XML 28 R15.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 6 Months Ended
--- | ---
Feb. 29, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 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 SOFR 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 one 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 the 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. Cash Flow Hedges As of February 29, 2024, 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 six months ended February 29, 2024:
Entity |  | Date Entered into |  | Derivative Financial Counter- party |  | Derivative Financial Instruments |  | Initial US$ Notional Amount |  | US$ Loan Held With |  | Floating Leg (swap counter-party) |  | Fixed Rate for PSMT Subsidiary |  | Settlement Dates |  | Effective Period of swap
Colombia subsidiary |  | 30-Nov-23 |  | Citibank, N.A. ("Citi") |  | Cross currency interest rate swap |  | $ | 10,000,000 |  |  | PriceSmart, Inc. |  | 5.00% |  | 11.27 | % |  | 30th day of each November, May and August, and 28th day of each February (except in case of a leap year, 29th day of each February) beginning on February 29, 2024 |  | November 30, 2023 - November 30, 2026
Colombia subsidiary |  | 12-Apr-23 |  | Citibank, N.A. ("Citi") |  | Cross currency interest rate swap |  | $ | 10,000,000 |  |  | PriceSmart, Inc. |  | 4.00% |  | 11.40 | % |  | 11th day of each July, October, January and April, beginning on July 11, 2023 |  | April 12, 2023 - April 11, 2028
Colombia subsidiary |  | 26-Sep-22 |  | Citibank, N.A. ("Citi") |  | Cross currency interest rate swap |  | $ | 12,500,000 |  |  | PriceSmart, Inc. |  | 3.00% |  | 10.35 | % |  | 24th day of each December, March, June and September beginning December 26, 2022 |  | September 26, 2022 - September 24, 2024
Colombia subsidiary |  | 3-May-22 |  | Citibank, N.A. ("Citi") |  | Cross currency interest rate swap |  | $ | 10,000,000 |  |  | PriceSmart, Inc. |  | 3.00% |  | 9.04 | % |  | 3rd day of each May, August, November and February, beginning on August 3, 2022 |  | May 3, 2022 - May 3, 2027
Colombia subsidiary |  | 17-Nov-21 |  | Citibank, N.A. ("Citi") |  | Cross currency interest rate swap |  | $ | 10,000,000 |  |  | PriceSmart, Inc. |  | 3.00% |  | 8.40 | % |  | 17th day of each February, May, August, and November, beginning on February 17, 2022 |  | November 17, 2021 - November 18, 2024
Colombia subsidiary |  | 3-Dec-19 |  | Citibank, N.A. ("Citi") |  | Cross currency interest rate swap |  | $ | 7,875,000 |  |  | Citibank, N.A. |  | Variable rate 3-month SOFR plus 2.45% |  | 7.87 | % |  | 3rd day of each December, March, June and September beginning March 3, 2020 |  | December 3, 2019 - December 3, 2024
Colombia subsidiary |  | 27-Nov-19 |  | Citibank, N.A. ("Citi") |  | Cross currency interest rate swap |  | $ | 25,000,000 |  |  | Citibank, N.A. |  | Variable rate 3-month SOFR plus 2.45% |  | 7.93 | % |  | 27th day of each November, February, May and August beginning February 27, 2020 |  | November 27, 2019 - November 27, 2024
PriceSmart, Inc. |  | 7-Nov-16 |  | U.S. Bank, N.A. ("U.S. Bank") |  | Interest rate swap |  | $ | 35,700,000 |  |  | U.S. Bank |  | Variable rate 3-month SOFR plus 1.7% |  | 3.65 | % |  | 1st day of each month beginning on April 1, 2017 |  | March 1, 2017 - March 1, 2027
For the three and six months ended February 29, 2024 and February 28, 2023, the Company included the gain or loss on the hedged items (that is, variable-rate borrowings) in the same line item—interest expense—as the offsetting gain or loss on the related interest rate swaps as follows (in thousands):
Income Statement Classification |  | Interest expense on borrowings (1) |  | Cost of swaps (2) |  | Total
Interest expense for the three months ended February 29, 2024 |  | $ | 1,054 |  |  | $ | 657 |  |  | $ | 1,711 |
Interest expense for the three months ended February 28, 2023 |  | $ | 1,327 |  |  | $ | 190 |  |  | $ | 1,517 |
Interest expense for the six months ended, February 29, 2024 |  | $ | 2,116 |  |  | $ | 1,072 |  |  | $ | 3,188 |
Interest expense for the six months ended, February 28, 2023 |  | $ | 2,430 |  |  | $ | 537 |  |  | $ | 2,967 |
(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 interest rate swaps and cross-currency swaps designated as cash flow hedging instruments. The total notional balance of the Company’s pay-fixed/receive-variable interest rate swaps and cross-currency interest rate swaps was as follows (in thousands):
|  | Notional Amount as of
Floating Rate Payer (Swap Counterparty) |  | February 29, 2024 |  | August 31, 2023
U.S. Bank |  | $ | 29,431 |  |  | $ | 30,069 |
Citibank N.A. |  | 73,934 |  |  | 65,599 |
Total |  | $ | 103,365 |  |  | $ | 95,668 |
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):
|  |  |  | February 29, 2024 |  | August 31, 2023
Derivatives designated as cash flow hedging instruments |  | Balance Sheet Classification |  | Fair Value |  | Net Tax Effect |  | Net OCI |  | Fair Value |  | Net Tax Effect |  | Net OCI
Cross-currency interest rate swaps |  | Other current assets |  | $ | 3,293 |  |  | $ | (1,153) |  |  | $ | 2,140 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Cross-currency interest rate swaps |  | Other non-current assets |  | — |  |  | — |  |  | — |  |  | 5,574 |  |  | (1,950) |  |  | 3,624 |
Cross-currency interest rate swaps |  | Other current liabilities |  | (2,054) |  |  | 719 |  |  | (1,335) |  |  | — |  |  | — |  |  | — |
Cross-currency interest rate swaps |  | Other long-term liabilities |  | (4,259) |  |  | 1,490 |  |  | (2,769) |  |  | (3,321) |  |  | 1,162 |  |  | (2,159) |
Interest rate swaps |  | Other non-current assets |  | 1,918 |  |  | (429) |  |  | 1,489 |  |  | 2,243 |  |  | (501) |  |  | 1,742 |
Net fair value of derivatives designated as hedging instruments |  | $ | (1,102) |  |  | $ | 627 |  |  | $ | (475) |  |  | $ | 4,496 |  |  | $ | (1,289) |  |  | $ | 3,207 |
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. The following table summarizes the non-deliverable forward foreign exchange contracts that are open as of February 29, 2024:
Financial Derivative (Counterparty) |  | Subsidiary |  | Dates Entered into (Range) |  | Derivative Financial Instrument |  | Total Notional Amounts (in thousands) |  | Settlement Dates (Range)
Citibank, N.A. ("Citi") |  | Colombia |  | 31-Aug-2023 - 28-Feb-2024 |  | Forward foreign exchange contracts (USD) |  | $ | 14,500 |  |  | 20-Mar-2024 - 24-Jul-2024
Forward derivative gains and (losses) on non-deliverable forward foreign-exchange contracts are included in Other income (expense), net in the consolidated statements of income in the period of change, but the amounts were immaterial for the three and six month periods ended February 29, 2024 and February 28, 2023.

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration