Pricesmart, Inc. (Exact Name of Registrant As Specified in Its Charter)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended May 31, 2020 OR

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

For the transition period from ______to

COMMISSION FILE NUMBER 0-22793 PriceSmart, Inc. (Exact name of registrant as specified in its charter)

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

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

(858) 404-8800 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: Title of each class Trading Symbol Name of each exchange on which registered Common Stock, $0.0001 par value PSMT NASDAQ Global Select Market

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

Yes x No ¨

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

Yes x No ¨

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

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

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

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

Yes ¨ No x

The registrant had 30,648,990 shares of its common stock, par value $0.0001 per share, outstanding at June 30, 2020.

PRICESMART, INC.

INDEX TO FORM 10-Q

Page PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 1 CONSOLIDATED BALANCE SHEETS AS OF MAY 31, 2020 (UNAUDITED) AND AUGUST 31, 2019 2 CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2020 AND 2019 - UNAUDITED 4 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2020 AND 2019 - UNAUDITED 5 CONSOLIDATED STATEMENTS OF EQUITY FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2020 AND 2019 - UNAUDITED 6 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MAY 31, 2020 AND 2019 - UNAUDITED 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED 9 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 35 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 58 ITEM 4. CONTROLS AND PROCEDURES 59 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 60 ITEM 1A. RISK FACTORS 60 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 60 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 61 ITEM 4. MINE SAFETY DISCLOSURES 61 ITEM 5. OTHER INFORMATION 61 ITEM 6. EXHIBITS 62

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PriceSmart, Inc.’s (“PriceSmart,” “we” or the “Company”) unaudited consolidated balance sheet as of May 31, 2020 and the consolidated balance sheet as of August 31, 2019, the unaudited consolidated statements of income for the three and nine months ended May 31, 2020 and 2019, the unaudited consolidated statements of comprehensive income for the three and nine months ended May 31, 2020 and 2019, the unaudited consolidated statements of equity for the three and nine months ended May 31, 2020 and 2019, and the unaudited consolidated statements of cash flows for the nine months ended May 31, 2020 and 2019 are included herein. Also included herein are the notes to the unaudited consolidated financial statements.

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PRICESMART, INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

May 31, 2020 August 31, (Unaudited) 2019 ASSETS Current Assets: Cash and cash equivalents $ 261,788 $ 102,653 Short-term restricted cash 240 54 Short-term investments 40,042 17,045 Receivables, net of allowance for doubtful accounts of $126 as of May 31, 2020 and $144 as of August 31, 2019, respectively 10,886 9,872 Merchandise inventories 268,762 331,273 Prepaid expenses and other current assets (includes $0 and $2,736 as of May 31, 2020 and August 31, 2019, respectively, for the fair value of derivative instruments) 24,736 30,999 Total current assets 606,454 491,896 Long-term restricted cash 3,996 3,529 Property and equipment, net 700,388 671,151 Operating lease right-of-use assets, net 121,802 — Goodwill 45,316 46,101 Other intangibles, net 10,772 12,576 Deferred tax assets 21,178 15,474 Other non-current assets (includes $428 and $0 as of May 31, 2020 and August 31, 2019, respectively, for the fair value of derivative instruments) 53,965 44,987 Investment in unconsolidated affiliates 10,618 10,697 Total Assets $ 1,574,489 $ 1,296,411 LIABILITIES AND EQUITY Current Liabilities: Short-term borrowings $ 70,886 $ 7,540 Accounts payable 283,045 286,219 Accrued salaries and benefits 28,017 25,401 Deferred income 24,154 25,340 Income taxes payable 9,613 4,637 Other accrued expenses and other current liabilities (includes $30 and $0 as of May 31, 2020 and August 31, 2019, respectively, for the fair value of derivative instruments) 35,622 32,442 Operating lease liabilities, current portion 8,409 — Dividends payable 10,719 — Long-term debt, current portion 22,784 25,875 Total current liabilities 493,249 407,454 Deferred tax liability 1,489 2,015 Long-term portion of deferred rent — 11,198 Long-term income taxes payable, net of current portion 4,865 5,069 Long-term operating lease liabilities 126,275 — Long-term debt, net of current portion 117,045 63,711 Other long-term liabilities (includes $5,567 and $2,910 for the fair value of derivative instruments and $6,099 and $5,421 for post-employment plans as of May 31, 2020 and August 31, 2019, respectively) 11,963 8,685 Total Liabilities 754,886 498,132

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Stockholders' Equity: Common stock $0.0001 par value, 45,000,000 shares authorized; 31,425,075 and 31,461,359 shares issued and 30,648,990 and 30,538,788 shares outstanding (net of treasury shares) as of May 31, 2020 and August 31, 2019, respectively 3 3 Additional paid-in capital 444,403 443,084 Tax benefit from stock-based compensation 11,486 11,486 Accumulated other comprehensive loss (168,019) (144,339) Retained earnings 562,408 525,804 Less: treasury stock at cost, 776,085 shares as of May 31, 2020 and 924,332 shares as of August 31, 2019 (31,615) (38,687) Total stockholders' equity attributable to PriceSmart, Inc. stockholders 818,666 797,351 Noncontrolling interest in consolidated subsidiaries 937 928 Total stockholders' equity 819,603 798,279 Total Liabilities and Equity $ 1,574,489 $ 1,296,411

See accompanying notes.

‎

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED—AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, 2020 2019 2020 2019 Revenues: Net merchandise sales $ 768,368 $ 755,009 $ 2,418,822 $ 2,322,742 Export sales 8,321 8,281 25,029 23,314 Membership income 13,525 13,132 41,364 38,717 Other revenue and income 9,717 12,134 33,392 37,845 Total revenues 799,931 788,556 2,518,607 2,422,618 Operating expenses: Cost of goods sold: Net merchandise sales 661,258 649,894 2,067,416 1,996,595 Export sales 7,995 7,872 24,044 22,136 Non-merchandise 3,503 4,121 12,416 13,194 Selling, general and administrative: Warehouse club and other operations 78,431 78,231 241,826 228,161 General and administrative 24,408 24,532 77,910 76,835 Pre-opening expenses 257 1,647 1,254 1,759 Loss on disposal of assets 112 262 251 735 Total operating expenses 775,964 766,559 2,425,117 2,339,415 Operating income 23,967 21,997 93,490 83,203 Other income (expense): Interest income 554 310 1,433 1,124 Interest expense (2,564) (915) (5,116) (2,949) Other income (expense), net (1,564) 159 (1,826) (2,032) Total other expense (3,574) (446) (5,509) (3,857) Income before provision for income taxes and

loss of unconsolidated affiliates 20,393 21,551 87,981 79,346 Provision for income taxes (7,744) (7,478) (29,849) (26,721) Loss of unconsolidated affiliates (16) (4) (79) (48) Net income 12,633 14,069 58,053 52,577 Less: net (income) loss attributable to noncontrolling interest 72 27 (20) (59) Net income attributable to PriceSmart, Inc. $ 12,705 $ 14,096 $ 58,033 $ 52,518 Net income attributable to PriceSmart, Inc. per share available for distribution: Basic $ 0.41 $ 0.46 $ 1.90 $ 1.73 Diluted $ 0.41 $ 0.46 $ 1.90 $ 1.73 Shares used in per share computations: Basic 30,271 30,198 30,268 30,192 Diluted 30,275 30,205 30,273 30,202 Dividends per share $ — $ — $ 0.70 $ 0.70

See accompanying notes.

‎

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED—AMOUNTS IN THOUSANDS)

Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, 2020 2019 2020 2019 Net income $ 12,633 $ 14,069 $ 58,053 $ 52,577 Less: net (income) loss attributable to noncontrolling interest 72 27 (20) (59) Net income attributable to PriceSmart, Inc. $ 12,705 $ 14,096 $ 58,033 $ 52,518

Other Comprehensive Income, net of tax: Foreign currency translation adjustments (1) (12,874) (9,697) (19,981) (17,972) Defined benefit pension plan: Net gain arising during period 22 42 109 129 Amortization of prior service cost and actuarial gains included in net periodic pensions cost (19) (19) (56) (56) Total defined benefit pension plan 3 23 53 73 Derivative instruments: (2) Unrealized losses on change in derivative obligations (1,471) (267) (208) (337) Unrealized losses on change in fair value of interest rate swaps (1,104) (1,118) (6,295) (1,716) Amounts reclassified from accumulated other comprehensive income (loss) to other expense, net for settlement of derivatives — — 2,751 — Total derivative instruments (2,575) (1,385) (3,752) (2,053) Other comprehensive loss (15,446) (11,059) (23,680) (19,952) Comprehensive income (loss) (2,741) 3,037 34,353 32,566 Less: comprehensive income attributable to noncontrolling interest 35 59 90 80 Comprehensive income (loss) attributable to PriceSmart, Inc. to stockholders $ (2,776) $ 2,978 $ 34,263 $ 32,486

(1) Translation adjustments arising in translating the financial statements of a foreign entity have no effect on the income taxes of that foreign entity. They may, however, affect: (a) the amount, measured in the parent entity's reporting currency, of withholding taxes assessed on dividends paid to the parent entity and (b) the amount of taxes assessed on the parent entity by the government of its country. The Company has determined that the reinvestment of earnings of its foreign subsidiaries are indefinite because of the long-term nature of the Company's foreign investment plans. Therefore, deferred taxes are not provided for on translation adjustments related to non-remitted earnings of the Company's foreign subsidiaries. (2) See Note 8 - Derivative Instruments and Hedging Activities.

See accompanying notes.

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED—AMOUNTS IN THOUSANDS)

Three Months Ended Total Tax Benefit Accumulated Stockholders' Additional From Other Equity Attributable Common Stock Paid-in Stock Based Comprehensive Retained Treasury Stock to Noncontrolling Total PriceSmart, Shares Amount Capital Compensation Loss Earnings Shares Amount Inc. Interest Equity Balance at February 28, 2019 31,447 $ 3 $ 442,273 $ 11,486 $ (130,109) $ 491,031 951 $ (41,524) $ 773,160 $ 430 $ 773,590 Purchase of treasury stock — — — — — — 12 (728) (728) — (728) Issuance of treasury stock (63) — (5,024) — — — (63) 5,024 — — — Issuance of restricted stock award 79 — — — — — — — — — — Forfeiture of restricted stock awards (23) — — — — — — — — — — Exercise of stock options — — — — — — — — — — — Stock-based compensation — — 3,124 — — — — — 3,124 — 3,124 Dividend paid to stockholders — — — — — — — — — — — Dividend payable to stockholders — — — — — — — — — — — Net income — — — — — 14,096 — — 14,096 (27) 14,069 Other comprehensive income (loss) — — — — (11,059) — — — (11,059) 59 (11,000) Balance at May 31, 2019 31,440 $ 3 $ 440,373 $ 11,486 $ (141,168) $ 505,127 900 $ (37,228) $ 778,593 $ 462 $ 779,055

Balance at February 29, 2020 31,451 $ 3 $ 441,372 $ 11,486 $ (152,573) $ 549,703 852 $ (32,098) $ 817,893 $ 974 $ 818,867 Purchase of treasury stock — — — — — — 4 (204) (204) — (204) Issuance of treasury stock (80) — (687) — — — (80) 687 — — — Issuance of restricted stock award 57 — — — — — — — — — — Forfeiture of restricted stock awards (3) — — — — — — — — — — Stock-based compensation — — 3,718 — — — — — 3,718 — 3,718 Dividend paid to stockholders — — — — — — — — — — — Dividend payable to stockholders — — — — — — — — — — — Net income — — — — — 12,705 — — 12,705 (72) 12,633 Other comprehensive income (loss) — — — — (15,446) — — — (15,446) 35 (15,411) Balance at May 31, 2020 31,425 $ 3 $ 444,403 $ 11,486 $ (168,019) $ 562,408 776 $ (31,615) $ 818,666 $ 937 $ 819,603

See accompanying notes.

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED—AMOUNTS IN THOUSANDS)

Nine Months Ended Total Tax Benefit Accumulated Stockholders' Additional From Other Equity Attributable Common Stock Paid-in Stock Based Comprehensive Retained Treasury Stock to Noncontrolling Total PriceSmart, Shares Amount Capital Compensation Income (Loss) Earnings Shares Amount Inc. Interest Equity Balance at August 31, 2018 31,373 $ 3 $ 432,882 $ 11,486 $ (121,216) $ 473,954 912 $ (39,107) $ 758,002 $ 636 $ 758,638 Purchase of treasury stock — — — — — — 51 (3,145) (3,145) — (3,145) Issuance of treasury stock (63) — (5,024) — — — (63) 5,024 — — — Issuance of restricted stock award 155 — — — — — — — — — — Forfeiture of restricted stock awards (25) — — — — — — — — — — Stock-based compensation — — 12,515 — — — — — 12,515 — 12,515 Dividend paid to stockholders — — — — — (10,673) — — (10,673) (313) (10,986) Dividend payable to stockholders — — — — — (10,672) — — (10,672) — (10,672) Net income — — — — — 52,518 — — 52,518 59 52,577 Other comprehensive income (loss) — — — — (19,952) — — — (19,952) 80 (19,872) Balance at May 31, 2019 31,440 $ 3 $ 440,373 $ 11,486 $ (141,168) $ 505,127 900 $ (37,228) $ 778,593 $ 462 $ 779,055

Balance at August 31,2019 31,461 $ 3 $ 443,084 $ 11,486 $ (144,339) $ 525,804 924 $ (38,687) $ 797,351 $ 928 $ 798,279 Purchase of treasury stock — — — — — — 26 (1,585) (1,585) — (1,585) Issuance of treasury stock (174) — (8,657) — — — (174) 8,657 — — — Issuance of restricted stock award 166 — — — — — — — — — — Forfeiture of restricted stock awards (28) — — — — — — — — — — Stock-based compensation — — 9,976 — — — — — 9,976 — 9,976 Dividend paid to stockholders — — — — — (10,710) — — (10,710) (101) (10,811) Dividend payable to stockholders — — — — — (10,719) — — (10,719) — (10,719) Net income — — — — — 58,033 — — 58,033 20 58,053 Other comprehensive income (loss) — — — — (23,680) — — — (23,680) 90 (23,590) Balance at May 31, 2020 31,425 $ 3 $ 444,403 $ 11,486 $ (168,019) $ 562,408 776 $ (31,615) $ 818,666 $ 937 $ 819,603

See accompanying notes.

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PRICESMART, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED—AMOUNTS IN THOUSANDS)

Nine Months Ended May 31, May 31, 2020 2019 Operating Activities: Net income $ 58,053 $ 52,577 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 44,867 40,365 Allowance for doubtful accounts (18) 68 Loss on sale of property and equipment 251 735 Deferred income taxes (4,079) (2,737) Equity in losses of unconsolidated affiliates 79 48 Stock-based compensation 9,976 12,515 Change in operating assets and liabilities: Receivables, prepaid expenses and other current assets, non-current assets, accrued salaries and benefits, deferred membership income and other accruals (157) 1,668 Merchandise inventories 62,511 (5,699) Accounts payable 2,647 13,412 Net cash provided by operating activities 174,130 112,952 Investing Activities: Additions to property and equipment (89,713) (86,409) Purchases of short-term investments (31,711) (14,204) Proceeds from settlements of short-term investments 8,891 29,485 Purchases of long-term investments (1,489) — Proceeds from disposal of property and equipment 44 157 Net cash used in investing activities (113,978) (70,971) Financing Activities: Proceeds from long-term bank borrowings 57,820 — Repayment of long-term bank borrowings (7,542) (9,509) Proceeds from short-term bank borrowings 271,014 5,180 Repayment of short-term bank borrowings (207,368) (3,028) Cash dividend payments (10,811) (10,986) Purchase of treasury stock for tax withholding on stock compensation (1,585) (3,145) Other financing activities (20) (59) Net cash provided by (used in) financing activities 101,508 (21,547) Effect of exchange rate changes on cash and cash equivalents and restricted cash (1,872) (3,365) Net increase in cash, cash equivalents 159,788 17,069 Cash, cash equivalents and restricted cash at beginning of period 106,236 96,914 Cash, cash equivalents and restricted cash at end of period $ 266,024 $ 113,983

Supplemental disclosure of noncash investing activities: Capital expenditures accrued, but not yet paid $ 7,975 $ 3,628 Dividends declared but not yet paid 10,719 10,672

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

Nine Months Ended May 31, May 31, 2020 2019 Cash and cash equivalents $ 261,788 $ 106,445 Short-term restricted cash 240 4,136 Long-term restricted cash $ 3,996 $ 3,402 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 266,024 $ 113,983

See accompanying notes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) May 31, 2020

NOTE 1 – COMPANY OVERVIEW AND BASIS OF PRESENTATION

PriceSmart, Inc.’s (“PriceSmart,” the “Company,” or "we") business consists primarily of international membership shopping warehouse clubs similar to, but typically smaller in size than, warehouse clubs in the United States. As of May 31, 2020, the Company had 45 warehouse clubs in operation in 12 countries and one U.S. territory (seven each in Colombia, Costa Rica, and Panama; five in the Dominican Republic, four each in Trinidad and Guatemala; three in Honduras; two each in El Salvador and Nicaragua; and one each in Aruba, Barbados, Jamaica and the United States Virgin Islands), of which the Company owns 100% of the corresponding legal entities (see Note 2 - Summary of Significant Accounting Policies). On June 17, 2020, the Company opened its 46th warehouse club and eighth club in Costa Rica, located in the city of Liberia, in the Guanacaste region. The Company also expects to open its third warehouse club in the greater metropolitan area of Bogota, its eighth in Colombia, during its second fiscal quarter of 2021.

PriceSmart continues to invest in technology to increase efficiencies and to enhance the member experience by enabling omni-channel capabilities, including e-commerce online shopping and services. During the third quarter of Fiscal 2020, the Company launched its online order and curbside pickup service, which provides for contactless shopping, called Click & Go™. In June 2020, this service was operational in all 13 PriceSmart markets and substantially all clubs. PriceSmart also operates a legacy business (casillero and marketplace) under the “Aeropost” banner in 38 countries in Latin America and the Caribbean, many of which overlap with markets where we operate warehouse clubs.

Basis of Presentation – The interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q for interim financial reporting pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The novel coronavirus (COVID-19) pandemic has severely impacted the economies of the U.S. and the countries where the Company operates. The Company has assessed the impact that COVID-19 has had on our estimates, assumptions and accounting policies and made additional disclosures, if and as necessary.

Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the consolidated balance sheet as of May 31, 2020 is not comparable, in this respect, with that as of August 31, 2019.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The Company determines whether any of the joint ventures in which it has made investments is a Variable Interest Entity (“VIE”) at the start of each new venture and if a reconsideration event has occurred. At this time, the Company also considers whether it must consolidate a VIE and/or disclose information about its involvement in a VIE. A reporting entity must consolidate a VIE if that reporting entity has a variable interest (or combination of variable interests) and is determined to be the primary beneficiary. If the Company determines that it is not the primary beneficiary of the VIE, then the Company records its investment in, and the Company's share of the income (loss) of, joint ventures recorded under the equity method. Due to the nature of the joint ventures that the Company participates in and the continued commitments for additional financing, the Company determined these joint ventures are VIEs.

In the case of the Company's ownership interest in real estate development joint ventures, both parties to each joint venture share all rights, obligations and the power to direct the activities of the VIE that most significantly impact the VIE's economic performance. As a result, the Company has determined that it is not the primary beneficiary of the VIEs and, therefore, has accounted for these entities under the equity method. Under the equity method, the Company's investments in unconsolidated affiliates are initially recorded as an investment in the stock of an investee at cost and are adjusted for the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of the initial investment. The Company's ownership interest in real estate development joint ventures the Company has recorded under the equity method as of May 31, 2020 are listed below:

Basis of

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

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

The Company has determined that for its ownership interest in store-front joint ventures within its marketplace and casillero business, the Company has the power to direct the activities that most significantly impact the economic performance of these VIEs. Therefore, the Company has determined that it is the primary beneficiary of these VIEs and has consolidated these entities within its consolidated financial statements. The Company's ownership interest in store-front joint ventures for which the Company has consolidated their financial statements as of May 31, 2020 are listed below:

Basis of

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

May 31, August 31, 2020 2019 Short-term restricted cash $ 240 $ 54 Long-term restricted cash (1) 3,996 3,529 Total restricted cash $ 4,236 $ 3,583

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

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

Long-Term Investments – The Company considers as long-term investments certificates of deposit and similar time-based deposits with financial institutions with maturities over one year.

Goodwill and Other Intangibles, net – Goodwill and other intangibles totaled $56.1 million as of May 31, 2020 and $58.7 million as of August 31, 2019. The Company reviews reported goodwill and other intangibles at the cash-generating unit level for impairment. The Company tests goodwill for impairment at least annually or when events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

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

In most countries where the Company operates, there are defined and structured processes to recover VAT receivables via refunds or offsets. However, in one country without a clearly defined refund process, the Company is actively engaged with the local government to recover VAT receivables totaling $6.2 million and $5.1 million as of May 31, 2020 and August 31, 2019, respectively. In two other countries, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.8 million and $7.8 million and deferred tax assets of $2.8 million and $2.7 million as of May 31, 2020 and August 31, 2019, 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

May 31, August 31, 2020 2019 Prepaid expenses and other current assets $ 724 $ 1,639 Other non-current assets 25,235 22,691 Total amount of VAT receivables reported $ 25,959 $ 24,330

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

May 31, August 31, 2020 2019 Prepaid expenses and other current assets $ 8,084 $ 9,009 Other non-current assets 20,652 16,381 Total amount of income tax receivables reported $ 28,736 $ 25,390

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s variable lease payments generally relate to amounts the Company pays for additional contingent rent based on a contractually stipulated percentage of sales.

In April 2020, the Financial Accounting Standards Board (“FASB”) issued a Staff Question-and-Answer (“Q&A”) to clarify whether lease concessions related to the effects of COVID-19 require the application of the lease modification guidance under the new lease standard, which the Company adopted on September 1, 2019. The Company has elected to apply the temporary practical expedient and not treat changes to certain leases due to the effects of COVID-19 as modifications. The Company has recorded accruals for rent payment deferrals.

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

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

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

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

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

Treasury Stock – Shares of common stock repurchased by the Company are recorded at cost as treasury stock and result in the reduction of stockholders’ equity in the Company’s consolidated balance sheets. The Company may reissue these treasury shares as part of its stock-based compensation programs. When treasury shares are reissued, the Company uses the first in/first out (“FIFO”) cost method for determining cost of the reissued shares. If the issuance price is higher than the cost, the excess of the issuance price over the cost is credited to additional paid-in capital (“APIC”). If the issuance price is lower than the cost, the difference is first charged against any credit balance in APIC from treasury stock and the balance is charged to retained earnings. During the nine months ended May 31, 2020, the Company reissued approximately 174,000 treasury shares.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

Cash Flow Instruments. The Company is a party to receive floating interest rate, pay fixed-rate interest rate swaps to hedge the interest rate risk of certain U.S. dollar denominated debt within its international subsidiaries. The swaps are designated as cash flow hedges of interest expense risk. These instruments are considered effective hedges and are recorded using hedge accounting. The Company is also a party to receive variable interest rate, pay fixed interest rate cross- currency interest rate swaps to hedge the interest rate and currency exposure associated with the expected payments of principal and interest of U.S. denominated debt within its international subsidiaries whose functional currency is other than the U.S. dollar. The swaps are designated as cash flow hedges of the currency risk and interest-rate risk related to payments on the U.S. denominated debt. These instruments are also considered to be effective hedges and are recorded using hedge accounting. Under cash flow hedging, the entire gain or loss of the derivative, calculated as the net present value of the future cash flows, is reported on the consolidated balance sheets in accumulated other comprehensive loss. Amounts recorded in accumulated other comprehensive loss are released to earnings in the same period that the hedged transaction impacts consolidated earnings. See Note 8 - Derivative Instruments and Hedging Activities for information on the fair value of interest rate swaps and cross-currency interest rate swaps as of May 31, 2020 and August 31, 2019.

Fair Value Instruments. The Company is exposed to foreign currency exchange rate fluctuations in the normal course of business. This includes exposure to foreign currency exchange rate fluctuations on U.S. dollar denominated liabilities within the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. The Company manages these fluctuations, in part, through the use of non-deliverable forward foreign-exchange contracts that are intended to offset changes in cash flows attributable to currency exchange movements. The contracts are intended primarily to economically address exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. Currently, these contracts are treated for accounting purposes as fair value instruments and do not qualify for derivative hedge accounting, and as such the Company does not apply derivative hedge accounting to record these

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) transactions. As a result, these contracts are valued at fair value with unrealized gains or losses reported in earnings during the period of the change. The Company seeks to mitigate foreign currency exchange-rate risk with the use of these contracts and does not intend to engage in speculative transactions. These contracts do not contain any credit-risk-related contingent features and are limited to less than one year in duration.

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

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

Insurance Reimbursements – Receipts from insurance reimbursements up to the amount of the losses recognized are considered recoveries. These recoveries are accounted for when they are probable of receipt. Insurance recoveries are not recognized prior to the recognition of the related cost. Anticipated proceeds in excess of the amount of loss recognized are considered gains and are subject to gain contingency guidance. Anticipated proceeds in excess of a loss recognized in the financial statements are not recognized until all contingencies related to the insurance claim are resolved.

Self-Insurance – The Company changed health insurance providers and is no longer self-insured as of October 1, 2019.

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

The following table discloses the net effect of translation into the reporting currency on other comprehensive loss for these local currency denominated accounts for the three and nine months ended May 31, 2020 and 2019:

Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, 2020 2019 2020 2019 Effect on other comprehensive loss due to foreign currency translation $ (12,874) $ (9,697) $ (19,981) $ (17,972)

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

Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, 2020 2019 2020 2019 Currency gain (loss) $ (1,529) $ 192 $ (2,431) $ (1,930)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Recent Accounting Pronouncements – Not Yet Adopted

FASB ASC 848 ASU 2020-04—Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU No. 2020-04 provides optional expedients and exceptions for a limited period of time to ease the potential burden in accounting for contracts, hedging relationships, and other transactions affected by reference rate reform. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

FASB ASC 740 ASU 2019-12—Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. ASU No. 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The ASU is effective for annual periods beginning after December 15, 2020. Early adoption is permitted. The Company expects to adopt ASU No. 2019-12 on September 1, 2021, the first quarter of fiscal year 2022. The Company will evaluate the impact adoption of this guidance may have on the Company’s consolidated financial statements.

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

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

Additionally, the amendments in this ASU require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU are effective for annual periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption is permitted. The Company expects to adopt ASU No. 2018-15 on September 1, 2020, the first quarter of fiscal year 2021. While the Company is still in the process of determining the impact that adoption of this guidance will have on its consolidated financial statements, it does not anticipate that the new guidance will have a material impact on its consolidated financial statements.

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) this guidance will have on its consolidated financial statements, it does not anticipate that the new guidance will have a material impact on its consolidated financial statements.

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

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

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

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

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), which amends the FASB’s guidance on the impairment of financial instruments. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments to clarify and address certain items related to the amendments in ASU 2016-13. These amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company expects to adopt the amendments on September 1, 2020, the first quarter of fiscal year 2021. While the Company is still in the process of determining the impact that adoption of this guidance will have on its consolidated financial statements, it does not anticipate that the new guidance will have a material impact on its consolidated financial statements given the materiality and nature of the financial assets currently held.

Recent Accounting Pronouncements Adopted

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

In October 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-16, Derivatives and Hedging —Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which expands the list of United States benchmark interest rates permitted in the application of hedge accounting. The amendments in this ASU allow use of the Overnight Index Swap (OIS) rate based on the Secured Overnight Financing Rate (SOFR) as a U.S. benchmark interest rate for hedge accounting purposes under Topic 815, Derivatives and Hedging. The Company adopted ASU 2018-16 in the first quarter of fiscal year 2020. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope to include share-based payment transactions for acquiring goods and services from non-employees. The amendments in this ASU apply to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations by issuing share-based payment awards. The amendments in this ASU are effective for annual periods beginning after December 15, 2018 and interim

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) periods within those annual periods. The Company adopted ASU 2018-07 in the first quarter of fiscal year 2020. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

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

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

The Company adopted ASU 2016-02 using the modified retrospective transition method in the first quarter of fiscal year 2020. In accordance with ASC 842, the Company did not restate comparative periods in transition to ASC 842 and instead reported comparative periods under ASC 840. Adoption of the standard resulted in the initial recognition of $120.6 million of operating lease right-of-use (“ROU”) assets and $132.1 million of short-term and long-term operating lease liabilities as of September 1, 2019. The difference between the assets and liabilities primarily represents the deferred rent recorded as of August 31, 2019, which was eliminated upon adoption. No cumulative-effect adjustments were recorded to retained earnings, and there was no material impact to the Company’s interim consolidated statements of income, consolidated statements of comprehensive income, or consolidated statements of cash flows. However, several of the Company’s leases are denominated in a currency that is not the functional currency of the Company’s local subsidiary. The resulting monetary liability is revalued to the functional currency at each balance sheet date, with the resulting gain or loss being recorded in Other income (expense). The monetary lease liability subject to revaluation as of May 31, 2020 was $33.7 million. Due to the mix of foreign currency exchange rate fluctuations during the third quarter of fiscal year 2020, the impact to the interim consolidated statements of income of revaluing this liability was immaterial.

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

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the three and nine month periods ended May 31, 2020, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of May 31, 2020 that the Company expects to have a material impact on its consolidated financial statements.

NOTE 3 – REVENUE RECOGNITION

Performance Obligations

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) amounts remitted to the respective merchandise vendors, as the Company is acting as an agent and is not the principal in the sale of those goods being purchased from the vendors by the Company’s customers.

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

Platinum Points Reward Programs. The Company currently offers Platinum memberships in eleven of its thirteen countries. The annual fee for a Platinum membership is approximately $75. The Platinum membership provides members with a 2% rebate on most items, up to an annual maximum of $500. The rebate is issued annually to Platinum members on March 1 and expires August 31. Platinum members can apply this rebate to future purchases at the warehouse club during the redemption period. The Company records this 2% rebate as a reduction of revenue at the time of the sales transaction. Accordingly, the Company has reduced warehouse sales and has accrued a liability within other accrued expenses and other current liabilities, platinum rewards. The Company has determined that breakage revenue is 5% of the awards issued; therefore, it records 95% of the Platinum membership liability at the time of sale. Annually, the Company reviews for expired unused rebates outstanding, and the expired unused rebates are recognized as “Other revenue and income” on the consolidated statements of income.

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contract Performance Liabilities

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

Contract Liabilities May 31, August 31, 2020 2019 Deferred membership income $ 23,380 $ 24,901 Other contract performance liabilities $ 4,892 $ 4,048

Disaggregated Revenues

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

Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, 2020 2019 2020 2019 Foods & Sundries $ 419,579 $ 384,902 $ 1,250,728 $ 1,174,087 Fresh Foods 228,858 209,452 685,413 630,657 Hardlines 70,374 83,606 261,796 274,596 Softlines 25,597 38,700 115,860 127,158 Other Business 23,960 38,349 105,025 116,244 Net Merchandise Sales $ 768,368 $ 755,009 $ 2,418,822 $ 2,322,742

NOTE 4 – EARNINGS PER SHARE

The Company presents basic net income per share using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders and that determines basic net income per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings that would have been available to common stockholders. A participating security is defined as a security that may participate in undistributed earnings with common stock. The Company’s capital structure includes securities that participate with common stock on a one-for-one basis for distribution of dividends. These are the restricted stock awards and restricted stock units issued pursuant to the 2013 Equity Incentive Award Plan. The Company does not include performance stock units as participating securities until they vest. The Company determines the diluted net income per share by using the more dilutive of the two class-method or the treasury stock method and by including the basic weighted average of outstanding performance stock units in the calculation of diluted net income per share under the two-class method and including all potential common shares assumed issued in the calculation of diluted net income per share under the treasury stock method.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the computation of net income per share for the three and nine months ended May 31, 2020 and 2019 (in thousands, except per share amounts):

Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, 2020 2019 2020 2019 Net income attributable to PriceSmart, Inc. $ 12,705 $ 14,096 $ 58,033 $ 52,518 Less: Allocation of income to unvested stockholders (188) (189) (527) (414) Net income attributable to PriceSmart, Inc. per share available for distribution $ 12,517 $ 13,907 $ 57,506 $ 52,104 Basic weighted average shares outstanding 30,271 30,198 30,268 30,192 Add dilutive effect of performance stock units (two-class method) 4 7 5 10 Diluted average shares outstanding 30,275 30,205 30,273 30,202 Basic net income per share $ 0.41 $ 0.46 $ 1.90 $ 1.73 Diluted net income per share $ 0.41 $ 0.46 $ 1.90 $ 1.73

NOTE 5 – STOCKHOLDERS’ EQUITY

Dividends

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

First Payment Second Payment Record Date Date Record Date Date

Declared Amount Date ‎Paid ‎Payable Amount ‎Date ‎Paid ‎Payable Amount 2/6/2020 $ 0.70 2/15/2020 2/28/2020 N/A $ 0.35 8/15/2020 N/A 8/31/2020 $ 0.35 1/30/2019 $ 0.70 2/15/2019 2/28/2019 N/A $ 0.35 8/15/2019 8/30/2019 N/A $ 0.35

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

Comprehensive Income and Accumulated Other Comprehensive Loss

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

Attributable to Noncontrolling PriceSmart Interests Total Beginning balance, September 1, 2019 $ (144,339) $ 20 $ (144,319) Foreign currency translation adjustments (19,981) 90 (19,891) Defined benefit pension plans 53 — 53 Derivative instruments (1) (3,752) — (3,752) Ending balance, May 31, 2020 $ (168,019) $ 110 $ (167,909)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Attributable to Noncontrolling PriceSmart Interests Total Beginning balance, September 1, 2018 $ (121,216) $ (1) $ (121,217) Foreign currency translation adjustments (17,972) 80 (17,892) Defined benefit pension plans 73 — 73 Derivative Instruments (1) (2,053) — (2,053) Ending balance, May 31, 2019 $ (141,168) $ 79 $ (141,089)

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

(1) See Note 8 - Derivative Instruments and Hedging Activities. (2) Amounts reclassified from accumulated other comprehensive loss related to the minimum pension liability are included in warehouse club and other operations in the Company's consolidated statements of income.

Retained Earnings Not Available for Distribution

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

May 31, August 31, 2020 2019 Retained earnings not available for distribution $ 8,478 $ 7,843

NOTE 6 – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

PERA filed a consolidated class action complaint, which alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Company believes the case lacks merit and intends to vigorously defend itself against any obligations or liability to the plaintiffs. During the third quarter of fiscal 2020, the Company filed a Motion to Dismiss the Plaintiff’s Consolidated Amended Complaint and the Plaintiff filed an Opposition to the Motion to Dismiss. During the fourth quarter of fiscal 2020, the Company plans to file a Reply to the Opposition. Oral arguments are scheduled for the first quarter of fiscal 2021.

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

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

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

In evaluating the exposure associated with various non-income tax filing positions, the Company accrues for probable and estimable exposures for non- income tax related tax contingencies. As of May 31, 2020 and August 31, 2019, the Company has recorded within other accrued expenses and other current liabilities a total of $3.1 million and $3.2 million, respectively, for various non-income tax related tax contingencies.

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

In two other countries where the Company operates, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.8 million and $7.8 million and deferred tax assets of $2.8 million and $2.7 million as of May 31, 2020 and August 31, 2019, 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other Commitments

In January 2017, the Company purchased a distribution center in Medley, Miami-Dade County, Florida. The Company transferred its Miami dry distribution center activities that were previously in the leased facility to the new facility during the third quarter of fiscal year 2017. As of May 31, 2020, all of the vacated space has been subleased (and/or returned to the landlord). As part of the subleases, the Company provided the landlord of the leased facility a letter of credit (“LOC”) for the initial amount of $500,000 which entitled the landlord to draw on the LOC based on a decreasing scale over four years if certain conditions were to occur related to nonpayment by the new tenant. The balance of this LOC decreases at an annual rate of $125,000 starting in August 2018. As of May 31, 2020, the remaining balance of the LOC was $250,000. Although this agreement is considered a guarantee, in measuring the fair value, the Company considers the risk and probability of default by the third-party tenant as not likely nor probable based on the Company’s review of the third-party tenant’s financial position as well as the third party’s considerable capital investment into the leased facility. Therefore, the Company has not recorded a liability for this guarantee.

The Company is also committed to non-cancelable construction service obligations for various warehouse club developments and expansions. As of May 31, 2020 and August 31, 2019, the Company had approximately $7.8 million and $14.9 million, respectively, in contractual obligations for construction services not yet rendered.

From time to time, the Company has entered into general land purchase and land purchase option agreements. The Company’s land purchase agreements are typically subject to various conditions, including, but not limited to, the ability to obtain necessary governmental permits or approvals. A deposit under an agreement is typically returned to the Company if all permits or approvals are not obtained. Generally, the Company has the right to cancel any of its agreements to purchase land without cause by forfeiture of some or all of the deposits it has made pursuant to the agreement. As of May 31, 2020, the Company did not have any pending land purchase option agreements.

The table below summarizes the Company’s interest in real estate joint ventures, commitments to additional future investments and the Company’s maximum exposure to loss as a result of its involvement in these joint venture as of May 31, 2020 (in thousands):

Company's

Company’s Commitment ‎Maximum

‎Variable ‎to Future ‎Exposure

% Initial Additional Net Income ‎Interest ‎Additional ‎to Loss in Inception to Entity ‎Ownership ‎Investment ‎Investments Date ‎in Entity ‎Investments(1) ‎Entity(2) GolfPark Plaza, S.A. 50 % $ 4,616 $ 2,402 $ 92 $ 7,110 $ 99 $ 7,209 Price Plaza Alajuela PPA, S.A. 50 % 2,193 1,236 79 3,508 785 4,293 Total $ 6,809 $ 3,638 $ 171 $ 10,618 $ 884 $ 11,502

(1) The parties intend to seek alternate financing for the project, which could reduce the amount of investments each party would be required to provide. The parties may mutually agree on changes to the project, which could increase or decrease the amount of contributions each party is required to provide. (2) The maximum exposure is determined by adding the Company’s variable interest in the entity and any explicit or implicit arrangements that could require the Company to provide additional financial support.

NOTE 7 – DEBT

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

Facilities Used Total Amount Short-term Letters of Facilities Weighted average of Facilities Borrowings Credit Available interest rate May 31, 2020 $ 81,210 $ 70,886 $ 472 $ 9,852 3.6 % August 31, 2019 $ 69,000 $ 7,540 $ 486 $ 60,974 6.1 %

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of May 31, 2020 and August 31, 2019, the Company had approximately $40.0 million of short-term facilities in the U.S. As of May 31, 2020 and August 31, 2019, the Company was in compliance with all covenants or amended covenants for each of its short-term facility agreements. Each of the facilities expires annually except for the U.S. facility, which expires bi-annually. The facilities are normally renewed.

The following table provides the changes in long-term debt for the nine-months ended May 31, 2020:

Current Long-term ‎portion of ‎debt (net of current (Amounts in thousands) ‎long-term debt portion) Total Balances as of August 31, 2019 $ 25,875 $ 63,711 $ 89,586 (1) Proceeds from long-term debt incurred during the period: Colombia subsidiary — 25,000 25,000 Guatemala subsidiary — 20,820 20,820 Trinidad subsidiary 6,000 6,000 12,000 Regularly scheduled loan payments (1,539) (6,003) (7,542) Refinances of short-term debt (11,046) 11,046 — Reclassifications of long-term debt due in the next 12 months 3,402 (3,402) — Translation adjustments on foreign currency debt of subsidiaries whose functional currency is not the U.S. dollar (2) 92 (127) (35) Balances as of May 31, 2020 $ 22,784 $ 117,045 $ 139,829 (3)

(1) The carrying amount of non-cash assets assigned as collateral for these loans was $111.3 million. No cash assets were assigned as collateral for these loans. (2) These foreign currency translation adjustments are recorded within Other comprehensive income. (3) The carrying amount of non-cash assets assigned as collateral for these loans was $166.2 million. No cash assets were assigned as collateral for these loans.

As of May 31, 2020, the Company had approximately $114.3 million of long-term loans in several foreign subsidiaries that require these subsidiaries to comply with certain annual or quarterly financial covenants, which include debt service and leverage ratios. As of May 31, 2020, the Company was in compliance with all covenants or amended covenants.

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

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

Twelve Months Ended May 31, Amount 2021 $ 22,784 2022 17,900 2023 25,845 2024 8,577 2025 24,983 Thereafter 39,740 Total $ 139,829

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 8 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

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

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cash Flow Hedges

As of May 31, 2020, all of the Company’s interest rate swap and cross-currency interest rate swap derivative financial instruments are designated and qualify as cash flow hedges. The Company formally documents the hedging relationships for its derivative instruments that qualify for hedge accounting.

The following table summarizes agreements for which the Company has recorded cash flow hedge accounting for the nine months ended May 31, 2020:

Bank Derivative Initial ‎US$ Date Financial Derivative US$ ‎loan Floating Leg Fixed Rate Entered ‎Counter- Financial ‎Notional ‎Held ‎(swap ‎for PSMT Settlement Effective

Subsidiary into ‎party ‎Instruments ‎Amount with ‎counter-party) ‎Subsidiary ‎Dates Period of swap Colombia 3-Dec-19 Citibank, N.A. Cross currency interest $ 7,875,000 Citibank, N.A. Variable rate 3- 7.87% 3rd day of each December, December 3, 2019 - ("Citi") rate swap month Libor plus March, June, and December 3, 2024 2.45% September, beginning on March 3, 2020 Colombia 27-Nov-19 Citibank, N.A. Cross currency interest $ 25,000,000 Citibank, N.A. Variable rate 3- 7.93% 27th day of each November 27, 2019 - ("Citi") rate swap month Libor plus November, February, May November 27, 2024 2.45% and August beginning February 27, 2020 Colombia 24-Sep-19 Citibank, N.A. Cross currency interest $ 12,500,000 PriceSmart, Inc. Variable rate 3- 7.09% 24th day of each September 24, 2019 - ("Citi") rate swap month Libor plus December, March, June September 26, 2022 2.50% and September beginning December 24, 2019 Panama 25-Jun-18 Bank of Nova Scotia Interest rate swap $ 14,625,000 Bank of Nova Variable rate 3- 5.99% 23rd day of each month June 25, 2018 - ("Scotiabank") Scotia month Libor plus beginning on July 23, 2018 March 23, 2023 3.0% Honduras 26-Feb-18 Citibank, N.A. Cross currency interest $ 13,500,000 Citibank, N.A. Variable rate 3- 9.75% 29th day of May, August, February 26, 2018 - ("Citi") rate swap month Libor plus November and February February 24, 2024 3.00% beginning May 29, 2018 PriceSmart, Inc 7-Nov-16 MUFG Union Bank, Interest rate swap $ 35,700,000 Union Bank Variable rate 1- 3.65% 1st day of each month March 1, 2017 - March 1, N.A. ("Union Bank") month Libor plus beginning on April 1, 2017 2027 1.7% Costa Rica 28-Aug-15 Citibank, N.A. Cross currency interest $ 7,500,000 Citibank, N.A. Variable rate 3- 7.65% 28th day of August, August 28, 2015 - ("Citi") rate swap month Libor plus November, February, and August 28, 2020 2.50% May beginning on November 30, 2015

For the three and nine months ended May 31, 2020 and 2019, the Company included the gain or loss on the hedged items (that is, variable-rate borrowings) in the same line item—interest expense—as the offsetting gain or loss on the related interest rate swaps as follows (in thousands):

Interest

‎expense on Cost of

Income Statement Classification ‎borrowings(1) ‎swaps (2) Total Interest expense for the three months ended May 31, 2020 $ 1,067 $ 620 $ 1,687 Interest expense for the three months ended May 31, 2019 $ 1,204 $ 110 $ 1,314 Interest expense for the nine months ended May 31, 2020 $ 3,287 $ 1,477 $ 4,764 Interest expense for the nine months ended May 31, 2019 $ 3,606 $ 380 $ 3,986

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Notional Amount as of

May 31, August 31, Floating Rate Payer (Swap Counterparty) 2020 2019 Union Bank $ 34,213 $ 35,169 Citibank N.A. 50,650 24,225 Scotiabank 16,500 18,375 Total $ 101,363 $ 77,769

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

May 31, 2020 August 31, 2019 Fair Net Tax Net Fair Net Tax Net Derivatives designated as cash flow hedging Balance Sheet instruments Classification ‎Value ‎Effect ‎OCI ‎Value ‎Effect ‎OCI Other non-current Cross-currency interest rate swaps assets $ 428 $ (132) $ 296 $ — $ — $ — Cross-currency interest rate swaps Other current assets — — — 2,736 (903) 1,833 Other long-term Interest rate swaps liabilities (4,005) 933 (3,072) (2,178) 517 (1,661) Other long-term Cross-currency interest rate swaps liabilities (1,562) 475 (1,087) (732) 220 (512) Cross-currency interest rate swaps Other current liabilities (30) 9 (21) — — — Net fair value of derivatives designated as hedging instruments $ (5,169) $ 1,285 $ (3,884) $ (174) $ (166) $ (340)

Fair Value Instruments

From time to time the Company enters into non-deliverable forward foreign-exchange contracts. These contracts are treated for accounting purposes as fair value contracts and do not qualify for derivative hedge accounting. The use of non-deliverable forward foreign-exchange contracts is intended to offset changes in cash flow attributable to currency exchange movements. These contracts are intended primarily to economically hedge exposure to U.S. dollar merchandise inventory expenditures made by the Company’s international subsidiaries whose functional currency is other than the U.S. dollar. As of May 31, 2020, the Company did not have any material non-deliverable forward foreign-exchange contracts.

Other Instruments

Other derivatives not designated as hedging instruments consist primarily of written call options in which the Company receives a premium that it uses to reduce the costs associated with its hedging activities. As of May 31, 2020, the Company has settled its outstanding call options and does not have any other contracts not designated as hedging instruments.

For the three and nine months ended May 31, 2020, the Company included in its consolidated statements of income the loss of its other non-designated derivative contracts as follows (in thousands):

Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, Income Statement Classification 2020 2019 2020 2019 Other expense, net $ — $ — $ (912) $ —

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 9 – SEGMENTS

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

United Central

‎States ‎American Caribbean Reconciling Colombia ‎Operations ‎Operations ‎Operations(1) Operations ‎Items(2) Total Three Months Ended May 31, 2020 Revenue from external customers $ 15,852 $ 452,927 $ 250,304 $ 80,848 — $ 799,931 Intersegment revenues 230,826 4,791 1,548 787 (237,952) — Depreciation, Property and equipment 1,294 7,577 3,810 1,591 — 14,272 Amortization, Intangibles 607 — — — — 607 Operating income (loss) (1,115) 27,606 13,547 3,487 (19,558) 23,967 Net income (loss) attributable to PriceSmart, Inc. (3,785) 22,724 10,849 2,403 (19,486) 12,705 Capital expenditures, net 1,446 9,395 2,163 3,508 — 16,512

Nine Months Ended May 31, 2020 Revenue from external customers $ 52,039 $ 1,442,336 $ 747,004 $ 277,228 $ — $ 2,518,607 Intersegment revenues 868,137 12,745 3,627 1,870 (886,379) — Depreciation, Property and equipment 3,981 22,027 11,602 5,452 — 43,062 Amortization, Intangibles 1,805 — — — — 1,805 Operating income 3,401 96,972 40,436 13,411 (60,730) 93,490 Net income (loss) attributable to PriceSmart, Inc. (5,350) 79,815 34,978 9,340 (60,750) 58,033 Long-lived assets (other than deferred tax assets) (3) 83,813 481,942 181,578 143,437 — 890,770 Intangibles, net 10,772 — — — — 10,772 Goodwill 10,695 24,484 10,137 — — 45,316 Total assets 224,682 727,527 384,168 238,112 — 1,574,489 Capital expenditures, net 5,564 42,766 13,913 28,807 — 91,050

Three Months Ended May 31, 2019 Revenue from external customers $ 17,454 $ 448,118 $ 228,586 $ 94,398 $ — $ 788,556 Intersegment revenues 284,205 3,401 1,032 444 (289,082) — Depreciation, Property and equipment 1,312 6,200 3,551 2,132 — 13,195 Amortization, Intangibles 606 — — — — 606 Operating income (loss) 1,139 26,314 10,295 3,294 (19,045) 21,997 Net income (loss) attributable to PriceSmart, Inc. (1,655) 22,725 9,514 2,528 (19,016) 14,096 Capital expenditures, net 143 13,322 8,010 1,093 — 22,568

Nine Months Ended May 31, 2019 Revenue from external customers $ 51,614 $ 1,372,918 $ 702,954 $ 295,132 $ — $ 2,422,618 Intersegment revenues 924,624 7,620 3,375 1,119 (936,738) — Depreciation, Property and equipment 3,958 18,072 10,181 6,356 — 38,567 Amortization, Intangibles 1,798 — — — — 1,798 Operating income 4,565 90,681 37,346 10,327 (59,716) 83,203 Net income (loss) attributable to PriceSmart, Inc. (3,885) 75,009 32,536 8,632 (59,774) 52,518 Long-lived assets (other than deferred tax assets) 85,638 339,950 157,186 105,384 — 688,158 Intangibles, net 13,182 — — — — 13,182 Goodwill 11,315 24,606 10,237 — — 46,158 Total assets 152,322 605,399 331,999 172,144 — 1,261,864 Capital expenditures, net 3,759 56,695 24,271 3,831 — 88,556

As of August 31, 2019 Long-lived assets (other than deferred tax assets) $ 65,278 $ 383,665 $ 165,584 $ 115,838 $ — $ 730,365 Intangibles, net 12,576 — — — — 12,576 Goodwill 11,315 24,593 10,193 — — 46,101 Total assets 161,583 614,579 340,216 180,033 — 1,296,411

(1) Management considers its club in the U.S. Virgin Islands to be part of its Caribbean operations. (2) The reconciling items reflect the amount eliminated on consolidation of intersegment transactions. (3) Effective September 1, 2019, we adopted the requirements of Accounting Standards Update (ASU) 2016-02, "Leases (Topic 842)" (ASC 842) using the modified retrospective approach, under which financial results reported in prior periods were not restated. As a result, the Long-lived assets (other than deferred tax assets) as of May 31, 2020 is not comparable with that as of May 31, 2019 and August 31, 2019.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 10 – LEASES

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

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

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

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

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

The Company did not elect the following practical expedients:

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

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

In accordance with ASC 842, the Company determines if an arrangement is a lease at inception or modification of a contract and classifies each lease as either operating or finance lease at commencement. The Company only reassesses lease classification subsequent to commencement upon a change to the expected lease term or the contract being modified. As of May 31, 2020, the Company only has operating leases for its clubs, distribution centers, office space, and land. Operating leases, net of accumulated amortization, are included in operating lease ROU assets, and current and non-current operating lease liabilities, on the Company’s consolidated balance sheets. Lease expense for operating leases is included in selling, general and administrative expense on the Company’s consolidated statements of income. Leases with an initial term of twelve months or less are not recorded on the Company’s consolidated balance sheet.

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

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

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

Three Months Ended Nine Months Ended May 31, May 31, 2020 2020 Operating lease cost $ 4,338 $ 12,831 Short-term lease cost 64 146 Variable lease cost 856 2,983 Sublease income (258) (829) Total lease costs $ 5,000 $ 15,131

The weighted average remaining lease term and weighted average discount rate for operating leases as of May 31, 2020 were as follows:

Operating leases Weighted average remaining lease term in years 18.3 Weighted average discount rate percentage 6.4%

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

Three Months Ended Nine Months Ended May 31, May 31, 2020 2020 Operating cash flows paid for operating leases $ 3,653 $ 11,306

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Leased Years Ended May 31, Locations(1) 2021 $ 14,914 2022 14,959 2023 14,762 2024 14,454 2025 13,984 Thereafter 171,840 Total future lease payments 244,913 Less imputed interest (110,229) Total operating lease liabilities $ 134,684 (2)

(1) Operating lease obligations have been reduced by approximately $1.2 million to reflect expected sub-lease income. Certain obligations under leasing arrangements are collateralized by the underlying asset being leased. (2) Future minimum lease payments include $0.7 million of lease payment obligations for the prior leased Miami distribution center. For purposes of calculating the minimum lease payments, a reduction is reflected for the actual sub-lease income the Company expects to receive during the remaining lease term. This sub-lease income was also considered for the purposes of calculating the exit obligation, which was immaterial as of May 31, 2020.

NOTE 11 – SUBSEQUENT EVENTS

The Company has evaluated all events subsequent to the balance sheet date of May 31, 2020 through the date of issuance of these consolidated financial statements and has determined that there are no subsequent events that require disclosure.

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PRICESMART, INC.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements concerning PriceSmart, Inc.'s ("PriceSmart", the "Company" or "we") anticipated future revenues and earnings, adequacy of future cash flows, proposed warehouse club openings, the Company's performance relative to competitors and related matters. These forward-looking statements include, but are not limited to, statements containing the words “expect,” “believe,” “will,” “may,” “should,” “project,” “estimate,” “anticipated,” “scheduled,” and like expressions, and the negative thereof. These statements are subject to risks and uncertainties that could cause actual results to differ materially including, but not limited to: adverse changes in economic conditions in the Company’s markets, natural disasters, compliance risks, volatility in currency exchange rates, competition, consumer and small business spending patterns, political instability, increased costs associated with the integration of online commerce with our traditional business, whether the Company can successfully execute strategic initiatives, breaches of security or privacy of member or business information, cost increases from product and service providers, interruption of supply chains, COVID-19 related factors and challenges, including among others, the duration of the pandemic, the unknown long-term economic impact, the impact of government policies and restrictions that have limited access for our members, and shifts in demand away from discretionary or higher priced products to lower priced products, exposure to product liability claims and product recalls, recoverability of moneys owed to PriceSmart from governments, and other important factors discussed under the captions “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2019 filed with the United States Securities and Exchange Commission (“SEC”) on October 29, 2019 and our Quarterly Report on Form 10-Q for the three months ended February 29, 2020 filed with the SEC on April 8, 2020. These risk factors may be updated from time to time in our other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Forward-looking statements speak only as of the date that they are made, and the Company does not undertake to update them, except as required by law.

The following discussion and analysis compares the results of operations for the three and nine months ended May 31, 2020 and May 31, 2019 and should be read in conjunction with the consolidated financial statements, and the accompanying notes included therein.

Overview

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

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

Logistics and distribution efficiencies are fundamental to delivering high quality merchandise at low prices to our members. We continue to explore ways to deliver value, improve efficiency, reduce costs and ensure a flow of high quality, curated merchandise to our warehouse clubs.

Purchasing land and constructing warehouse clubs is generally our largest ongoing capital investment. Securing land for warehouse club locations is challenging in several of our markets because suitable sites at economically feasible prices are difficult to find. We believe real estate ownership provides a number of advantages as compared to leasing, including lower operating expenses, flexibility to expand or otherwise enhance our buildings, long-term control over the use of the property and

Table of Contents the residual value that the real estate may have in future years. While our preference is to own rather than lease real estate, we have entered into real estate leases in certain cases and will likely continue to do so in the future.

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

The number of warehouse clubs as of May 31, 2020 for each country or territory were as follows:

Number of Number of Warehouse Clubs Warehouse Clubs in Operation as of in Operation as of Country/Territory May 31, 2019 May 31, 2020 Colombia 7 7 Costa Rica 7 7 Panama 6 7 Dominican Republic 4 5 Trinidad 4 4 Guatemala 3 4 Honduras 3 3 El Salvador 2 2 Nicaragua 2 2 Aruba 1 1 Barbados 1 1 U.S. Virgin Islands 1 1 Jamaica 1 1 Totals 42 45

Our warehouse clubs and local distribution centers are located in Latin America and the Caribbean, and our corporate headquarters, U.S. buying operations and regional distribution centers are located primarily in the United States. Our operating segments are the United States, Central America, the Caribbean and Colombia. We opened our 46th warehouse club in Liberia, Costa Rica, on June 17, 2020. The new Liberia club is a smaller warehouse club located approximately 130 miles from the nearest PriceSmart club and three hours from the capital city of San José. We are also currently constructing and expect to open our third warehouse club in Bogota, Colombia during our second fiscal quarter of 2021.

Due to the uncertainty created from the outbreak of COVID-19 and the unknown potential social and economic impacts in the markets where we operate and any resulting consequences to our results of operations and cash flow, we continue to closely monitor and reevaluate the timing of our future capital investments and warehouse club openings.

We continue to invest in technology to increase efficiencies and to enhance our member experience by enabling omni-channel capabilities, including e- commerce online shopping and services. During the third quarter of Fiscal 2020, we launched online ordering and our Click & Go™ curbside pickup service. In June 2020, we offered this service in all 13 of our markets and in substantially all clubs.

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

Factors Affecting Our Business

COVID-19 Updates

The COVID-19 pandemic resulted in significant challenges across our 13 markets in the third quarter of fiscal 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 are permitted to be open, restrictions on segments of the population permitted to shop or circulate on particular days, and limits on the number of people permitted to be in the club at the same time. In addition, the

Table of Contents governments of some of the countries in which we operate have expressed a preference in favor of imports of essential items over discretionary goods. We have also experienced product mix shifts due to changing consumer habits, as well as sporadic supply-chain challenges, which can impact inventory levels. In response, we have shifted our focus to four main priorities:

Protect the safety and well-being of our employees and our members. We continue to be vigilant in taking the necessary and prudent measures to provide the safest possible environment for our employees and our members. We are closely tracking numerous decrees and government mandates and are following all local guidelines. We have taken preventative measures that include frequent and enhanced cleaning and sanitizing protocols, providing personal protective equipment, installing protective barriers for the cashiers and in other member-facing areas, reducing or eliminating in-club food service, eliminating food sampling, implementing social distancing measures, metering the number of customers in a club at any one time, requiring masks to be worn by members in the club (where legally permitted), taking temperatures of employees at the beginning of shifts, quickly identifying and cooperating with local health officials about confirmed cases, promptly implementing contact tracing protocols and mapping of potentially exposed employees who are then immediately quarantined while continuing to be paid, off-siting employees whose functions could be performed remotely, offering vulnerable employees with underlying health conditions, employees over 60 and pregnant employees paid leave and vigilantly educating our employees about safe practices and enforcing best practices of good hygiene. We have also expanded our efforts to educate family members of employees about safe practices and to provide them with masks and sanitizing materials. We have modified our sick leave policy to make sure that sick people can take paid time off. We have built reserve teams of employees who do not overlap with each other so that they can step in as needed.

Take proactive measures to protect our supply chain. We are working closely with our suppliers to make sure that we have essential items available for our members. This includes increasing the use of our regional and local distribution centers and merchandise vendors to provide additional flexibility and reduce the risk of interruption of the flow of merchandise to our markets. We have also placed limits on the quantity of certain key items that members can purchase such as cleaning supplies, paper products and core shelf-stable groceries. We have also activated distribution systems and routing to ensure optionality in the event of outbreak or restrictions on mobility in certain geographic areas.

Expand technology-enabled shopping. During the third fiscal quarter of 2020, we launched our Click & Go™ program to allow for a contactless way for our members to shop. In June 2020, we offered the Click & Go™ program in all 13 of our markets and substantially all clubs we operate, providing an alternative and convenient way for our members to shop, while reducing physical contact. Our Click & Go™ program enables members to use our e-commerce platform to identify and select merchandise, order and pay online, and then have their orders placed in their cars at their chosen clubs. We continue to work on improving and expanding our online initiatives, in conjunction with optimizing our club operations to allow members to shop safely, quickly and efficiently.

Manage cash and capital resources. Given the uncertainty surrounding the potential impact of the outbreak on our results of operations and cash flows, we are proactively taking steps to secure and preserve available cash. Initially, we suspended most of our capital projects and discretionary spending. As we gained a better understanding of the climate in which we were operating and our resulting performance, we methodically restarted several of our previously postponed investments. We opened our smaller format warehouse club in Liberia, Costa Rica, on June 17, 2020, and we have resumed construction on our third club in the greater metropolitan area of Bogota, the eighth in Colombia, which is expected to open in the second quarter of fiscal 2021. We continue to evaluate when to restart previously announced construction of future warehouse clubs on land that we acquired in Bucaramanga, Colombia and in Jamaica, as well as other capital projects. We also furloughed approximately 80 employees in the United States and implemented temporary salary reductions for employees and executives above a certain income level on a tiered basis increasing from 10% to 30% based on compensation level. Additionally, the Board of Directors waived their cash payment for the calendar quarter ended June 30, 2020. Finally, we have negotiated extended terms with many vendors and have taken advantage of tax deferral arrangements, where available. In the current environment, we believe cash flows from operations, our current cash position and access to capital markets will continue to be sufficient to meet our anticipated operating cash needs, which include any deferred liabilities, funding seasonal buildups in merchandise inventories and funding our capital expenditures, dividend payments and other financing requirements. Refer to Item 2 “Management’s Discussion and Analysis - Liquidity and Capital Resources” for additional information.

We expect continued uncertainty in the economies of our 13 markets with respect to the duration and intensity of the COVID–19 pandemic; the length and impact of stay-at-home orders and other restrictions; volatility in employment trends and consumer confidence; volatility in foreign currency exchange rates and commodity prices; and the fiscal austerity measures taken by governments in our markets, which will likely impact our results in the near future.

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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 within the 13 markets we serve depending on general economic factors, including GDP growth; consumer spending patterns; foreign currency exchange rates; political policies and employment and social conditions; local demographic characteristics (such as population growth); the number of years we have operated in a particular market; and the level of retail and wholesale competition in that market.

Currency fluctuations can be one of the largest variables affecting our overall sales and profitability because many of our markets are susceptible to foreign currency exchange rate volatility. During the first nine months of fiscal year 2020 and fiscal year 2019, approximately 78% of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 49% and 52% were comprised of sales of products we purchased in U.S. dollars during the first nine months of fiscal year 2020 and fiscal year 2019, respectively.

Fluctuation of local currency versus the U.S. dollar can increase or decrease the value of sales and membership income that we generate in that country when translated to U.S. dollars for our consolidated financial results. In cases where a local currency experiences devaluation, we may elect to increase the local currency price of imported merchandise to maintain our target margins, which could impact demand for the merchandise affected by the price increase. We may also modify the mix of imported versus local merchandise and/or the source of imported merchandise to mitigate the impact of currency fluctuations. Information about the effect of local currency devaluations is discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Net Merchandise Sales and Comparable Sales.”

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. Island countries such as Aruba, Barbados and the U.S. Virgin Islands offer us limited upside for sales growth given their overall market size. Countries with smaller upper and middle class consumer populations, such as Honduras, El Salvador, Jamaica and Nicaragua, offer growth potential but may have a more limited market opportunity for sales growth as compared to more developed countries with larger or growing upper and middle class consumer populations.

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

In the past, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This can impede 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 redeploy in our Company, increasing our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. We continued to experience illiquidity in Trinidad during fiscal year 2020. However, as of May 31, 2020, our Trinidad subsidiary was current on its U.S. dollar payables for imported merchandise. We are working with our banks in Trinidad to source tradeable currencies, but until more U.S. dollars become available, this illiquidity condition is likely to continue. As of May 31, 2020, our Trinidad subsidiary had Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars of approximately $72.3 million, an increase of $47.4 million from August 31, 2019 when these same balances were approximately $24.9 million. Illiquidity of the Trinidad dollar could signify that it is overvalued, and the Trinidad government could 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 $14.5 million, with a corresponding decrease in our Stockholders’ Equity recorded in the Accumulated other comprehensive loss caption of our consolidated balance sheet. Separate from the Trinidad dollar denominated cash and investments illiquidity situation described above, as of May 31, 2020, we had a U.S. dollar denominated net monetary asset position of approximately $11.2 million in Trinidad that 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 of revaluing these U.S. dollar net monetary assets would be an approximate $2.2 million gain.

We are carefully monitoring the situation, which may require us to limit future shipments from the U.S. to Trinidad in line with our ability to exchange Trinidad dollars for tradeable currencies to manage our exposure to any potential devaluation.

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Mission and Business Strategy

Our mission is to improve the quality of life for members, their businesses and the communities in which they live and work, while treating our employees well and being supportive of our suppliers. To do this, we make available a wide range of high quality, curated merchandise sourced from around the world at good value. The annual membership fee enables us to operate our business with lower margins than traditional retail stores. Through the use of technology and the development of an omni-channel platform, we are pursuing opportunities to satisfy our members’ shopping expectations, create additional efficiencies in the supply chain and increase our significance in our members’ lives. We strive to establish a relationship with our members that enhances their lives with quality goods and services and offers a shopping experience that blends the excitement and appeal of our brick and mortar business with the convenience 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, membership income and total revenues. However, our investments are intended to increase the value our membership provides to our member. Our investments are geared toward creating greater efficiency, to enable lower prices, better services, enhanced convenience and exciting experiences for our members, which we believe will support sustained growth for the Company. 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 three months ended May 31, 2020 included:

 Total revenues increased 1.4% over the comparable prior year period.  Net merchandise sales increased 1.8% over the comparable prior year period. We ended the quarter with 45 warehouse clubs compared to 42 warehouse clubs at the end of the third quarter of fiscal year 2019. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 2.5% versus the same three-month period in the prior year.  Comparable net merchandise sales (that is, sales in the 41 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 13 weeks ended May 31, 2020 decreased 3.6%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 2.5%.  Membership income increased 3.0% to $13.5 million over the comparable prior-year period primarily driven by new member sign-ups for the four club openings in Panama, Dominican Republic, and Guatemala in calendar year 2020.  Total gross margins (net merchandise sales less associated cost of goods sold) increased 1.9% over the comparable prior year period and total gross margins as a percent of net merchandise club sales were 13.9%, remaining flat over the prior year.  Operating income was $24.0 million, an increase of 9.0%, or $2.0 million, compared to the third quarter of fiscal year 2019.  We recorded a $1.5 million net currency loss from currency transactions in the current quarter compared to a $192,000 net gain in the same period last year.  The effective tax rate for the third quarter of fiscal year 2020 was 38.0%, as compared to the effective tax rate for the third quarter of fiscal year 2019 of 34.7%.  Net income attributable to PriceSmart, Inc. for the third quarter of fiscal year 2020 was $12.7 million, or $0.41 per diluted share, compared to $14.1 million, or $0.46 per diluted share, in the comparable prior year period.

Financial highlights for the nine months ended May 31, 2020 included:

 Total revenues increased 4.0% over the comparable prior year period.  Net merchandise sales increased 4.1% over the comparable prior year period. We ended the quarter with 45 warehouse clubs compared to 42 warehouse clubs at the end of the third quarter of fiscal year 2019. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by 1.5%.  Comparable net merchandise sales (that is, sales in the 41 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 39 weeks ended May 31, 2020 decreased 0.7%. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by 1.4%.  Membership income increased 6.8% to $41.4 million membership over the comparable prior-year period primarily driven by new member sign-ups for the four club openings in Panama, Dominican Republic, and Guatemala in calendar year 2020.

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 Total gross margin (net merchandise sales less associated cost of goods sold) increased 7.7% over the comparable prior year period and total gross margins as a percent of net merchandise club sales were 14.5%, an increase of 50 basis points (0.5%) versus the same period last year.  Operating income was $93.5 million, an increase of 12.4%, or $10.3 million, compared to the first nine months of fiscal year 2019.  We recorded a $2.4 million net currency loss from currency transactions in the current nine-month period compared to a $1.9 million net loss in the same period last year.  The effective tax rate for the first nine months of fiscal year 2020 was 33.9%, as compared to the effective tax rate for the first nine months of fiscal year 2019 of 33.7%.  Net income attributable to PriceSmart, Inc. for the first nine months of fiscal year 2020 was $58.0 million, or $1.90 per diluted share, compared to $52.5 million, or $1.73 per diluted share, in the comparable prior year period.

COMPARISON OF THE THREE AND NINE MONTHS ENDED MAY 31, 2020 AND 2019

The following discussion and analysis compares the results of operations for the three-month and nine-month periods ended on May 31, 2020 with the three-month and nine-month periods ended on May 31, 2019 and should be read in conjunction with the consolidated financial statements and the accompanying notes included elsewhere in this report. Unless otherwise noted, all tables on the following pages present U.S. dollar amounts in thousands. Certain percentages presented are calculated using actual results prior to rounding.

Net Merchandise Sales

The following tables indicate the net merchandise club sales in the segments in which we operate and the percentage growth in net merchandise sales by segment during the three and nine-months ended May 31, 2020 and 2019.

Three Months Ended May 31, 2020 May 31, 2019 Increase/

‎(decrease)

% of net ‎from % of net

Amount ‎sales ‎prior year Change Amount ‎sales Central America $ 442,804 57.6 % $ 5,202 1.2 % $ 437,602 58.0 % Caribbean 246,461 32.1 21,555 9.6 224,906 29.8 Colombia 79,103 10.3 (13,398) (14.5) 92,501 12.2 Net merchandise sales $ 768,368 100.0 % $ 13,359 1.8 % $ 755,009 100.0 %

Nine Months Ended May 31, 2020 May 31, 2019 Increase/

‎(decrease)

% of net ‎from % of net

Amount ‎sales ‎prior year Change Amount ‎sales Central America $ 1,412,007 58.4 % $ 70,860 5.3 % $ 1,341,147 57.7 % Caribbean 735,299 30.4 43,170 6.2 692,129 29.8 Colombia 271,516 11.2 (17,950) (6.2) 289,466 12.5 Net merchandise sales $ 2,418,822 100.0 % $ 96,080 4.1 % $ 2,322,742 100.0 %

Comparison of Three and Nine Months Ended May 31, 2020 and 2019

Overall, total net merchandise sales grew 1.8% for the third quarter and 4.1% for the nine-month period ended May 31, 2020, respectively, when compared to the same periods last year. The third quarter increase resulted from a 21.7% increase in average ticket and a 16.4% decrease in transactions. For the nine-month period, the increase resulted from a 6.4% increase in average ticket and a 2.1% decrease in transactions. Transactions represent the number of visits our members make to our warehouse clubs and average ticket represents the amount our members spend on each visit.

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During the third quarter and the nine-month period, net merchandise sales were positively impacted by increases in average ticket, which were offset by decreases in transactions due to capacity restrictions and other government restrictions as a result of the COVID-19 pandemic. In the third quarter, governments in our markets imposed restrictions of varying degrees on nearly all businesses, including essential businesses such as ours. These governments have mandated various protocols resulting in limitations on the number of people in our clubs, reduced hours of operation, restrictions on or closure of dining and other services areas, and, in some cases, closure of our clubs intermittently or on certain days of the week. These, in combination with consumer trepidation about the spread of COVID-19 and government restrictions limiting times when consumers can leave their homes, have caused reduced traffic in our clubs and led to the significant decline in transactions for the third quarter and nine-month period ended May 31, 2020.

Net merchandise sales in our Central America segment increased 1.2% and 5.3% for the third quarter and the nine-months ended May 31, 2020, respectively, when compared to the same periods last year. These increases had a 70 basis point (0.7%) and 310 basis point (3.1%) positive impact on total net merchandise sales growth, respectively. All markets within this segment, with the exception of Honduras, showed increased net merchandise sales year-on-year. We added two new clubs to the segment when compared to the period ended May 31, 2019. In Panama, we opened our seventh club in October 2019 and in Guatemala, we opened our fourth club in November 2019.

Net merchandise sales in our Caribbean segment grew 9.6% and 6.2% for the third quarter and the nine-months ended May 31, 2020, respectively, when compared to the same periods last year. These increases had a 290 basis point (2.9%) and 190 basis point (1.9%) positive impact on total net merchandise sales growth, respectively. Our Dominican Republic, Trinidad, and Jamaica markets led the way in this segment with 21.4%, 16.4%, and 11.8% growth for the third quarter ended May 31, 2020, and 17.9%, 6.8%, and 11.5% growth for the nine-months ended May 31, 2020, respectively. In the Dominican Republic, we opened our fifth club in June 2019, while in Jamaica and Trinidad, strong comparable sales growth was the primary driver of growth for the third quarter and the nine- months ended May 31, 2020.

Net merchandise sales in our Colombia segment decreased 14.5% and 6.2% for the third quarter and the nine-months ended May 31, 2020, respectively, when compared to the same period last year. These decreases had a 180 basis point (1.8%) and 90 basis point (0.9%) negative impact on total net merchandise sales growth, respectively. The declines for the third quarter and the nine-months ended May 31, 2020, are primarily due to significant unfavorable foreign currency devaluation during the current period and government restrictions in response to the coronavirus outbreak.

In discussing our operating results, the term “currency exchange rates” refers to the currency exchange rates we use to convert the operating results for all countries where the functional currency is not the U.S. dollar into U.S. dollars. We calculate the effect of changes in currency exchange rates as the difference between current period activities translated using the current period's currency exchange rates and the comparable prior year period's currency exchange rates. The disclosure of currency exchange rate fluctuations permits investors to better understand our underlying performance without the effects of currency exchange rate fluctuations.

The following table indicates the impact that currency exchange rates had on our net merchandise sales in dollars and the percentage change from the three and nine-month periods ended May 31, 2020.

Currency exchange rate fluctuations for the three months ended May 31, 2020 Amount % change Central America $ 5,556 1.2 % Caribbean (7,616) (3.4) Colombia (17,260) (18.7) Net merchandise sales $ (19,320) (2.5)%

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Currency exchange rate fluctuations for the nine months ended May 31, 2020 Amount % change Central America $ 15,549 1.1 % Caribbean (17,426) (2.5) Colombia (32,504) (11.2) Net merchandise sales $ (34,381) (1.5)%

Overall, the effects of currency fluctuations within our markets had an approximately $19.3 million and $34.4 million, or 250 basis point (2.5%) and 150 basis point (1.5%), negative impact on net merchandise sales for the quarter and nine-months ended May 31, 2020, respectively.

Currency fluctuations had a $5.6 million and $15.6 million, or 120 basis point (1.2%) and 110 basis point (1.1%), positive impact on net merchandise sales in our Central America segment for the quarter and nine months ended May 31, 2020, respectively. The currency fluctuations contributed approximately 70 basis points (0.7%) and 60 basis points (0.6%) of the total positive impact on total net merchandise sales, respectively. The Costa Rica Colón appreciated significantly against the dollar as compared to the same three and nine-month period a year ago and was a significant factor in the contribution to the favorably of currency exchange rate fluctuations in this segment.

Currency devaluations had a $7.6 million and $17.4 million, or 340 basis point (3.4%) and 250 basis point (2.5%) negative impact on reported net merchandise sales in our Caribbean segment for the quarter and nine months ended May 31, 2020, respectively. The currency devaluations contributed approximately 100 basis points (1.0%) and 80 basis points (0.8%) of the total negative impact on total net merchandise sales for the quarter and nine months ended May 31, 2020, respectively. Our Jamaica and Dominican Republic markets both experienced currency devaluation when compared to the same periods last year.

Currency devaluations had a $17.3 million and $32.5 million, or 1,870 basis point (18.7%) and 1,120 basis point (11.2%), negative impact on net merchandise sales in our Colombia segment for the quarter and nine-months ended May 31, 2020, respectively. The currency devaluations contributed approximately 220 basis points (2.2%) and 130 basis points (1.3%) of the total negative impact on total net merchandise sales, respectively.

Comparable Merchandise Sales

We report comparable net merchandise sales on a “same week” basis with 13 weeks in each quarter beginning on a Monday and ending on a Sunday. The periods are established at the beginning of the fiscal year to provide as close of a match as possible to the calendar month and quarter that is used for financial reporting purposes. This approach equalizes the number of weekend days and weekdays in each period for improved sales comparison, as we experience higher merchandise club sales on the weekends. Each of the warehouse clubs used in the calculations was open for at least 13 ½ calendar months before its results for the current period were compared with its results for the prior period. As a result, sales related to our four warehouse clubs opened during calendar year 2019 will not be used in the calculation of comparable sales until they have been open for at least the 13 ½ months. Therefore, comparable net merchandise sales include only 41 warehouse clubs for the thirteen and thirty-nine week periods ended May 31, 2020.

The following tables indicate the comparable net merchandise sales in the reportable segments in which we operate and the percentage changes in net merchandise sales by segment during the thirteen week and thirty-nine week periods ended May 31, 2020 and June 2, 2019.

Thirteen Weeks Ended May 31, 2020 June 2, 2019 % Increase/(decrease) % Increase/(decrease) in comparable in comparable net merchandise sales net merchandise sales Central America (6.4)% (1.8)% Caribbean 6.4 2.9 Colombia (14.8) (4.5) Consolidated comparable net merchandise sales (3.6)% (0.8)%

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Thirty-Nine Weeks Ended May 31, 2020 June 2, 2019

% Increase/(decrease) % Increase/(decrease) in comparable in comparable net merchandise sales net merchandise sales Central America (1.4)% (2.9)% Caribbean 3.2 1.4 Colombia (6.6) 0.6 Consolidated comparable net merchandise sales (0.7)% (1.3)%

Comparison of Thirteen and Thirty-Nine Week Periods Ended May 31, 2020 and June 2, 2019

Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the thirteen week period ended May 31, 2020 decreased 3.6%. Comparable net merchandise sales for those warehouse clubs that were open for at least 13 ½ months for some or all of the thirty- nine week period ended on May 31, 2020 decreased 0.7%.

Comparable net merchandise sales in our Central America segment decreased 6.4% and 1.4% for the thirteen week and thirty-nine week periods ended May 31, 2020. These decreases contributed approximately 370 basis points (3.7%) and 80 basis points (0.8%) of the decrease in total comparable merchandise sales, respectively.

For the thirteen weeks ended May 31, 2020, decreases in comparable net merchandise sales in Guatemala, Honduras and Panama contributed approximately 540 basis points (5.4%) of the decrease, which was partially offset by a 170 basis point (1.7%) increase in Costa Rica, El Salvador, and Nicaragua. The decreases in Guatemala, Honduras, and Panama are primarily related to periodic club closures and other government-mandated restrictions in response to the coronavirus outbreak, which also include travel restrictions, “shelter in place” advisories, curfews, and social distancing measures. Many of these government policies and restrictions in response to the coronavirus outbreak have resulted in limiting access for our members and impacted our club operations. These include temporary club closures, limits on the number of days during the week and hours per day our clubs can be open, restrictions on segments of the population permitted to shop on particular days, and limits on the number of people that can be in a club. We believe comparable net merchandise sales in the segment were also adversely affected by transfers of sales from existing clubs included in the calculation of comparable net merchandise sales to newly opened clubs not included in the calculation, with two in Panama and one in Guatemala. These decreases were partially offset by significant foreign currency appreciation within our Costa Rica market as well as strong performance in our El Salvador and Nicaragua markets.

For the thirty-nine week period ended May 31, 2020, comparable net merchandise sales experienced a decline of 11.6% in Panama, 5.6% in Guatemala, and 4.0% in Honduras. These declines contributed approximately 250 basis points (2.5%) of the decrease, primarily due to coronavirus restrictions and transfers of sales from existing to newly opened clubs. These declines were offset by a 170 basis point (1.7%) increase in Costa Rica, El Salvador, and Nicaragua due to foreign currency appreciation in Costa Rica and strong performance in El Salvador and Nicaragua.

Comparable net merchandise sales in our Caribbean segment increased 6.4% for the thirteen week period ended May 31, 2020. This increase contributed approximately 190 basis points (1.9%) of positive impact on total comparable net merchandise sales. For the thirty-nine week period ended May 31, 2020, comparable net merchandise sales in our Caribbean segment increased 3.2%, which contributed approximately 90 basis points (0.9%) of positive impact on total comparable net merchandise sales.

For the thirteen and thirty-nine week periods ended May 31, 2020, all markets in our Caribbean segment, with the exception of the U.S. Virgin Islands, Aruba and Barbados, showed strong growth compared to the same period in the prior year. Strong performance in our Trinidad market resulted in 17.0% and 6.6% growth in comparable net merchandise sales and investments we made in our Jamaica market resulted in 12.3% and 11.2% growth in comparable net merchandise sales for the thirteen and thirty-nine week periods ended May 31, 2020. In our U.S. Virgin Islands market, comparable net merchandise sales declined when compared to the same period in the prior year. Hurricanes Irma and Maria had a severe impact on the infrastructure of the islands in the fall of calendar year 2017. From that time until the end the first quarter of fiscal year 2020, the Company benefitted from the difficulty other retailers had in becoming fully operational, but those same retailers have rebuilt, contributing to increased competition in that market.

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Comparable net merchandise sales in our Colombia segment decreased 14.8% and 6.6% for the thirteen and thirty-nine week periods ended May 31, 2020. These decreases contributed approximately 180 basis points (1.8%) and 80 basis points (0.8%) of negative impact on total comparable sales for the respective period. These declines were largely due to the devaluation of the Colombian peso relative to the U.S. dollar and government restrictions imposed in response to the coronavirus outbreak.

The following tables illustrate the impact that changes in foreign currency exchange rates had on our comparable merchandise sales in dollars and the percentage change from the thirteen and thirty-nine week periods ended May 31, 2020.

Currency Exchange Rate Fluctuations for the Thirteen Weeks Ended May 31, 2020 Amount % change Central America $ 5,096 1.2 % Caribbean (6,905) (3.1) Colombia (16,630) (18.3) Consolidated comparable net merchandise sales $ (18,439) (2.5)%

Currency Exchange Rate Fluctuations for the Thirty-Nine Weeks Ended May 31, 2020 Amount % change Central America $ 15,061 1.1 % Caribbean (16,224) (2.4) Colombia (31,866) (11.0) Consolidated comparable net merchandise sales $ (33,029) (1.4)%

Overall, the mix of currency fluctuations within our markets had an approximate $18.4 million and $33.0 million, or 250 basis points (2.5%) and 140 basis points (1.4%), of negative impact on comparable net merchandise sales for the thirteen and thirty-nine week periods ended May 31, 2020.

Currency fluctuations within our Central America segment accounted for approximately 70 basis points (0.7%) and 60 basis points (0.6%) of positive impact in total comparable net merchandise sales for the thirteen and thirty-nine week periods. This is primarily the result of significant appreciation in the Costa Rica Colón against the U.S. dollar during the current periods compared to the same periods a year ago.

Currency devaluations within our Caribbean segment accounted for approximately 90 basis points (0.9%) and 70 basis points (0.7%) of negative impact on total comparable net merchandise sales for the thirteen and thirty-nine week periods, respectively. The Dominican Republic peso and Jamaican dollar devalued against the U.S. dollar when compared to the same periods last year.

Currency devaluations within our Colombia segment accounted for approximately 230 basis points (2.3%) and 130 basis points (1.3%) of negative impact in total comparable net merchandise sales for the thirteen and thirty-nine week periods ended May 31, 2020. This reflects the devaluation of the Colombian peso against the U.S. dollar 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. The table below represents the change in membership income by segment and as a percentage of net merchandise club sales of each segment:

Three Months Ended May 31, May 31, 2020 2019 Membership

Increase (decrease) ‎ income % to

‎from ‎net merchandise

Amount ‎prior year % Change ‎club sales Amount Membership income - Central America $ 8,194 $ 286 3.6 % 1.9 % $ 7,908 Membership income - Caribbean 3,730 255 7.3 1.5 3,475 Membership income - Colombia 1,601 (148) (8.5) 2.0 1,749 Membership income - Total $ 13,525 $ 393 3.0 % 1.8 % $ 13,132

Nine Months Ended May 31, May 31, 2020 2019 Membership

Increase (decrease) ‎income % to

‎ from ‎net merchandise

Amount ‎prior year % Change ‎club sales Amount Membership income - Central America $ 24,938 $ 1,657 7.1 % 1.8 % $ 23,281 Membership income - Caribbean 11,176 941 9.2 1.5 10,235 Membership income - Colombia 5,250 49 0.9 1.9 5,201 Membership income - Total $ 41,364 $ 2,647 6.8 % 1.7 % $ 38,717

Number of accounts - Central America 840,240 (11,773) (1.4)% 852,013 Number of accounts - Caribbean 428,822 4,835 1.1 423,987 Number of accounts - Colombia 313,629 (28,387) (8.3) 342,016 Number of accounts - Total 1,582,691 (35,325) (2.2)% 1,618,016

Comparison of Three and Nine Months Ended May 31, 2020 and 2019

The number of member accounts during the first nine months of fiscal year 2020 was 2.2% lower than the prior year period. Membership income increased 3.0% and 6.8% over the three and nine-month periods ended May 31, 2020, respectively, compared to the prior-year periods.

The growth in membership income during fiscal year 2020 in our Central America segment is primarily the result of the opening of three new warehouse clubs – Santiago de Veraguas and Metropark in Panama and San Cristobal in Guatemala. The launch of Platinum membership in two Central American markets in calendar year 2019 also contributed to the increase in membership income for the quarter and nine-month period.

In our Caribbean market, membership income growth was primarily attributable to the opening of the new Bolivar warehouse club in the Dominican Republic in June 2019. The launch of Platinum membership in three Caribbean markets in calendar year 2019 also contributed to the increase in membership income for the quarter and nine-month period.

In Colombia, we increased the Diamond membership fee from 75,000 (COP) to 90,000 (COP) (including VAT) beginning in April 2019, providing a converted membership price of approximately $24, which has contributed to the increase in membership income for the nine months ended May 31, 2020 compared to the same prior year period. Membership income in

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Colombia declined in the third quarter due to the decline in total Colombia membership accounts for the second consecutive quarter.

We began offering our Platinum membership program in Colombia in June 2020 and we intend to expand our Platinum membership program to additional markets. 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 82.5% and 85.0% for the periods ended May 31, 2020 and May 31, 2019, respectively. We believe the renewal rate decline is driven by the overall decrease in membership accounts of 2.2% over the same period because of a significant decline of in-club traffic in some of our markets due to governmental COVID-19 movement restrictions on their respective general populaces. Historically, membership renewals have primarily been transacted in the club at the time of purchase of merchandise or services when a membership has expired. Since COVID-19 and the notable increase of online traffic due to our new online catalogue and Click & Go™ services, sign-ups and renewals completed online have been increasing.

Other Revenue

Other revenue consists primarily of non-merchandise revenue from freight and handling fees generated from our marketplace and casillero operations; miscellaneous income comprised primarily of revenue from an interest generating portfolio (“IGP”) from our co-branded credit cards; and rental income from operating leases where the Company is the lessor.

Three Months Ended May 31, 2020 May 31, 2019 Decrease from Amount prior year % Change Amount Non-merchandise revenue $ 7,221 $ (1,670) (18.8)% $ 8,891 Miscellaneous income 1,861 (540) (22.5) 2,401 Rental income 635 (207) (24.6) 842 Other revenue $ 9,717 $ (2,417) (19.9)% $ 12,134

Nine Months Ended May 31, 2020 May 31, 2019 Decrease from

Amount ‎prior year % Change Amount Non-merchandise revenue $ 26,167 $ (1,743) (6.2)% $ 27,910 Miscellaneous income 5,089 (2,376) (31.8) 7,465 Rental income 2,136 (334) (13.5) 2,470 Other revenue $ 33,392 $ (4,453) (11.8)% $ 37,845

Comparison of Three and Nine Months Ended May 31, 2020 and 2019

Non-merchandise revenue and rental income for the three-months ended May 31, 2020 decreased primarily from the effects of COVID-19. Non- merchandise revenue decreased because of a decline in customer orders in our casillero and marketplace businesses as consumer purchasing behavior shifted away from discretionary spending to stockpiling and consumption of essential goods. Rental income decreased due to concessions granted to our lessees. Miscellaneous income decreased because of a one-time $666,000 reimbursement from a credit card vendor for underpayment of income earned on our co-branded credit card interest-generating portfolio during the three-months ended May 31, 2019. Non-merchandise revenue and rental income for the nine-months ended May 31, 2020 decreased primarily because of the activity in the third quarter of 2020 as explained above. Miscellaneous income declined primarily from a prior year $2.9 million reimbursement we received during the nine-months ended May 31, 2019 from the underpayment of income earned on our co-branded credit card interest- generating portfolio over several years.

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Results of Operations

Three Months Ended Results of Operations Consolidated May 31, 2020 May 31, 2019 Increase/(Decrease) (Amounts in thousands, except percentages and number of warehouse clubs) Net merchandise sales Net merchandise sales $ 768,368 $ 755,009 $ 13,359 Total gross margin $ 107,110 $ 105,115 $ 1,995 Total gross margin percentage 13.9% 13.9% -%

Revenues Total revenues $ 799,931 $ 788,556 $ 11,375 Percentage change from prior period 1.4 %

Comparable net merchandise sales Total comparable net merchandise sales decrease (3.6)% (0.8)% (2.8)%

Total revenue margin Total revenue margin $ 127,175 $ 126,669 $ 506 Total revenue margin percentage 15.9% 16.1% (0.2)%

Selling, general and administrative Selling, general and administrative $ 103,208 $ 104,672 $ (1,464) Selling, general and administrative percentage of total revenues 12.9 % 13.3 % (0.4)%

Three Months Ended May 31, % of May 31, % of Results of Operations Consolidated 2020 Total Revenue 2019 Total Revenue Operating income- by segment Central America $ 27,606 3.4 % $ 26,314 3.4 % Caribbean 13,547 1.7 10,295 1.3 Colombia 3,487 0.4 3,294 0.4 United States (1,115) (0.1) 1,139 0.1 Reconciling Items (1) (19,558) (2.4) (19,045) (2.4) Operating income - Total $ 23,967 3.0 % $ 21,997 2.8 %

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

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Nine Months Ended Results of Operations Consolidated May 31, 2020 May 31, 2019 Increase (Amounts in thousands, except percentages and number of warehouse clubs) Net merchandise sales Net merchandise sales $ 2,418,822 $ 2,322,742 $ 96,080 Total gross margin $ 351,406 $ 326,147 $ 25,259 Total gross margin percentage 14.5 % 14.0 % 0.5 %

Revenues Total revenues $ 2,518,607 $ 2,422,618 $ 95,989 Percentage change from comparable period 4.0 %

Comparable net merchandise sales Total comparable net merchandise sales decrease (0.7) % (1.3)% 0.6 %

Total revenue margin Total revenue margin $ 414,731 $ 390,693 $ 24,038 Total revenue margin percentage 16.5 % 16.1 % 0.4 %

Selling, general and administrative Selling, general and administrative $ 321,241 $ 307,490 $ 13,751 Selling, general and administrative percentage of total revenues 12.8 % 12.7 % 0.1 %

Nine Months Ended May 31, % of May 31, % of Results of Operations Consolidated 2020 Total Revenue 2019 Total Revenue Operating income- by segment Central America $ 96,972 3.9 % $ 90,681 3.7 % Caribbean 40,436 1.6 37,346 1.5 Colombia 13,411 0.5 10,327 0.4 United States 3,401 0.1 4,565 0.2 Reconciling Items (1) (60,730) (2.4) (59,716) (2.5) Operating income - Total $ 93,490 3.7 % $ 83,203 3.4 %

Warehouse clubs Warehouse clubs at period end 45 42 3 Warehouse club sales square feet at period end 2,232 2,123 109

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

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

Three Months Ended May 31, % of May 31, % of 2020 Total Revenue 2019 Total Revenue Warehouse club and other operations $ 78,431 9.8 % $ 78,231 9.9 % General and administrative 24,408 3.1 24,532 3.1 Pre-opening expenses 257 — 1,647 0.3 Loss on disposal of assets 112 — 262 — Total Selling, General and Administrative $ 103,208 12.9 % $ 104,672 13.3 %

Nine Months Ended May 31, % of May 31, % of 2020 Total Revenue 2019 Total Revenue Warehouse club and other operations $ 241,826 9.6 % $ 228,161 9.4 % General and administrative 77,910 3.1 76,835 3.2 Pre-opening expenses 1,254 0.1 1,759 0.1 Loss on disposal of assets 251 — 735 — Total Selling, general and administrative $ 321,241 12.8 % $ 307,490 12.7 %

Comparison of Three and Nine Months Ended May 31, 2020 and 2019

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 third quarter of fiscal year 2020 as a percentage of total net merchandise sales was 13.9%, the same as the third quarter of fiscal year 2019.

For the nine-month period, consolidated total gross margin as a percentage of total net merchandise sales was 14.5%, 50 basis points (0.5%) higher than the comparable period of fiscal year 2019. This improvement is attributable to more focused merchandising strategies and inventory management. Net merchandise margins increased across all segments with the Central America segment contributing 30 basis points (0.3%) the Caribbean segment contributing 10 basis points (0.1%), and the Colombia segment contributing 10 basis points (0.1%) to the overall increase.

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 decreased 20 basis points (0.2%) for the three-month period presented, which is the result of the lower revenue margins from our casillero and marketplace business in the quarter of 10 basis points (0.1%). The other 10 basis point (0.1%) shortfall was the result of the non-recurring reimbursement payment from one of our credit card vendors in the prior year. Total revenue margin increased 40 basis points (0.4%) for the nine-month period. Total revenue margin during the nine-months ended May 31, 2020 increased by 50 basis points (0.5%) primarily due to improved total gross margins. These total revenue margin improvements were offset by the non-recurring reimbursement payment from one of our credit card vendors in the prior year, which resulted in a 10 basis point (0.1%) decline in total revenue margins.

Selling, general, and administrative expenses consist of warehouse club and other operations, general and administrative expenses, pre-opening expenses, and loss/(gain) on disposal of assets. In total, selling, general and administrative expenses decreased $1.5 million to 12.9% of total revenues compared to 13.3% of total revenues in the third quarter of fiscal year 2019.

Warehouse club and other operations expenses decreased to 9.8% of total revenues compared to 9.9% for the third quarter of fiscal year 2019. This decrease of 10 basis points (0.1%) was primarily attributable to savings in salaries and utilities because of reduced hours at our warehouse clubs resulting from COVID 19-related restrictions and cost-saving initiatives in our Aeropost subsidiary.

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General and administrative expenses remained flat at 3.1% of total revenues for the third quarter of fiscal year 2020 due to employee furloughs and reduced compensation in our U.S. corporate headquarters and distribution centers.

Pre-opening expenses declined 30 basis points (0.3%) in the third quarter ended May 31, 2020 compared to the same prior year period. This is due to club openings occurring in the prior-year period.

Selling, general and administrative expenses increased to 12.8% of total revenues for the nine-month period ended May 31, 2020, compared to 12.7% of total revenues in the same prior year period.

Warehouse club and other operations expenses increased to 9.6% of total revenues compared to 9.4% for the nine-month period ended fiscal year 2019. The increase is due to operating an additional four warehouse clubs compared to the prior year period. These four new clubs have not reached sales maturity as of May 31, 2020, thus increasing operational expenses by 20 basis points (0.2%) as a percentage of total revenues.

General and administrative expenses decreased to 3.1% of total revenues compared to 3.2% of total revenues for the nine-months ended May 31, 2020 when compared to the same prior year period. In the prior nine-months ended May 31, 2019, two non-recurring transactions increased general and administrative expenses. First, was the $3.8 million, or a 20 basis points (0.2%) decrease, recorded in the first quarter of fiscal year 2019 for separation and other related termination benefits for our former Chief Executive Officer and President who resigned in October 2018 by mutual agreement with the Board of Directors. These costs, net of tax, negatively impacted earnings per share for the nine months ended May 31, 2019, by $0.13 per share. An additional decrease of approximately $2.3 million, or 10 basis points (0.10%), was due to the expiration of the amortization of post-combination compensation expense related to the Aeropost business we acquired in March 2018. These decreases were offset by net increases of $8.8 million, or 40 basis points (0.4%), in general and administrative expenses primarily due to additions to headcount to support technology development and implementation and other administrative functions made during the nine-month period ended May 31, 2020.

For the nine-months ended May 31, 2020, pre-opening expenses remained flat, as a percentage of total revenue, compared to the prior-year period.

Operating income in the third quarter of fiscal year 2020 increased to $24.0 million (3.0% of total revenue) compared to $22.0 million (2.8% of total revenue) for the same period last year. This reflects the increase in total revenue margin dollars from net merchandise sales, and lower selling, general and administrative expenses over the comparable prior-year period principally because of the decrease in pre-opening expenses as we had temporarily halted some our previously announced warehouse club projects. These were the primary factors for the overall 20 basis point (0.2%), as percentage of total revenue, increase in operating income.

Operating income for the nine months ended May 31, 2020 increased to $93.5 million (3.7% of total revenue) compared to $83.2 million (3.4% of total revenue) for the same period last year. Higher total gross margins as a percent of total revenue and margin dollars were partially offset by incrementally higher general and administrative expenses and were the primary factors for the overall 30 basis point (0.3%) increase in operating income.

Interest Expense

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.

Three Months Ended

May 31, May 31, 2020 2019 Amount Increase Amount Interest expense on loans $ 2,220 $ 813 $ 1,407 Interest expense related to hedging activity 620 510 110 Less: Capitalized interest (276) 326 (602) Net interest expense $ 2,564 $ 1,649 $ 915

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Nine Months Ended

May 31, May 31, 2020 2019 Amount Increase Amount Interest expense on loans $ 5,265 $ 1,056 $ 4,209 Interest expense related to hedging activity 1,477 1,097 380 Less: Capitalized interest (1,626) 14 (1,640) Net interest expense $ 5,116 $ 2,167 $ 2,949

Comparison of Three and Nine Months Ended May 31, 2020 and 2019

Net interest expense increased for the three and nine-month periods ended May 31, 2020 primarily due to higher average long-term loan balances to fund our capital projects and recent drawdowns on short-term lines of credit as part of our COVID-19 related efforts to secure cash. Interest expense related to hedging activity increased due to an increase in hedging activity as we seek to mitigate our exposure to interest rate risk on our recently executed loan agreements to finance our anticipated warehouse club openings in fiscal year 2021. A decrease in capitalized interest for the three and nine-month periods ended May 31, 2020 is mainly attributable to a temporary halt of some of our construction projects as part of our efforts to preserve our cash on hand.

Other income (expense), net

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

Three Months Ended May 31, May 31, 2020 2019 Decrease from Amount prior year % Change Amount Other income (expense), net $ (1,564) $ (1,723) (1,083.6) % $ 159

Nine Months Ended May 31, May 31, 2020 2019 Increase

‎from

Amount ‎prior year % Change Amount Other expense, net $ (1,826) $ 206 10.1 % $ (2,032)

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

Comparison of Three and Nine Months Ended May 31, 2020 and 2019

For the three and nine months ended May 31, 2020 Other income (expense), net included $1.5 million and $2.4 million of net expense, respectively, associated with foreign currency transactions and the revaluation of monetary assets and liabilities. These 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, net of any exchange reserve movements.

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For the three-month period, the net loss is attributable primarily to losses recorded on the revaluation of our U.S. dollar denominated liabilities in the Dominican Republic as the peso devalued against the U.S. dollar. For the nine months ended May 31, 2020, the primary driver for the net expense was $2.4 million of net expense associated with foreign currency transactions and revaluation of U.S. dollar denominated liabilities in several of our markets. These net expenses were partially offset by a $705,000 gain resulting from the settlement of outstanding claims related to the acquisition of the business that we purchased in March of 2018.

Provision for Income Taxes

Three Months Ended May 31, May 31, 2020 2019 Increase from Amount prior year Amount Provision for income taxes $ 7,744 $ 266 $ 7,478 Effective tax rate 38.0 % 34.7 %

Nine Months Ended May 31, May 31, 2020 2019 Increase

‎ from

Amount ‎prior year Amount Provision for income taxes $ 29,849 $ 3,128 $ 26,721 Effective tax rate 33.9 % 33.7 %

Comparison of Three and Nine Months Ended May 31, 2020 and 2019

For the three months ended May 31, 2020, the effective tax rate was 38.0%. The increase in the effective tax rate versus the prior year was primarily attributable to the following factors:

 A comparably favorable net impact of 6.8% resulting from changes in income tax liabilities for uncertain tax positions;

 The comparably unfavorable impact of 4.4% in the current period from the effect of changes in foreign currency value and related adjustments; and

 A comparably unfavorable net impact of 3.9% in the current period resulting from the loss of benefit of foreign tax credits, which are no longer recoverable as a result of U.S. Tax Reform.

For the nine months ended May 31, 2020, the effective tax rate was 33.9%. The increase in the effective tax rate versus the prior year was primarily attributable to the following factors:

 A comparably favorable impact of 2.2% resulting from changes in income tax liabilities for uncertain tax positions; and

 A comparably unfavorable net impact of 2.6% in the current period resulting from the loss of benefit of foreign tax credits, which are no longer recoverable as a result of U.S. Tax Reform.

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Other Comprehensive Loss

Three Months Ended May 31, May 31, 2020 2019 Decrease from Amount prior year % Change Amount Other comprehensive loss $ (15,446) $ (4,387) (39.7) % $ (11,059)

Nine Months Ended May 31, May 31, 2020 2019 Decrease from Amount prior year % Change Amount Other comprehensive loss $ (23,680) $ (3,728) (18.7) % $ (19,952)

Comparison of Three and Nine Months Ended May 31, 2020 and 2019

Our other comprehensive loss of approximately $15.4 million for the third quarter of fiscal year 2020 resulted primarily from the comprehensive loss of approximately $12.9 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, with additional losses of approximately $2.6 million related to unrealized losses on changes in our derivative obligations. Other comprehensive loss for nine-months ended May 31, 2020, of approximately $23.7 million was primarily the result of the comprehensive loss of $20.0 million from foreign currency translation adjustments and $3.8 million related to unrealized losses on changes in the fair value of our derivative obligations. The Colombian and Dominican Republic pesos foreign currency exchange rate with the U.S. dollar declined significantly during the nine-months ended May 31, 2020 primarily due to COVID-19 related impacts on the economies of those countries.

LIQUIDITY AND CAPITAL RESOURCES

Financial Position and Cash Flow

Our operations have historically supplied us with a significant source of liquidity. Our cash flows provided by operating activities, supplemented with our long-term debt and short-term borrowings, have generally been sufficient to fund our operations while allowing us to invest in activities that support the long-term growth of our operations and to pay dividends on our common stock. We evaluate our funding requirements on a regular basis to cover any shortfall in our ability to generate sufficient cash from operations to meet our capital requirements. We may consider funding alternatives to provide additional liquidity if necessary. There is some uncertainty surrounding the continuing potential impact of the novel coronavirus outbreak (COVID-19) on our results of operations and cash flows. As a result, we are proactively taking steps to increase cash available on-hand, including, but not limited to, drawing funds on our short-term facilities and delaying some strategic capital expenditures. Refer to the Notes to Consolidated Financial Statements – Note 7 – Debt for additional information regarding our drawdown on our short-term facilities and long-term borrowings. We have and plan to continue cost savings measures in the U.S. and in the markets where we operate to improve our cash availability.

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.

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

May 31, August 31, 2020 2019 Amounts held by foreign subsidiaries $ 195,479 $ 98,964 Amounts held domestically 70,545 7,272 Total cash and cash equivalents, including restricted cash $ 266,024 $ 106,236

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

May 31, August 31, 2020 2019 Amounts held by foreign subsidiaries $ 40,042 $ 17,045 Amounts held domestically — — Total short-term investments $ 40,042 $ 17,045

As of May 31, 2020, certificates of deposits with a maturity of over a year held by our foreign subsidiaries and domestically were $1.5 million. There were no certificates of deposits with a maturity of over a year held by our foreign subsidiaries or domestically as of August 31, 2019.

From time to time, we have experienced a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This impedes our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products. Since fiscal year 2017, we have experienced this situation in Trinidad and have been unable to source a sufficient level of tradeable currencies. We are working with our banks in Trinidad to source tradeable currencies. We expect the illiquid market conditions in Trinidad to continue. See Item 2 “Management’s Discussion & Analysis – Factors Affecting Our Business” for our quantitative analysis and discussion.

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

Nine Months Ended May 31, May 31, Increase/ 2020 2019 (Decrease) Net cash provided by operating activities $ 174,130 $ 112,952 $ 61,178 Net cash used in investing activities (113,978) (70,971) (43,007) Net cash provided by (used in) financing activities 101,508 (21,547) 123,055 Effect of exchange rates (1,872) (3,365) 1,493 Net increase in cash and cash equivalents $ 159,788 $ 17,069 $ 142,719

Net cash provided by operating activities totaled $174.1 million and $113.0 million for the nine months ended May 31, 2020 and 2019, respectively. Our cash flow provided by operations is primarily derived from net merchandise sales and membership fees. Cash flows used in operations generally consist of payments to our merchandise vendors, warehouse operating costs (including payroll, employee benefits and utilities), as well as payments for income taxes. The $61.2 million increase in net cash provided by operating activities was primarily due to a net increase of $55.6 million in operating assets and liabilities and a net increase of $5.6 million from changes in non-cash reconciling items. The $55.6 million increase in operating assets and liabilities is primarily due to net working capital improvements of $57.5 million, which resulted from a $68.2 million decrease in merchandise inventories and a $10.7 million decrease in accounts payable over the comparable nine-months ended May 31, 2020 and 2019. The decrease in merchandise inventories is primarily the result of lower replenishment of certain items within our non-food categories in response to changes in consumer preferences toward purchases of more essential goods during the initial stages of the COVID-19 crisis. The $5.6 million change in non-cash reconciling items was primarily due to the increase in net income of $5.5 million over the comparable nine- month period ended May 31, 2020 and 2019.

Net cash used in investing activities totaled $114.0 million and $71.0 million for the nine months ended May 31, 2020 and 2019, respectively. Our cash used in investing activities is primarily for the construction of and improvements to our warehouse clubs and management of our cash investments. The $43.0 million increase in cash used in investing activities is primarily the result of a net $39.6 million increase in short-term and long-term certificate of deposit purchases and fewer settlements compared to the same nine-month period a year-ago. The increase in purchases and fewer settlements is the result of

Table of Contents additional Trinidad dollars we have on-hand and that we have invested into certificates of deposit to generate interest income while we actively work to convert those Trinidad dollars into U.S. dollars as availability allows. Refer to Item 2 “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. We also had $3.3 million of additional construction expenditures made for our future warehouse club openings versus the same nine-month period a year ago.

Net cash provided by financing activities totaled $101.5 million and net cash used in financing activities was $21.5 million for the nine months ended May 31, 2020 and 2019, respectively. Our cash flows provided by or used in financing activities are used primarily to fund our working capital needs and our warehouse club expansions and investments. The $123.1 million increase in cash provided by financing activities is primarily the result of a net increase of proceeds from long-term borrowings of $59.8 million compared to a year ago and a net $61.5 million increase in cash provided by additional short-term borrowings, compared to the same nine-month period a year-ago. We have increased our short-term borrowings to increase available cash on hand to meet current and any future potential operational cash needs as a result of COVID-19.

The following table summarizes the dividends declared and paid during fiscal year 2020 (amounts are per share).

First Payment Second Payment Record Date Date Record Date Date

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

Short-Term Borrowings and Long-Term Debt

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

Derivatives

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

Off-Balance Sheet Arrangements

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

Repurchase of Equity Securities and Reissuance of Treasury Shares

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

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

We have reissued treasury shares as part of our stock-based compensation programs. During the nine months ended May 31, 2020, the Company reissued 174,000 treasury shares.

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Critical Accounting Estimates

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

Income Taxes

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

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

We accrue an amount for our estimate of probable additional income tax liability. In certain cases, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more likely than not to be sustained upon audit by the relevant tax authority. An uncertain income tax position will not be recognized if it has less than 50% likelihood of being sustained. This requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws. When facts and circumstances change, we reassess these probabilities and record any changes in the consolidated financial statements as appropriate. There were no material changes in our uncertain income tax positions as of May 31, 2020 and August 31, 2019.

Tax Receivables

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

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In most countries where the Company operates, there are defined and structured processes to recover VAT receivables via regular refunds or offsets. However, in one country without a clearly defined refund process, the Company is actively engaged with the local government to recover VAT receivables totaling $6.2 million and $5.1 million as of May 31, 2020 and August 31, 2019, respectively. In two other countries, minimum income tax rules require the Company to pay taxes based on a percentage of sales rather than income. As a result, the Company is making income tax payments substantially in excess of those it would expect to pay based on taxable income. The Company had income tax receivables of $9.8 million and $7.8 million and deferred tax assets of $2.8 million and $2.7 million as of May 31, 2020 and August 31, 2019, 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.

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

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

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

Long-lived Assets

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

 the asset's inability to continue to generate income from operations and positive cash flow in future periods;  loss of legal ownership or title to the asset;  significant changes in its strategic business objectives and utilization of the asset(s); and  the impact of significant negative industry or economic trends.

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

Goodwill and Other Indefinite-Lived Intangibles

Goodwill and other indefinite-lived acquired intangible assets are not amortized but are evaluated for impairment annually or whenever events or changes in circumstances indicate that the value of a certain asset may be impaired. Generally, this evaluation begins with a qualitative assessment to determine whether a quantitative impairment test is necessary. If we determine, after performing an assessment based on the qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, or that a fair value of the reporting unit substantially in excess of the carrying amount cannot be assured, then a quantitative impairment test would be performed. The quantitative test for impairment requires management to make judgments relating to future cash flows, growth rates and economic and market conditions. These evaluations are based on determining the fair value of a reporting unit or asset using a valuation method such as discounted cash flow or a relative, market-based approach. Historically, our reporting units and other indefinite-lived acquired intangible assets have generated sufficient returns to recover the cost of goodwill and other indefinite-lived acquired intangible assets. Because of the nature of the factors used in these tests, if different conditions occur in future periods, future operating results could be materially impacted. For approximately $45.3 million of certain acquired indefinite-lived intangible assets, the fair value approximated the carrying value; any deterioration in the fair value may result in an impairment charge.

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Seasonality

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to our operations result primarily from changes in interest rates and changes in currency exchange rates. As part of the adoption of the new leasing standard, we recorded several monetary liabilities on the consolidated balance sheet that are exposed to foreign exchange movements. These monetary liabilities arise from leases denominated in a currency that is not the functional currency of the Company’s local subsidiary. The monetary liability for these leases as of May 31, 2020 was $33.7 million. Due to the mix of foreign currency exchange rate fluctuations during the third quarter of fiscal year 2020, the impact to the interim consolidated statements of income and comprehensive income from these monetary liabilities was immaterial.

The following table discloses the net effect on other expense, net for U.S. dollar-denominated and other foreign-denominated accounts relative to a hypothetical simultaneous currency revaluation based on balances as of May 31, 2020 (in thousands) including the new lease-related monetary liabilities described above:

Losses based on change in U.S. dollar denominated and other Overall weighted foreign denominated cash, cash Losses based on change in U.S. Gains based on change in U.S. negative currency equivalents and restricted cash dollar denominated inter- dollar denominated other movement balances company balances asset/liability balances Net Loss(1) 5% $ (3,279) $ (902) $ 3,675 $ (506) 10% $ (6,557) $ (1,803) $ 7,350 $ (1,010) 20% $ (13,114) $ (3,606) $ 14,699 $ (2,021)

(1) Amounts are before consideration of income taxes.

Information about the financial impact of foreign currency exchange rate fluctuations for the three and nine-month period ended May 31, 2020 is disclosed in Item 2 “Management’s Discussion and Analysis – Other Expense, net”.

Information about the change in the fair value of our hedges and the financial impact thereof for the three and nine-month period ended May 31, 2020 is disclosed in the Notes to Consolidated Financial Statements – Note 8 – Derivative Instruments and Hedging Activities.

Information about the movements in currency exchange rates and the related impact on the translation of the balance sheets of our subsidiaries whose functional currency is not the U.S. dollar for the three and nine-month period ended May 31, 2020 is disclosed in Item 2 “Management’s Discussion and Analysis – Other Comprehensive Loss”.

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ITEM 4. CONTROLS AND PROCEDURES

Limitations on Effectiveness of Controls and Procedures

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

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

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

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

On May 22, 2019, a class action complaint was filed against PriceSmart, Inc., as well as certain former and current officers in the United States District Court for the Southern District of California. On October 7, 2019, the Court granted Public Employees Retirement Association of New Mexico’s (PERA’s) Motion for Appointment as Lead Plaintiff. On January 3, 2020, PERA filed a consolidated class action complaint, which alleges violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The Company intends to vigorously defend itself against any obligations or liability to the plaintiffs with respect to such claims. The Company believes the claims are without merit. During the third quarter of fiscal 2020, the Company filed a Motion to Dismiss the Plaintiff’s Consolidated Amended Complaint and the Plaintiff filed an Opposition to the Motion to Dismiss. During the fourth quarter of fiscal 2020, the Company plans to file a Reply to the Opposition. Oral arguments are scheduled for the first quarter of fiscal 2021.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, the reader should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended August 31, 2019 and the factors discussed in Part II, “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2020. There have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2019 and Part II, “Item 1A. Risk Factors” in the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2020.

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

(a) None.

(b) None.

Upon vesting of restricted stock awarded by the Company to employees, the Company repurchases shares and withholds the amount of the repurchase payment to cover employees’ tax withholding obligations. As set forth in the table below, during the quarter ended May 31, 2020, the Company repurchased 4,210 shares in the indicated months. These were the only repurchases of equity securities made by the Company during the third quarter of fiscal year 2020. The Company does not have a stock repurchase program.

‎Total Number ‎Maximum

‎of Shares ‎Number of

‎Purchased ‎Shares That

‎as Part of ‎May Yet Be

(a) ‎Publicly ‎Purchased

‎Total Number (b) ‎Announced ‎Under the

‎of Shares ‎Average Price ‎Plans or ‎Plans or

Period ‎Purchased ‎Paid Per Share ‎Programs ‎Programs March 1, 2020 - March 31, 2020 3,914 $ 48.17 — N/A April 1, 2020 - April 30, 2020 296 $ 53.70 — N/A May 1, 2020 - May 31, 2020 — $ — — N/A Total 4,210 $ 48.56 — —

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a) Exhibits:

3.1(1) Amended and Restated Certificate of Incorporation of the Company. 3.2(2) Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company. 3.3(3) Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company. 3.4(4) Second Amended and Restated Bylaws of the Company. 10.1(5)* Employment Agreement between the Company and Michael McCleary dated April 1, 2020. 10.2 Promissory Note between PriceSmart clubs (TT) Limited and Citibank, N.A. dated April 17, 2020. 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Identifies management contract or compensatory plan or arrangement.

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

(1) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 1997 filed with the Commission on November 26, 1997. (2) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 29, 2004 filed with the Commission on April 14, 2004. (3) Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended August 31, 2004 filed with the Commission on November 24, 2004. (4) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on July 17, 2015. (5) Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Commission on April 7, 2020.

Table of Contents

SIGNATURES

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

PRICESMART, INC.

Date: July 9, 2020 By: /s/ SHERRY S. BAHRAMBEYGUI Sherry S. Bahrambeygui Chief Executive Officer (Principal Executive Officer)

Date: July 9, 2020 By: /s/ MICHAEL L. MCCLEARY Michael L. McCleary Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

63 EXHIBIT 10.2

PROMISSORY NOTE

U.S.$12,000,000.00 Dated: April 17, 2020

FOR VALUE RECEIVED, the undersigned, PRICESMART CLUBS (TT) LIMITED organized and existing under the laws of Trinidad and Tobago (the “Borrower”) HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of Citibank, N.A. (the “Bank”), acting through its international banking facility, the principal sum of Twelve Million United States Dollars (U.S.$12,000,000.00) as stated in the amortization schedule in Section 1(d) hereof.

The Borrower unconditionally promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, payable on the last day of each Interest Period (as defined below), on the date this loan shall be paid in full, at an interest rate per annum equal at all times during each Interest Period to 5.63488% per annum above the rate of interest per annum determined on the basis of the London interbank offered rate for deposits in U.S. Dollars (“LIBOR”) for a period equal to such Interest Period, as shown on the display page designated as Reuters Screen LIBOR 03 (or any replacement Reuters page which displays that rate, or on the appropriate page of such other information service which publishes that rate from time to time in place of Reuters) at approximately 11:00 a.m. (London time) two Business Days (as defined below) prior to the first day of such Interest Period (the “Screen Rate”) for advances with a tenor equal to the Interest Period and for an amount in U.S. Dollars approximately equal to the unpaid principal of this Note then outstanding and, if that rate is less than zero, LIBOR shall be deemed to be zero; provided that if no Screen Rate has a tenor equal to the Interest Period, then LIBOR shall be the rate which results from interpolating on a linear basis between (a) the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of the loan, and (b) the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of the loan; provided, that in the event that the Borrower fails to provide the Bank with at least three full Business Days' notice of its intent to make the borrowing evidenced by this Note, and in connection with such failure, the Bank incurs any penalties, fees, costs or charges in providing the funds for such borrowing, then the margin above the interest rate charged by the Bank for the first Interest Period of such borrowing shall be increased by the amount of such penalties, fees, costs and charges. If, on or prior the first day of any Interest Period the Bank determines that, by reason of circumstances affecting the London interbank market, “LIBOR” cannot be determined pursuant to the definition thereof, then the Bank shall give notice thereof to the Borrower as soon as practicable and the interest rate to be used in substitution of LIBOR shall be the rate of interest announced publicly by Citibank, N.A. in New York City two business days prior to the first day of such Interest Period. The period between the date hereof and the date of payment in full of the principal amount hereof shall be divided into successive periods, each such period being an “Interest Period”. The initial Interest Period shall begin on the day this Note is dated above on this page and each subsequent Interest Period shall begin on the last day of the immediately preceding Interest Period. The duration of each Interest Period shall be three (3) months, provided, however, that (a) the duration of any Interest Period which begins prior to the maturity hereof and would otherwise end after such maturity shall end on such maturity; (b) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (c) whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month. A “Business Day” means a day on which dealings are carried on in the London interbank market and banks are opened for business in London and not required or authorized to close in New York City and Port of Spain, Trinidad and Tobago. During the continuance of an Event of Default, if notified in writing by the Bank, the Borrower shall pay interest on the unpaid principal amount hereof, and on any amount of interest, fees or other amounts not paid when due, at an interest rate per annum equal at all times to 2% above the rate per annum required to be paid on unpaid principal pursuant to the foregoing, payable on the dates specified for payment of interest above and on demand.

SECTION 1. Payments and Computations

(a) All payments made by the Borrower under this Note shall be made, without deduction, withholding, set off or counterclaim, no later than 11:00 A.M. (New York City time) on the date when due in freely transferable lawful money of the United States of America to the Bank at its address at 388 Greenwich St, New York, NY 10013, U.S.A. ., for the account of the Bank’s Lending Office in same day funds. The Bank’s “Lending Office” means the main office of the Bank in New York, NY, U.S.A., or any other office or affiliate of the Bank hereafter selected and notified to the Borrower from time to time by the Bank.

(b) Computations of interest shall be made by the Bank on the basis of a year of 360 days for the actual number of days elapsed (including the first day but excluding the last day) occurring in the period for which such interest is payable.

(c) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest; provided, however, that if such extension would cause such payment to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. Any amounts of principal repaid hereunder may not be reborrowed.

(d) The Borrower shall repay to the Bank the aggregate principal amount in accordance with the amortization schedule below; provided, however, that the last installment shall be sufficient to repay the outstanding principal in full:

Date Principal Payment Balance 17-Apr-20 $12,000,000.00 16-Jul-20 $ 1,500,000.00 $ 10,500,000.00 14-Oct-20 $ 1,500,000.00 $ 9,000,000.00 12-Jan-21 $ 1,500,000.00 $ 7,500,000.00 12-Apr-21 $ 1,500,000.00 $ 6,000,000.00 11-Jul-21 $ 1,500,000.00 $ 4,500,000.00 9-Oct-21 $ 1,500,000.00 $ 3,000,000.00 7-Jan-22 $ 1,500,000.00 $ 1,500,000.00 7-Apr-22 $ 1,500,000.00 $ -

SECTION 2. Prepayments

(a) The Borrower may, upon at least ten (10) Business Days’ notice to the Bank stating the proposed date, the principal amount of the prepayment and the specific installment from the amortization schedule in Section 1(d) hereof intended to be prepaid, and if such notice is given the Borrower shall, prepay this Note in whole or in part, together with accrued and unpaid interest to the date of such prepayment on the amount prepaid, provided that (x) each partial prepayment shall be in a principal amount not less than U.S.$500,000.00 and (y) the Borrower shall be obligated to reimburse the Bank in respect thereof pursuant to Section 15(c) hereof.

(b) If the Bank shall notify the Borrower that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for the Bank to continue to fund or maintain this Note, upon demand by the Bank the Borrower shall forthwith prepay in full this Note with accrued interest thereon and all other amounts payable by the Borrower hereunder.

SECTION 3. Increased Costs If, due to either (i) the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation, provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in law”, regardless of the date enacted, adopted or issued for purposes of this Section 3; or (ii) the compliance by the Bank with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) -- there shall be any increase in the cost to the Bank of funding or maintaining this Note, then the Borrower shall from time to time, upon demand by the Bank, pay to the Bank additional amounts sufficient to indemnify the Bank against such increased cost. A certificate as to the amount of such increased cost, submitted to the Borrower by the Bank, shall be conclusive and binding for all purposes, absent manifest error.

SECTION 4. Increased Capital

If the Bank determines that compliance with any law or regulation or any guideline or interpretation thereof or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by the Bank or any entity controlling the Bank and that the amount of such capital is increased by or based upon the existence of the Note, then, upon demand by the Bank, the Borrower shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank in the light of such circumstances, to the extent that the Bank reasonably determines such increase in capital to be allocable to the existence of the Note. A certificate as to such amounts, submitted to the Borrower by the Bank, shall be conclusive and binding for all purposes, absent manifest error.

SECTION 5. Taxes

(a) Any and all payments made to the Bank hereunder or under any instrument delivered hereunder shall be made, in accordance with Section 1 or the applicable provisions of such other instrument, free and clear of and without deduction for any and all present and future taxes (including, without limitation, value-added taxes and withholding taxes), levies, imposts, deductions, charges or withholdings and all liabilities with respect thereto, excluding, in the case of the Bank, taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction under the laws of which the Bank is organized or any political subdivision thereof and taxes imposed on its overall net income, and franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction of the Bank's lending office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities hereinafter referred to as “Taxes”). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any other instrument to be delivered hereunder to the Bank, (i) the sum payable shall be increased as may be necessary so that, after making all required deductions (including deductions applicable to additional sums payable under this Section 5), the Bank receives an amount equal to the sum it would have received had no such deductions been made, (ii) the

Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law.

(b) In addition, the Borrower shall pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under any other instrument to be delivered hereunder or from the execution, delivery or registration of, performing under, or otherwise with respect to, this Note or any other instrument to be delivered hereunder (hereinafter referred to as “Other Taxes”).

(c) The Borrower shall indemnify the Bank for and hold it harmless against the full amount of Taxes or Other Taxes (including, without limitation, any taxes of any kind imposed or asserted by any jurisdiction on amounts payable under this Section 5) imposed on or paid by the Bank or any affiliate of the Bank in respect of any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date the Bank makes written demand therefor.

(d) Within 30 days after the date of any payment of Taxes, the Borrower shall furnish to the Bank, at its address referred to in Section 13, the original or a certified copy of a receipt evidencing such payment. In the case of any payment hereunder or under any other documents to be delivered hereunder by or on behalf of the Borrower, if the Borrower determines that no Taxes are payable in respect thereof, the Borrower shall, at the Bank’s request, furnish, or cause the pay or to furnish, to the Bank, an opinion of counsel acceptable to the Bank stating that such payment is exempt from Taxes.

SECTION 6. Use of Proceeds

The proceeds of this Note shall be used solely to finance trade activities of the Borrower in Trinidad and Tobago which activities, and all documentation relating to such activities and trade transactions, are valid and fully enforceable in Trinidad and Tobago, and not to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. The Borrower acting as documentation collection agent is in charge of managing the documentation related to the above activities and transactions. The Borrower undertakes to submit said documentation to the Bank at the Bank’s request. The Borrower hereby acknowledges and understands that it is the policy of the Federal Reserve that extensions of credit by international banking facilities, such as the loan to be made under this Note, may be used only to finance the non-U.S. operations of a customer (or its foreign affiliates) located outside the U.S. and therefore the Obligor acknowledges and understands that the proceeds of its borrowings from the Bank under this Note will be used solely to finance its operations outside the U.S. or that of its foreign affiliates.

None of (A) the Borrower or any of its subsidiaries, or any of their respective directors, officers, or employees, or (B) its affiliates or agents or those of any of its subsidiaries will directly or indirectly use any part of any proceeds of this Note, or lend, contribute, or otherwise make available such proceeds to any person or entity (x) to fund or facilitate any activities or business of or with any person or entity that, at the time of such funding or facilitation, is the subject or the target of Sanctions, (y) to fund or facilitate any activities or business of or in any Sanctioned Country or any activities or business of the government of such Sanctioned Country or (z) in any other manner that will result in a violation by any person or entity of Sanctions1. No direct or indirect use of any part of any proceeds of this Note will result in a violation of Anti-Corruption Laws or Sanctions by the Bank or the Borrower;

For purposes of this Note, “Anti-Corruption Laws” means the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act of 2010, and all other Applicable Law concerning or relating to bribery, money laundering or corruption; “Sanctioned Country” means, at any time, a country or territory, which is the subject or target of any comprehensive territorial Sanctions; “Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, Her Majesty’s Treasury of the United ______

1 Citi OFAC team must approve any limitation, qualification or exception to this representation.

Kingdom, the European Union or any EU member state, the United Nations Security Council, or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country, or (c) otherwise the subject of any Sanctions, including any Person controlled or owned, directly or indirectly, by (individually or in the aggregate) or acting on behalf of any such Person or Persons described in the foregoing clauses (a) or (b); and “Sanctions” means economic or financial sanctions, requirements, or trade embargoes imposed, administered, or enforced from time to time by (a) the U.S. government, including without limitation, those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury and the U.S. Department of State, (b) Her Majesty’s Treasury of the United Kingdom, (c) the European Union or any European Union member state, (d) the United Nations Security Council, or (e) any other relevant sanctions authority.

SECTION 7. Representations and Warranties

The Borrower represents and warrants as follows:

(a) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of Trinidad and Tobago and has all requisite corporate power and authority (including, without limitation, all governmental licenses, permits and other approvals) to own, lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted.

(b) The execution, delivery and performance by the Borrower of this Note are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, will not violate, or result in a violation by the Bank or any other Person, of any law, rule or regulation (including, without limitation, Sanctions (as defined below), export controls imposed, administered or enforced by the United States, the European Union, any member state of the European Union, the United Kingdom, the United Nations or other relevant governmental authority, foreign exchange control regulations, anti- boycott rules, and other trade-related regulations), will not contravene its statutes or other constitutive documents, will not contravene, or constitute (with notice or lapse of time or both) a default under, or result in a breach of, any provision of any indenture, agreement, mortgage, contract or other instrument binding on or affecting it or any of its property, and will not result in the creation or imposition of any encumbrance of any nature whatsoever upon any of its property, and do not contravene (i) the Borrower’s charter and bylaws or equivalent or comparable constitutive documents or (ii) any law or contractual restriction binding on or affecting the Borrower.

(c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority, regulatory body or any other third party is required for the due execution, delivery and performance by the Borrower of this Note.

(d) This Note has been duly executed and delivered by the Borrower. This Note is the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms.

(e) The Consolidated balance sheet of the Borrower and its Subsidiaries as at August 31st , 2019, and the related Consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, accompanied by an opinion of Ernst & Young, independent public accountants, and the Consolidated balance sheet of the Borrower and its Subsidiaries as at August 31st , 2019, and the related Consolidated statements of income and cash flows of the Borrower and its Subsidiaries for the six months then ended, duly certified by the chief financial officer of the Borrower, copies of which have been furnished to the Bank, fairly present, subject, in the case of said balance sheet as at February 29th, 2020, and said statements of income and cash flows for the six months then ended, to year end audit adjustments, the Consolidated financial condition of the Borrower and its Subsidiaries as at such dates and the Consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, all in accordance with IFRS. Since February 29th , 2020, there has been no Material Adverse Change.

(f) There is no pending or threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that (i) could be reasonably likely to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of this Note or the consummation of the transactions contemplated hereby.

(g) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the U.S. Federal Reserve System), and no proceeds of the loan evidenced by this Note will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.

(h) Each of the Borrower and each of its Subsidiaries has filed, has caused to be filed or has been included in all tax returns (national, departmental, local, municipal and foreign) required to be filed and has paid all taxes, assessments, fees and other charges (including interest and penalties) due with respect to the years covered by such returns.

(i) Each of the Borrower and each of its Subsidiaries is in compliance with all applicable laws, ordinances, rules, regulations and requirements of all governmental authorities (including, without limitation, all governmental licenses, certificates, permits, franchises and other governmental authorizations and approvals necessary to the ownership of its properties or to the conduct of its business, Environmental Laws, and laws with respect to social security and pension fund obligations), in each case except to the extent that failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

(j) No income, stamp or other taxes (other than taxes on, or measured by, net income or net profits) or levies, imposts, deductions, charges, compulsory loans or withholdings whatsoever are or will be, under applicable law in Trinidad and Tobago, imposed, assessed, levied or collected by Trinidad and Tobago or any political subdivision or taxing authority thereof or therein either (i) on or by virtue of the execution or delivery of this Note or (ii) on any payment to be made by the Borrower pursuant to this Note.

(k) None of the Borrower or any of its Subsidiaries nor any of their respective properties has any immunity from jurisdiction of any court or from set-off or any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) under the laws of Trinidad and Tobago.

(l) The Borrower’s obligations under this Note constitute direct, unconditional, unsubordinated and unsecured obligations of the Borrower and do rank and will rank pari passu in priority of payment and in all other respects with all other unsecured indebtedness of the Borrower.

(m) This Note is in proper legal form under the law of Trinidad and Tobago for the enforcement thereof against the Borrower under the law of Trinidad and Tobago; and to ensure the legality, validity, enforceability or admissibility in evidence of this Note in Trinidad and Tobago, it is not necessary that this Note or any other document be filed or recorded with any court or other authority in Trinidad and Tobago or that any stamp or similar tax be paid on or in respect of this Note.

(n) The Borrower, a nonbank entity located outside the United States of America, understands that it is the policy of the Board of Governors of the U.S. Federal Reserve System that extensions of credit by international banking facilities (as defined in Section 204.8(a) of Regulation D of the Board of Governors of the U.S. Federal Reserve System as in effect from time to time (“Regulation D”)) may be used only to finance the non-U.S. operations of a customer (or its foreign affiliates) located outside the United States of America as provided in Section 204.8(a)(3)(vi) of Regulation D. Therefore, the Borrower acknowledges that the proceeds of its borrowing from the International

Banking Facility of the Bank will be used solely to finance the Borrower’s operations outside the United States of America or that of the Borrower’s foreign affiliates.

(o) Neither the Borrower nor any of its Subsidiaries is an “investment company”, or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company”, as such terms are defined in the Investment Company Act of 1940, as amended.

(p) No information, exhibit or report furnished by or on behalf of the Borrower to the Bank in connection with the negotiation of this Note or pursuant to the terms of this Note contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein not misleading.

(q) The Borrower is Solvent.

(r) Borrower, and to the best of its knowledge and belief, each of its respective Affiliates, subsidiaries, directors and officers, (i) is not a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) is not a Person who engages in any dealings or transactions prohibited by Section 2 of such executive order, or, to Borrower’s knowledge, is otherwise associated with any such Person in any manner violative of Section 2 of such executive order or any other applicable law, rule, regulation or order of any governmental authority, (iii) is not a Person on the list of countries, territories, individuals and/or entities prohibited pursuant to any law, regulation, or executive order administered by OFAC, including the List of Specially Designated Nationals and Blocked Persons administered by OFAC, (iv) is not a Person who is otherwise a target of the economic sanctions, laws, regulations, embargoes or restrictive measures administered or enforced by the United States government, including, without limitation, OFAC and the United States Department of State, (v) if an entity, is not a prohibited “shell bank” as defined in Section 313 of the USA Patriot Act of 2001, 31 U.S.C. and does not provide services to any shell bank and (vi) has operated under policies, procedures and practices, if any, that are in compliance with the Patriot Act and available to the Bank for the Bank’s review and inspection during normal business hours and upon reasonable prior notice. Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by the Borrower and its subsidiaries, and its and their respective directors, officers, employees, affiliates and agents with Anti-Corruption Laws and applicable Sanctions, and the Borrower and its subsidiaries, directors, officers and employees and to the knowledge of the Borrower, its affiliates and agents are in compliance with Anti-Corruption Laws and applicable Sanctions.

(s) Neither Borrower, nor to the knowledge of Borrower, any agent or other person acting on behalf of Borrower, has (i) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by Borrower (or made by any person acting on its behalf of which Borrower is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act.

(t) The Borrower understands that it is the policy of the Federal Reserve that extensions of credit by international banking facilities may be used only to finance the non-U.S. operations of a customer (or its foreign affiliates) located outside the U.S. and therefore the Borrower acknowledges that the proceeds of its borrowings from the Bank under this Note will be used solely to finance its operations outside the U.S. or that of its foreign affiliates.

(u) No Guarantor Event of Default (as defined in the Guaranty) or Guarantor Default (as defined in the Guaranty) has occurred and is continuing.

SECTION 8. Affirmative Covenants

So long as the loan evidenced by this Note shall remain unpaid, the Borrower will:

(a) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries to comply, in all material respects, with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, compliance with Environmental Laws.

(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, might by law become a Lien upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such tax, assessment, charge or claim that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained, unless and until any Lien resulting therefrom attaches to its property and becomes enforceable against its other creditors.

(c) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is customarily carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates.

(d) Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory), permits, approvals, licenses, privileges and franchises; provided, however, that the Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 9(c) and provided further that neither the Borrower nor any of its Subsidiaries shall be required to preserve any right or franchise if the Board of Directors (or equivalent or comparable organizational body) of the Borrower or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Borrower or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to the Borrower, such Subsidiary or the Bank.

(e) Visitation Rights. At any reasonable time and from time to time, permit the Bank or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries.

(f) Keeping of Books. Keep, and cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in accordance with IFRS.

(g) Maintenance of Properties, Etc. Maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are used or useful in the conduct of its business in good working order and condition, ordinary wear and tear excepted.

(h) Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under this Note with any of their Affiliates on terms that are fair and reasonable and no less favorable to the Borrower or such Subsidiary than it would obtain in a comparable arm’s- length transaction with a Person who is not an Affiliate.

(i) Reporting Requirements. Furnish to the Bank:

(i) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such quarter and Consolidated and

consolidating statements of income and cash flows of the Borrower and its Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, duly certified (subject to year-end audit adjustments) by the chief financial officer of the Borrower as having been prepared in accordance with IFRS and certificates of the chief financial officer of the Borrower as to compliance with the terms of this Note, provided that in the event of any change in accounting principles used in the preparation of such financial statements, the Borrower shall also provide a statement of reconciliation conforming such financial statements to IFRS;

(ii) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the annual audit report for such year for the Borrower and its Subsidiaries, containing Consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal year and Consolidated and consolidating statements of income and cash flows of the Borrower and its Subsidiaries for such fiscal year, in each case accompanied by an opinion acceptable to the Bank by Ernst & Young or other independent public accountants reasonably acceptable to the Bank, provided that in the event of any change in accounting principles used in the preparation of such financial statements, the Borrower shall also provide a statement of reconciliation conforming such financial statements to IFRS;

(iii) as soon as available and in any event no later than 90 days after the end of each fiscal year of the Borrower, forecasts prepared by management of the Borrower, in form satisfactory to the Bank, of balance sheets, income statements and cash flow statements on a monthly basis for the fiscal year following such fiscal year then ended and on an annual basis for each fiscal year thereafter until the maturity date of this loan;

(iv) as soon as possible and in any event within five days after the occurrence of each Default continuing on the date of such statement, a statement of the chief financial officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto;

(v) promptly after the sending or filing thereof, copies of all reports that the Borrower sends to any of its security holders, and copies of all reports and registration statements that the Borrower or any Subsidiary files with the U.S. Securities and Exchange Commission or any national securities exchange in Trinidad and Tobago, the United States or any other securities exchange or regulator, if any;

(vi) promptly after the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 7(f); and

(vii) such other information respecting the Borrower or any of its Subsidiaries as the Bank may from time to time reasonably request.

SECTION 9. Negative Covenants

So long as the loan evidenced by this Note shall remain unpaid, the Borrower will not:

(a) Liens, Etc. Create or suffer to exist, or permit any of its Subsidiaries to create or suffer to exist, any Lien on or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any right to receive income, without the prior consent of the Bank, which consent shall not be unreasonably withheld other than:

(i) Permitted Liens,

(ii) purchase money Liens upon or in any real property or equipment acquired or held by the Borrower or any Subsidiary in the ordinary course of business to secure the purchase price of such property or equipment or to secure Debt incurred solely for the purpose of financing the acquisition of such property or equipment, or Liens existing on such property or equipment at the time of its acquisition (other than any such Liens created in contemplation of such acquisition that were not incurred to finance the acquisition of such property) or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided, however, that no such Lien shall extend to or cover any properties of any character other than the real property or equipment being acquired, and no such extension, renewal or replacement shall extend to or cover any properties not theretofore subject to the Lien being extended, renewed or replaced, provided further that the aggregate principal amount of the indebtedness secured by the Liens referred to in this clause (ii) shall not exceed the amount specified therefor in Section 9(b)(iii)(B) at any time outstanding,

(iii) the Liens existing on the date of this Note,

(iv) other Liens securing Debt in an aggregate principal amount not to exceed U.S. $500,000.00 (or its equivalent in other currencies) at any time outstanding, and

(v) the replacement, extension or renewal of any Lien permitted by clause (iii) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Debt secured thereby.

(b) Mergers, Etc. Merge or consolidate with or into any Person, or permit any of its Subsidiaries to do so, except that any Subsidiary of the Borrower may merge or consolidate with or into any other Subsidiary of the Borrower, and except that any Subsidiary of the Borrower may merge into the Borrower, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom.

(c) Accounting Changes. Make or permit, or permit any of its Subsidiaries to make or permit, any change in accounting policies or reporting practices, except as required by IFRS.

(d) Change in Nature of Business. Make, or permit any of its Subsidiaries to make, any material change in the nature of its business as carried on at the date hereof.

(e) Amendment of Constitutive Documents. Amend its charter and bylaws or equivalent or comparable constitutive documents in any respect which would reasonably be expected to have a Material Adverse Effect.

SECTION 10. [INTENTIONALLY OMITTED]

SECTION 11. Events of Default.

If any of the following events (“Events of Default”) occurs and is continuing:

(a) The Borrower fails to pay any principal of this Note when due; or fails to pay any interest or other amount payable hereunder when due; or

(b) Any representation or warranty made by the Borrower (or any of its officers) under or in connection with this Note proves to have been incorrect in any material respect when made; or

(c) The Borrower fails to perform or observe any term, covenant or agreement contained in this Note on its part to be performed or observed if such failure remains unremedied for 5 days after written notice thereof has been given to the Borrower by the Bank; or

(d) The Borrower or any of its Subsidiaries fails to pay any principal of or premium or interest on any Debt that is outstanding in a principal or notional amount of at least U.S. $1,000,000.00 (or its equivalent in other currencies) in the aggregate (but excluding Debt outstanding hereunder) of the Borrower or such Subsidiary (as the case may be), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; or

(e) The Borrower or any of its Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower, any of its Subsidiaries or the Guarantor seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property; or the Borrower or any of its Subsidiaries or the Guarantor shall take any corporate action to authorize any of the actions set forth above in this subsection (e); or

(f) Any final non-appealable judgment or order for the payment of money in excess of U.S. $1,000,000.00 (or its equivalent in other currencies) is rendered against the Borrower or any of its Subsidiaries and either (i) enforcement proceedings are commenced by any creditor upon such judgment or order or (ii) there is a period of 30 or more consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in effect; or

(g) Any final non-appealable non-monetary judgment or order is rendered against the Borrower or any of its Subsidiaries that could be reasonably expected to have a Material Adverse Effect, and there is any period of 30 or more consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(h) The obligations of the Borrower under this Note fails to rank at least pari passu with all other unsecured Debt of the Borrower; or

(i) Any provision of this Note or the Guaranty ceases to be valid and binding on or enforceable against the Borrower or the Guarantor, or the Borrower or the Guarantor shall so assert or state in writing, or the obligations of the Borrower under this Note or of the Guarantor under the Guaranty in any way become illegal; or

(j) Either (i) any authority asserting or exercising governmental or police powers in Trinidad and Tobago takes any action, including a general moratorium, canceling, suspending or deferring the

obligation of the Borrower to pay any amount of principal or interest payable under this Note or preventing or hindering the fulfillment by the Borrower of its obligations under this Note or having any effect on the currency in which the Borrower may pay its obligations under this Note or on the availability of foreign currencies in exchange for Trinidad and Tobago dollars (TT Dollars) (including any requirement for the approval to exchange foreign currencies for TT Dollars) or otherwise or (ii) the Borrower voluntarily or involuntarily, participates or takes any action to participate in any facility or exercise involving the rescheduling of the Borrower’s debts or the restructuring of the currency in which the Borrower may pay its obligations; or

(k) Any authority asserting or exercising governmental or police powers in Trinidad and Tobago or any person acting or purporting to act under such authority takes any action to condemn, seize or appropriate, or to assume custody or control of, all or any material portion of the property of the Borrower. Whether such action from an authority in Trinidad and Tobago is material will be determined at the sole and reasonable discretion of the Bank; or

(l) Pricesmart Inc., a Delaware corporation, ceases to beneficially own at least One Hundred percent (100%) of the outstanding Voting Stock of the Borrower, or the persons who are directors of the Board of Directors of Pricesmart, Inc. on the date hereof cease to occupy a majority of the seats of the Board of Directors or

(m) A Material Adverse Change shall have occurred and be continuing; or

(n) A Guarantor Event of Default (as defined in the Guaranty) has occurred and is continuing, then, and in any such event, the Bank may, by notice to the Borrower, declare this Note, all principal amounts evidenced thereby, all interest thereon and all other amounts payable under this Note to be forthwith due and payable, whereupon this Note, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower or the Guarantor under clause (e) above, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.

SECTION 12. Amendments, etc

No amendment or waiver of any provision of this Note, nor consent to any departure by the Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 13. Notices, etc

All notices and other communications provided for hereunder shall be in writing and mailed (by international courier), telecopied, telegraphed, telexed, cabled or delivered, if to the Borrower, at its address at Pricesmart Clubs (TT) Limited, Endeavour and Narsaloo Road, Chaguanas, Trinidad and Tobago, Attention: Salisha Sieupersad with a copy to the Borrower at 9740 Scranton Road, San Diego, CA 92121, U.S.A., Attention: Atul Patel; and if to the Bank, at its address at 399 Park Avenue, New York, NY 10043, U.S.A., Attention: Department Group with a copy to the Bank at 12 Queen’s Park East, Port of Spain, Trinidad and Tobago, Attention: Nicholas Mc Intyre; or, as to each party, at such other address as shall be designated by such party in a written notice to the other party. All such notices and communications shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective when deposited in the mails, telecopied, delivered to the telegraph company, confirmed by telex answerback or delivered to the cable company, respectively.

SECTION 14. No Waiver; Remedies

No failure on the part of the Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 15. Costs and Expenses

(a) The Borrower agrees to pay on demand all reasonable and documented losses, costs and expenses, if any (including reasonable and documented counsel fees and expenses), in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiation, legal proceedings or otherwise) of this Note and the Guaranty including, without limitation, reasonable and documented losses, costs and expenses sustained by the Bank as a result of a default hereunder.

(b) The Borrower agrees to indemnify and hold harmless the Bank and each of its Affiliates and their officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith) this Note, or the actual or proposed use of the proceeds thereof, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this subsection (b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, equityholders or creditors or an Indemnified Party or any other person, whether or not any Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. The Borrower also agrees not to assert any claim for special, indirect, consequential or punitive damages against the Bank, any of its Affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability arising out of or otherwise relating to this Note, any of the transactions contemplated herein or the actual or proposed use of the proceeds of this Note.

(c) (i) If the Borrower makes any payment of principal under this Note or pursuant to Sections 2, 3 or 4 or acceleration of the maturity of the Note pursuant to Section 11 or for any other reason other than on the installment dates as set forth in Section 1(d) or the maturity date hereof or on the last day of an Interest Period, or (ii) if the Borrower fails to make a payment or prepayment of this Note for which a notice of prepayment has been given or that is otherwise required to be made, or (iii) if by making any prepayments per Section 2(a) the Bank may incur in any loss, cost or expense, including any amounts due to the Bank as a result of the unwinding or termination of any hedges, the Borrower shall, upon demand, pay the Bank any resulting loss, cost or expense incurred by it, including (without limitation), any loss (including loss of anticipated profits), cost or expense incurred in obtaining, liquidating or reemploying deposits or other funds acquired by the Bank to maintain this Note.

(d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Sections 3, 4, 5, 15, 17, 22, 23 and 24 shall survive the payment in full of the principal, interest and all other amounts payable hereunder.

SECTION 16. Right of Set-off

(a) Upon the occurrence and during the continuance of any Event of Default, the Bank and any of its Affiliates are hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final), at any time held and other indebtedness at any time owing by the Bank or any of its Affiliates to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Note, irrespective of whether or not the Bank shall have made any demand under this Note and although such obligations may be unmatured. The Bank agrees to notify the Borrower promptly after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Bank and its Affiliates under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that the Bank and its Affiliates may have.

(b) The Borrower hereby authorizes the Bank and any of its Affiliates, if and to the extent payment is not made when due hereunder after the expiration of any grace periods, to charge from time to time against any or all of the Borrower’s accounts with the Bank or any of its Affiliates for any amount so due even if such charge causes any such accounts to be overdrawn. So long as any amount under this Note shall remain unpaid, the Borrower shall, unless the Bank otherwise consents in writing, maintain its account number 0107793003, 0107793011 and 0107793054 with Citibank Trinidad and Tobago. The Bank is hereby authorized to deliver a copy of this Note to any of its Affiliates for the purposes described in this Section 16.

(c) The currency equivalent of the amount of any deposit or indebtedness that shall be set-off and applied against any and all obligations of the Borrower hereunder or that may be charged against any or all of the Borrower’s accounts with the Bank or any of its Affiliates shall be that which, in accordance with normal banking procedures, will be necessary to purchase with such other currency, in New York City, NY, U.S.A., the amount of United States Dollars that the Borrower has so failed to pay when due.

SECTION 17. Judgment

(a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder in United States Dollars into another currency, the Borrower and the Bank agree, to the fullest extent permitted by law, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Bank could purchase United States Dollars with such other currency in New York City on the Business Day preceding that on which final, non-appealable judgment is given.

(b) The obligation of the Borrower in respect of any sum due from it to the Bank hereunder shall, notwithstanding any judgment in a currency other than United States Dollars, be discharged only to the extent that on the Business Day following receipt by the Bank of any sum adjudged to be due hereunder in such other currency, the Bank may in accordance with normal banking procedures, purchase United States Dollars with such other currency. If the amount of United States Dollars so purchased is less than the sum originally due to the Bank in United States Dollars, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Bank against such loss, and if the United States Dollars so purchased exceed the sum originally due to the Bank in United States Dollars, the Bank agrees to remit to the Borrower such excess.

SECTION 18. Pronouns

If appropriate, each neuter pronoun shall be read as a masculine or feminine pronoun and each singular pronoun as a plural pronoun.

SECTION 19. Completion of Instrument

The Borrower hereby irrevocably authorizes the Bank, if this Note is delivered to the Bank undated, to complete the appropriate blank at the head of this Note with a date that is earlier of the date this Note is delivered to the Bank and the date any obligation intended to be evidenced hereby is first created, or, if it is delivered with elements essential to its being an instrument not completed, to make whatever appropriate insertions are necessary to make this Note an instrument.

SECTION 20. Certain Waivers

The Borrower hereby waives presentment for payment, demand, notice of dishonor and protest of this Note.

SECTION 21. Binding Effect

The Borrower shall not assign or transfer any right or obligation under this Note without the prior written consent of the Bank. This Note shall be binding upon and inure to the benefit of the Borrower and the Bank and their respective successors and assigns. The Bank may assign to any third party all or any part of, or any interest in, the Bank’s rights and benefits hereunder and to the extent of such assignment such assignee shall have the same rights and benefits against the Borrower as it would have had if it were the Bank hereunder.

SECTION 22. Governing Law

This Note and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Note and the transactions contemplated hereby shall be governed by and construed in accordance with the laws of the State of New York, United States of America.

SECTION 23. Consent to Jurisdiction; Waiver of Immunities

(a) This Note shall be deemed to have been made in New York County, New York. The Borrower hereby irrevocably (i) submits, for itself and its property, to the non-exclusive jurisdiction of any New York State or Federal court sitting in [New York County, New York] [New York City] and any appellate court from any thereof, with respect to matters arising out of or relating to this Note, (ii) unconditionally agrees that all claims in respect of such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court and (iii) waives, to the fullest extent it may effectively do so, any objection that it may now or hereafter have to the laying of venue of any such action or proceeding and the defense of inconvenient forum to the maintenance of any such action or proceeding. The Obligor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. The Obligor further agrees not to commence or prosecute any action or proceeding against the Bank or its property in connection with this Note in any court or tribunal other than the above-mentioned courts. . The Borrower hereby irrevocably appoints CT Corporation System (the “Process Agent”), with an office on the date hereof at 111 Eighth Avenue, New York, NY 10011, U.S.A., as its agent to receive on behalf of the Borrower and its property, service of copies of the summons and complaint and any other process which may be served in any such action or proceeding. Such service may be made by mailing or delivering a copy of such process to the Borrower in care of the Process Agent at the Process Agent’s above address, and the Borrower hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. As an alternative method of service, the Borrower also irrevocably consents to the service of any and all process in any such action or proceeding by the mailing of copies of such process to the Borrower at its address as set forth in Section 13 above. The Obligor hereby expressly consents and authorizes the Bank to (i) pay the Process Agent’s fees if the Bank elects to do so on behalf of such Obligor, (ii) deliver to the Process Agent on behalf of such Obligor any information pertinent to the appointment (and this Note shall irrevocably constitute an appointment by the Process Agent pursuant to this paragraph upon which the Process Agent may rely), and (iii) receive a copy of the corresponding acceptance letter to be issued by the Process Agent. The Obligor agrees that nothing

in this Note shall affect the Bank's right to serve legal process in any other manner permitted by law or to commence any action or proceedings or otherwise proceed against any Obligor or its property in any other jurisdiction, including, without limitation, the courts sitting in the Local Country. The Obligor agrees that final judgment against it in any action or proceeding shall be enforceable in any other jurisdiction within or outside the United States by suit on the judgment, a certified copy of which shall be conclusive evidence of the judgment.

(b) Nothing in this Section 23 shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the Bank to bring any action or proceeding against the Borrower or its property in the courts of any other jurisdiction.

(c) To the extent that the Borrower has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Borrower hereby irrevocably waives such immunity in respect of its obligations under this Note, and, without limiting the generality of the foregoing, agrees that the waivers set forth in this subsection (d) shall have the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United States are intended to be irrevocable for purposes of such Act.

SECTION 24. Confidentiality

The Bank agrees to hold all Confidential Information obtained pursuant to the provisions of this Note in accordance with its customary procedure for handling such information of this nature and in accordance with safe and sound banking practices, provided, that nothing herein shall prevent the Bank from disclosing and/or transferring such Confidential Information (i) upon the order of any court or administrative agency or otherwise to the extent required by statute, rule, regulation or judicial process, (ii) to bank examiners or upon the request or demand of any other regulatory agency or authority, (iii) which had been publicly disclosed other than as a result of a disclosure by the Bank prohibited by this Note, (iv) in connection with any litigation to which the Bank is a party, or in connection with the exercise of any remedy hereunder or under this Note, (v) to the Bank’s legal counsel and independent auditors and accountants, (vi) to the Bank’s branches, subsidiaries, representative offices, affiliates and agents and third parties selected by any of the foregoing entities, wherever situated, for confidential use (including in connection with the provision of any service and for data processing, statistical and risk analysis purposes), and (vii) subject to provisions substantially similar to those contained in this Section 24, to any actual or proposed participant or assignee.

SECTION 25. Patriot Act.

The Obligor hereby acknowledges that pursuant to applicable regulatory requirements, including, but not limited to those under the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001 (as amended from time to time, the “Patriot Act”),, the Bank is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Bank to identify the Borrower. The Borrower shall, and shall cause each of its subsidiaries to, provide such information and take such actions as are reasonably requested by the Bank in order to assist the Bank in maintaining compliance with such applicable requirements.

SECTION 26. Defined Terms

(a) As used in this Note, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the

power to vote 10% or more of the Voting Stock of such Person or to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.

“Bank” has the meaning specified in the first paragraph of this Note.

“Borrower” has the meaning specified in the first paragraph of this Note.

“Business Day” has the meaning specified in the second paragraph of this Note.

“Capitalized Leases” means all leases that have been or should be, in accordance with IFRS, recorded as capitalized leases.

“Citigroup” means Citigroup, Inc. and each subsidiary and affiliate thereof (including, without limitation, Citibank, N.A. and each of its branches wherever located).

“Confidential Information” means all information that the Borrower furnishes to the Bank, but does not include any such information that is or becomes generally available to the public or that is or becomes available to the Bank from a source other than the Borrower, unless, to the actual knowledge of the recipient of such information, such source breached an obligation of confidentiality in providing such information to such recipient.

“Consolidated” refers to the consolidation of accounts in accordance with IFRS.

“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables not overdue by more than 90 days incurred in the ordinary course of such Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under leases that have been or should be, in accordance with IFRS, recorded as capital leases, (f) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit or similar extensions of credit, (g) all obligations of such Person in respect of Hedge Agreements, (h) all Debt of others referred to in clauses (a) through (g) above or clause (i) below and other payment obligations (collectively, “Guaranteed Debt”) guaranteed directly or indirectly in any manner by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (1) to pay or purchase such Guaranteed Debt or to advance or supply funds for the payment or purchase of such Guaranteed Debt, (2) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Guaranteed Debt or to assure the holder of such Guaranteed Debt against loss, (3) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (4) otherwise to assure a creditor against loss, and (i) all Debt referred to in clauses (a) through (h) above (including Guaranteed Debt) secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Debt.

“Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

“Environmental Action” means any action, suit, demand, demand letter, claim, written notice of noncompliance or violation, written notice of liability or potential liability, investigation,

proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment, including, without limitation, (a) by any governmental or regulatory authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any governmental or regulatory authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.

“Environmental Law” means any federal, state, local, national, regional or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Events of Default” has the meaning specified in Section 11.

“Foreign Corrupt Practices Act” means the Foreign Corrupt Practices Act of 1977 (15 U.S.C. §§ 78dd-1, et seq.), as amended.

“Guarantor” means PriceSmart, Inc., corporation organized and existing under the laws of Delaware.

“Guaranty” means that certain Guaranty dated as of July 28, 2014 and made by the Guarantor in favor of Citigroup Inc. and each subsidiary or affiliate thereof, including Citibank, N.A. [BUSINESS TO CONFIRM]

“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.

“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other similar agreements.

“IFRS” means International Financial Reporting Standards promulgated by the International Accounting Standards Board.

“Indemnified Party” has the meaning specified in Section 15(b).

“Interest Period” has the meaning specified in the second paragraph of this Note.

“Lending Office” has the meaning specified in Section 1(a).

“Lien” means any lien, security interest or other charge or encumbrance of any kind, or any other type of preferential arrangement, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property.

“Material Adverse Change” means any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole.

“Material Adverse Effect” means a material adverse effect on (a) the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Bank under this Note or (c) the ability of the Borrower to perform its obligations under this Note.

“Material Contract” means, with respect to any Person, each contract to which such Person is a party involving aggregate consideration payable to or by such Person of U.S.$500,000.00 (or its equivalent in other currencies) or more or otherwise material to the business, condition (financial or otherwise), operations, performance, properties or prospects of such Person.

“OFAC” means the Office of Foreign Assets Control, Department of the Treasury.

“Other Taxes” has the meaning specified in Section 5(b).

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56, signed into law October 26, 2001, as amended from time to time.

“Permitted Liens” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced: (a) Liens for taxes, assessments and governmental charges or levies to the extent not required to be paid under Section 8(b) hereof; (b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations that are not overdue for a period of more than 30 days; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; and (d) easements, rights of way and other encumbrances on title to real property that do not render title to the property encumbered thereby unmarketable or materially adversely affect the use of such property for its present purposes.

“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.

“Process Agent” has the meaning specified in Section 23(a).

“Solvent” means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding capital stock having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency), (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled

by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries.

“Taxes” has the meaning specified in Section 5(a).

“Voting Stock” means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

(b) All accounting terms not specifically defined herein shall be construed in accordance with IFRS.

SECTION 27. Waiver of Jury Trial.

Each of the Borrower and the Bank hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Note or the actions of the Bank in the negotiation, administration, performance or enforcement hereof.

SECTION 28. Right of First Refusal.

The Borrower hereby grants to the Bank and its Subsidiaries and Affiliates the exclusive right (which for the avoidance of doubt, is not an obligation of the Bank) to advise in relation to and execute with the Borrower any Hedge Agreement in connection with this Note, subject to terms and conditions mutually acceptable to the parties thereto. Notwithstanding the aforementioned in this Section 28, in addition, the Borrower also hereby grants to the Bank and its Subsidiaries and Affiliates the exclusive right (which for the avoidance of doubt, is not an obligation of the Bank) to execute any refinancing, extension or novation of this Note.

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its officer thereunto duly authorized, as of the date first above written.

PRICESMART CLUBS (TT) LIMITED

By:

Name: Atul Patel Title: Treasurer

By:

Name: Bill Naylon Title: President

Exhibit 31.1 Exhibit 31.1

Certification I, Sherry S. Bahrambeygui, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of PriceSmart, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

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

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

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

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

Date: July 9, 2020 /s/ SHERRY S. BAHRAMBEYGUI Sherry S. Bahrambeygui Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2 Exhibit 31.2

Certification I, Michael L. McCleary, certify that:

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

Date: July 9, 2020 /s/ MICHAEL L. MCCLEARY Michael L. McCleary Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Exhibit 32.1 Exhibit 32.1

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

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended May 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

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

Date: July 9, 2020 /s/ SHERRY S. BAHRAMBEYGUI Sherry S. Bahrambeygui Chief Executive Officer (Principal Executive Officer) The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2 Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of PriceSmart, Inc. (the “Company”) hereby certifies, to such officer's knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period May 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

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

Date: July 9, 2020 /s/ MICHAEL L. MCCLEARY Michael L. McCleary Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.