x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
33-0628530
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports); and
(2) has been subject to such filing requirements for the past
90 days.
|
Yes
þ
|
No
¨
|
Indicate
by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).
|
Yes þ
|
No
¨
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of “accelerated filer and large
accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
|
Large
accelerated filer ¨
|
Accelerated
filer þ
|
Non-accelerated
filer ¨
|
Smaller
Reporting Company ¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange
Act).
|
Yes
¨
|
No
þ
|
The
registrant had 29,761,856 shares of its common stock, par value
$0.0001 per share, outstanding at December 31,
2009.
|
Page
|
||
N
|
||||||||
November
30, 2009
|
August
31,
2009
|
|||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$
|
39,039
|
$
|
44,193
|
||||
Short-term
restricted cash
|
—
|
10
|
||||||
Receivables,
net of allowance for doubtful accounts of $8 and $10 in November and
August of 2009, respectively
|
2,399
|
2,187
|
||||||
Merchandise
inventories
|
147,390
|
115,841
|
||||||
Deferred
tax assets – current
|
2,940
|
2,618
|
||||||
Prepaid
expenses and other current assets
|
18,010
|
19,033
|
||||||
Assets
of discontinued operations
|
947
|
900
|
||||||
Total
current assets
|
210,725
|
184,782
|
||||||
Long-term
restricted cash
|
765
|
732
|
||||||
Property
and equipment, net
|
236,857
|
231,798
|
||||||
Goodwill
|
37,415
|
37,538
|
||||||
Deferred
tax assets – long term
|
19,849
|
20,938
|
||||||
Other
assets
|
3,885
|
3,927
|
||||||
Investment
in unconsolidated affiliates
|
7,761
|
7,658
|
||||||
Total
Assets
|
$
|
517,257
|
$
|
487,373
|
||||
LIABILITIES
AND EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Short-term
borrowings
|
$
|
2,951
|
$
|
2,303
|
||||
Accounts
payable
|
113,280
|
101,412
|
||||||
Accrued
salaries and benefits
|
7,715
|
8,831
|
||||||
Deferred
membership income
|
8,977
|
8,340
|
||||||
Income
taxes payable
|
5,937
|
5,942
|
||||||
Other
accrued expenses
|
9,481
|
10,022
|
||||||
Long-term
debt, current portion
|
5,386
|
4,590
|
||||||
Deferred
tax liability – current
|
198
|
189
|
||||||
Liabilities
of discontinued operations
|
121
|
299
|
||||||
Total
current liabilities
|
154,046
|
141,928
|
||||||
Deferred
tax liability – long-term
|
1,224
|
1,026
|
||||||
Long-term
portion of deferred rent
|
2,793
|
2,673
|
||||||
Long-term
income taxes payable, net of current portion
|
3,562
|
3,458
|
||||||
Long-term
debt, net of current portion
|
42,795
|
37,120
|
||||||
Total
liabilities
|
204,420
|
186,205
|
||||||
Equity:
|
||||||||
Common
stock, $0.0001 par value, 45,000,000 shares authorized;
30,402,285 and 30,337,109 shares issued and 29,746,173 and 29,681,031
shares outstanding (net of treasury shares),
respectively
|
3
|
3
|
||||||
Additional
paid-in capital
|
378,326
|
377,210
|
||||||
Tax
benefit from stock-based compensation
|
4,609
|
4,547
|
||||||
Accumulated
other comprehensive loss
|
(17,149
|
)
|
(17,230
|
)
|
||||
Accumulated
deficit
|
(39,621
|
)
|
(49,998
|
)
|
||||
Less:
treasury stock at cost; 656,112 shares as of November 30, 2009 and
656,078 as of August 31, 2009.
|
(14,135
|
)
|
(14,134
|
)
|
||||
Total
PriceSmart stockholders’ equity
|
312,033
|
300,398
|
||||||
Noncontrolling
interest
|
804
|
770
|
||||||
Total
equity
|
312,837
|
301,168
|
||||||
Total
Liabilities and Equity
|
$
|
517,257
|
$
|
487,373
|
Three
Months Ended
November
30,
|
||||||||
2009
|
2008
|
|||||||
Net
warehouse club sales
|
$
|
308,653
|
$
|
298,518
|
||||
Export
sales
|
587
|
836
|
||||||
Membership
income
|
4,649
|
4,325
|
||||||
Other
income
|
1,530
|
1,529
|
||||||
Total
revenues
|
315,419
|
305,208
|
||||||
Operating
expenses:
|
||||||||
Cost
of goods sold:
|
||||||||
Net
warehouse club
|
261,717
|
254,426
|
||||||
Export
|
554
|
800
|
||||||
Selling,
general and administrative:
|
||||||||
Warehouse
club operations
|
29,234
|
27,280
|
||||||
General
and administrative
|
7,568
|
7,544
|
||||||
Pre-opening
expenses
|
111
|
—
|
||||||
Asset
impairment and closure costs
|
—
|
248
|
||||||
Total
operating expenses
|
299,184
|
290,298
|
||||||
Operating
income
|
16,235
|
14,910
|
||||||
Other
income (expense):
|
||||||||
Interest
income
|
215
|
126
|
||||||
Interest
expense
|
(630
|
)
|
(581
|
)
|
||||
Other
income (expense), net
|
4
|
(20
|
)
|
|||||
Total
other expense
|
(411
|
)
|
(475
|
)
|
||||
Income
from continuing operations before provision for income taxes and loss of
unconsolidated affiliates
|
15,824
|
14,435
|
||||||
Provision
for income taxes
|
(5,401
|
)
|
(3,647
|
)
|
||||
Loss
of unconsolidated affiliates
|
(2
|
)
|
(5
|
)
|
||||
Income
from continuing operations
|
10,421
|
10,783
|
||||||
Income
(loss) from discontinued operations, net of tax
|
9
|
(19
|
)
|
|||||
Net
income
|
10,430
|
10,764
|
||||||
Net
income attributable to noncontrolling interest
|
(53
|
)
|
(66
|
)
|
||||
Net
income attributable to PriceSmart
|
$
|
10,377
|
$
|
10,698
|
||||
Net income attributable to PriceSmart: | ||||||||
Income from continuing operations | $ | 10,368 | $ | 10,717 | ||||
Income (loss) from discontinued operations, net of tax | 9 | (19 | ) | |||||
$ | 10,377 | $ | 10,698 | |||||
Net income per share attributable to PriceSmart and available for distribution: | ||||||||
Basic
net income per share from continuing operations
|
$
|
0.35
|
$
|
0.36
|
||||
Basic
net income per share from discontinued operations, net of
tax
|
$
|
—
|
$
|
—
|
||||
Basic
net income per share
|
$
|
0.35
|
$
|
0.36
|
||||
Diluted
net income per share from continuing operations
|
$
|
0.35
|
$
|
0.36
|
||||
Diluted
net income per share from discontinued operations, net of
tax
|
$
|
—
|
$
|
—
|
||||
Diluted
net income per share
|
$
|
0.35
|
$
|
0.36
|
||||
Shares
used in per share computations:
|
||||||||
Basic
|
29,105
|
28,860
|
||||||
Diluted
|
29,163
|
28,964
|
||||||
Dividends
per share
|
$
|
—
|
$
|
—
|
Tax
Benefit
|
Accum-
|
|||||||||||||||||||||||||||||||||||||||||||
From
|
ulated
|
Total
|
||||||||||||||||||||||||||||||||||||||||||
Stock-
|
Other
|
PriceSmart
|
||||||||||||||||||||||||||||||||||||||||||
Additional
|
based
|
Compre-
|
Accum-
|
Stock-
|
Non-
|
|||||||||||||||||||||||||||||||||||||||
Common
Stock
|
Paid-in
|
Compen-
|
hensive
|
ulated
|
Treasury
Stock
|
holder’s
|
Controlling
|
Total
|
||||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
sation
|
Loss
|
Deficit
|
Shares
|
Amount
|
Equity
|
Interest
|
Equity
|
||||||||||||||||||||||||||||||||||
30,196 | $ | 3 | $ | 373,192 | $ | 4,563 | $ | (12,897 | ) | $ | (77,510 | ) | 580 | $ | (12,845 | ) | $ | 274,506 | $ | 480 | $ | 274,986 | ||||||||||||||||||||||
Stock-based
compensation
|
— | — | 773 | 2 | — | — | — | — | 775 | — | 775 | |||||||||||||||||||||||||||||||||
Common
stock subject to put agreement
|
— | — | 161 | — | — | — | — | — | 161 | — | 161 | |||||||||||||||||||||||||||||||||
Purchase
of treasury stock for PSC settlement
|
— | — | — | — | — | — | 7 | (161 | ) | (161 | ) | — | (161 | ) | ||||||||||||||||||||||||||||||
Dividend
payable to stockholders
|
— | — | — | — | — | 4,744 | — | — | 4,744 | — | 4,744 | |||||||||||||||||||||||||||||||||
Dividend
paid to stockholders
|
— | — | — | — | — | (4,744 | ) | — | — | (4,744 | ) | — | (4,744 | ) | ||||||||||||||||||||||||||||||
Change
in fair value of interest rate swaps
|
— | — | — | — | (578 | ) | — | — | — | (578 | ) | — | (578 | ) | ||||||||||||||||||||||||||||||
Net
income
|
— | — | — | — | — | 10,698 | — | — | 10,698 | 66 | 10,764 | |||||||||||||||||||||||||||||||||
Translation
adjustment
|
— | — | — | — | (1,538 | ) | — | — | — | (1,538 | ) | 4 | (1,534 | ) | ||||||||||||||||||||||||||||||
Comprehensive
income
|
8,582 | 70 | 8,652 | |||||||||||||||||||||||||||||||||||||||||
Balance
at November 30, 2008
|
30,196 | $ | 3 | $ | 374,126 | $ | 4,565 | $ | (15,013 | ) | $ | (66,812 | ) | 587 | $ | (13,006 | ) | $ | 283,863 | $ | 550 | $ | 284,413 | |||||||||||||||||||||
Balance
at August 31, 2009
|
30,337 | $ | 3 | $ | 377,210 | $ | 4,547 | $ | (17,230 | ) | $ | (49,998 | ) | 656 | $ | (14,134 | ) | $ | 300,398 | $ | 770 | $ | 301,168 | |||||||||||||||||||||
Stock-based
compensation
|
— | — | 770 | 62 | — | — | — | — | 832 | — | 832 | |||||||||||||||||||||||||||||||||
Purchase
of treasury stock
|
— | — | — | — | — | — | — | (1 | ) | (1 | ) | — | (1 | ) | ||||||||||||||||||||||||||||||
Issuance
of restricted stock awards
|
15 | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Forfeiture
of restricted stock awards
|
(3 | ) | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Exercise
of stock options
|
53 | — | 346 | — | — | — | — | — | 346 | — | 346 | |||||||||||||||||||||||||||||||||
Change
in fair value of interest rate swaps, net of tax
|
— | — | — | — | (71 | ) | — | — | — | (71 | ) | — | (71 | ) | ||||||||||||||||||||||||||||||
Net
income
|
— | — | — | — | — | 10,377 | — | — | 10,377 | 53 | 10,430 | |||||||||||||||||||||||||||||||||
Translation
adjustment
|
— | — | — | — | 152 | — | — | — | 152 | (19 | ) | 133 | ||||||||||||||||||||||||||||||||
Comprehensive
income
|
10,458 | 34 | 10,492 | |||||||||||||||||||||||||||||||||||||||||
Balance
at November 30, 2009
|
30,402 | $ | 3 | $ | 378,326 | $ | 4,609 | $ | (17,149 | ) | $ | (39,621 | ) | 656 | $ | (14,135 | ) | $ | 312,033 | $ | 804 | $ | 312,837 |
Three
Months Ended
November
30,
|
||||||||
2009
|
2008
|
|||||||
Income
from continuing operations
|
$
|
10,421
|
$
|
10,783
|
||||
Adjustments
to reconcile income from continuing operations to net cash (used
in) provided by operating activities:
|
||||||||
Depreciation
and amortization
|
3,636
|
2,972
|
||||||
Allowance
for doubtful accounts
|
(2
|
)
|
(2
|
)
|
||||
Asset
impairment and closure costs
|
—
|
175
|
||||||
(Gain)
Loss on sale of property and equipment
|
(4
|
)
|
8
|
|||||
Deferred
income taxes
|
1,036
|
(107
|
)
|
|||||
Equity
in losses of unconsolidated affiliates
|
2
|
5
|
||||||
Excess
tax benefit on stock-based compensation
|
(62
|
)
|
(2
|
)
|
||||
Stock-based
compensation
|
770
|
773
|
||||||
Change
in operating assets and liabilities:
|
||||||||
Change
in accounts receivable, prepaid expenses and other current assets, accrued
salaries and benefits, deferred membership income and other accrued
expenses
|
102
|
(3,678
|
)
|
|||||
Merchandise
inventories
|
(31,549
|
)
|
(20,410
|
)
|
||||
Accounts
payable
|
11,868
|
11,847
|
||||||
Net
cash (used in) provided by continuing operating
activities
|
(3,782
|
)
|
2,364
|
|||||
Net
cash provided by (used in) discontinued operating
activities
|
140
|
(144
|
)
|
|||||
Net
cash (used in) provided by operating activities
|
(3,642
|
)
|
2,220
|
|||||
Investing
Activities:
|
||||||||
Additions
to property and equipment
|
(8,625
|
)
|
(14,174
|
)
|
||||
Proceeds from
disposal of property and equipment
|
60
|
4
|
||||||
Purchase
of interest in Costa Rica joint ventures
|
—
|
(2,241
|
)
|
|||||
Purchase
of interest in Panama joint venture
|
—
|
(4,616
|
)
|
|||||
Capital
contribution to Panama joint venture
|
(100
|
)
|
—
|
|||||
Net
cash used in continuing investing activities
|
(8,665
|
)
|
(21,027
|
)
|
||||
Net
cash provided by discontinued investing activities
|
—
|
51
|
||||||
Net
cash used in investing activities
|
(8,665
|
)
|
(20,976
|
)
|
||||
Financing
Activities:
|
||||||||
Proceeds
from bank borrowings
|
13,582
|
7,260
|
||||||
Repayment
of bank borrowings
|
(6,427
|
)
|
(7,063
|
)
|
||||
Cash
dividend payments
|
—
|
(4,744
|
)
|
|||||
Excess
tax benefit on stock-based compensation
|
62
|
2
|
||||||
Purchase
of treasury stock for PSC settlement
|
—
|
(161
|
)
|
|||||
Purchase
of treasury stock - excluding PSC Settlement
|
(1
|
)
|
—
|
|||||
Proceeds
from exercise of stock options
|
346
|
—
|
||||||
Net
cash provided by (used in) financing activities
|
7,562
|
(4,706
|
)
|
|||||
Effect
of exchange rate changes on cash and cash
equivalents
|
(409
|
)
|
33
|
|||||
Net
decrease in cash and cash equivalents
|
(5,154
|
)
|
(23,429
|
)
|
||||
Cash
and cash equivalents at beginning of period
|
44,193
|
48,121
|
||||||
Cash
and cash equivalents at end of period
|
$
|
39,039
|
$
|
24,692
|
Three
Months Ended
November
30,
|
||||||||
2009
|
2008
|
|||||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest,
net of amounts capitalized
|
$ | 698 | $ | 112 | ||||
Income
taxes
|
$ | 4,197 | $ | 4,093 |
·
|
Reclassified
to noncontrolling interest, a component of total equity, $770,000 at
August 31, 2009, which was previously reported as minority interest
on the consolidated balance sheet. A new subtotal,
"total PriceSmart stockholders’ equity", refers to the equity attributable
to stockholders of PriceSmart;
|
·
|
Reported
as separate captions within the consolidated statements of
income: "Net income attributable to noncontrolling interest" and
"Net income attributable to PriceSmart;"
and
|
·
|
Utilized
income from continuing operations as the starting point on the
consolidated statements of cash flows in order to reconcile net
income to cash flows from operating
activities.
|
Subsidiary
|
Countries
|
Ownership
|
Basis
of Presentation
|
||||
PriceSmart,
Aruba
|
Aruba
|
100.0%
|
Consolidated
|
||||
PriceSmart,
Barbados
|
Barbados
|
100.0%
|
Consolidated
|
||||
PSMT
Caribe, Inc.:
|
|||||||
Costa Rica
|
Costa
Rica
|
100.0%
|
Consolidated
|
||||
Dominican Republic
|
Dominican
Republic
|
100.0%
|
Consolidated
|
||||
El Salvador
|
El
Salvador
|
100.0%
|
Consolidated
|
||||
Honduras
|
Honduras
|
100.0%
|
Consolidated
|
||||
PriceSmart,
Guam
|
Guam
|
100.0%
|
Consolidated
(1)
|
||||
PriceSmart,
Guatemala
|
Guatemala
|
100.0%
|
Consolidated
|
||||
PriceSmart,
Jamaica
|
Jamaica
|
100.0%
|
Consolidated
|
||||
PriceSmart,
Nicaragua
|
Nicaragua
|
100.0%
|
Consolidated
|
||||
PriceSmart,
Panama
|
Panama
|
100.0%
|
Consolidated
|
||||
PriceSmart,
Trinidad
|
Trinidad
|
95.0%
|
Consolidated
|
||||
PriceSmart,
U.S. Virgin Islands
|
U.S. Virgin
Islands
|
100.0%
|
Consolidated
|
||||
GolfPark
Plaza, S.A.
|
Panama
|
50.0%
|
Equity
(2)
|
||||
Price
Plaza Alajuela PPA, S.A.
|
Costa
Rica
|
50.0%
|
Equity (2)
|
||||
Newco2
|
Costa
Rica
|
50.0%
|
Equity
(2)
|
(1)
|
Entity
is treated as discontinued operations in the consolidated financial
statements.
|
(2)
|
Purchases
of joint venture interests during the first quarter of fiscal year 2009
recorded as investment in unconsolidated affiliates on the consolidated
balance sheets.
|
Tax
Jurisdiction
|
Fiscal
Years Subject to Audit
|
|
U.S.
federal
|
1995
through 1998, 2000 through 2001, and 2005 through
2009
|
|
California
(U.S.)
|
2000
through 2001 and 2005 to the present
|
|
Florida(U.S.)
|
2000
through 2001 and 2005 to the present
|
|
Aruba
|
2002
to the present
|
|
Barbados
|
2000
to the present
|
|
Costa
Rica
|
2006
to the present
|
|
Dominican
Republic
|
2006
to the present
|
|
El
Salvador
|
2006
to the present
|
|
Guatemala
|
2005
to the present
|
|
Honduras
|
2005
to the present
|
|
Jamaica
|
2003
to the present
|
|
Mexico
|
2006
to the present
|
|
Nicaragua
|
2006
to the present
|
|
Panama
|
2006
to the present
|
|
Trinidad
|
2003
to the present
|
|
U.S.
Virgin Islands
|
2001
to the present
|
November
30, 2009
|
August
31,
2009
|
|||||||
Cash
and cash equivalents
|
$
|
143
|
$
|
28
|
||||
Accounts
receivable, net
|
223
|
223
|
||||||
Prepaid
expenses and other current assets
|
43
|
46
|
||||||
Other
assets
|
538
|
603
|
||||||
Assets
of discontinued operations
|
$
|
947
|
$
|
900
|
||||
Other
accrued expenses
|
$
|
121
|
$
|
299
|
||||
Liabilities
of discontinued operations
|
$
|
121
|
$
|
299
|
Three
Months Ended November 30,
|
|||||||
2009
|
2008
|
||||||
Net
warehouse club sales
|
$
|
—
|
$
|
—
|
|||
Pre-tax
income (loss) from operations
|
9
|
(19
|
) | ||||
Income
tax (provision) benefit
|
—
|
—
|
|||||
Net
income (loss)
|
$
|
9
|
$
|
(19
|
) |
November
30, 2009
|
August
31,
2009
|
|||||||
Land
|
$ | 74,564 | $ | 74,506 | ||||
Building
and improvements
|
141,977 | 139,639 | ||||||
Fixtures
and equipment
|
83,672 | 80,680 | ||||||
Construction
in progress
|
19,745 | 16,253 | ||||||
Total
property and equipment, historical cost
|
319,958 | 311,078 | ||||||
Less:
accumulated depreciation
|
(83,101 | ) | (79,280 | ) | ||||
Property
and equipment, net
|
$ | 236,857 | $ | 231,798 |
Land
Costa Rica
|
$
|
3,724
|
||
Land
Panama
|
2,856
|
|||
Total
land acquired
|
$
|
6,580
|
Three
Months Ended
|
||||||||||||||||||||||||
November
30, 2009
|
November
30, 2008
|
|||||||||||||||||||||||
Income
|
Weighted
Average Shares Outstanding
|
Per
Share Amount
|
Income
|
Weighted
Average Shares Outstanding
|
Per
Share Amount
|
|||||||||||||||||||
Net income from
continuing operations attributable to PriceSmart
|
$ | 10,368 | $ | 10,717 | ||||||||||||||||||||
Less:
|
||||||||||||||||||||||||
Earnings
allocated to unvested stockholders
|
(218 | ) | (271 | ) | ||||||||||||||||||||
Basic
EPS
|
||||||||||||||||||||||||
Distributable
Income available to stockholders
|
10,150 | 29,105 | $ | 0.35 | 10,446 | 28,860 | $ | 0.36 | ||||||||||||||||
Effect
of Dilutive Securities
|
||||||||||||||||||||||||
Add
Back:
|
||||||||||||||||||||||||
Undistributed
earnings allocated to unvested stockholders (two-class
method)
|
218 | 271 | ||||||||||||||||||||||
Stock
Options
|
58 | 104 | ||||||||||||||||||||||
Less:
|
||||||||||||||||||||||||
Undistributed
earnings reallocated to unvested stockholders (two-class
method)
|
(218 | ) | (270 | ) | ||||||||||||||||||||
Diluted
EPS – common shares
|
$ | 10,150 | 29,163 | $ | 0.35 | 10,447 | 28,964 | $ | 0.36 |
Three
Months Ended
November
30,
|
||||||||
2009
|
2008
|
|||||||
Options
granted to employees and directors
|
$ | 10 | $ | 27 | ||||
Restricted
stock grants
|
744 | 746 | ||||||
Restricted
stock units
|
16 | — | ||||||
Stock-based
compensation expense
|
$ | 770 | $ | 773 |
Shares
|
Weighted
Average Exercise Price
|
|||||||
Shares
subject to outstanding options at August 31, 2009
|
$ | 179,998 | $ | 10.02 | ||||
Granted
|
— | — | ||||||
Exercised
|
(59,150 | ) | 6.20 | |||||
Forfeited
or expired
|
— | — | ||||||
Shares
subject to outstanding options at November 30, 2009
|
$ | 120,848 | $ | 11.89 |
Range
of
Exercise
Prices
|
Outstanding as
of
November 30, 2009
|
Weighted-Average
Remaining
Contractual
Life
(in
years)
|
Weighted-Average
Exercise
Price on Options Outstanding
|
Options
Exercisable as
of November
30, 2009
|
Weighted-Average
Exercise
Price
on
Options
Exercisable
as of
November
30, 2009
|
|||||||||||||||||
$
|
6.13
– $8.90
|
85,848
|
0.53
|
$
|
6.40
|
83,848
|
$
|
6.36
|
||||||||||||||
8.91
– 20.00
|
13,000
|
3.86
|
16.15
|
3,800
|
16.14
|
|||||||||||||||||
20.01
– 39.00
|
22,000
|
2.08
|
30.77
|
15,600
|
33.70
|
|||||||||||||||||
$
|
6.13
– $39.00
|
120,848
|
1.17
|
$
|
11.89
|
103,248
|
$
|
10.86
|
Three
Months Ended November 30,
|
|||||
2009
|
2008
|
||||
Grants
outstanding at August 31,
|
618,250
|
748,860
|
|||
Granted
|
14,800
|
—
|
|||
Cancelled
|
(3,274
|
)
|
(1,150)
|
||
Vested
|
(112
|
)
|
—
|
||
Grants
outstanding at November 30,
|
629,664
|
747,710
|
Three
Months Ended November 30,
|
||||||||
2009
|
2008
|
|||||||
Proceeds
from stock options exercised
|
$ | 346 | — | |||||
Intrinsic
value of stock options exercised
|
$ | 768 | — |
Location (1)
|
Facility
Type
|
Date
Opened
|
Approximate
Square
Footage
|
Current
Lease
Expiration
Date
|
Remaining
Option(s)
to
Extend
|
|||
Via
Brazil, Panama
|
Warehouse
Club
|
December 4, 1997
|
68,696
|
October
31, 2026
|
10
years
|
|||
Miraflores, Guatemala
|
Warehouse
Club
|
April
8, 1999
|
66,059
|
December 31, 2020
|
5
years
|
|||
Pradera, Guatemala
|
Warehouse
Club
|
May
29, 2001
|
48,438
|
May
28, 2021
|
none
|
|||
Tegucigalpa, Honduras
|
Warehouse
Club
|
May
31, 2000
|
64,735
|
May
30, 2020
|
none
|
|||
Oranjestad,
Aruba
|
Warehouse
Club
|
March
23, 2001
|
64,627
|
March
23, 2021
|
10
years
|
|||
Port of Spain, Trinidad
|
Warehouse
Club
|
December
5, 2001
|
54,046
|
July
5, 2031
|
none
|
|||
St.
Thomas, U.S.V.I.
|
Warehouse
Club
|
May
4, 2001
|
54,046
|
February
28, 2020
|
10
years
|
|||
Barbados
|
Storage
Facility
|
May
5, 2006
|
4,800
|
May
31, 2011
|
1
year
|
|||
Chaguanas,
Trinidad
|
Employee
Parking
|
May
1, 2009
|
4,944
|
April
30, 2024
|
none
|
|||
San
Diego, CA
|
Corporate
Headquarters
|
April
1, 2004
|
35,000
|
March
31, 2011
|
5
years
|
|||
Miami,
FL
|
Distribution
Facility
|
March
1, 2008
|
200,709
|
August
31, 2018
|
10
years
|
|||
Miami,
FL
|
Distribution
Facility
|
September
1, 2001
|
36,575
|
February
28, 2011
|
none
|
(1)
|
The
former club located in Guam is not included; this warehouse club was
closed in fiscal year 2004. The land and building are currently
subleased to a third-party.
|
Three
Months Ended
November
30,
|
||||||||
2009
|
2008
|
|||||||
Minimum
rental payments
|
$ | 1,695 | $ | 1,631 | ||||
Deferred
rent accruals
|
110 | 133 | ||||||
Total
straight line rent expense
|
1,805 | 1,764 | ||||||
Contingent
rental payments
|
356 | 328 | ||||||
Rental
expense
|
$ | 2,161 | $ | 2,092 |
Periods
Ended November 30,
|
Open
Locations
(1)
|
|||
2010
|
$ | 6,569 | ||
2011
|
5,674 | |||
2012
|
5,539 | |||
2013
|
5,626 | |||
2014
|
5,674 | |||
Thereafter
|
49,326 | |||
Total
(2)
|
$ | 78,408 |
(1)
|
Operating
lease obligations have been reduced by approximately $648,000 to reflect
sub-lease income.
|
(2)
|
The
total excludes payments for the discontinued operations in
Guam. The projected minimum payments excluded for Guam are
approximately $1.6 million; however, sublease income for this location is
projected to be approximately $2.1 million, yielding no net projected
obligation.
|
Three
Months Ended
November
30,
|
||||||||
2009
|
2008
|
|||||||
Minimum
rental income
|
$
|
604
|
$
|
647
|
||||
Deferred
rent income
|
16
|
297
|
(1)
|
|||||
Total
straight line rent income
|
620
|
944
|
||||||
Contingent
rental income
|
25
|
—
|
||||||
Total
rental income
|
$
|
645
|
$
|
944
|
(1)
|
The
Company recorded deferred rental income of $279,000 in the first quarter
of fiscal year 2009 based on a revised calculation that is not expected to
affect future quarters.
|
Periods
ended November 30,
|
Amount
|
|||
2010
|
$
|
1,928
|
||
2011
|
1,425
|
|||
2012
|
1,050
|
|||
2013
|
955
|
|||
2014
|
945
|
|||
Thereafter
|
6,603
|
|||
Total
|
$
|
12,906
|
November
30,
|
August
31,
|
|||||||
2009
|
2009
|
|||||||
Note
due July 2017, 9.0% fixed rate
|
$
|
6,311
|
$
|
6,552
|
||||
Note
due November 2014, (BB Prime rate - 2%) 7.85% current rate (1)
|
3,600
|
3,825
|
||||||
Note
due November 2014, (six-month LIBOR + 1.5%) 2.03%
current
Rate(1)
|
3,557
|
3,780
|
||||||
Note
due September 2014, (greater of 30 days LIBOR + 4% or 7.5%) 7.5% current
rate(1)
|
7,867
|
—
|
||||||
Note
due February 2018, (1 year LIBOR + 2.75%) 7.05% current rate(1)
|
7,875
|
8,100
|
||||||
Note
due February 2016, 6.7% fixed rate
|
8,788
|
9,025
|
||||||
Note
due August 2014, (greater of 30 days LIBOR + 4% or 7.5%) 7.5% current
rate(1)
|
9,750
|
10,000
|
||||||
Note
due September 2011
|
433
|
428
|
||||||
Total
long-term debt
|
48,181
|
41,710
|
||||||
Less:
current portion
|
5,386
|
4,590
|
||||||
Long-term
debt, net of current portion
|
$
|
42,795
|
$
|
37,120
|
(1)
|
Under
the terms of these agreements, the subsidiaries that received these loans
must comply with certain financial covenants, which include debt service
and leverage ratios. As of November 30, 2009 and August 31, 2009, these
subsidiaries are in compliance with the
covenants.
|
Income
Statement Classification
|
Interest
expense
on
Borrowings
|
Loss
on
Swaps
|
Interest
expense
|
|||||||||
Interest
expense for the three months ended November 30, 2009
|
$ | 113 | $ | 80 | $ | 193 | ||||||
Interest
expense for the three months ended November 30, 2008
|
$ | 181 | $ | 26 | $ | 207 |
Floating Rate Payer (Swap
Counterparty)
|
Notional
Amount as of November 30, 2009
|
Notional
Amount as of August 31, 2009
|
||||||
RBTT
|
$
|
7,875
|
$
|
8,100
|
||||
Citibank
N.A.
|
$
|
3,600
|
$
|
3,825
|
||||
Total
|
$
|
11,475
|
$
|
11,925
|
Liability
Derivatives
|
||||||||||
November
30, 2009
|
August
31, 2009
|
|||||||||
Derivatives
designated as hedging instruments
|
Balance
Sheet Location
|
Fair
Value
|
Balance
Sheet Location
|
Fair
Value
|
||||||
Interest
Rate Swaps(1)
|
Other
Accrued Expenses
|
$
|
713
|
Other
Accrued Expenses
|
$
|
625
|
||||
Total derivatives designated as hedging instruments (2)
|
$
|
713
|
$
|
625
|
(1)
|
The
effective portion of the interest rate swaps was recorded as a
debit (charge) to accumulated other comprehensive loss for $535,000 and
$464,000, net of tax, as of November 30, and August 31, 2009,
respectively.
|
(2)
|
There
were no derivatives not designated as hedging
instruments.
|
November
30,
|
August
31,
|
|||||||
2009
|
2009
|
|||||||
Current
assets
|
$ | 174 | $ | 22 | ||||
Noncurrent
assets
|
10,950 | 10,868 | ||||||
Current
liabilities
|
31 | 41 | ||||||
Noncurrent
liabilities
|
$ | — | $ | — |
For
the three months ended
November
30,
|
||||||||
2009
|
2008
|
|||||||
Net
loss
|
$ | (4 | ) | $ | (10 | ) |
United
States
Operations
|
Central
American
Operations
|
Caribbean
Operations
|
Reconciling
Items(1)
|
Total
|
||||||||||||||||||
Period
Ended November 30, 2009
|
||||||||||||||||||||||
Revenue
from external customers
|
$
|
602
|
$
|
190,518
|
$
|
124,299
|
$
|
—
|
$
|
315,419
|
||||||||||||
Intersegment
revenues
|
128,859
|
—
|
811
|
(129,670
|
)
|
—
|
||||||||||||||||
Depreciation
and amortization
|
(276
|
)
|
(1,993
|
)
|
(1,367
|
)
|
—
|
(3,636
|
)
|
|||||||||||||
Asset
impairment and closure (costs) gains
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||
Operating
income
|
5,480
|
7,345
|
3,410
|
—
|
16,235
|
|||||||||||||||||
Interest
income from external sources
|
111
|
42
|
62
|
—
|
215
|
|||||||||||||||||
Interest
income from intersegment sources
|
906
|
194
|
—
|
(1,100
|
)
|
—
|
||||||||||||||||
Interest
expense from external sources
|
(8
|
)
|
(464
|
)
|
(158
|
)
|
—
|
(630
|
)
|
|||||||||||||
Interest
expense from intersegment sources
|
(20
|
)
|
(539
|
)
|
(541
|
)
|
1,100
|
—
|
||||||||||||||
Income
from continuing operations before taxes
|
6,474
|
6,581
|
2,769
|
—
|
15,824
|
|||||||||||||||||
Income
tax expense
|
(1,452
|
)
|
(2,899
|
)
|
(1,050
|
)
|
—
|
(5,401
|
)
|
|||||||||||||
Net
income
|
5,032
|
3,679
|
1,666
|
—
|
10,377
|
|||||||||||||||||
Assets
of discontinued operations
|
947
|
—
|
—
|
—
|
947
|
|||||||||||||||||
Long-lived
assets (other than deferred tax assets)
|
27,235
|
161,343
|
98,105
|
—
|
286,683
|
|||||||||||||||||
Goodwill
|
—
|
32,284
|
5,131
|
—
|
37,415
|
|||||||||||||||||
Identifiable
assets
|
34,096
|
299,422
|
183,739
|
—
|
517,257
|
|||||||||||||||||
Period
Ended November 30, 2008
|
||||||||||||||||||||||
Revenue
from external customers
|
$
|
852
|
$
|
178,866
|
$
|
125,490
|
$
|
—
|
$
|
305,208
|
||||||||||||
Intersegment
revenues
|
116,333
|
—
|
679
|
(117,012
|
)
|
—
|
||||||||||||||||
Depreciation
and amortization
|
(211
|
)
|
(1,575
|
)
|
(1,190
|
)
|
—
|
(2,976
|
)
|
|||||||||||||
Asset
impairment and closure (costs) gains
|
—
|
(269
|
)
|
21
|
—
|
(248
|
)
|
|||||||||||||||
Operating
income
|
1,115
|
8,110
|
5,685
|
—
|
14,910
|
|||||||||||||||||
Interest
income from external sources
|
69
|
41
|
16
|
—
|
126
|
|||||||||||||||||
Interest
income from intersegment sources
|
1,042
|
206
|
—
|
(1,248
|
)
|
—
|
||||||||||||||||
Interest
expense from external sources
|
(12
|
)
|
(237
|
)
|
(332
|
)
|
—
|
(581
|
)
|
|||||||||||||
Interest
expense from intersegment sources
|
(27
|
)
|
(758
|
)
|
(463
|
)
|
1,248
|
—
|
||||||||||||||
Income
from continuing operations before taxes
|
2,191
|
7,342
|
4,831
|
—
|
14,364
|
|||||||||||||||||
Income
tax expense
|
(402
|
)
|
(1,534
|
)
|
(1,711
|
)
|
—
|
(3,647
|
)
|
|||||||||||||
Net
income
|
1,769
|
5,808
|
3,121
|
—
|
10,698
|
|||||||||||||||||
Assets
of discontinued operations
|
1,340
|
—
|
—
|
—
|
1,340
|
|||||||||||||||||
Long-lived
assets (other than deferred tax assets)
|
27,060
|
152,457
|
80,622
|
—
|
260,139
|
|||||||||||||||||
Goodwill
|
—
|
33,388
|
5,448
|
—
|
38,836
|
|||||||||||||||||
Identifiable
assets
|
37,229
|
279,452
|
149,979
|
—
|
466,660
|
|||||||||||||||||
Year
Ended August 31, 2009
|
||||||||||||||||||||||
Revenue
from external customers
|
$
|
3,740
|
$
|
741,133
|
$
|
506,755
|
$
|
—
|
$
|
1,251,628
|
||||||||||||
Intersegment
revenues
|
409,840
|
—
|
3,349
|
(413,189
|
)
|
—
|
||||||||||||||||
Depreciation
and amortization
|
(983
|
)
|
(7,830
|
)
|
(5,085
|
)
|
—
|
(13,898
|
)
|
|||||||||||||
Asset
impairment and closure (costs) gains
|
(99
|
)
|
212
|
136
|
—
|
249
|
||||||||||||||||
Operating
income
|
3,823
|
32,601
|
21,060
|
—
|
57,484
|
|||||||||||||||||
Interest
income from external sources
|
148
|
186
|
123
|
—
|
457
|
|||||||||||||||||
Interest
income from intersegment sources
|
3,769
|
824
|
—
|
(4,593
|
)
|
—
|
||||||||||||||||
Interest
expense from external sources
|
220
|
(795
|
)
|
(1,125
|
)
|
—
|
(1,700
|
)
|
||||||||||||||
Interest
expense from intersegment sources
|
(126
|
)
|
(2,778
|
)
|
(1,689
|
)
|
4,593
|
—
|
||||||||||||||
Income
from continuing operations before taxes
|
7,847
|
29,938
|
17,631
|
—
|
55,416
|
|||||||||||||||||
Income
tax expense
|
(2,128
|
)
|
(9,059
|
)
|
(1,882
|
)
|
—
|
(13,069
|
)
|
|||||||||||||
Net
income
|
5,690
|
20,879
|
15,750
|
—
|
42,319
|
|||||||||||||||||
Assets
of discontinued operations
|
900
|
—
|
—
|
—
|
900
|
|||||||||||||||||
Long-lived
assets (other than deferred tax assets)
|
27,309
|
159,607
|
94,737
|
—
|
281,653
|
|||||||||||||||||
Goodwill
|
—
|
32,394
|
5,144
|
—
|
37,538
|
|||||||||||||||||
Identifiable
assets
|
43,544
|
277,481
|
166,348
|
—
|
487,373
|
(1)
|
The
reconciling items reflect the amount eliminated on consolidation of
intersegment transactions.
|
ITEM 2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Country/Territory
|
Number
of
Warehouse
Clubs
in
Operation (as of
November
30, 2009)
|
Number
of
Warehouse Clubs
in Operation (as of
November
30, 2008)
|
Ownership (as of
November
30, 2009)
|
Basis
of
Presentation
|
||||
Panama
|
4
|
4
|
100%
|
Consolidated
|
||||
Costa
Rica
|
5
|
4
|
100%
|
Consolidated
|
||||
Dominican
Republic
|
2
|
2
|
100%
|
Consolidated
|
||||
Guatemala
|
3
|
3
|
100%
|
Consolidated
|
||||
El
Salvador
|
2
|
2
|
100%
|
Consolidated
|
||||
Honduras
|
2
|
2
|
100%
|
Consolidated
|
||||
Trinidad
|
3
|
3
|
95%
|
Consolidated
|
||||
Aruba
|
1
|
1
|
100%
|
Consolidated
|
||||
Barbados
|
1
|
1
|
100%
|
Consolidated
|
||||
U.S.
Virgin Islands
|
1
|
1
|
100%
|
Consolidated
|
||||
Jamaica
|
1
|
1
|
100%
|
Consolidated
|
||||
Nicaragua
|
1
|
1
|
100%
|
Consolidated
|
||||
Totals
|
26
|
25
|
·
|
The
economic slowdown in the U.S. and other major world economies is having a
negative impact on the economies of most of those countries where
PriceSmart operates. Flat or declining expatriate remittances,
falling U.S. demand for exports from Central America (particularly
affecting the assembly (“maquila”) export sector in Guatemala, Honduras
and the Dominican Republic), and reduced tourism from the U.S. and Europe
are all contributing to recessionary pressures and falling consumer
confidence in many of the Company’s markets. Reduced overall consumer
spending has and will likely continue to affect sales for the Company to
both retail and wholesale members.
|
·
|
The
Company has experienced a reduced level of sales growth beginning in
January 2009 with reported monthly comparable warehouse club sales growth
of 18% in January 2009 declining in the subsequent months to a negative
growth rate of 1.1% and 0.7% in September 2009 and October 2009,
respectively. In November 2009, the Company's comparable
warehouse club sales increased 0.8%. This sales growth
reduction occurred 9 to 12 months after similar trends were reported by
the major U.S. retailers. While the Company cannot know for
certain, an economic recovery in the retail sector in the Company’s
markets may similarly lag behind any recovery that might be experienced in
the U.S. over the next year.
|
·
|
Many
PriceSmart markets are susceptible to foreign currency exchange rate
volatility. Currency exchange rate changes either increase or decrease the
cost of imported products and can have an effect on the reported sales of
the consolidated company when local currency denominated sales are
translated to U.S. dollars. Approximately 49% of the Company’s
net warehouse sales are comprised of products imported into the markets
where PriceSmart warehouse clubs are located. Products imported for sale
in PriceSmart markets are purchased in U.S. dollars, but approximately 78%
of the Company's net warehouse sales are in foreign currencies. In
general, local currencies in PriceSmart markets have declined
relative to the dollar. Declines in local currencies relative to the
dollar effectively increase the cost to the Company’s members of imported
products, while appreciation in local currencies makes imported products
more affordable. There is no way to accurately forecast how currencies may
trade in the future. PriceSmart monitors movements in currency rates and
makes adjustments to pricing of U.S. merchandise from time to
time. With respect to locally acquired merchandise sold in the
Company’s warehouse clubs, which accounts for approximately 51% of net
warehouse sales, a decline in local currency rates relative to the U.S.
dollar will decrease the reported year over year sales of the Company
when expressed in U.S. dollars. Conversely, a strengthening of
local currency rates relative to the U.S. dollar will increase the
reported year over year sales.
|
·
|
Due
to the slowing economic environment in the Company’s markets, management
has noted a shift in member demand toward more consumable merchandise
purchases. In this respect, the Company is carefully
monitoring inventory mix and levels, while maintaining its pricing
leadership position and aggressively pursuing product
purchasing opportunities.
|
·
|
The
Company’s strategy is to continually seek ways to reduce prices for
its members. This involves improving purchasing, reducing supply
chain costs for the movement of merchandise from the U.S. to its
warehouse clubs, and controlling operating expenses within the warehouse
clubs and corporate headquarters. The strong growth in sales that the
Company has experienced over the last three years has improved the
Company’s buying power and has resulted in leveraging of
costs. This allows for reduced prices, thereby providing better
value to PriceSmart members.
|
·
|
During
the first three months of fiscal year 2010, the Company contracted for the
use of a bonded warehouse in Miami, Florida. The Company will incur
distribution charges on a per unit basis for this distribution center. The
Company entered into a new lease amendment for its Miami frozen
distribution center on August 31, 2009, providing for an expansion of
5,000 square feet of leased frozen and refrigerated space, which will meet
the Company’s projected capacity needs for at least the next year, during
which time the Company will evaluate the need to relocate to a
larger facility. In August 2009, fiscal year 2009, the Company eliminated
the Panama distribution center for which the Company incurred distribution
charges on a per unit basis. In fiscal year 2008, the Company signed a
lease for a larger dry distribution center in Miami,
Florida. These actions have permitted the Company to more efficiently
service the PriceSmart warehouse club locations, to reduce transit
times for merchandise shipped between the U.S. and its warehouse club
locations and to realize efficiencies in distribution operating
expenses.
|
·
|
The
Company offers a co-branded credit card to PriceSmart members in Central
America in partnership with a bank in the region. The program
allows for savings in credit card processing fees when the co-branded card
is used at the warehouse club as well as providing benefits to club
members. Management anticipates that as more members obtain and
use the card, the Company will see increased savings related to credit
card costs. During fiscal year 2009 the Company introduced the
co-branded program in its Caribbean markets, except for Aruba, in
partnership with a bank in that region. The Company has been
pleased with the initial response from members, and management expects to
grow the use of the co-branded cards in those markets in the future,
resulting in reduced credit card processing fees and increased value for
members.
|
·
|
Based
on the success of previously expanding the size of certain PriceSmart
buildings, the Company expanded two additional warehouse clubs during
fiscal year 2009. The expansion of the warehouse club in Aruba
was opened to the members in September 2009, fiscal year 2010, adding
approximately 9,000 square feet of sales floor space. The expansion of the
warehouse club in Nicaragua was completed and opened to the members in
April 2009, and the club is now operating with additional sales floor
space of approximately 8,600 square
feet.
|
·
|
The
Company continues to evaluate sites for additional PriceSmart
locations. Although a specific target for new warehouse club
openings in fiscal years 2010 and beyond has not been set, management
believes that there are opportunities to add locations in certain
PriceSmart markets. In that regard, the Company announced on October
1, 2008 that it had entered into agreements to acquire properties in
Panama and Costa Rica for the construction of new warehouse
clubs. The new Costa Rica warehouse club, the fifth
PriceSmart warehouse club in that country, opened in April
2009. In Panama, the Company will relocate an existing
warehouse club to this new site and plans to sell or lease the existing
site after relocation has occurred. This is expected to be
completed during the spring of 2010. In December 2008, the Company
acquired approximately 31,000 square meters of land in Trinidad upon which
it is currently constructing a new warehouse club which will bring the
number of warehouse clubs in that country to four. This new warehouse club
is expected to open in the spring of 2010. Subsequent to the
end of the quarter, the Company acquired 30,000 square meters of land in
Santo Domingo, Dominican Republic on December 22, 2009. The
Company plans on constructing a new warehouse club on the site, the second
club in Santo Domingo and the third in the Dominican
Republic. Currently, the Company expects to open this new
warehouse club during fiscal year 2011. Finally, the Company
continues to examine Colombia as a potential new market for multiple
PriceSmart warehouse clubs.
|
·
|
The
Company’s policy is to own its real estate wherever possible because of
the lower operating expenses associated with ownership and because a
successful PriceSmart warehouse club historically has enhanced
adjacent real estate values. In acquiring suitable sites for new
warehouse clubs, the Company sometimes is required to purchase a land
parcel that is larger than what is typically needed for the
warehouse club itself. In those cases, the Company may
utilize the additional land for commercial real estate
developments. For example, the Company purchased a 50% interest in
the joint ventures that own and will develop additional land adjacent to
the new warehouse club sites in Panama and Costa Rica as commercial
shopping centers. With respect to the Trinidad site acquisition, the
Company is planning to develop approximately 50% of that site for retail
shops.
|
·
|
Net
warehouse club sales increased 3.4% over the prior year, resulting from
the opening of a new warehouse club in Costa Rica in April
2009. Comparable warehouse club sales (that is, sales in
warehouse clubs that have been open for greater than 13 1/2 calendar
months) for the 13 weeks ending November 29, 2009 were essentially
flat.
|
·
|
Membership
income for the first three months of fiscal year 2010 increased 7.5% to
$4.6 million as a result of a 7% increase in membership accounts from
November 30, 2008 to November 30, 2009, continued strong renewal rates at
83% and a 0.9% decrease in the average membership
fee.
|
·
|
Gross
profits (net warehouse club sales less associated cost of goods sold)
increased 6.5% over the prior year due to increased warehouse sales, and
an increase in gross margin of 44 basis points as a percent of net
warehouse sales largely related to the effect of foreign exchange rate
movements.
|
·
|
Selling,
general and administrative expenses were 33 basis points higher, as a
percentage of sales than the same period last year reflecting the
costs associated with an additional warehouse club and the effect of
higher payroll costs in the comparable warehouse clubs on low or negative
sales growth.
|
·
|
Operating
income for the first three months of fiscal year 2010 was $16.2
million, an increase of $1.3 million over the first three months
of fiscal year 2009.
|
·
|
Net
income for the first three months of fiscal year 2010 was $10.4 million,
or $0.35 per diluted share.
|
Three
Months Ended November 30,
|
||||||||||||||||||||||||
2009
|
2008
|
|||||||||||||||||||||||
Amount
|
% of Net
Revenue
|
Amount
|
% of Net
Revenue
|
Increase
|
Change
|
|||||||||||||||||||
(Dollar
amounts in thousands)
|
||||||||||||||||||||||||
Central
America
|
$
|
186,231
|
60.3
|
%
|
$
|
174,810
|
58.6
|
%
|
$
|
11,421
|
6.5
|
%
|
||||||||||||
Caribbean
|
122,422
|
39.7
|
%
|
123,708
|
41.4
|
%
|
(1,286
|
)
|
(1.0)
|
%
|
||||||||||||||
$
|
308,653
|
100.0
|
%
|
$
|
298,518
|
100.0
|
%
|
$
|
10,135
|
3.4
|
%
|
Liability
Derivatives
|
||||||||||
November
30,
|
||||||||||
2009
|
2008
|
|||||||||
Derivatives
designated as hedging instruments
|
Balance
Sheet Location
|
Fair
Value
|
Balance
Sheet Location
|
Fair
Value
|
||||||
Interest
Rate Swaps(1)
|
Other
Accrued Expenses
|
$
|
713
|
Other
Accrued Expenses
|
$
|
625
|
||||
Total derivatives designated as hedging instruments(2)
|
$
|
713
|
$
|
625
|
(1)
|
The
effective portion of the interest rate swaps was recorded as a
debit (charge) to accumulated other comprehensive loss for $535,000 and
$464,000, net of tax, as of November 30, 2009 and August 31,
2009.
|
(2)
|
There
were no derivatives not designated as hedging
instruments.
|
Payments
due in:
|
||||||||||||||||||||
Contractual
obligations
|
Less than
1
Year
|
1
to 3
Years
|
4
to 5
Years
|
After
5
Years
|
Total
|
|||||||||||||||
Long-term
debt (1)
|
$
|
5,386
|
$
|
11,205
|
$
|
19,389
|
$
|
12,201
|
$
|
48,181
|
||||||||||
Operating
leases (2)(3)
|
6,569
|
11,212
|
11,300
|
49,327
|
78,408
|
|||||||||||||||
Additional
capital contribution commitments to
joint
ventures (4)
|
3,996
|
—
|
—
|
—
|
3,996
|
|||||||||||||||
Equipment
lease(5)
|
107
|
—
|
—
|
—
|
107
|
|||||||||||||||
Distribution
center services(6)
|
125
|
135
|
—
|
—
|
260
|
|||||||||||||||
Total
|
$
|
16,183
|
$
|
22,552
|
$
|
30,689
|
$
|
61,528
|
$
|
130,952
|
(1)
|
Amounts
shown are for the principal portion of the long-term debt payments
only.
|
(2)
|
Amounts
shown exclude future operating lease payments due for the closed warehouse
club in Guam. The projected minimum payments excluded for Guam are
approximately $1.6 million; sublease income for this location is also
approximately $2.1 million, yielding no net projected
obligation.
|
(3)
|
Operating
lease obligations have been reduced by approximately $648,000 to reflect
the amounts net of sublease income.
|
(4)
|
Amounts
shown are the contractual capital contribution requirements for the
Company's investment in the joint ventures that the Company has agreed,
however, the parties intend to seek alternate financing for these
projects.
|
(5)
|
Certain
obligations under leasing arrangements are collateralized by the
underlying asset being leased.
|
(6)
|
Amounts
shown are the contractual distribution center services agreements for
Mexico City. The minimum payment includes only the fixed portion of each
contract.
|
Country/Territory
|
Number
of
Warehouse Clubs
In
Operation
|
Anticipated Warehouse
Club
Openings
in
FY 2010
|
Currency
|
|||
Panama
|
4
|
—(2)
|
U.S.
Dollar
|
|||
Costa
Rica
|
5
|
—
|
Costa
Rican Colon
|
|||
Dominican
Republic
|
2
|
—
|
Dominican
Republic Peso
|
|||
Guatemala
|
3
|
—
|
Guatemalan
Quetzal
|
|||
El
Salvador
|
2
|
—
|
U.S.
Dollar
|
|||
Honduras
|
2
|
—
|
Honduran
Lempira
|
|||
Trinidad
|
3
|
1(3)
|
Trinidad
Dollar
|
|||
Aruba
|
1
|
—
|
Aruba
Florin
|
|||
Barbados
|
1
|
—
|
Barbados
Dollar
|
|||
U.S.
Virgin Islands
|
1
|
—
|
U.S.
Dollar
|
|||
Jamaica
|
1
|
—
|
Jamaican
Dollar
|
|||
Nicaragua
|
1
|
—
|
Nicaragua
Cordoba Oro
|
|||
Totals
|
26 (1)
|
1
|
(1)
|
The
Company opened a warehouse club in fiscal year 2009 in Costa Rica and
opened two warehouse clubs in fiscal year 2008, one each in Guatemala and
Trinidad.
|
(2)
|
An
existing PriceSmart warehouse club in Panama City, Panama (known as the
Los Pueblos club) will be relocated to a new site (Brisas) in the spring
of 2010, and the Company will close the existing warehouse club after the
relocation has been completed.
|
(3)
|
This
warehouse club is expected to open in the spring of 2010 (San
Fernando).
|
LEGAL
PROCEEDINGS
|
ITEM 1A.
|
DEFAULTS
UPON SENIOR SECURITIES
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
OTHER
INFORMATION
|
EXHIBITS
|
3.1(1)
|
Amended
and Restated Certificate of Incorporation of the
Company.
|
3.2(2)
|
Certificate
of Amendment of Amended and Restated Certificate of Incorporation of the
Company.
|
3.3(3)
|
Certificate
of Amendment of Amended and Restated Certificate of Incorporation of the
Company.
|
3.4(1)
|
Amended
and Restated Bylaws of the Company.
|
10.1*
|
Twenty
Third Amendment to Employment Agreement between the Company and Robert M.
Gans, dated as of October 1, 2009.
|
10.2*
|
Twelfth
Amendment to Employment Agreement between the Company and Jose Luis
Laparte dated as of October 1, 2009.
|
10.3 | Loan Agreement between PriceSmart and ScotiaBank El Salvador dated September 1, 2009. |
10.4 | Line of Credit Agreement between PriceSmart and Bacbamer dated October 14, 2009. |
31.1
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
31.2
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.1**
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2**
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002.
|
*
|
Identifies
management contract or compensatory plan or
arrangement.
|
**
|
These
certifications are being furnished solely to accompany this Report
pursuant to 18 U.S.C. 1350, and are not being filed for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended, and are not
to be incorporated by reference into any filing of PriceSmart, Inc.,
whether made before or after the date hereof, regardless of any general
incorporation language in such
filing.
|
(1)
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K for the year
ended August 31, 1997 filed with the Commission on November 26,
1997.
|
(2)
|
Incorporated
by reference to the Company’s Quarterly Report on Form 10-Q for the
quarter ended February 29, 2004 filed with the Commission on April 14,
2004.
|
(3)
|
Incorporated
by reference to the Company’s Annual Report on Form 10-K for the year
ended August 31, 2004 filed with the Commission on November 24,
2004.
|
PRICESMART,
INC.
|
|||
Date:
January 8, 2010
|
By:
|
/s/ ROBERT
E. PRICE
|
|
Robert
E. Price
|
|||
Chairman
of the Board and
|
|||
Chief
Executive Officer
|
|||
Date:
January 8, 2010
|
By:
|
/s/ JOHN
M. HEFFNER
|
|
John
M. Heffner
|
|||
Executive
Vice President and Chief Financial Officer
|
|||
(Principal
Financial Officer and
|
|||
Principal
Accounting Officer)
|