the amounts of U.S. dollars
we expect to source in Trinidad. Net merchandise sales for Trinidad have
improved thus far during the first quarter of fiscal year 2022 compared to
fourth quarter of fiscal 2021. Refer to "Management's Discussion & Analysis -
Factors Affecting Our Business" for more discussion on the Trinidad liquidity
situation. Aruba also had soft sales due to this market's ongoing economic
slowdown caused by the COVID-19 pandemic due primarily to a reduction in
tourism.

Net merchandise sales in our Colombia segment increased 15.1% during fiscal year
2021. This increase had a 170 basis point (1.7%) positive impact on total net
merchandise sales growth. The primary driver of the increased revenue for the
year was due to the additional club added to the segment when compared to the
comparable prior year period. We opened our eighth club in Colombia in December
2020.

The following table indicates the impact that currency exchange rates had on our
net merchandise sales in dollars and as a percentage of net merchandise sales
for the year ended August 31, 2021.

                                Currency Exchange Rate Fluctuations for the
                                            Twelve Months Ended
                                              August 31, 2021
                                Amount                                    % change
Central America        $               (38,477)                              (2.1) %
Caribbean                              (27,069)                              (2.7)
Colombia                               (10,784)                              (3.0)
Net merchandise sales  $               (76,330)                              (2.4) %

Overall, the effects of currency fluctuations within our markets had an approximately $76.3 million, or 240 basis point (2.4%), negative impact on net merchandise sales for the twelve-months ended August 31, 2021.


Currency fluctuations had a $38.5 million, or 210 basis point (2.1%), negative
impact on net merchandise sales in our Central America segment for the twelve
months ended August 31, 2021. These currency fluctuations contributed
approximately 120 basis points (1.2%) of the total negative impact on total net
merchandise sales for the current fiscal year period. The Costa Rica Colón
depreciated significantly against the dollar as compared to the same period a
year ago, and was a significant factor in the contribution to the unfavorable
currency fluctuations in this segment.

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Currency fluctuations had a $27.1 million, or 270 basis point (2.7%), negative
impact on net merchandise sales in our Caribbean segment for the twelve months
ended August 31, 2021. These currency fluctuations contributed approximately 90
basis points (0.9%) of the total negative impact on total net merchandise sales
for the current fiscal year period. Jamaica and the Dominican Republic markets
both experienced currency devaluation when compared to the same periods last
year.

Currency fluctuations had a $10.8 million, or 300 basis point (3.0%), negative
impact on net merchandise sales in our Colombia segment for the twelve months
ended August 31, 2021. These currency fluctuations contributed approximately 30
basis points (0.3%) of the total negative impact on total net merchandise sales
for the current fiscal year period.

Net Merchandise Sales by Category

The following table indicates the approximate percentage of net sales accounted for by each major category of items sold during the fiscal years ended August 31, 2021 and 2020.

                        Years Ended August 31,
                      2021                     2020
Foods & Sundries         50 %                   52 %
Fresh Foods              29                     29
Hardlines                12                     11
Softlines                 5                      4
Other Business            4                      4
                        100 %                  100 %

Comparison of 2021 to 2020


During fiscal year 2021, our Members have started purchasing more in our
non-food categories of Hardlines and Softlines after their steep decline in the
second half of 2020 due to the COVID-19 pandemic. The 200 basis points (2.0%)
decline in the Foods & Sundries was distributed fairly equally with 100 basis
points (1.0%) to both Hardlines and Softlines. All other categories were
consistent with the prior year mix.

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 Liberia club in Costa Rica, which opened in June
2020 and our Usaquen club in Colombia, which opened in December 2020, will not
be used in the calculation of comparable sales until they have been open for at
least 13 ½ months. Therefore, comparable net merchandise sales includes 45
warehouse clubs for the fifty-two week period ended August 29, 2021.

The following tables indicate the comparable net merchandise sales in the reportable segments in which we operate and the percentage changes in net merchandise sales by segment during the fifty-two week periods ended August 29, 2021 and August 30, 2020 compared, in each case, to the prior year.

                                                    Fifty-Two Weeks Ended
                                         August 29, 2021              August 30, 2020
                                            % Increase             % Increase/(decrease)
                                          in comparable                in comparable
                                      net merchandise sales        net merchandise sales
Central America                                     8.8 %                        (3.2) %
Caribbean                                           1.4                            3.8
Colombia                                            2.4                          (6.4)
Consolidated comparable net
merchandise sales                                   5.8 %                        (1.5) %


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Comparison of Fifty-Two Week Periods Ended August 29, 2021 and August 30, 2020


Comparable net merchandise sales for those warehouse clubs that were open for at
least 13 ½ months for some or all of the fifty-two week period ended August 29,
2021 increased 5.8%.

Comparable net merchandise sales in our Central America segment increased 8.8%
for the fifty-two week period ended August 29, 2021. This increase contributed
approximately 510 basis points (5.1%) of the increase in total comparable
merchandise sales.

For the fifty-two weeks ended August 29, 2021, strong performance in the
relatively smaller markets of Guatemala, Nicaragua, Honduras, and El Salvador,
along with our second largest market, Panama, contributed approximately 540
basis points (5.4%) of positive impact on the segment's comparable net
merchandise sales. This increase was offset by a 30 basis point (0.3%) negative
impact on the segment's comparable net merchandise sales from our largest
market, Costa Rica. During the year, Costa Rica experienced foreign currency
exchange headwinds, with the Costa Rica Colón devaluing versus the comparable
prior year period.

Comparable net merchandise sales in our Caribbean segment increased 1.4% for the fifty-two week period ended August 29, 2021. This increase contributed approximately 40 basis points (0.4%) of positive impact in total comparable merchandise sales.


Our Dominican Republic market continued its strong performance in the fifty-two
week period, despite having a foreign currency exchange devaluation with 15.5%
comparable sales growth, respectively. This strong performance was offset by our
Trinidad market, which declined in comparable net merchandise sales by 10.9% for
the fifty-two week period. Trinidad sales were adversely affected during most of
the fiscal year because we limited merchandise shipments to the market due to
the ongoing U.S. dollar illiquidity situation and the COVID-19 restrictions.
Refer to "Management's Discussion & Analysis - Factors Affecting Our Business"
for more discussion on the Trinidad illiquidity situation.

Comparable net merchandise sales in our Colombia segment increased 2.4% for the
fifty-two week period ended August 29, 2021. This increase contributed
approximately 30 basis points (0.3%) of the increase in total comparable
merchandise sales. The year-to-date increase is primarily due to year-over-year
improvements in sales growth due to the comparably improved COVID-19 situation.
Comparable net merchandise sales were also negatively impacted by sales
transfers from existing clubs to our recent club that opened in December 2020.

The following table illustrates the impact that changes in foreign currency
exchange rates had on our comparable merchandise sales in dollars and as a
percentage of comparable merchandise sales for the fifty-two week period ended
August 29, 2021.

                                                 Fifty-Two Weeks Ended
                                                    August 29, 2021
                                                  Amount      % change
Central America                                $    (36,463)     (2.0) %
Caribbean                                           (26,834)     (2.7)
Colombia                                            (10,782)     (3.0)

Consolidated comparable net merchandise sales $ (74,079) (2.3) %

Overall, the mix of currency fluctuations within our markets had an approximate $74.1 million, or 230 basis point (2.3%), negative impact on comparable net merchandise for the fifty-two week period ended August 29, 2021.


Currency fluctuations within our Central America segment accounted for
approximately 110 basis points (1.1%) of the negative impact on total comparable
merchandise sales for the fifty-two week period ended August 29, 2021. This is
primarily the result of significant devaluation in the Costa Rica Colón against
the U.S. dollar during the current periods compared to the same periods a year
ago.

Currency fluctuations within our Caribbean segment accounted for approximately
90 basis points (0.9%) of negative impact on total comparable merchandise for
the fifty-two week period ended August 29, 2021. Our Dominican Republic and
Jamaica markets experienced currency devaluation when compared to the same
period last year.

Currency fluctuations within our Colombia segment accounted for approximately 30
basis points (0.3%) of negative impact on total comparable merchandise sales for
the fifty-two week period ended August 29, 2021. This reflects the devaluation
of the Colombia peso when compared to the same period a year ago.



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Membership Income


Membership income is recognized ratably over the one-year life of the
membership.

                                                           Years Ended
                                                     August 31,                           August 31,
                                                        2021                                 2020
                                                                         Membership
                                             Increase                   ?income % to
                                               from                   ?net merchandise
                               Amount       prior year    % Change       ?club sales        Amount
Membership income -
Central America              $    33,149   $        324       1.0 %            1.6 %      $    32,825
Membership income -
Caribbean                         15,398            584       3.9              1.6             14,814
Membership income -
Colombia                           7,483            621       9.0              1.8              6,862
Membership income - Total    $    56,030   $      1,529       2.8 %            1.6 %      $    54,501

Number of accounts -
Central America                  904,577         75,619       9.1 %                           828,958
Number of accounts -
Caribbean                        429,749          3,366       0.8                             426,383
Number of accounts -
Colombia                         336,109         33,130      10.9                             302,979
Number of accounts - Total     1,670,435        112,115       7.2 %                         1,558,320


Comparison of 2021 to 2020

The number of Member accounts at the end of fiscal 2021 was 7.2% higher than the
prior year period, and it has surpassed our pre-COVID peak at the end of the
second quarter of fiscal 2020 of 1,655,875 accounts. Membership income increased
2.8% compared to the comparable prior-year period.

Membership income increased across all operating segments in the twelve months
ended August 31, 2021. The consolidated increase in membership income is due to
an increasing membership base since the start of fiscal year 2021. Since August
31, 2020, all segments have increased their membership base. Colombia had the
largest increase in membership base in fiscal year 2021 due to the opening of
its eighth club in December 2020 with 10.9% growth, followed by Central America
with a 9.1% increase and the Caribbean with a 0.8% increase.

We began offering our Platinum membership program in Nicaragua in October 2020
and in El Salvador in March 2021. We now offer this program in all locations
where PriceSmart operates. The annual fee for a Platinum Membership in most
markets is approximately $75. The Platinum Membership program provides Members
with a 2% rebate on most items, up to an annual maximum of $500. We record the
2% rebate as a reduction on net merchandise sales at the time of the sales
transaction.

Our trailing twelve-month renewal rate was 89.6% and 80.5% for the periods ended
August 31, 2021 and August 31, 2020, respectively. With our twelve-month renewal
rate at 89.6%, this has increased 200 basis points (2.0%) since the end of the
third quarter and is well above our renewal rate immediately preceding the
COVID-19 pandemic, which we believe is a key indicator of membership
satisfaction and loyalty and demonstrates that our Members recognize the value
we bring. Although we continue to see reductions in in-club traffic resulting
from the COVID-19 pandemic, we have seen increased sign-ups and renewals
completed online with the launch of a new online catalog and our Click & Go™
services. Approximately 16% and 6% of our membership sign-ups were completed
using our online platform for the twelve month period ended August 31, 2021 and
August 31, 2020, respectively. Our online platform facilitates capturing data
and provides the opportunity for automatic renewal of memberships, as well as
improving our digital connection with our Members.



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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.

                                                    Years Ended
                                        August 31, 2021                   August 31, 2020
                                   Increase/(Decrease) from
                          Amount          ?prior year         % Change        Amount
Non-merchandise revenue  $ 46,876  $                   8,605     22.5 %  $          38,271
Miscellaneous income        7,047                      (499)    (6.6)                7,546
Rental income               2,956                        222      8.1                2,734
Other revenue            $ 56,879  $                   8,328     17.2 %  $          48,551


Comparison of 2021 to 2020

The primary driver of the increase in other revenue for the period is higher
package volume in our marketplace and casillero operations, which increased due
to the COVID-19 pandemic and the resulting higher ecommerce activity. We sold
our marketplace and casillero operations in October 2021. Refer to Part II.
"Item 1. Business - General" for further discussion regarding the sale of our
legacy casillero and marketplace operations.

Results of Operations

Results of Operations Consolidated

(Amounts in thousands, except percentages and number of warehouse clubs)


                                                             Years Ended
Results of Operations Consolidated              August 31, 2021       August 31, 2020
Net merchandise sales
Net merchandise sales                         $       3,465,442     $       3,191,762
Total gross margin                            $         552,953     $         467,820
Total gross margin percentage                              16.0 %                14.7 %

Revenues
Total revenues                                $       3,619,871     $       3,329,188
Percentage change from prior period                         8.7 %           

3.3 %


Comparable merchandise sales
Total comparable merchandise sales increase
(decrease)                                                  5.8 %               (1.5) %

Total revenue margin
Total revenue margin                          $         644,533     $         554,410
Total revenue margin percentage                            17.8 %           

16.7 %


Selling, general and administrative
Selling, general and administrative           $         486,513     $       

431,942

Selling, general and administrative
percentage of total revenues                               13.4 %                13.0 %


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                                                         Years Ended
Results of Operations                            % of Total                         % of Total
Consolidated                   August 31, 2021    ?Revenue        August 31, 2020    ?Revenue
Operating income- by
segment
Central America              $         151,933          4.2 %   $         125,351          3.8 %
Caribbean                               74,769          2.1                57,217          1.7
Colombia                                21,932          0.6                18,071          0.5
United States                           12,687          0.4                 3,873          0.1
Reconciling items (1)                (103,301)        (2.9)              (82,044)        (2.5)
Operating income - Total     $         158,020          4.4 %   $         122,468          3.7 %

Warehouse clubs
Warehouse clubs at period
end                                         47                                 46
Warehouse club sales
square feet at period end                2,336                              2,270

(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.

                                                         Years Ended
                                                 % of Total                         % of Total
                               August 31, 2021    ?Revenue        August 31, 2020    ?Revenue
Selling, general and
administrative detail:
Warehouse club and other
operations                   $         359,221          9.9 %   $         323,178          9.7 %
General and administrative             125,416          3.5               106,776          3.2
Pre-opening expenses                       849          0.0                 1,545          0.1
Loss on disposal of assets               1,027          0.0                   443          0.0
Total Selling, general and
administrative               $         486,513         13.4 %   $         431,942         13.0 %


Comparison of 2021 to 2020

Total gross margin is derived from our Revenue - Net merchandise sales less our
Cost of goods sold - Net merchandise sales and represents our sales and cost of
sales generated from the business activities of our warehouse clubs. We express
our Total gross margin percentage as a percentage of our Net merchandise sales.

On a consolidated basis, total gross margin for the twelve months ended August
31, 2021 was 16.0%, 130 basis points (1.3%) higher than the comparable prior
year period. Approximately 80 basis points (0.8%) of this increase is due to
certain pricing actions we took to offset foreign currency exchange costs and
COVID-related operating costs. In particular, we substantially increased the
liquidity premium we factor into our sales prices in Trinidad on our imported
merchandise, as we continue to experience a shortage of available U.S. dollars
for exchange in that market. Refer to "Management's Discussion & Analysis -
Factors Affecting Our Business" for additional discussion. Of the remaining
approximately 50 basis points (0.5%), 40 basis points (0.4%) of this improvement
is primarily attributable to returning margin to prior levels on our non-food
inventory and of our other business categories such as food services, tire
center, and optical, which saw decreased demand and/or sales restrictions due to
COVID-19 in the prior-year period. The remaining 10 basis points (0.1%) is the
result of more focused merchandising strategies and inventory management that
primarily resulted from fewer markdowns and spoilage.

Total revenue margin is derived from Total revenues, which includes our Net
merchandise sales, Membership income, Export sales, and Other revenue and income
less our Cost of goods sold for net merchandise sales, Export sales, and
Non-merchandise revenues. We express our Total revenue margin as percentage of
Total revenues.

Total revenue margin increased 110 basis points (1.1%) for the twelve months
ended August 31, 2021 compared to the prior-year period, which is primarily the
result of the higher total gross margins of 130 basis points (1.3%). This
increase was offset by 10 basis points (0.1%) from lower revenue margins from
our casillero and marketplace business in the current year compared to the prior
year and 10 basis points (0.1%) from lower Revenue and other income compared the
prior year.

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Selling, general, and administrative expenses consist of warehouse club and
other operations, general and administrative expenses, pre-opening expenses, and
loss on disposal of assets. In total, selling, general and administrative
expenses increased $54.6 million to 13.4% of total revenue for fiscal year 2021
compared to 13.0% of total revenues for fiscal year 2020.

Warehouse club and other operations expenses increased to 9.9% of total revenues
for fiscal year 2021 compared to 9.7% for fiscal year 2020, primarily due to the
opening of new clubs in Colombia, Costa Rica, and Guatemala that had not reached
sales maturity as of August 31, 2021. Honduras experienced currency appreciation
during fiscal year 2021 which led to a slight deleveraging of expenses.

General and administrative expenses increased to 3.5% of total revenues for the
current year compared to 3.2% for the prior fiscal year. The 30 basis point
(0.3%) increase is primarily due to our continued investments to support our
technology development, talent acquisition, and employee development. Given our
strategic initiatives, we anticipate that we will continue to make investments
at comparable levels (as a percentage of revenue) to further our omni-channel
and technology initiatives.

Operating income in fiscal year 2021 increased to $158.0 million (4.4% of total
revenue) compared to $122.5 million (3.7% of total revenue) for the same period
last year. This reflects the increase in total revenue margin dollars primarily
from net merchandise sales of 110 basis points (1.1%), partially offset by a 40
basis point (0.4%) decrease due to deleveraging of selling, general and
administrative expenses over the comparable prior-year period.

Interest Expense

                                                         Years Ended
                                                   August 31,        August 31,
                                                      2021              2020
                                               Amount     Change       Amount
Interest expense on loans                     $   5,836  $ (1,563)  $      7,399

Interest expense related to hedging activity 3,655 1,239 2,416 Less: Capitalized interest

                      (2,281)       (91)       (2,190)
Net interest expense                          $   7,210  $   (415)  $      7,625


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.

Comparison of 2021 to 2020

Net interest expense decreased for the twelve-month period ended August 31,
2021, primarily due to lower short-term borrowings compared to the comparable
prior year period. We drew down on short-term lines of credit in the third
quarter of fiscal year 2020 as a part of our efforts to secure adequate cash to
cover contingencies arising from COVID-19 related risks. We repaid all of these
borrowings by the end of the third quarter in fiscal year 2021. These savings
were offset by new loans for our capital projects in Guatemala and U.S. dollar
working capital needs in Trinidad. The increase in interest expense related to
more hedging activity is primarily the result of a full year of interest
recorded on our Colombia swaps entered into in the prior year.



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 receipt of a one-time indemnification payment from a business combination escrow account.

                                 Years Ended
                           August 31,          August 31,
                              2021                2020
                                 Increase
                                   ?from
                     Amount     ?prior year      Amount
Other expense, net  $ (5,603)  $     (4,769)  $      (834)


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

Comparison of 2021 to 2020


For the twelve-months ended August 31, 2021 the primary driver of Other expense,
net included losses of $5.4 million associated with foreign currency
transactions and the revaluation of monetary assets and liabilities in several
of our markets. The foreign currency gains and losses resulted from the
revaluation of net U.S. dollar assets and liabilities in markets where the local
functional currency revalued or devalued against the U.S. dollar and from
exchange transactions.

The primary impacts during the twelve-month period were higher transaction costs
associated with converting Trinidad dollars into available tradeable currencies
such as Euros or Canadian dollars, before converting them to U.S. dollars. This
was partially offset by an appreciation of the Honduran Lempira, which resulted
in a gain from our net U.S. dollar liability position in that market.

Provision for Income Taxes

The tables below summarize the effective tax rate for the periods reported:

                                          Years Ended
                                   August 31,           August 31,
                                      2021                 2020
                                           Increase
                                             from
                              Amount      prior year      Amount
Current tax expense         $  52,822    $     11,654  $   41,168
Net deferred tax benefit      (3,853)           (449)     (3,404)

Provision for income taxes $ 48,969 $ 11,205 $ 37,764 Effective tax rate

               33.3 %                      32.5 %


Comparison of 2021 to 2020

For fiscal 2021, the effective tax rate was 33.3% compared to 32.5% for fiscal year 2020. The increase in the effective rate versus the prior year was primarily attributable to the following factors:

1.The comparably favorable impact of 2.5% due to a greater portion of income falling into lower tax jurisdictions;

2.The comparably unfavorable impact of 1.8% resulting from the nonrecurrence of changes from prior periods in income tax liabilities from uncertain tax position for which the applicable statutes of limitations had expired;


3.The comparably unfavorable impact of 0.4% resulting from the effect of changes
in foreign currency exchange rates related to the remeasurement of our monetary
assets and liabilities; and

4.The comparably unfavorable impact of 0.4% resulting from valuation allowances
we were required to take with respect to deferred tax assets from foreign tax
credits that are no longer deemed recoverable.

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Other Comprehensive Loss


Other comprehensive loss for fiscal years 2021 and 2020 resulted primarily from
foreign currency translation adjustments related to the assets and liabilities
and the translation of the statements of income related to revenue, costs and
expenses of our subsidiaries whose functional currency is not the U.S. dollar.
When the functional currency in our international subsidiaries is the local
currency and not U.S. dollars, the assets and liabilities of such 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 not affect net income until the sale or liquidation of the
underlying investment. The reported other comprehensive income or loss reflects
the unrealized increase or decrease in the value in U.S. dollars of the net
assets of the subsidiaries as of the date of the balance sheet, which will vary
from period to period as exchange rates fluctuate.

                                           Other Comprehensive Loss
                                                  Years Ended
                                            August 31,                    August 31,
                                               2021                          2020
                           Amount     Change From Prior Year   % Change     Amount
Other comprehensive loss  $ (5,688)  $                 26,793     82.5 %  $  (32,481)


Comparison of 2021 to 2020

Our other comprehensive loss of approximately $5.7 million for fiscal 2021
resulted primarily from the comprehensive loss of approximately $7.8 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. During
fiscal 2021, the largest translation adjustments were related to the devaluation
of the local currencies against the U.S. dollar for our Colombia, Costa Rica and
Jamaica subsidiaries, partially offset by the translation adjustment for the
appreciation of the local currency against the U.S. dollar of our Dominican
Republic subsidiary. These losses were offset by approximately $2.3 million
related to unrealized gains on changes in our derivative obligations.



LIQUIDITY AND CAPITAL RESOURCES

Financial Position and Cash Flow


Our operations have historically supplied us with a significant source of
liquidity. We generate cash from operations primarily through
net merchandise sales and membership fees. Cash used in operations generally
consist of payments to our merchandise vendors, warehouse club and distribution
center operating costs (including payroll, employee benefits and utilities), as
well as payments for income taxes. Our cash flows provided by operating
activities, supplemented with our long-term debt and short-term borrowings, have
generally been sufficient to fund our operations while allowing us to invest in
activities that support the long-term growth of our operations and to pay
dividends on our common stock. We evaluate our funding requirements on a regular
basis to cover any shortfall in our ability to generate sufficient cash from
operations to meet our capital requirements. We may consider funding
alternatives to provide additional liquidity if necessary. Refer to Part II.
"Item 8. Financial Statements and Supplementary Data: Notes to Consolidated
Financial Statements, Note 11 - Debt" for additional information regarding our
drawdown on our short-term facilities and long-term borrowings.

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).

                                                    August 31,         August 31,
                                                       2021               2020
Amounts held by foreign subsidiaries             $        160,808   $       

203,598

Amounts held domestically                                  54,671           

100,173

Total cash and cash equivalents, including
restricted cash                                  $        215,479   $        303,771


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The following table summarizes the short-term investments held by our foreign subsidiaries and domestically (in thousands).


                                       August 31,    August 31,
                                          2021          2020

Amounts held by foreign subsidiaries $ 50,233 $ 46,509 Amounts held domestically

                        -             -

Total short-term investments $ 50,233 $ 46,509

As of August 31, 2021 and August 31, 2020, certificates of deposits with a maturity of over a year held by our foreign subsidiaries and domestically were $1.5 million in both periods.


From time to time, we have experienced a lack of availability of U.S. dollars in
certain markets (U.S. dollar illiquidity). This impedes our ability to convert
local currencies obtained through merchandise sales into U.S. dollars to settle
the U.S. dollar liabilities associated with our imported products or otherwise
fund our operations. Since fiscal 2017, we have experienced this situation in
Trinidad and have been unable to source a sufficient level of tradeable
currencies. We are working with our banks in Trinidad and government officials
to source tradeable currencies. We expect the illiquid market conditions in
Trinidad to continue and are considering various measures to address the adverse
effect of this situation on the Company's liquidity. In addition, our Barbados
subsidiary recently began facing a similar U.S. dollar liquidity situation.
Refer to "Management's Discussion & Analysis - Factors Affecting Our Business"
for our quantitative analysis and discussion.

The following table summarizes our significant sources and uses of cash and cash
equivalents:

                                                              Years Ended
                                                August 31,    August 31,
                                                   2021          2020         Change

Net cash provided by operating activities $ 127,166 $ 259,268 $ (132,102) Net cash used in investing activities

             (116,721)     (131,212)   

14,491

Net cash provided by (used in) financing
activities                                         (95,137)        75,563   

(170,700)

Effect of exchange rates                            (3,600)       (6,084)   

2,484

Net increase (decrease) in cash and cash
equivalents                                     $  (88,292)   $   197,535   

$ (285,827)



Net cash provided by operating activities totaled $127.2 million and
$259.3 million for the twelve months ended August 31, 2021 and 2020,
respectively. The decrease in net cash provided by operating activities was
primarily due to the increase in our inventory position and the higher net
settlement of accounts payable versus the comparable prior year period, which
was partially offset by a significant increase in net income for the year ended
August 31, 2021 over the prior-year period.

Inventory was $389.7 million as of August 31, 2021, compared with $309.5 million
at August 31, 2020. The increase over the balances as of August 31, 2020
reflects our efforts to bring our inventory levels in-line with our sales
trends. In addition, the lower balance as of August 31, 2020 reflected the rapid
sell-through of merchandise as Members stockpiled items in anticipation of the
impacts of the COVID-19 pandemic in the third and fourth fiscal quarter of 2020
and the reduction of certain non-food categories to align with initial consumer
preferences at the start of the COVID-19 pandemic. We have made strategic
investments in inventory to avoid future out-of-stocks on high volume items that
have been impacted from container, commodity, and electronic part shortages.
Lastly, we have one additional club in the current year. Accounts payable was
$388.8 million as of August 31, 2021, compared with $373.2 million at August 31,
2020. The increase from the balances as of August 31, 2020 is largely the result
of a return to our normal inventory levels compared to the prior year, operating
one additional club in the current year, and the expiration of temporary
extensions of vendor terms negotiated as part of our response to the COVID-19
pandemic in fiscal 2020. However, although not quite to the same extent, we have
been able to permanently extend some of our vendor payment terms.

Net cash used in investing activities totaled $116.7 million and $131.2 million,
respectively, for the years ended August 31, 2021 and August 31, 2020. The
decrease is primarily the result of an increase in the net proceeds of
short-term and long-term certificate of deposit purchases and settlements,
partially offset by an increase in construction expenditures compared to the
same period a year-ago. The increase in net proceeds from certificates of
deposit is primarily a result of improved sources versus uses of U.S. dollars in
Trinidad during our prior fiscal year, reducing our need to invest Trinidad
dollars. Refer to "Management's Discussion and Analysis - Factors Affecting Our
Business" for additional discussion of the current U.S. dollar illiquidity we
are experiencing in that market.

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Net cash used in financing activities totaled $95.1 million and net cash
provided by financing activities was $75.6 million for the years ended
August 31, 2021 and August 31, 2020, respectively. We use cash flows provided by
financing activities primarily to fund our working capital needs, our warehouse
club and distribution center acquisitions and expansions, and investments in
technology to support our omni-channel initiatives. The $170.7 million shift
from cash provided by to cash used in financing activities is primarily the
result of a net decrease of proceeds from long-term borrowings and a net
decrease in short-term borrowings compared to the same twelve-month period a
year-ago. In the prior year period, we executed long-term loans primarily to
finance land purchases and construction of several of our warehouse clubs and
increased our short-term borrowings as part of our cash management strategy in
the early stages of the COVID-19 pandemic. In the current year, our long-term
borrowings were made to increase our ability to borrow U.S. dollars in exchange
for payments in Trinidad dollars and to provide additional sources of tradeable
currencies to support our working capital needs of that subsidiary. Refer to
"Management's Discussion and Analysis - Factors Affecting Our Business" for
additional discussion of the current U.S. dollar illiquidity we are experiencing
in that market.

The following table summarizes the dividends declared and paid during fiscal years 2021, 2020 and 2019 (amounts are per share).


                               First Payment                    Second Payment
                       Record       Date                 Record       Date
Declared    Amount      ?Date       ?Paid     Amount      ?Date       ?Paid     Amount
2/4/2021    $  0.70   2/15/2021   2/26/2021   $  0.35   8/15/2021   8/31/2021   $  0.35
2/6/2020    $  0.70   2/15/2020   2/28/2020   $  0.35   8/15/2020   8/31/2020   $  0.35
1/30/2019   $  0.70   2/15/2019   2/28/2019   $  0.35   8/15/2019   8/30/2019   $  0.35

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. Refer to Part II. "Item 8. Financial Statements and
Supplementary Data: Notes to Consolidated Financial Statements, Note 11 - Debt."
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, with the funds used to pay the employees' statutory tax
withholding requirements related to the vesting of restricted stock awards. We
do not have a stock repurchase program.

Shares of common stock repurchased by us are recorded at cost as treasury stock
and result in the reduction of stockholders' equity in our consolidated balance
sheets. We may reissue these treasury shares.

The following table summarizes the shares repurchased during fiscal years 2021,
2020 and 2019:

                                                           Years Ended
                                              August 31,    August 31,    August 31,
                                                 2021          2020          2019
Shares repurchased                                 62,282        56,503        75,462

Cost of repurchase of shares (in thousands) $ 5,542 $ 3,651 $

4,604

We reissued 96,400 treasury shares as part of our stock-based compensation programs during fiscal 2021, 234,400 treasury shares during fiscal 2020 and 63,000 treasury shares during fiscal 2019.

Dividends


Refer to Part II. "Item 8. Financial Statements and Supplementary Data: Notes to
Consolidated Financial Statements, Note 6 - Stockholders' Equity" for further
discussion.



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Derivatives


Refer to Part II. "Item 8. Financial Statements and Supplementary Data: Notes to
Consolidated Financial Statements, Note 13 - Derivative Instruments and Hedging
Activities" for further discussion.

Critical Accounting Estimates


Our financial statements are prepared in accordance with GAAP in the United
States. The preparation of our consolidated financial statements requires that
management make estimates and judgments that affect the reported amounts of
assets and liabilities, 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.

We evaluate our accounting policies and significant estimates on an ongoing
basis, 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.

We believe that the accounting policies described below involve a significant
degree of judgment and complexity. Accordingly, we believe these are the most
critical to aid in fully understanding and evaluating our consolidated financial
condition and results of operations. For further information, refer to Part II.
"Item 8. Financial Statements and Supplementary Data: Notes to Consolidated
Financial Statements, Note 2 - Summary of Significant Accounting Policies."

Income Taxes


We account for income taxes using the asset and liability method. Under the
asset and liability method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences and carry-forwards are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is established when necessary to reduce
deferred tax assets to amounts expected to be realized.

As of August 31, 2021, we evaluated our deferred tax assets and liabilities and
determined that a valuation allowance was necessary for certain deferred tax
asset balances, primarily because of the existence of significant negative
objective evidence, such as the fact that certain subsidiaries are in a
cumulative loss position for the past three years, indicating that certain net
operating loss carry-forward periods are not sufficient to realize the related
deferred tax assets. We also specifically considered whether foreign tax credit
balances could be utilized in the foreseeable future in light of current and
future U.S. tax liabilities. We have historically applied foreign tax credits,
generated from taxes withheld on certain payments PriceSmart receives from our
foreign subsidiaries, to reduce U.S. income tax liabilities. However, as an
incidental result of U.S. tax reform, following the reduction of the U.S.
corporate income tax rate from 35% to 21%, we expect foreign tax credits
generated to exceed U.S. income tax liability for the foreseeable future.
Therefore, for the twelve-month period ended August 31, 2021 and August 31,
2020, we have recorded valuation allowances of $11.4 million and $8.5 million
against our foreign tax credits, respectively.

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 paid by us. We, in consultation with our tax advisors, base our tax returns
on interpretations that we believe to be reasonable under the circumstances. The
tax returns, however, are subject to routine reviews by the various taxing
authorities in the jurisdictions in which we file our tax returns. As part of
these reviews, a taxing authority may disagree with respect to the
interpretations we used to calculate our tax liability and therefore require us
to pay additional taxes.

We accrue an amount for our estimate of probable additional income tax
liability. In certain cases, the impact of an uncertain income tax position on
the income tax return must be recognized at the largest amount that is more
likely than not to be sustained upon audit by the relevant tax authority. An
uncertain income tax position will not be recognized if it has 50% or less
likelihood of being sustained. This requires significant judgment, the use of
estimates, and the interpretation and application of complex tax laws. When
facts and circumstances change, we reassess these probabilities and record any
changes in the consolidated financial statements as appropriate. There were no
material changes in our uncertain income tax positions for the period ended on
August 31, 2021.

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Tax Receivables


We pay Value Added Tax ("VAT") or similar taxes, income taxes, and other taxes
within the normal course of our business in most of the countries in which we
operate related to the procurement of merchandise and/or services we acquire
and/or on sales and taxable income. VAT is a form of indirect tax applied to the
value added at each stage of production (primary, manufacturing, wholesale and
retail). This tax is similar to, but operates somewhat differently than, sales
tax paid in the United States. We generally collect VAT from our Members upon
sale of goods and services and pay VAT to our vendors upon purchase of goods and
services. Periodically, we submit VAT reports to governmental agencies and
reconcile the VAT paid and VAT received. The net overpaid VAT may be refunded or
applied to subsequent returns, and the net underpaid VAT must be remitted to the
government.

With respect to income taxes paid, if the estimated income taxes paid or
withheld exceed the actual income tax due this creates an income tax receivable.
In most countries where we operate, the governments have implemented additional
collection procedures, such as requiring credit card processors to remit a
portion of sales processed via credit and debit cards directly to the government
as advance payments of VAT and/or income tax. This collection mechanism
generally leaves us with net VAT and/or income tax receivables, forcing us to
process significant refund claims on a recurring basis. These refund or offset
processes can take anywhere from several months to several years to complete.

In most countries where we operate, 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 $9.7 million and $7.0
million as of August 31, 2021 and August 31, 2020, respectively. In addition, in
two other countries where the Company operates, there have been changes in the
method of computing minimum tax payments, under which the governments have
sought to require the Company to pay taxes based on a percentage of sales rather
than taxable income. As a result, we have made and may continue to make income
tax payments substantially in excess of those we would expect to pay based on
taxable income. The Company had income tax receivables of $11.0 million and
$10.4 million and deferred tax assets of $3.3 million and $2.8 million as of
August 31, 2021 and August 31, 2020, respectively, in these countries. While the
rules related to refunds of income tax receivables in these countries are either
unclear or complex, the Company has not placed any type of allowance on the
recoverability of these tax receivables or deferred tax assets, because the
Company believes that it is more likely than not that it will ultimately succeed
in its refund requests. Similarly, we have not placed any recoverability
allowances on tax receivables that arise from payments we are required to make
originating from tax assessments that we are appealing, as we believe it is more
likely than not that we will ultimately prevail in the related appeals.

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


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

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

Long-lived Assets

We periodically evaluate 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.

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Management's judgments are based on market and operational conditions at
the time of the evaluation and can include management's best estimate of
future business activity, which in turn drives estimates of future cash flows
from these assets. These periodic evaluations could cause management to conclude
that impairment factors exist, requiring an adjustment of these assets to their
then-current fair market value. Future business conditions and/or activity could
differ materially from the projections made by management causing the need for
additional impairment charges. We did not record any impairment charges during
fiscal 2021 related to the loss of legal ownership or title to assets;
significant changes in the Company's strategic business objectives or
utilization of assets; or the impact of significant negative industry or
economic trends. Loss on disposal of assets recorded during the years reported
resulted from improvements to operations and normal preventive maintenance.

Goodwill


Goodwill is not amortized, but is evaluated for impairment annually or whenever
events or changes in circumstances indicate that the value of a certain asset
may be impaired. Generally, this evaluation begins with a qualitative assessment
to determine whether a quantitative impairment test is necessary. If we
determine, after performing an assessment based on the qualitative factors, that
the fair value of the reporting unit is more likely than not less than the
carrying amount, or that a fair value of the reporting unit substantially in
excess of the carrying amount cannot be assured, then a quantitative impairment
test would be performed. The quantitative test for impairment requires
management to make judgments relating to future cash flows, growth rates and
economic and market conditions. These evaluations are based on determining the
fair value of a reporting unit or asset using a valuation method such as
discounted cash flow or a relative, market-based approach. Historically, our
reporting units have generated sufficient returns to recover the cost of our
goodwill. Because of the nature of the factors used in these tests, if different
conditions occur in future periods, future operating results could be materially
impacted. For approximately $45.1 million of certain acquired goodwill, the fair
value was greater than the carrying value; any deterioration in the fair value
may result in an impairment charge.

Seasonality and Quarterly Fluctuations


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.

© Edgar Online, source Glimpses

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