8-K
PRICESMART INC (PSMT)
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): January 9, 2020
PriceSmart, Inc.
(Exact name of registrant as specified in its charter)
| | | | | --- | --- | --- | | Delaware | 000-22793 | 33-0628530 | | (State or Other Jurisdiction of<br> <br>Incorporation) | (Commission File Number) | (I.R.S. Employer<br> <br>Identification No.) | | | | | --- | --- | | | 9740 Scranton Road | | | San Diego, CA 92121 | | | (Address of principal executive offices and 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): | | | | --- | --- | | ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2)(b)) | | ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Securities Exchange Act 0f 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 is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02. Results of Operations and Financial Condition.
On January 9, 2020, PriceSmart, Inc. issued a press release regarding the results of operations for its first quarter ended November 30, 2019. 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<br>No. | | Description | | | 99.1 | | Press Release of PriceSmart, Inc. dated January 9, 2020. |
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.
| ec | | | --- | --- | | | | | | | | Date: January 9, 2020 | /S/ MICHAEL MCCLEARY | | | Michael McCleary | | | Senior Vice President and Interim Chief Financial Officer | | | (Principal Financial Officer and | | | Principal Accounting Officer) |
EXHIBIT INDEX
| | | | | --- | --- | --- | | | | | | | Exhibit<br>Number | Description | | | 99.1 | Press Release of PriceSmart, Inc. dated January 9, 2020. |
Earnings Release Q1FY20
PriceSmart Announces Fiscal 2020 First Quarter Operating Results
San Diego, CA (January 9, 2020) - PriceSmart, Inc. (NASDAQ: PSMT), operator of 45 warehouse clubs in 12 countries and one U.S. territory, today announced its results of operations for the first quarter of fiscal year 2020 which ended on November 30, 2019.
Total revenues for the first quarter of fiscal year 2020 increased 4.1% to $811.9 million compared to $779.6 million in the first quarter of the prior year. For the first quarter of fiscal year 2020, net merchandise sales increased 4.2% to $778.7 million from $747.4 million in the first quarter of fiscal year 2019. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by $12.2 million or 1.6% of net merchandise sales.
The Company had 45 clubs in operation as of November 30, 2019, compared to 41 warehouse clubs in operation as of November 30, 2018.
For the thirteen-week period ended December 1, 2019, comparable net merchandise sales increased 1.0% compared to the same thirteen-week period a year ago. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by $11.3 million, or 1.5% of comparable net merchandise sales.
The Company recorded operating income for the first quarter of fiscal year 2020 of $30.7 million, as compared to operating income of $24.7 million in the prior year. Net income attributable to PriceSmart was $19.7 million, or $0.64 per diluted share, in the first quarter of fiscal year 2020. Net income in the first quarter of fiscal year 2019 was $14.6 million, or $0.48 per diluted share. The first quarter fiscal 2019 earnings were negatively impacted by $3.8 million or $0.13 per share from the separation related costs associated with the resignation of our former Chief Executive Officer by mutual agreement with the Company’s board in November 2018.
The Company reports 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 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.
The term “currency exchange rates” refers to the currency exchange rates we use to convert net merchandise and comparable net merchandise sales 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 the effects of currency exchange rate fluctuations on the Company’s results permits investors to understand better our underlying performance.
PriceSmart management will host a conference call at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) on Friday, January 10, 2020, to discuss the financial results. Individuals interested in participating in the conference call may do so by dialing (855) 209-8211 toll free, or (412) 317-5214 for international callers and asking to join the PriceSmart, Inc. call. A digital replay will be available following the conclusion of the call through January 17, 2020 by dialing (877) 344-7529 for domestic callers, or (412) 317-0088 for international callers, and entering replay passcode 10137166.
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 operates 45 warehouse clubs in 12 countries and one U.S. territory (seven each in Colombia, Costa Rica, and Panama; five in the Dominican Republic, four in Trinidad and Guatemala; three in Honduras; two each in El Salvador and Nicaragua; and one each in Aruba, Barbados, Jamaica and the United States Virgin Islands). The Company is currently constructing and plans to open warehouse clubs in Liberia, Costa Rica, in the summer of 2020; and Bogota, Colombia, in the fall of 2020. The Company also plans to build new warehouse clubs in Portmore, Jamaica and Bucaramanga, Colombia and open them in the fall of 2020. Once these four new clubs are open, the Company will operate 49 warehouse clubs. PriceSmart is investing in technology to increase efficiencies
and to enable omni-channel capabilities, including e-commerce, to enhance the member experience. PriceSmart also operates a legacy (marketplace and casillero) business through the Aeropost brand in 38 countries in Latin America and the Caribbean, many of which overlap with markets where PriceSmart operates its warehouse clubs.
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, 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, 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, as such 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.
For further information, please contact Michael McCleary, SVP and Interim Chief Financial Officer at (858) 404-8826 or send an email to ir@pricesmart.com.
PRICESMART, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
| | | | | | | --- | --- | --- | --- | --- | | | | | | | | | Three Months Ended | | | | | | November 30, | | November 30, | | | | 2019 | | 2018 | | | Revenues: | | | | | | Net merchandise sales | $ | 778,728 | $ | 747,443 | | Export sales | | 8,274 | | 8,189 | | Membership income | | 13,746 | | 12,740 | | Other revenue and income | | 11,193 | | 11,265 | | Total revenues | | 811,941 | | 779,637 | | Operating expenses: | | | | | | Cost of goods sold: | | | | | | Net merchandise sales | | 662,724 | | 641,155 | | Export sales | | 7,971 | | 7,778 | | Non-merchandise | | 4,251 | | 4,247 | | Selling, general and administrative: | | | | | | Warehouse club and other operations | | 79,373 | | 74,222 | | General and administrative | | 25,884 | | 27,335 | | Pre-opening expenses | | 953 | | 15 | | Loss on disposal of assets | | 71 | | 215 | | Total operating expenses | | 781,227 | | 754,967 | | Operating income | | 30,714 | | 24,670 | | Other income (expense): | | | | | | Interest income | | 293 | | 391 | | Interest expense | | (862) | | (1,033) | | Other expense, net | | (985) | | (1,819) | | Total other income (expense) | | (1,554) | | (2,461) | | Income before provision for income taxes and <br>loss of unconsolidated affiliates | | 29,160 | | 22,209 | | Provision for income taxes | | (9,403) | | (7,540) | | Loss of unconsolidated affiliates | | (48) | | (24) | | Net income | | 19,709 | | 14,645 | | Less: net (income) loss attributable to noncontrolling interest | | 19 | | (33) | | Net income attributable to PriceSmart, Inc. | $ | 19,728 | $ | 14,612 | | Net income attributable to PriceSmart, Inc. per share available for distribution: | | | | | | Basic | $ | 0.64 | $ | 0.48 | | Diluted | $ | 0.64 | $ | 0.48 | | Shares used in per share computations: | | | | | | Basic | | 30,277 | | 30,172 | | Diluted | | 30,284 | | 30,189 | | Dividends per share | $ | — | $ | — |
PRICESMART, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
| | |||
|---|---|---|---|
| | |||
| | |||
| | August 31, | ||
| | 2019 | ||
| ASSETS | |||
| Current Assets: | |||
| Cash and cash equivalents | 111,359 | $ | 102,653 |
| Short-term restricted cash | 65 | 54 | |
| Short-term investments | 25,098 | 17,045 | |
| Receivables, net of allowance for doubtful accounts of 125 as of November 30, 2019 and 144 as of August 31, 2019, respectively | 10,293 | 9,872 | |
| Merchandise inventories | 388,072 | 331,273 | |
| Prepaid expenses and other current assets (includes 2,747 and 2,736 as of November 30, 2019 and August 31, 2019, respectively, for the fair value of derivative instruments) | 36,990 | 30,999 | |
| Total current assets | 571,877 | 491,896 | |
| Long-term restricted cash | 3,689 | 3,529 | |
| Property and equipment, net | 693,275 | 671,151 | |
| Operating lease right-of-use assets, net | 118,203 | — | |
| Goodwill | 45,425 | 46,101 | |
| Other intangibles, net | 11,977 | 12,576 | |
| Deferred tax assets | 17,790 | 15,474 | |
| Other non-current assets (includes 436 and 0 as of November 30, 2019 and August 31, 2019, respectively, for the fair value of derivative instruments) | 51,226 | 44,987 | |
| Investment in unconsolidated affiliates | 10,649 | 10,697 | |
| Total Assets | 1,524,111 | $ | 1,296,411 |
| LIABILITIES AND EQUITY | |||
| Current Liabilities: | |||
| Short-term borrowings | 23,018 | $ | 7,540 |
| Accounts payable | 328,585 | 286,219 | |
| Accrued salaries and benefits | 24,131 | 25,401 | |
| Deferred income | 25,147 | 25,340 | |
| Income taxes payable | 6,640 | 4,637 | |
| Other accrued expenses and other current liabilities (includes 127 and 0 as of November 30, 2019 and August 31, 2019, respectively, for the fair value of foreign currency forward contracts) | 40,519 | 32,442 | |
| Operating lease liabilities, current portion | 8,310 | — | |
| Long-term debt, current portion | 13,726 | 25,875 | |
| Total current liabilities | 470,076 | 407,454 | |
| Deferred tax liability | 1,829 | 2,015 | |
| Long-term portion of deferred rent | — | 11,198 | |
| Long-term income taxes payable, net of current portion | 5,346 | 5,069 | |
| Long-term operating lease liabilities | 121,698 | — | |
| Long-term debt, net of current portion | 98,084 | 63,711 | |
| Other long-term liabilities (includes 3,259 and 2,910 for the fair value of derivative instruments and 5,675 and 5,421 for post-employment plans as of November 30, 2019 and August 31, 2019, respectively) | 9,306 | 8,685 | |
| Total Liabilities | 706,339 | 498,132 |
All values are in US Dollars.
PRICESMART, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
| | |||
|---|---|---|---|
| | |||
| Stockholders' Equity: | |||
| Common stock 0.0001 par value, 45,000,000 shares authorized; 31,474,818 and 31,461,359 shares issued and 30,612,511 and 30,538,788 shares outstanding (net of treasury shares) as of November 30, 2019 and August 31, 2019, respectively | 3 | 3 | |
| Additional paid-in capital | 440,756 | 443,084 | |
| Tax benefit from stock-based compensation | 11,486 | 11,486 | |
| Accumulated other comprehensive loss | (147,524) | (144,339) | |
| Retained earnings | 545,532 | 525,804 | |
| Less: treasury stock at cost, 862,307 shares as of November 30, 2019 and 924,332 shares as of August 31, 2019 | (33,424) | (38,687) | |
| Total stockholders' equity attributable to PriceSmart, Inc. stockholders | 816,829 | 797,351 | |
| Noncontrolling interest in consolidated subsidiaries | 943 | 928 | |
| Total stockholders' equity | 817,772 | 798,279 | |
| Total Liabilities and Equity | 1,524,111 | $ | 1,296,411 |
All values are in US Dollars.