8-K Second Quarter Earnings FY15 and March Sales Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 9, 2015
PriceSmart, Inc.
(Exact name of registrant as specified in its charter)
Delaware
000-22793
33-0628530
(State or Other Jurisdiction of
Incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)

9740 Scranton Road, San Diego, CA 92121
(Address of Principal Executive Offices, including Zip Code)

Registrant's telephone number, including area code: (858) 404-8800

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2)(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02. Results of Operations and Financial Condition.
On April 9, 2015, PriceSmart, Inc. issued a press release regarding its results of operations for its second quarter ended February 28, 2015 and its net warehouse club sales for the month ended March 31, 2015. A copy of the press release is furnished herewith as Exhibit 99.1. Pursuant to the rules and regulations of the Securities and Exchange Commission, such exhibit and the information set forth therein and herein shall be deemed “furnished” and not “filed” for purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section.

Item 9.01. Exhibits.
(d)
The following exhibit is furnished herewith:
Exhibit No.
 
Description
99.1
 
Press Release of PriceSmart, Inc. dated April 9, 2015.







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 hereunto duly authorized.
Date: April 9, 2015
 
/S/ JOHN M. HEFFNER
 
 
John M. Heffner
 
 
Executive Vice President and Chief Financial Officer
 
 
(Principal Financial Officer and
 
 
Principal Accounting Officer)







EXHIBIT INDEX
Exhibit
Number
 
Description
99.1
 
Press Release of PriceSmart, Inc. dated April 9, 2015.






PriceSmart Announces Second Quarter Results of Operations and March Sales

San Diego, CA (April 9, 2015) - PriceSmart, Inc. (NASDAQ: PSMT) today announced its results of operations for the second quarter of fiscal year 2015 which ended on February 28, 2015.

For the second quarter of fiscal year 2015, net warehouse club sales increased 11.4% to $732.1 million from
$657.2 million in the second quarter of fiscal year 2014. Total revenues for the second quarter of fiscal year 2015 were $750.3 million compared to $674.4 million in the comparable period of the prior year. The Company had 36
warehouse clubs in operation as of February 2015 and 32 clubs in operation as of February 2014.

The Company recorded operating income during the quarter of $41.7 million, as compared to operating income of $39.4 million in the prior year. Net income was $24.8 million, or $0.82 per diluted share, in the second quarter of fiscal year 2015 as compared to $28.3 million, or $0.93 per diluted share, in the second quarter of fiscal year 2014.

Commenting on the results, Jose Luis Laparte, PriceSmart's President and Chief Executive Officer said, "While many of our markets performed well in the quarter, the reduction in net income can be attributed to Colombia where various factors, most notably the devaluation of the Colombian peso, led to a year on year reduction of net income and negatively impacted the consolidated results of the Company by approximately $0.16 per share.  The rest of the Company performed well in the quarter with growth in sales and membership income, and higher operating profit; contributing additional net income of approximately $0.05 per share to the consolidated results compared to the second quarter of last year."

For the first six months of fiscal year 2015, net warehouse club sales increased 9.8% to $1,368.5 million from $1,246.9 million in the first six months of fiscal year 2014. Total revenues for the first half of fiscal year 2015 increased 9.9% to $1,406.3 million from $1,280.0 million in the same period of the prior year. For the first six months of fiscal year 2015, the Company recorded operating income of $78.0 million and net income of $45.5 million, or $1.50 per diluted share. During the same six month period in fiscal year 2014, the Company recorded operating income of $71.7 million and net income of $49.7 million, or $1.64 per diluted share.

The Company also announced that for the month of March 2015, net warehouse club sales increased 17.0% to $237.7 million, from $203.2 million in March a year earlier. For the seven months ended March 31, 2015, net warehouse club sales increased 10.8% to $1,606.2 million from $1,450.1 million for the seven months ended March
31, 2014. There were 36 warehouse clubs in operation at the end of March 2015 and 32 warehouse clubs in operation at the end of March 2014.

For the four weeks ended March 29, 2015, comparable net warehouse club sales for the 32 warehouse clubs open at least 13 1/2 full months increased 7.3%, compared to the same four-week period last year. For the thirty- week period ended March 29, 2015, comparable net warehouse club sales increased 2.4%, compared to the comparable thirty-week period a year ago.
    
PriceSmart management plans to host a conference call at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) on Friday, April 10, 2015, to discuss the financial results. Individuals interested in participating in the conference call may do so by dialing (800) 316-8317 for domestic callers or (719) 325-2172 for international callers, and entering participant code 7665186. A digital replay will be available through April 30, 2015, following the conclusion of the call by dialing (888) 203-1112 for domestic callers, or (719) 457-0820 for international callers, and entering relay passcode 7665186.




About PriceSmart

PriceSmart, headquartered in San Diego, owns and operates U.S.-style membership shopping warehouse clubs in Latin America and the Caribbean, selling high quality merchandise at low prices to PriceSmart members. PriceSmart now operates 36 warehouse clubs in 12 countries and one U.S. territory (six each in Costa Rica, and Colombia; four each in Panama, and Trinidad; three each in Guatemala, the Dominican Republic, and Honduras; two in El Salvador; and one each in Aruba, Barbados, Jamaica, Nicaragua and the United States Virgin Islands).

This press release may contain forward-looking statements concerning the Company's anticipated future revenues and earnings, adequacy of future cash flow, proposed warehouse club openings, the Company's performance relative to competitors, the outcome of tax proceedings 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 the following risks: our financial performance is dependent on international operations, which exposes us to various risks; any failure by us to manage our widely dispersed operations could adversely affect our business; we face significant competition; future sales growth depends, in part, on our ability to successfully open new warehouse clubs; we might not identify in a timely manner or effectively respond to changes in consumer preferences for merchandise, which could adversely affect our relationship with members, demand for our products and market share; although we have begun to offer limited online shopping to our members, our sales could be adversely affected if one or more major international online retailers were to enter our markets or if other competitors were to offer a superior online experience; we face difficulties in the shipment of, and inherent risks in the importation of, merchandise to our warehouse clubs; we are exposed to weather and other natural disaster risks; general economic conditions could adversely impact our business in various respects; we are subject to risks associated with possible changes in our relationships with third parties with which we do business, as well as the performance of such third parties; we rely extensively on computer systems to process transactions, summarize results and manage our business, and failure to adequately maintain our systems or disruptions in our systems could harm our business and adversely affect our results of operations; we could be subject to additional tax liabilities; a few of our stockholders own approximately 28.1% of our voting stock as of August 31, 2014, which may make it difficult to complete some corporate transactions without their support and may impede a change in control; our inability to develop and retain existing key personnel or to attract highly qualified employees could adversely impact our business, financial condition and results of operations; we are subject to volatility in foreign currency exchange rates; we face the risk of exposure to product liability claims, a product recall and adverse publicity; if we do not maintain the privacy and security of confidential information, we could damage our reputation, incur substantial additional costs and become subject to litigation; we are subject to payment related risks; changes in accounting standards and assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial condition and results of operations; we face increased public company compliance risks and compliance risks related to our international operations; we face increased compliance risks associated with compliance with Section 404 of the Sarbanes-Oxley Act of 2002; and if remediation costs or hazardous substance contamination levels at certain properties for which we maintain financial responsibility exceed management’s current expectations, our financial condition and results of operations could be adversely impacted. In addition to the risks described above, these statements are also subject to other risks detailed in the Company's U.S. Securities and Exchange Commission (SEC) reports, including the Company's Annual Report on Form 10-K filed for the fiscal year ended August 31, 2014 filed on October 30, 2014 pursuant to the Securities Exchange Act of 1934. We assume no obligation and expressly disclaim any duty to update any forward-looking statement to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events.

For further information, please contact John M. Heffner, Principal Financial Officer and Principal Accounting Officer (858) 404-8826.




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



 
Three Months Ended February 28,
 
Six Months Ended February 28,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Net warehouse club sales
$
732,120

 
$
657,167

 
$
1,368,535

 
$
1,246,861

Export sales
6,229

 
6,764

 
14,660

 
12,485

Membership income
10,898

 
9,481

 
21,013

 
18,749

Other income
1,049

 
962

 
2,109

 
1,880

Total revenues
750,296

 
674,374

 
1,406,317

 
1,279,975

Operating expenses:
 
 
 
 
 
 
 
Cost of goods sold:
 
 
 
 
 
 
 
Net warehouse club
625,876

 
561,652

 
1,164,904

 
1,065,939

Export
5,934

 
6,423

 
13,961

 
11,864

Selling, general and administrative:
 
 
 
 
 
 
 
Warehouse club operations
62,041

 
53,203

 
118,251

 
104,975

General and administrative
14,117

 
13,277

 
27,467

 
24,461

Pre-opening expenses
229

 
340

 
3,378

 
814

Loss/(gain) on disposal of assets
391

 
104

 
363

 
188

Total operating expenses
708,588

 
634,999

 
1,328,324

 
1,208,241

Operating income
41,708

 
39,375

 
77,993

 
71,734

Other income (expense):
 
 
 
 
 
 
 
Interest income
266

 
193

 
530

 
374

Interest expense
(1,970
)
 
(886
)
 
(3,144
)
 
(1,924
)
Other income (expense), net
(1,659
)
 
712

 
(4,291
)
 
1,023

Total other income (expense)
(3,363
)
 
19

 
(6,905
)
 
(527
)
Income before provision for income taxes and income (loss) of unconsolidated affiliates
38,345

 
39,394

 
71,088

 
71,207

Provision for income taxes
(13,526
)
 
(11,116
)
 
(25,628
)
 
(21,501
)
Income (loss) of unconsolidated affiliates
16

 
—

 
22

 
4

Net income
24,835

 
$
28,278

 
$
45,482

 
49,710

Net income per share available for distribution:
 
 
 
 
 
 
 
Basic net income per share
$
0.82

 
$
0.93

 
$
1.50

 
$
1.64

Diluted net income per share
$
0.82

 
$
0.93

 
$
1.50

 
$
1.64

Shares used in per share computations:
 
 
 
 
 
 
 
Basic
29,827

 
29,724

 
29,809

 
29,707

Diluted
29,833

 
29,736

 
29,816

 
29,719

Dividends per share
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70







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


 
February 28,
2015
 
August 31, 2014
 
(Unaudited)
 
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
119,243

 
$
137,098

Short-term restricted cash
1,500

 
2,353

Receivables, net of allowance for doubtful accounts of $5 and $0 as of February 28, 2015 and August 31, 2014, respectively
7,078

 
7,910

Merchandise inventories
281,256

 
226,383

Deferred tax assets – current
6,839

 
6,177

Prepaid expenses and other current assets (includes $0 and $495 as of February 28, 2015 and August 31, 2014, respectively, for the fair value of derivative instruments and $1,064 and $0 as of February 28, 2015 and August 31, 2014, respectively, for the fair value of foreign currency forward contracts)
27,068

 
17,260

Total current assets
442,984

 
397,181

Long-term restricted cash
25,428

 
27,013

Property and equipment, net
424,360

 
426,325

Goodwill
36,069

 
36,108

Deferred tax assets – long term
9,013

 
11,825

Other non-current assets (includes $6,996 and $1,095 as of February 28, 2015 and August 31, 2014, respectively, for the fair value of derivative instruments)
38,267

 
30,755

Investment in unconsolidated affiliates
10,245

 
8,863

Total Assets
$
986,366

 
$
938,070

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Short-term borrowings
$
4,470

 
$
—

Accounts payable
233,266

 
223,559

Accrued salaries and benefits
15,288

 
17,799

Deferred membership income
21,992

 
17,932

Income taxes payable
8,359

 
7,718

Other accrued expenses (includes $0 and $14 as of February 28, 2015 and August 31, 2014, respectively, for the fair value of foreign currency forward contracts)
22,193

 
21,030

Dividends payable
10,564

 
—

Long-term debt, current portion
14,792

 
11,848

Deferred tax liability – current
137

 
157

Total current liabilities
331,061

 
300,043

Deferred tax liability – long-term
2,432

 
2,290

Long-term portion of deferred rent
6,107

 
5,591

Long-term income taxes payable, net of current portion
1,562

 
1,918

Long-term debt, net of current portion
90,328

 
79,591

Other long-term liabilities (includes $586 and $0 for the fair value of derivative instruments and $379 and $372 for the defined benefit plan as of February 28, 2015 and August 31, 2014, respectively)
965

 
372

Total liabilities
432,455

 
389,805

Equity:
 
 
 
Common stock, $0.0001 par value, 45,000,000 shares authorized; 30,973,256 and 30,950,701 shares issued and 30,182,541 and 30,209,917 shares outstanding (net of treasury shares) as of February 28, 2015 and August 31, 2014, respectively
3

 
3

Preferred stock $0.0001 par value; 2,000,000 shares authorized; no shares issued and outstanding as of February 28, 2015 and August 31, 2014
—

 
—

Additional paid-in capital
400,539

 
397,150

Tax benefit from stock-based compensation
10,962

 
9,505

Accumulated other comprehensive loss
(68,399
)
 
(49,286
)
Retained earnings
239,967

 
215,613

Less: treasury stock at cost; 790,715 and 740,784 shares as of February 28, 2015 and August 31, 2014, respectively
(29,161
)
 
(24,720
)
Total equity
553,911

 
548,265

Total Liabilities and Equity
$
986,366

 
$
938,070