PriceSmart (PSMT) 8-K Results of Operations and Financial Condition

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 7, 2011

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 7, 2011, PriceSmart, Inc. issued a press release regarding its results of operations for its second quarter ended February 28, 2011 and net warehouse club sales for the month ended March 31, 2011.  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.   Financial Statements and Exhibits.

(d) The following exhibit is furnished herewith:

Exhibit No.	Description
99.1	Press Release of PriceSmart, Inc. dated April 7, 2011.

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 7, 2011	/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 7, 2011.

PriceSmart Announces Second Quarter Results of Operations

and March Sales

San Diego, CA (April 7, 2011) – PriceSmart, Inc. (NASDAQ: PSMT, www.pricesmart.com) today announced its results of operations for the second quarter of fiscal year 2011 which ended on February 28, 2011.

For the second quarter of fiscal year 2011, net warehouse club sales increased 22.7% to $440.3 million from $358.9 million in the second quarter of fiscal year 2010.  Total revenues for the second quarter of fiscal year 2011 were $449.6 million compared to $366.1 million in the prior year.  The Company had 28 clubs in operation as of February 2011 and 26 clubs in operation as of February 2010.

The Company recorded operating income during the quarter of $27.2 million, as compared to operating income of $20.4 million in the prior year.  Net income attributable to PriceSmart was $17.9 million, or $0.60 per diluted share, in the second quarter of fiscal year 2011 as compared to $13.7 million, or $0.46 per diluted share, in the second quarter of fiscal year 2010.

For the first six months of fiscal year 2011, net warehouse club sales increased 22.5% to $817.6 million from $667.5 million in the first six months of fiscal year 2010.  Total revenues for the first half of fiscal year 2011 increased 22.6% to $835.7 million from $681.5 million in the same period of the prior year.  For the first six months of fiscal year 2011, the Company recorded operating income of $49.8 million and net income attributable to PriceSmart of $32.8 million, or $1.11 per diluted share.  During the same six month period in fiscal year 2010, the Company recorded operating income of $36.7 million and net income attributable to PriceSmart of $24.1 million, or $0.81 per diluted share.

The Company also announced that for the month of March 2011, net warehouse club sales increased 16.6% to $139.2 million, from $119.4 million in March a year earlier.  For the seven months ended March 31, 2011, net warehouse club sales increased 21.6% to $956.8 million from $786.9 million for the seven months ended March 31, 2010.  There were 28 warehouse clubs in operation at the end of March 2011 and 26 warehouse clubs in operation at the end of March 2010.

For the four weeks ended April 3, 2011, comparable net warehouse club sales for the warehouse clubs open at least 13 1/2 full months increased 16.7%, compared to the same four-week period last year.  For the thirty-week period ended April 3, 2011, comparable net ware­house club sales increased 16.9%, compared to the comparable thirty-week period a year ago.

About PriceSmart

PriceSmart, headquartered in San Diego, owns and operates U.S.-style membership shopping warehouse clubs in Central America and the Caribbean, selling high quality merchandise at low prices to PriceSmart members. PriceSmart now operates 28 warehouse clubs in 11 countries and one U.S. territory (five in Costa Rica; four each in Panama and Trinidad; three each in Guatemala and Dominican Republic, two each in El Salvador and Honduras; 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 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: the Company’s financial performance is dependent on international operations which exposes the Company to various risks; any failure by the Company to manage its widely dispersed operations could adversely affect its business; the Company faces significant competition; the Company may encounter difficulties in the shipment of, and risks inherent in the acquisition and importation of, merchandise to its warehouse clubs; the Company is exposed to weather and other natural disaster risks; declines in the economies of the countries in which the Company operates its warehouse clubs would harm its business; a few of the Company's stockholders own nearly 39% of the Company's voting stock, which may make it difficult to complete some corporate transactions without their support and may impede a change in control; the loss of key personnel could harm the Company’s business; the Company is subject to volatility in foreign currency exchange; the Company faces the risk of exposure to product liability claims, a product recall and adverse publicity; a determination that the Company's long-lived or intangible assets have been impaired could adversely affect the Company's future results of operations and financial position; although the Company takes steps to continuously review, enhance, and implement improvements to its internal controls, there may be material weaknesses or significant deficiencies that the Company has not yet identified; as well as the 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 year ended August 31, 2010 filed pursuant to the Securities Exchange Act of 1934 on November 9, 2010.  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					Six Months Ended
		February 28,					February 28,
		2011			2010		2011			2010
Revenues:
Net warehouse club sales	$	440,263		$	358,893		$	817,595		$	667,545
Export sales		1,872			1,006			3,280			1,593
Membership income		5,576			4,827			11,001			9,476
Other income		1,906			1,396			3,813			2,926
Total revenues		449,617			366,122			835,689			681,540
Operating expenses:
Cost of goods sold:
Net warehouse club		374,573			304,867			692,386			566,584
Export		1,758			935			3,102			1,489
Selling, general and administrative:
Warehouse club operations		37,239			31,041			72,373			60,274
General and administrative		8,874			8,667			17,684			16,235
Pre-opening expenses		(15	)		175			388			286
Total operating expenses		422,429			345,685			785,933			644,868
Operating income		27,188			20,437			49,756			36,672
Other income (expense):
Interest income		239			122			367			338
Interest expense		(1,071	)		(634	)		(2,028	)		(1,264	)
Other income (expense), net		(260	)		(10	)		(303	)		(7	)
Total other expense		(1,092	)		(522	)		(1,964	)		(933	)
Income from continuing operations before provision for income taxes and loss of unconsolidated affiliates		26,096			19,915			47,792			35,739
Provision for income taxes		(8,049	)		(6,190	)		(14,894	)		(11,592	)
Loss of unconsolidated affiliates		(37	)		(3	)		(42	)		(5	)
Income from continuing operations		18,010			13,722			32,856			24,142
Income (loss) from discontinued operations, net of tax		(93	)		35			(86	)		44
Net income		17,917			13,757			32,770			24,186
Net income attributable to noncontrolling interest		—			(60	)		—			(112	)
Net income attributable to PriceSmart	$	17,917		$	13,697		$	32,770		$	24,074
Net income attributable to PriceSmart:
Income from continuing operations		18,010			13,662			32,856			24,030
Income (loss) from discontinued operations, net of tax		(93	)		35			(86	)		44
	$	17,917		$	13,697		$	32,770		$	24,074
Net income per share attributable to PriceSmart and available for distribution:
Basic net income per share from continuing operations	$	0.60		$	0.46		$	1.11		$	0.81
Basic net income (loss) per share from discontinued operations, net of tax	$	—		$	—		$	—		$	—
Basic net income per share	$	0.60		$	0.46		$	1.11		$	0.81
Diluted net income per share from continuing operations	$	0.60		$	0.46		$	1.11		$	0.81
Diluted net income (loss) per share from discontinued operations, net of tax	$	—		$	—		$	—		$	—
Diluted net income per share	$	0.60		$	0.46		$	1.11		$	0.81
Shares used in per share computations:
Basic		29,414			29,222			29,385			29,163
Diluted		29,423			29,250			29,392			29,206
Dividends per share	$	0.60		$	0.50		$	0.60		$	0.50

PRICESMART, INC.

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

		February 28,
		2011		August 31,
		(Unaudited)		2010
ASSETS
Current Assets:
Cash and cash equivalents	$	70,659		$	73,346
Short-term restricted cash		1,240			1,240
Receivables, net of allowance for doubtful accounts of $16 and $15 as of February 28, 2011 and August 31, 2010, respectively.		3,167			2,855
Merchandise inventories		151,692			131,190
Deferred tax assets – current		4,086			3,639
Prepaid expenses and other current assets		24,031			21,879
Assets of discontinued operations		803			692
Total current assets		255,678			234,841
Long-term restricted cash		13,670			5,640
Property and equipment, net		280,919			265,544
Goodwill		37,533			37,471
Deferred tax assets – long term		15,344			16,637
Other assets		4,301			4,341
Investment in unconsolidated affiliates		8,061			8,091
Total Assets	$	615,506		$	572,565
LIABILITIES AND EQUITY
Current Liabilities:
Short-term borrowings	$	2,984		$	3,551
Accounts payable		142,567			124,401
Accrued salaries and benefits		9,442			10,911
Deferred membership income		11,014			9,729
Income taxes payable		6,216			6,615
Other accrued expenses		11,490			12,095
Dividends payable		8,969			—
Long-term debt, current portion		7,761			7,715
Deferred tax liability – current		425			357
Liabilities of discontinued operations		212			109
Total current liabilities		201,080			175,483
Deferred tax liability – long-term		1,718			1,198
Long-term portion of deferred rent		3,744			3,272
Long-term income taxes payable, net of current portion		3,361			3,564
Long-term debt, net of current portion		54,185			53,005
Total liabilities		264,088			236,522
Equity:
Common stock, $0.0001 par value, 45,000,000 shares authorized; 30,688,399 and 30,624,666 shares issued and 29,896,805 and 29,897,909 shares outstanding (net of treasury shares) as of February 28, 2011 and August 31, 2010, respectively.		3			3
Additional paid-in capital		381,436			379,368
Tax benefit from stock-based compensation		5,371			4,490
Accumulated other comprehensive loss		(16,565	)		(16,672	)
Accumulated deficit		(746	)		(15,578	)
Less: treasury stock at cost; 791,594 and 726,757 shares as of February 28, 2011 and August 31, 2010, respectively.		(18,081	)		(15,568	)
Total PriceSmart stockholders’ equity and total equity		351,418			336,043
Total Liabilities and Equity	$	615,506		$	572,565