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): October 21, 2021
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 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 is an emerging growth company 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 October 21, 2021, PriceSmart, Inc. issued a press release regarding the results of operations for its fourth quarter ended August 31, 2021. 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 October 21, 2021. | |
| 104 | The cover page from this Current report on Form 8-K, formatted in Inline XBRL. |
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: October 21, 2021 | /S/ MICHAEL L. MCCLEARY |
|---|---|
| Michael L. McCleary | |
| Executive Vice President and Chief Financial Officer | |
| (Principal Financial Officer and | |
| Principal Accounting Officer) |
EXHIBIT INDEX
| Exhibit<br>Number | Description |
|---|---|
| 99.1 | Press Release of PriceSmart, Inc. dated October 21, 2021. |
| 104 | The cover page from this Current report on Form 8-K, formatted in Inline XBRL. |
Exhibit 991\_4QFY21\_Earnings Press Release
Exhibit 99.1
PRICESMART ANNOUNCES FISCAL 2021 FOURTH QUARTER OPERATING RESULTS
12.7% GROWTH IN NET MERCHANDISE SALES
12.0% INCREASE IN OPERATING INCOME
MEMBERSHIP BASE AT RECORD LEVELS
89.6% MEMBERSHIP RENEWAL RATE FOR TRAILING 12 MONTHS
$0.63 DILUTED EARNINGS PER SHARE
San Diego, CA (October 21, 2021) - PriceSmart, Inc. (NASDAQ: PSMT), operator of 47 warehouse clubs in 12 countries and one U.S. territory, today announced its results of operations for the fourth quarter and full year, which ended on August 31, 2021.
Comments from Sherry S. Bahrambeygui, Chief Executive Officer:
“Net merchandise sales grew 12.7%, and comparable net merchandise sales grew 10.3% in our fiscal fourth quarter as compared to the same period last year. For the entire fiscal year, net merchandise sales grew 8.6%, and comparable net merchandise sales grew 5.8%. Our 12-month trailing Membership renewal rate has risen to 89.6% and our Membership base now exceeds pre-COVID levels and is at an all-time high.
“This could not have been achieved, especially under some very challenging circumstances, had it not been for the unwavering commitment of our team of more than 10,000 employees who are dedicated to our Members and remain laser-focused on extracting operational efficiencies, expanding our digital capabilities, and maintaining an agile supply chain.
“While delivering strong results, we have added incremental benefits to the Membership, including our Wellness initiatives in Optical, Pharmacy and most recently introduced Audiology services. Our investments in technology and our omni-channel initiatives have enabled us to further expand services, benefits, and convenience for our Members to shop safely, and enhance the quality of their shopping experience. Data analytics is becoming an increasingly important tool in our decision-making. Applying recently developed technology and analytics capabilities are enabling us to build on a key characteristic of our business model, our Membership data. What we are learning is helping to sharpen our business strategy.
“Our team is innovating, elevating performance and delivering results in unprecedented ways. This inspires us all for the future of our Company.”
Fourth Quarter Financial Results
Total revenues for the fourth quarter of fiscal year 2021 increased 12.2% to $909.6 million compared to $810.6 million in the comparable period of the prior year. For the fourth quarter of fiscal year 2021, net merchandise sales increased 12.7% to $871.2 million from $772.9 million in the fourth quarter of fiscal year 2020. Foreign currency exchange rate fluctuations impacted net merchandise sales negatively by $10.1 million, or 1.3%, versus the same period in the prior year.
The Company had 47 warehouse clubs in operation as of August 31, 2021 compared to 46 warehouse clubs in operation as of August 31, 2020.
Comparable net merchandise sales for the 45 warehouse clubs that have been open for greater than 13 ½ calendar months increased 10.3% for the 13-week period ended August 29, 2021 compared to the comparable period of the prior year. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by $9.1 million or 1.1% versus the same period in the prior year.
The Company recorded operating income during the fiscal fourth quarter of $32.5 million compared to operating income of $29.0 million in the prior year period. Net income attributable to PriceSmart was $19.5 million, or $0.63 per diluted share, in the fourth quarter of fiscal year 2021 as compared to $20.1 million, or $0.65 per diluted share, in the fourth quarter of fiscal year 2020.
Full Year Financial Results
Total revenues for the twelve months ended August 31, 2021 increased 8.7% to $3,619.9 million compared to $3,329.2 million in the prior year.
Comparable net merchandise sales for warehouse clubs that have been open for greater than 13 ½ calendar months increased 5.8% for the 52-week period ended August 29, 2021 compared to the comparable period of the prior year. Foreign currency exchange rate fluctuations impacted comparable net merchandise sales negatively by $74.1 million, or 2.3%, versus the prior year.
For the twelve months ended August 31, 2021, the Company recorded operating income of $158.0 million and net income attributable to PriceSmart of $98.0 million, or $3.18 per diluted share. During the twelve months ended August 31, 2020, the Company recorded operating income of $122.5 million and net income of $78.1 million, or $2.55 per diluted share.
The Company intends to file its Annual Report on Form 10-K for the year ended August 31, 2021 on or around October 21, 2021.
PriceSmart management will host a conference call at 12:00 p.m. Eastern time (9:00 a.m. Pacific time) on Friday, October 22, 2021, 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 through October 29, 2021, following the conclusion of the call by dialing (877) 344-7529 for domestic callers, or (412) 317-0088 for international callers, and entering replay passcode 10159925.
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 and services at low prices to PriceSmart Members. PriceSmart operates 47 warehouse clubs in 12 countries and one U.S. territory (eight in Costa Rica and Colombia; seven in 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 also plans to open new warehouse clubs in Guatemala City, Guatemala in October 2021 and in Bucaramanga, Colombia in November 2021 and in Portmore, Jamaica in the spring of 2022. Once these three new clubs are open, the Company will operate 50 warehouse clubs.
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 an improved sales comparison, as the Company experiences 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 the Company uses 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. The Company calculates 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 Company believes the disclosure of the effects of currency exchange rate fluctuations on the Company’s results permits investors to understand better the Company’s underlying performance.
This press release may contain forward-looking statements concerning the Company's anticipated future revenues and earnings, adequacy of future cash flows, omni-channel initiatives, 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,” “intend,” 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 and illiquidity of certain local currencies in our markets, 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, cybersecurity breaches that could cause disruptions in our systems or jeopardize the security 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 in the Risk Factors section of the Company’s most recent Annual Report on Form 10-K, and other factors discussed from time to time in other filings with the SEC, which are accessible on the SEC’s website at www.sec.gov, including Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. 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 L. McCleary, EVP, Chief Financial Officer and Principal Accounting Officer (858) 404-8826 or send an email to ir@pricesmart.com
PRICESMART, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
| | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Three Months Ended | | | | Twelve Months Ended | | | | | | August 31, | | | | August 31, | | | | | | 2021 | | 2020 | | 2021 | | 2020 | | | Revenues: | | | | | | | | | | Net merchandise sales | $ | 871,191 | $ | 772,940 | $ | 3,465,442 | $ | 3,191,762 | | Export sales | | 10,720 | | 9,345 | | 41,520 | | 34,374 | | Membership income | | 14,603 | | 13,137 | | 56,030 | | 54,501 | | Other revenue and income | | 13,092 | | 15,159 | | 56,879 | | 48,551 | | Total revenues | | 909,606 | | 810,581 | | 3,619,871 | | 3,329,188 | | Operating expenses: | | | | | | | | | | Cost of goods sold: | | | | | | | | | | Net merchandise sales | | 733,036 | | 656,526 | | 2,912,489 | | 2,723,942 | | Export sales | | 9,945 | | 8,632 | | 39,513 | | 32,676 | | Non-merchandise | | 5,489 | | 5,744 | | 23,336 | | 18,160 | | Selling, general and administrative: | | | | | | | | | | Warehouse club and other operations | | 94,618 | | 81,352 | | 359,221 | | 323,178 | | General and administrative | | 33,400 | | 28,866 | | 125,416 | | 106,776 | | Pre-opening expenses | | 198 | | 291 | | 849 | | 1,545 | | Loss on disposal of assets | | 459 | | 192 | | 1,027 | | 443 | | Total operating expenses | | 877,145 | | 781,603 | | 3,461,851 | | 3,206,720 | | Operating income | | 32,461 | | 28,978 | | 158,020 | | 122,468 | | Other income (expense): | | | | | | | | | | Interest income | | 525 | | 598 | | 1,979 | | 2,031 | | Interest expense | | (1,353) | | (2,509) | | (7,210) | | (7,625) | | Other income (expense), net | | (1,471) | | 992 | | (5,603) | | (834) | | Total other expense | | (2,299) | | (919) | | (10,834) | | (6,428) | | Income before provision for income taxes and <br>loss of unconsolidated affiliates | | 30,162 | | 28,059 | | 147,186 | | 116,040 | | Provision for income taxes | | (10,704) | | (7,915) | | (48,969) | | (37,764) | | Loss of unconsolidated affiliates | | (24) | | (16) | | (58) | | (95) | | Net income | | 19,434 | | 20,128 | | 98,159 | | 78,181 | | Less: net income attributable to noncontrolling interest | | 27 | | (52) | | (196) | | (72) | | Net income attributable to PriceSmart, Inc. | $ | 19,461 | $ | 20,076 | $ | 97,963 | $ | 78,109 | | Net income attributable to PriceSmart, Inc. per share available for distribution: | | | | | | | | | | Basic | $ | 0.63 | $ | 0.65 | $ | 3.18 | $ | 2.55 | | Diluted | $ | 0.63 | $ | 0.65 | $ | 3.18 | $ | 2.55 | | Shares used in per share computations: | | | | | | | | | | Basic | | 30,424 | | 30,234 | | 30,403 | | 30,259 | | Diluted | | 30,424 | | 30,234 | | 30,403 | | 30,259 | | Dividends per share | $ | 0.70 | $ | 0.35 | $ | 0.70 | $ | 0.70 |
PRICESMART, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
| | |||
|---|---|---|---|
| | |||
| | |||
| | 2020 | ||
| ASSETS | |||
| Current Assets: | |||
| Cash and cash equivalents | 202,060 | $ | 299,481 |
| Short-term restricted cash | 3,647 | 185 | |
| Short-term investments | 50,233 | 46,509 | |
| Receivables, net of allowance for doubtful accounts of 94 as of August 31, 2021 and 147 as of August 31, 2020, respectively | 12,359 | 13,153 | |
| Merchandise inventories | 389,711 | 309,509 | |
| Prepaid expenses and other current assets | 39,194 | 30,165 | |
| Total current assets | 697,204 | 699,002 | |
| Long-term restricted cash | 9,772 | 4,105 | |
| Property and equipment, net | 730,204 | 692,279 | |
| Operating lease right-of-use assets, net | 123,655 | 119,533 | |
| Goodwill | 45,095 | 45,206 | |
| Other intangibles, net | 7,762 | 10,166 | |
| Deferred tax assets | 24,225 | 21,672 | |
| Other non-current assets (includes 2,464 and 872 as of August 31, 2021 and August 31, 2020, respectively, for the fair value of derivative instruments) | 57,329 | 54,260 | |
| Investment in unconsolidated affiliates | 10,544 | 10,602 | |
| Total Assets | 1,705,790 | $ | 1,656,825 |
| LIABILITIES AND EQUITY | |||
| Current Liabilities: | |||
| Short-term borrowings | — | $ | 65,143 |
| Accounts payable | 388,791 | 373,172 | |
| Accrued salaries and benefits | 41,896 | 32,946 | |
| Deferred income | 26,898 | 23,525 | |
| Income taxes payable | 8,310 | 7,727 | |
| Other accrued expenses and other current liabilities | 39,736 | 37,731 | |
| Operating lease liabilities, current portion | 8,526 | 8,594 | |
| Long-term debt, current portion | 19,395 | 19,437 | |
| Total current liabilities | 533,552 | 568,275 | |
| Deferred tax liability | 1,568 | 1,713 | |
| Long-term income taxes payable, net of current portion | 4,160 | 5,132 | |
| Long-term operating lease liabilities | 129,256 | 124,181 | |
| Long-term debt, net of current portion | 110,110 | 112,610 | |
| Other long-term liabilities (includes 3,010 and 4,685 for the fair value of derivative instruments and 7,380 and 6,155 for post-employment plans as of August 31, 2021 and August 31, 2020, respectively) | 10,930 | 12,182 | |
| Total Liabilities | 789,576 | 824,093 |
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; 31,467,971 and 31,417,576 shares issued and 30,755,308 and 30,670,712 shares outstanding (net of treasury shares) as of August 31, 2021 and August 31, 2020, respectively | 3 | 3 | |
| Additional paid-in capital | 465,015 | 454,455 | |
| Accumulated other comprehensive loss | (182,508) | (176,820) | |
| Retained earnings | 658,919 | 582,487 | |
| Less: treasury stock at cost, 712,663 shares as of August 31, 2021 and 746,864 shares as of August 31, 2020 | (26,084) | (28,406) | |
| Total stockholders' equity attributable to PriceSmart, Inc. stockholders | 915,345 | 831,719 | |
| Noncontrolling interest in consolidated subsidiaries | 869 | 1,013 | |
| Total stockholders' equity | 916,214 | 832,732 | |
| Total Liabilities and Equity | 1,705,790 | $ | 1,656,825 |
All values are in US Dollars.