PRICESMART INC

Previous wording

As of February 29, 2024, we had 54 warehouse clubs in operation in 12 countries, plus the U.S. Virgin Islands, with revenues in excess of $4.4 billion in fiscal year 2023. We believe PriceSmart has become one of the most respected and trusted brands in the region. With nearly two million membership accounts and more than three million cardholders, we believe PriceSmart is an essential part of the shopping experience for consumers and small businesses in PriceSmart's markets.

Current wording

As of May 31, 2024, we had 54 warehouse clubs in operation in 12 countries, plus the U.S. Virgin Islands, with revenues in excess of $4.4 billion in fiscal year 2023. We believe PriceSmart has become one of the most respected and trusted brands in the region. With nearly two million membership accounts and almost four million cardholders, we believe PriceSmart is an essential part of the shopping experience for consumers and small businesses in PriceSmart's markets.

Previous wording

PriceSmart sources slightly more than half its merchandise from suppliers within the region, with the balance of merchandise sourced throughout the world. Product selection includes basic consumable merchandise for consumers and businesses, “Member’s Selection®” private label merchandise and unique consumable and non-consumable products that are often not otherwise available in its markets.

Current wording

PriceSmart sources slightly more than half its merchandise from suppliers within the region, with the balance of merchandise sourced throughout the rest of the world. Product selection includes basic consumable merchandise for consumers and businesses, “Member’s Selection®” private label merchandise and unique consumable and non-consumable products that are often not otherwise available in its markets.

Previous wording

PriceSmart is committed to improving the quality of life for people living in the communities in which it does business. The newly created PriceSmart Foundation, in partnership with Price Philanthropies Foundation, provides school supplies to more than 150,000 children and eyeglasses to thousands of children through its Aprender y Crecer program. The Foundation also makes philanthropic donations to support work force development, small business entrepreneurship and to improve the environment.

Current wording

PriceSmart is committed to improving the quality of life for people living in the communities in which it does business. The newly created PriceSmart Foundation, in partnership with Price Philanthropies Foundation, provides school supplies to more than 150,000 children and eyeglasses to thousands of children through its Aprender y Crecer program. The PriceSmart Foundation also makes philanthropic donations to support work force development, small business entrepreneurship and to improve the environment.

Previous wording

We have purchased land and plan to open our ninth warehouse club in Costa Rica, located in Cartago, approximately 10 miles east from the nearest club in the capital of San Jose. The club will be built on a six-acre property and is anticipated to open early 2025. Once this new club is open, we will operate 9 warehouse clubs in Costa Rica and 55 warehouse clubs in total.

Current wording

We have purchased land and plan to open our ninth warehouse club in Costa Rica, located in Cartago, approximately 10 miles east from the nearest club in the capital of San Jose. The club will be built on a six-acre property and is anticipated to open in the spring of 2025. Once this new club is open, we will operate 55 warehouse clubs in total.

Previous wording

Although we have seen recent inflationary pressures subsiding, substantial product cost increases and commodity price increases have and could continue to impact our financial results and could lead to reduced sales, fewer units sold, and/or margin pressure. Events directly or indirectly related to COVID-19 resulted in market and supply-chain disruptions, which increasedthe complexity of managing our inventory flow and business and resulted in substantial inventory markdowns on certain non-food product categories in the third quarter of fiscal year 2022. In addition, shipping and freight rates increased dramatically during that time. While supply chains and transportation rates have normalized, we continue to work to hold down and/or mitigate the price increases passed on to our Members while maintaining the right inventory mix to grow sales. One key factor has been our expanded network of distribution centers, which has facilitated alternative shipping routes, increased throughput, and provided flexibility to mitigate our supply chain challenges and risks more effectively.

Current wording

Although we have seen recent inflationary pressures subsiding, substantial product cost increases and commodity price increases have and could continue to impact our financial results and could lead to reduced sales, fewer units sold, and/or margin pressure. Events directly or indirectly related to COVID-19 resulted in market and supply-chain disruptions, which increasedthe complexity of managing our inventory flow and business and resulted in substantial inventory markdowns on certain non-food product categories in the third quarter of fiscal year 2022. In addition, shipping and freight rates increased dramatically during that time. While supply chains and transportation rates have normalized, we continue to work to hold down and/or mitigate the price increases passed on to our Members while maintaining the right inventory mix to grow sales. One key factor has been our expanded network of distribution centers, which has facilitated alternative shipping routes, increased merchandise throughput, and provided flexibility to mitigate our supply chain challenges and risks more effectively.

Previous wording

Currency fluctuation can be one of the largest variables affecting our overall sales and profit performance because many of our markets are susceptible to foreign currency exchange rate volatility. In the second quarter of fiscal year 2024, some markets, especially Colombia and Costa Rica, benefited from currency appreciation, which helped offset currency devaluations we experienced in some of the other countries. During the first six months of fiscal year 2024 and 2023, approximately 79.6% and 78.8%, respectively, of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 49.4% and 48.9% consisted of sales of products we purchased in U.S. dollars for each period, respectively.

Current wording

Currency fluctuation can be one of the largest variables affecting our overall sales and profit performance because many of our markets are susceptible to foreign currency exchange rate volatility. In the third quarter of fiscal year 2024, some markets, especially Colombia and Costa Rica, benefited from currency appreciation, which helped offset currency devaluations we experienced in some of the other countries. During the first nine months of fiscal year 2024 and 2023, approximately 79.5% and 78.8%, respectively, of our net merchandise sales were in currencies other than the U.S. dollar. Of those sales, 49.1% and 48.6% consisted of sales of products we purchased in U.S. dollars for each period, respectively.

Previous wording

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

Current wording

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

Previous wording

At times we face difficulties in the shipment and importation of merchandise to our warehouse clubs in certain markets, such as disputes with customs and tax authorities in Nicaragua which delayed the issuance of importation clearance in May 2023. We also continue to face the risk of political instability which may have significant effects on our business. For example, protestors set up roadblocks in Panama during October and November 2023, disrupting traffic to our clubs throughout most of the market, as a reaction to an agreement between the Panamanian government and a mining company. Roadblocks in Guatemala in October 2023 relating to election protests also limited access to certain of our warehouse clubs. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021. Nicaragua and Honduras experienced anti-government protests in 2019; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018.

Current wording

At times we face difficulties in the shipment and importation of merchandise to our warehouse clubs in certain markets, such as disputes with customs and tax authorities in Nicaragua which delayed the issuance of importation clearance in May 2023. We also continue to face the risk of political instability which may have significant effects on our business. For example, protestors set up roadblocks in Panama during October and November 2023 as a reaction to an agreement between the Panamanian government and a mining company, disrupting traffic to our clubs throughout most of the market. Roadblocks in Guatemala in October 2023 relating to election protests also limited access to certain of our warehouse clubs. Civil unrest in Colombia in response to tax reform and austerity measures paralyzed significant portions of the country’s infrastructure as roadblocks and riots disrupted normal economic activity during the third quarter of fiscal year 2021. Nicaragua and Honduras experienced anti-government protests in 2019; Costa Rica also had a general strike against tax reform measures that significantly impeded regular economic activity in 2018.

Previous wording

Changes in tax laws, increases in the enacted tax rates, adverse outcomes in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. In one of the countries where we operate, the government made changes several years ago in the method of computing minimum tax payments, under which the government sought to require retailers to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). We, together with our tax and legal advisers, appealed these interpretations and litigated our cases in the country’s court system. Nevertheless, in the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute. To address the inherent risk of operating in a country in which tax legislation changes can significantly impact our low margin business model and in which our ability to successfully appeal the application of these taxes is limited, we have increased prices in this market to offset or partially offset the rise in costs to comply with the annual AMT payment.

Current wording

Changes in tax laws, increases in the enacted tax rates, adverse outcomes in connection with tax audits in any jurisdiction, or any change in the pronouncements relating to accounting for income taxes could have a material adverse effect on our financial condition and results of operations. In one of the countries where we operate, the government made changes several years ago in the method of computing minimum tax payments, under which the government sought to require retailers to pay taxes based on a percentage of sales if the resulting tax were greater than the tax payable based on a percentage of income (Alternative Minimum Tax or "AMT"). We, together with our tax and legal advisers, appealed these interpretations and litigated our cases in the country’s court system. Nevertheless, in the fourth quarter of fiscal year 2023, we recorded a $7.2 million charge to settle the minimum tax payment dispute. To address the inherent risk of operating in a country in which tax legislation changes can significantly impact our low margin business model and in which our ability to successfully appeal the application of these taxes is limited, we have increased prices in this market to offset or partially offset the rise in costs to comply with the annual AMT payment. These and other challenges may persist or become more acute and could have a material adverse effect on our business and results of operations.

Previous wording

Periodically, we experience a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This can and has impeded our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products and to otherwise redeploy these funds in our Company. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. For instance, during fiscal year 2021, we experienced significant limitations on our ability to convert Trinidad dollars to U.S. dollars or other tradable currencies. Our balance as of February 29, 2024 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $36.9 million, a decrease of $63.6 million from the peak of $100.5 million as of November 30, 2020. However, as the Trinidad central bank strictly manages the exchange rate of the Trinidad dollar with the U.S. dollar and affects the level of U.S. dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency.

Current wording

Periodically, we experience a lack of availability of U.S. dollars in certain markets (U.S. dollar illiquidity). This can and has impeded our ability to convert local currencies obtained through merchandise sales into U.S. dollars to settle the U.S. dollar liabilities associated with our imported products and to otherwise redeploy these funds in our Company. This illiquidity also increases our foreign exchange exposure to any devaluation of the local currency relative to the U.S. dollar. For instance, during fiscal year 2021, we experienced significant limitations on our ability to convert Trinidad dollars to U.S. dollars or other tradable currencies. Our balance as of May 31, 2024 of Trinidad dollar denominated cash and cash equivalents and short and long-term investments measured in U.S. dollars was $41.6 million, a decrease of $58.9 million from the peak of $100.5 million as of November 30, 2020. However, as the Trinidad central bank strictly manages the exchange rate of the Trinidad dollar with the U.S. dollar and affects the level of U.S. dollar liquidity in the market through its interventions, we are subject to continued challenges in converting our Trinidad dollars to U.S. dollars, as well as being exposed to the risk of a potential devaluation of the currency.

Previous wording

During the third quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars. As of February 29, 2024, our Honduran subsidiary had approximately $26.9 million of cash and cash equivalents and short-term investments denominated in Honduran lempiras, which cannot be readily converted to U.S. dollars for general use within the Company. We are actively working with our banking partners and government authorities to address this situation.

Current wording

During the third quarter of fiscal year 2023, the Honduran Central Bank began limiting the availability and controlling the allocation of U.S. dollars for the conversion from Honduran lempiras to U.S. dollars. As of May 31, 2024, our Honduran subsidiary had approximately$19.0 million of cash and cash equivalents and short-term investments denominated in Honduran lempiras, which cannot be readily converted to U.S. dollars for general use within the Company. We are actively working with our banking partners and government authorities to address this situation.

Previous wording

I. Invest in Remodeling Current PriceSmart Clubs, Adding New PriceSmart Locations and Opening More Distribution Centers. We believe that oneof the quickest and most effective ways to increase sales and profitability is to increase the size and efficiency of our existing warehouse clubs and the number of parking spaces at our high-volume locations. For instance, we are currently remodeling our clubs in San Pedro Sula, Honduras; Santiago, Dominican Republic; and Port of Spain, Trinidad and Tobago. We are also currently expanding one of our clubs in San Salvador, El Salvador. We've recently entered into a lease agreement to relocate and extend the lease term for our Miraflores club, which is our highest selling location in Guatemala. The new warehouse will have increased sales floor square footage and a greater number of parking spaces, along with covered parking for our Members. We have also completed the purchase of our Via Brasil club in Panama, which is the club with the highest sales volume in our Panama market. We continue to pursue opportunities to add new warehouse clubs in our existing markets and to assess opportunities in new markets. We have plans to open a new warehouse club in Cartago, near the capital of San Jose, in Costa Rica, in early 2025. Our distribution network currently consists of major distribution centers in Miami and Costa Rica, complemented by varying distribution facilities in other markets. Based on our experience with the Costa Rica distribution center, we believe that investing in similar distribution centers in other major markets will play a strategic role in a variety of ways. In October 2023, we relocated our distribution center in Panama, increasing the square footage which will allow us to drive more efficiencies within our distribution network. We have also signed a lease agreement for a distribution center in Guatemala. In addition to major distribution centers, PriceSmart has been investing in produce distribution centers, which enable us to process and package produce we purchase directly from farms in our markets as well as imported produce.

Current wording

I. Invest in Remodeling Current PriceSmart Clubs, Adding New PriceSmart Locations and Opening More Distribution Centers. We believe that oneof the quickest and most effective ways to increase sales and profitability is to increase the size and efficiency of our existing warehouse clubs and the number of parking spaces at our high-volume locations. For instance, we are currently remodeling our clubs in San Pedro Sula, Honduras; Santiago, Dominican Republic; and Port of Spain, Trinidad and Tobago. We are also currently expanding our clubs in San Salvador, El Salvador; Liberia, Costa Rica; and Portmore, Jamaica. We've recently entered into a lease agreement to relocate and extend the lease term for our Miraflores club, which is our highest selling location in Guatemala. The new warehouse will have increased sales floor square footage and a greater number of parking spaces, along with covered parking for our Members. We have also completed the purchase of our Via Brasil club in Panama, which is the club with the highest sales volume in our Panama market. We continue to pursue opportunities to add new warehouse clubs in our existing markets and to assess opportunities in new markets. We have plans to open a new warehouse club in Cartago, near the capital of San Jose, in Costa Rica, in the spring of 2025. Our distribution network currently consists of major distribution centers in Miami and Costa Rica, complemented by varying distribution facilities in other markets. Based on our experience with the Costa Rica distribution center, we believe that investing in similar distribution centers in other major markets will play a strategic role in a variety of ways. In October 2023, we relocated our distribution center in Panama, increasing the square footage which we believe will allow us to drive more efficiencies within our distribution network. We have also signed a lease agreement for a distribution center in Guatemala.

Previous wording

II. Increase Membership Value. We are seeking to attract more Members and retain our current Members by expanding the benefits of being a Member of PriceSmart. As benefits grow and the value of being a PriceSmart Member increases, adjustments to the membership fee may be warranted. We have increased this fee by $5 in most countries during the first six months of fiscal year 2024. A larger membership base and higher membership fee contribute to the bottom line of the business and can be reinvested in providing better pricing to our Members. We focus on growth of our membership base, Member renewal rates and spend per Member as part of determining how Members see our value. By adding more benefits that Members can only obtain with us, we believe we can achieve growth in the number of Members, which drives Membership income and Net merchandise sales. Recent examples of enhancements we have made to the value of membership include: additional services, such as the ability for all of our Members to transact on PriceSmart.com; pickup and delivery service in our clubs; and the implementation and expansion of our Well-being initiative, which offers optical services with free eye exams for our Members and additional members of their families and lower prices on discounted eyeglass frames, audiology services with free hearing exams and deeply discounted hearing aids, and, in some of our markets, pharmacies. Another way we enhance Membership value is by offering private label merchandise under the “Member’s Selection®” brand, which is available only to PriceSmart Members. We believe the “Member’s Selection®” brand carries goodwill and is recognized in our markets for value. Private label products also provide the opportunity to source quality items locally. Select local sourcing has multiple benefits, including support of local communities in which we operate by enhancing business activity and creating direct and indirect jobs, mitigation of foreign currency exchange risk, and reduced supply chain exposure. These initiatives offer additional benefits and services for our Members, whether they choose to shop on-line, in-club, or both. During the first six months of fiscal year 2024, our private label sales represented 27.1% of total merchandise sales, up from 25.9% in the same period of fiscal year 2023, and we plan to continue to invest in the development of additional private label products under the “Member’s Selection®” brand.

Current wording

II. Increase Membership Value. We are seeking to attract more Members and retain our current Members by expanding the benefits of being a Member of PriceSmart. As benefits grow and the value of being a PriceSmart Member increases, adjustments to the membership fee may be warranted. We have increased this fee by $5 in most countries during the first nine months of fiscal year 2024 and will complete the remaining planned increases by the end of the fiscal year. A larger membership base and higher membership fee contribute to the bottom line of the business and can be reinvested in providing better pricing to our Members. We focus on growth of our membership base, Member renewal rates and spend per Member as part of determining how Members see our value. By adding more benefits that Members can only obtain with us, we believe we can achieve growth in the number of Members, which drives Membership income and Net merchandise sales. Recent examples of enhancements we have made to the value of membership include: additional services, such as the ability for all of our Members to transact on PriceSmart.com; pickup and delivery service in our clubs; and the implementation and expansion of our Well-being initiative, which offers optical services with free eye exams for our Members and additional members of their families and lower prices on discounted eyeglass frames, audiology services with free hearing exams and deeply discounted hearing aids, and, in some of our markets, pharmacies. Another way we enhance Membership value is by offering private label merchandise under the “Member’s Selection®” brand, which is available only to PriceSmart Members. We believe the “Member’s Selection®” brand carries goodwill and is recognized in our markets for value. Private label products also provide the opportunity to source quality items locally. Select local sourcing has multiple benefits, including support of local communities in which we operate by enhancing business activity and creating direct and indirect jobs, mitigation of foreign currency exchange risk, and reduced supply chain exposure. These initiatives offer additional benefits and services for our Members, whether they choose to shop on-line, in-club, or both. During the first nine months of fiscal year 2024, our private label sales represented 27.4% of total merchandise sales, which increased from 26.0% in the same period of fiscal year 2023, and we plan to continue to invest in the development of additional private label products under the “Member’s Selection®” brand.

Previous wording

III. Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities. We recognize the growing expectation of consumers in our markets for convenience. As a result, we continue to improve the functionality and content of PriceSmart.com and to expand our product offerings available online. We also build and apply technological tools to continue to learn more about and strengthen our relationships with each of our Members. Using data analytics, which allow us to better identify Member preferences, we believe we have been able to provide our Members with enhancements to the membership experience and our merchandise procurement. PriceSmart.com provides the opportunity for us to continually strengthen and expand the scope of our relationship with each Member and offer incremental products and services in the future. Our PriceSmart.com offering provides data that informs us regarding the potential viability of new clubs in new areas and offers us options to serve and expand into new markets without the need for a traditional brick & mortar club location. We also invest in technology to capture operational efficiencies and enhance our decision-making for the dynamic environments in which we do business.

Current wording

III. Drive Incremental Sales via PriceSmart.com and Enhanced Online, Digital and Technological Capabilities. We recognize the growing expectation of consumers in our markets for convenience. As a result, we continue to improve the functionality and content of PriceSmart.com and to expand our product offerings available online. We also build and apply technological tools to continue to learn more about and strengthen our relationships with each of our Members. Using data analytics, which allow us to better identify Member preferences, we believe we have been able to provide our Members with enhancements to the membership experience and our merchandise procurement. PriceSmart.com provides the opportunity for us to continually strengthen and expand the scope of our relationship with each Member and offer incremental products and services in the future. Our PriceSmart.com offering provides data that informs us regarding the potential viability of new clubs in new areas and offers us options to serve and expand into new markets without the need for a traditional brick & mortar club location. In the third quarter of fiscal year 2024, we began a country by country roll out of our new website platform. This platform will allow us to better tailor delivery zones and services for our Members, update inventory availability more quickly, improve product discovery and reduce friction in the shopping experience. We also invest in technology to capture operational efficiencies and enhance our decision-making for the dynamic environments in which we do business.

Previous wording

Financial highlights for the second quarter of fiscal year 2024 included:

Current wording

Financial highlights for the third quarter of fiscal year 2024 included:

Previous wording

•Net merchandise sales increased 13.0% over the comparable prior year period. We ended the quarter with 54 warehouse clubs compared to 50 warehouse clubs at the end of the second quarter of fiscal year 2023. Net merchandise sales - constant currency increased 9.0% over the comparable prior year period.

Current wording

•Net merchandise sales increased 11.6% over the comparable prior-year period. We ended the quarter with 54 warehouse clubs compared to 51 warehouse clubs at the end of the third quarter of fiscal year 2023. Net merchandise sales - constant currency increased 9.1% over the comparable prior-year period.

Previous wording

•Comparable net merchandise sales (that is, sales in the 50 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 13 weeks ended March 3, 2024 increased 8.8%. Comparable net merchandise sales - constant currency for the 13 weeks ended March 3, 2024 increased 5.2%.

Current wording

•Comparable net merchandise sales (that is, sales in the 50 warehouse clubs that have been open for more than 13 ½ calendar months) for the 13 weeks ended June 2, 2024 increased 7.8%. Comparable net merchandise sales - constant currency for the 13 weeks ended June 2, 2024 increased 5.6%.

Previous wording

•Membership income for the second quarter of fiscal year 2024 increased 14.6% to $18.5 million over the comparable prior year period.

Current wording

•Membership income for the third quarter of fiscal year 2024 increased 15.2% to $19.3 million over the comparable prior year period.

Previous wording

•Total gross margins (net merchandise sales less associated cost of goods sold) increased 11.0% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.7%, a decrease of 30 basis points or 0.3% from the same period in the prior year.

Current wording

•Total gross margins (net merchandise sales less associated cost of goods sold) increased 13.5% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.6%, an increase of 30 basis points or 0.3% from the same period in the prior year.

Previous wording

•Operating income for the second quarter of fiscal year 2024 was $63.6 million, an increase of 18.2%, or $9.8 million, compared to the second quarter of fiscal year 2023.

Current wording

•Operating income for the third quarter of fiscal year 2024 was $49.9 million, an increase of 15.9%, or $6.9 million, compared to the third quarter of fiscal year 2023.

Previous wording

•We recorded a $7.1 million net loss in total other expense in the second quarter of fiscal year 2024 compared to a $6.2 million net loss in total other expense in the same period last year. This increase in total other expense was primarily due to an increase in other expense, net of $1.7 million, driven by an increase in total overall foreign currency losses, partially offset by higher interest income of $1.3 million, comparatively, because of significantly more investments of surplus cash at higher yields.

Current wording

•We recorded a $2.9 million net loss in total other expense in the third quarter of fiscal year 2024 compared to a $1.5 million net loss in total other expense in the same period last year. This increase in total other expense was primarily due to an increase in interest expense of $0.8 million, driven by increased interest expense on hedged loans as well as lower interest income of $0.6 million, comparatively, due to a decrease in investments of surplus cash.

Previous wording

•Adjusted net income for the second quarter of fiscal year 2024 was $39.3 million, or an adjusted $1.31 per diluted share, compared to adjusted net income of $38.5 million, or $1.25 per diluted share, in the comparable prior year period.

Current wording

•Adjusted net income for the third quarter of fiscal year 2024 was $32.5 million, or an adjusted $1.08 per diluted share, compared to adjusted net income of $32.5 million, or $1.04 per diluted share, in the comparable prior year period.

Previous wording

Financial highlights for the six months ended February 29, 2024 included:

Current wording

Financial highlights for the nine months ended May 31, 2024 included:

Previous wording

•Net merchandise sales increased 11.9% over the comparable prior year period. We ended the first six months of fiscal year 2024 with 54 warehouse clubs compared to 50 warehouse clubs at the end of the second quarter of fiscal year 2023. Net merchandise sales - constant currency increased 8.0% over the comparable prior year period.

Current wording

•Net merchandise sales increased 11.8% over the comparable prior-year period. We ended the first nine months of fiscal year 2024 with 54 warehouse clubs compared to 51 warehouse clubs at the end of the third quarter of fiscal year 2023. Net merchandise sales - constant currency increase 8.3% over the comparable prior year period.

Previous wording

•Comparable net merchandise sales (that is, sales in the 50 warehouse clubs that have been open for greater than 13 ½ calendar months) for the 26 weeks ended March 3, 2024 increased 8.4%. Comparable net merchandise sales - constant currency for the 26 weeks ended March 3, 2024 increased 4.7%.

Current wording

•Comparable net merchandise sales (that is, sales in the 50 warehouse clubs that have been open for more than 13 ½ calendar months) for the 39 weeks ended June 2, 2024 increased 8.2%. Comparable net merchandise sales - constant currency for the 39 weeks ended June 2, 2024 increased 5.0%.

Previous wording

•Membership income for the first six months of fiscal year 2024 increased 13.1% to $36.3 million over the comparable prior year period.

Current wording

•Membership income for the first nine months of fiscal year 2024 increased 13.9% to $55.6 million over the comparable prior year period.

Previous wording

•Total gross margins (net merchandise sales less associated cost of goods sold) increased 10.3% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales were 15.9%, a decrease of 20 basis points or 0.2% from the same period in the prior year.

Current wording

•Total gross margins (net merchandise sales less associated cost of goods sold) increased 11.4% over the prior-year period, and merchandise gross profits as a percent of net merchandise sales remained constant at 15.8% compared to the same period in the prior year.

Previous wording

•Selling, general and administrative expenses increased 10.5% compared to the first six months of fiscal year 2023, primarily due to higher compensation, professional fees and depreciation expense.

Current wording

•Selling, general and administrative expenses increased 11.5% compared to the first nine months of fiscal year 2023, primarily due to higher compensation, professional fees and depreciation expense.

Previous wording

•Operating income was $121.8 million, an increase of 11.4%, or $12.5 million, compared to the first six months of fiscal year 2023.

Current wording

•Operating income was $171.7 million, an increase of 12.7%, or $19.4 million, compared to the first nine months of fiscal year 2023.

Previous wording

•We recorded a $9.2 million net loss in total other expense in the first six months of fiscal year 2024 compared to a $12.4 million net loss in total other expense in the same period last year. This decrease in total other expense was primarily due to an increase of $3.0 million in interest income comparatively.

Current wording

•We recorded a $12.1 million net loss in total other expense in the first nine months of fiscal year 2024 compared to a $13.8 million net loss in total other expense in the same period last year. This decrease in total other expense was primarily due to an increase of $2.4 million in interest income comparatively, partially offset by an increase of $1.4 million in interest expense comparatively.

Previous wording

•Our effective tax rate decreased for the first six months of fiscal year 2024 to 31.4% from 33.7% in the first six months of fiscal year 2023. The decrease in the effective tax rate is primarily related to the non-recurrence of the separation costs associated with the departure of our former Chief Executive Officer.

Current wording

•Our effective tax rate decreased for the first nine months of fiscal year 2024 to 31.3% from 32.2% in the first nine months of fiscal year 2023. The decrease in the effective tax rate is primarily related to fewer valuation allowances on deferred tax assets from foreign tax credits that are no longer deemed recoverable.

Previous wording

•Adjusted net income for the first six months of fiscal year 2024 was $77.3 million, or an adjusted $2.54 per diluted share, compared to adjusted net income of $73.6 million, or an adjusted $2.37 per diluted share, in the comparable prior year period.

Current wording

•Adjusted net income for the first nine months of fiscal year 2024 was $109.8 million, or an adjusted $3.62 per diluted share, compared to adjusted net income of $106.1 million, or an adjusted $3.41 per diluted share, in the comparable prior-year period.

Previous wording

Adjusted net income and adjusted net income per diluted share are important measures used by management to compare the performance of our core operations between periods. We define adjusted net income as net income, as reported, adjusted for: separation costs associated with the departure of our former Chief Executive Officer, the write-off of certain Aeropost receivables, and the tax impact of the foregoing adjustments on net income. We define adjusted net income per diluted share as adjusted net income divided by the weighted-average diluted shares outstanding.

Current wording

Adjusted net income and adjusted net income per diluted share are important measures used by management to compare the performance of our core operations between periods. We define adjusted net income as net income, as reported, adjusted for: separation costs associated with the departure of our former Chief Executive Officer, the write-off of certain VAT receivables following unfavorable court rulings, the write-off of certain Aeropost receivables, and the tax impact of the foregoing adjustments on net income. We define adjusted net income per diluted share as adjusted net income divided by the weighted-average diluted shares outstanding.

Previous wording

We believe adjusted net income and adjusted net income per diluted share are useful metrics to investors and analysts because they present more accurate year-over-year comparisons for our net income and net income per diluted share because adjusted items are not the result of our normal operations.

Current wording

We believe adjusted net income and adjusted net income per diluted share are useful metrics to investors and analysts because they present more accurate year-over-year comparisons for our net income and net income per diluted share because adjusted items are not the result of our normal operations. We note that no adjustments to net income or net income per diluted share have been made for the three-month and nine-month periods ended May 31, 2024.

Previous wording

(3)Reflects $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023.

Current wording

(3)Reflects $2.8 million consisting of $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023 and $0.7 million of Aeropost-related write-offs in the third quarter of fiscal year 2023.

Previous wording

(3)Reflects the tax effect of the above-mentioned adjustments.

Current wording

(4)Reflects the tax effect of the above-mentioned adjustments.

Previous wording

Adjusted EBITDA is defined as net income before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including interest income; other income (expense), net; separation costs associated with Chief Executive Officer departure; and Aeropost-related write-offs. The following is a reconciliation of our Net income to Adjusted EBITDA for the periods presented:

Current wording

Adjusted EBITDA is defined as net income before interest expense, net, provision for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including interest income; other income (expense), net; separation costs associated with Chief Executive Officer departure, the write-off of certain VAT receivables following unfavorable rulings, and Aeropost-related write-offs. The following is a reconciliation of our Net income to Adjusted EBITDA for the periods presented:

Previous wording

(1)Primarily consists of transaction costs of converting the local currencies into available tradable currencies in some of our countries with liquidity issues and foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars) for the three and six months ended February 29, 2024. Primarily consists of foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars) for the three and six months ended February 28, 2023.

Current wording

(1)Primarily consists of transaction costs of converting the local currencies into available tradable currencies in some of our countries with liquidity issues and foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars) for the three and nine months ended May 31, 2024. Primarily consists of foreign currency losses or gains due to the revaluation of monetary assets and liabilities (primarily U.S. dollars) for the three and nine months ended May 31, 2023.

Previous wording

(2)Reflects $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023.

Current wording

(3)Reflects $2.8 million consisting of $2.1 million of Aeropost-related write-offs in the first quarter of fiscal year 2023 and $0.7 million of Aeropost-related write-offs in the third quarter of fiscal year 2023.

Previous wording

COMPARISON OF THE THREE AND SIX MONTHS ENDED FEBRUARY 29, 2024 AND FEBRUARY 28, 2023

Current wording

COMPARISON OF THE THREE AND NINE MONTHS ENDED MAY 31, 2024 AND 2023