Good day and welcome to the PriceSmart Inc's Earnings and Release Conference Call for the Third Quarter of Fiscal Year 2014 for three months and nine month period ending on May 31, 2014. All participants are currently in a listen-only mode. After remarks from Jose Luis Laparte, PriceSmart's President and Chief Executive Officer; and John Heffner, PriceSmart's Executive Vice President and Chief Financial Officer, you will be given an opportunity to ask questions as time permits. (Operator Instructions) As a reminder, this conference call is being recorded on Friday, July 11, 2014. A digital replay of this call will be available through July 31, 2014, by dialing 888-203-1112 for domestic callers or 719-547-0820 for international callers. The pass code is 9238757. I would now like to turn the conference over to John Heffner. Please go ahead, sir.

Thank you, Hanna and welcome to our earnings call for the third quarter of fiscal year 2014. As usual, we'll be discussing the information that we provided at our earnings press release, which included a report on our net warehouse sales for June 2014 and our 10-Q filing, both of which we released yesterday, July 10, 2014. You can find both the 10-Q filing as well as the press release on our website www.pricesmart.com. Please note that statements made during this call may contain forward-looking statements concerning the company's anticipated future plans, revenues and related matters. These forward-looking statements include, but are not limited to, statements containing the words expect, believe, will, may, should, estimate and similar expressions. These statements are subject to risks and uncertainties that could cause actual results to differ materially, including the risks detailed in the company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2013, filed with the Securities and Exchange Commission on October 30, 2013. We assume no obligation and expressly disclaim any duty to update any forward-looking statement to reflect the occurrence of events or circumstances, which may arise after the date of this call. Now, I will turn this over to Jose Luis Laparte, PriceSmart's President and Chief Executive Officer.

Good morning and thank you for joining us today. I will begin with a quick update on our third quarter results. Sales came in at $598 million, representing 7.6% total growth, compared to prior year. The growth was driven mainly by transactions that were up 7.3% and average ticket was up 0.2%. The rate of sales growth has slowed as we have progressed through the fiscal year. The 7.6% growth in the current quarter compares to a 12.6% growth in Q1 and 11% growth in Q2. The June sales results, which we also released yesterday, continue that trend with a 4% growth over June last year. I will speak more about this later in my remarks. In terms of comparable sales for the fiscal third quarter, we had an increase of 2.9% for the 13-week period ended in June 3, 2014. As we have mentioned in the past two calls, the transfer of sales from warehouse clubs that are not in our comp measurement to the three warehouse clubs that are not yet in our comp calculation continues to have a negative impact on our reported comp. If I remove from the comp calculation not only the clubs that are less than 13.5 months old, but also those three warehouse clubs that have been most affected by the transfer of sales, the comps for the same 13-week period will be 260 basis points higher. When we look at the numbers by region, in Latin America where we have three additional warehouse clubs compared to the year ago period, sales were up 8.4% in the Caribbean region, which has the same number of clubs as compared to the year ago period, sales were up 5.7%. As for particular countries we have double digit sales in Columbia, Panama and Aruba and single…

Thank you, Jose Luis. Let me highlight a few additional items with respect to our financial results for the third quarter before we take your questions. As Jose Luis mentioned, net warehouse sales in the quarter grew 7.6%. Operating income in the quarter grew 9.5% as a result of higher net warehouse margins 34 basis points, offset somewhat by higher operating and preopening expenses. We had more net interest expense compared to a year ago, largely as a result of less capitalized interest this year, although we did take out some additional long term debt, which also added some interest expense. We recorded a favorable gain in currency and we had a lower effective tax rate, all of which combined to yield a 15% growth in net income or $0.70 per share compared to $0.61 per share for last year's Q3. The increase in net warehouse margin percent from the year ago period was largely attributable to both operational effects such as lower shrink, salvage and throw-aways and vendor related items like higher end Cap activity and supplier rebates. Membership income grew 8.9% on a 10% growth in member accounts. For the past few quarters, we've been seeing membership income growing faster than account growth as a result of the membership fee increase some two years. That effect became less and less as the fee increase worked its way through the membership income stream and in the current quarter, the currency devaluation in Costa Rica negatively impacted membership income as the deferred member income is now being translated back to U.S. dollars in approximately 10% less value, the result being an overall company decrease and income recognized per member account of 1.2%. The additions of the Tres Rios Costa Rica and El Sauce, Honduras warehouse clubs contributed higher operating expenses…

Thank you. (Operator Instructions) And we'll take our first question from Ronald Bookbinder from the Benchmark Company.

Hi, good morning. You talked about the cannibalization from the new stores opening, but now you’ve got a couple I believe, both the Cali stores in the months of June have entered into the comp base. As these new stores hit that 13, 14 month mark that they enter into the comp base, shouldn't we begin to see a benefit from those as they will likely be ramping up at a higher rate than the company comp?

The second warehouse club in Cali will be in the comps for the first time in July Ron. So, in the next month, we'll see -- I will say, the biggest cannibalization now we’re seeing really is in Costa Rica and Honduras.

But as we look forward historically as these new stores come into the comp base, do they typically since they're new and they're ramping up and building their market share and business, wouldn't they be comping above the company average?

Yeah, that's our expectation and I think we're going to notice that in this first month that they'll be definitely into the comp figure Ronald.

Okay. And on the membership fees, would the problem, would the currency devaluations translate those back into dollars, have you all ever thought about just charging the fee in U.S. dollars or would that put too much of a strain on membership renewals?

Yes Ron we do actually. So we adjust the price for our new members that are coming in now and we will -- in Costa Rica, we do essentially take it to the U.S. dollars, so we would adjust prices. The issue is we've got a huge base of people who bought memberships over the last year and they bought it at -- in local currency at whatever the value was at that point, and then we defer the revenue recognition over 12 months, so now we can't go back and charge those people more money for the membership that they already have. So it's an accounting issue associated with the fact that now everyone who bought a membership prior to I guess February, when we started adjusting the price because of devaluation, that base of people were translating their one twelfth of their membership income back in U.S. dollars, which is impacted by the devaluation.

Okay. And one last question and then I'll get back in queue. But continuing on that topic, you talked about the ramp up in membership, renewals that we saw last year, before this price adjustment went into effect. So when we get to the end of Q4, the rolling 12 months average of renewals it's been steady at about 85%, which is pretty nice, but should we expect to see a slight decline in that as we had that big bump up in Q4 last year?

It was actually June of two years ago that we did it right.

Yeah. It's been two years so definitely…

We worked it through now I think.

We already anniversaried effect, so I think we're going to continue -- hopefully we will continuing seeing the same renewal rates or better now which have been consistent for the last few quarters also Ronald.

Okay. Great. Thank you. I'll get back into queue.

Thank you.

And we'll take our next question from Patricio Danziger from Everest Capital.

Hi. I was just curious on what happened in terms of prices in Costa Rica. It increased prices in line with the devaluation of the currency or if you're just increasing prices in line with inflation and then what we're seeing is that basically prices are lowering dollars and volumes are the same or increasing a little bit?

Yes Patricio let me kind of describe what's happening there. Obviously we will start seeing an increase in prices as we get some of the new merchandize, especially the U.S. imports are arriving into the country. We try to hold our prices as much as possible without impacting necessarily our members that definitely we have -- we know they have been affected by the devaluation. But as we get the new inventory, definitely we will start seeing an increase in those prices and locally we will also be seeing some price increases coming from a lot of vendors or distributors that definitely will have the same impact either because of raw material or production or inflation. Normally when we have these devaluations in these countries we see also an impact from in terms of inflation. As a policy we try to keep our prices obviously as sharp as possible. We keep an eye on competition so that we are not the first one raising prices. So we have been doing over the last -- especially the last third quarter, we have been kind of hold with our prices. At the end of the day we have seen more probably in units an impact of people just not spending as much especially in the non-food area and even in some food categories. So that's how we pretty much treat our prices when we have devaluations particularly in Costa Rica.

Great. Thanks. And just as a follow-up if you -- if you did not increase prices as much as the devaluation of the currency, did you see volumes going up decently or volumes not even growing?

I don't think we have really seen volumes growing. I think what we have seen in Costa Rica is I think people are very cautious on how they are spending their money. I don't think we have seen something changing in terms of volumes.

Well I guess I'd say, let me add to that because I think we talked about the fact that transactions are up. We are having good -- even in June, our average ticket was down about 9%. Devaluation was 10%. So I guess there will be sort of -- the average ticket will be about even and our transactions are up, I guess I'll run the math that way. So I think we continuously -- relatively good traffic there, but really it's the buying power I think of the members that are coming in.

Thank you very much.

Thank you, Patricio.

And we’ll take our next question from Jon Braatz with Kansas City Capital.

Good morning, gentlemen. Jose Luis, I guess I was unclear you had mentioned -- you were talking about the June comps and you had said something about 260 basis points higher. Could you clarify that for me? I missed that.

That was the explanation, if we were to remove the three clubs that are basically -- the three warehouse clubs that are not yet in our comp calculation continue to have a negative effect. So if we were to remove those clubs -- those three warehouses from the calculation of comps; that comps will be 260 points higher.

Okay.

So it's actually -- Jon just to clarify, if we have 33 warehouse clubs, we comp 30 of them, but there is three others that are impacted. So we would say, well, let's just comp 27 what it would be…

Okay.

And one way to think about that is to look at it, the Caribbean grew 5.7%, the Caribbean is all comps.

It's all comps, yeah, okay, okay, good.

It’s only a clear picture in the Caribbean because there is no any calculation.

Okay. Looking ahead, when do we start seeing sort of an inventory build in advance of the new Colombian stores? Do we see it here in the fourth quarter or is that more of a first quarter 2015?

It's going to be more in the first quarter of 2013. We're going to have a little bit in the fourth quarter. At the end of the fourth quarter, we could see some seasonal merchandize that will start flowing -- that we purchased for those new clubs and thus there will be a little bit of that. But mainly will be definitely first quarter starting September, little bit in August and then heavy in September and October for sure.

Okay. And how should we think about pre-opening expenses as we approach, let's say the opening dates of the three new stores. It's pretty heavy already with recognizing the lease payment, but does it ratchet up even more from that million dollar level as we get into the first quarter of 2015?

Jon, yeah it will certainly go up. I think with this run rate right now, since we don't -- in this quarter Q4, we don’t have any new clubs opening right now, we do have this run rate of the least payment where in Bogotá, whether we get to the first quarter with three new clubs opening, there will be a fair amount of preopening expense in that first quarter and I think you can probably -- if you look back at, quarters when we opened warehouse clubs and then multiply it by three, it will probably give you a view of what that would look like.

Okay.

The effect of three makes it obviously a little, higher, note…

We’re spending a little more in Colombia particularly as we enter these new markets Medellin and Bogotá, but little more marketing activity as opposed to in a city like Tegucigalpa, where they know was already.

Yeah.

Okay. And then lastly, any commentary you want to make on further expansion in Colombia?

Well, I will only say that we keep looking for opportunities. We do recognize that there are more cities out there and definitely Bogotá just as a city we know that one club wouldn't be sufficient for that area. The only thing I would say is that we continue pursuing and looking for opportunities to continue the expansion and knowing that the opportunities there Jon and that eventually will be finding and hopefully we'll be announcing and finding possible new sites in -- again Medellin, Bogotá and more cities that we haven't even announced.

Okay. Thank you very much.

Thank you, Jon.

And we’ll take our next question from [indiscernible].

Hello, thank you for the call. If I may start from a little bit broader picture, which seems since January decreasing same store sales. If I may ask, was that completely unexpected for a company as a more surprise and is there a way how the company can improve same-store sales growth? Also if I may ask, do you see any stabilization on Costa Rica and Honduras in general or perhaps we could see the negative growth in those markets or any other markets.

Okay, let me start -- let me make sure I understand the first question regarding -- I guess you were asking if it have -- if it was a surprise for us the slowdown in sales, that's what you were referring to, okay. I’ll say that in some markets like Costa Rica definitely we couldn’t predict at all that there was going to be devaluation and it was definitely a surprise and an impact on our sales. I think it took a couple of weeks after the first devaluation that we started seeing in our sales very clear that the members were just more cautious on their spending and I’ll say that yes, it was a surprise because we kind of -- and we have the same experience in Jamaica almost a year ago when we saw the devaluation. I don’t think there is much you can do to prepare for the devaluation and definitely it affected member's purchasing power. So that’s and over the years as we see a slowdown in the economy in the other countries particularly for instances El Salvador or to a lesser degree as I said in my comments Honduras. We do see the members just more cautious on their spending and they just don’t spend that more money. So that's the effect that we are trying to see. I am not sure is that going to change drastically in the next couple of months; probably not. Probably we're going to have a little bit of challenge in those specific markets until we see some things improving. I know hopefully like cycles that have like in cycles these countries they go through a recovery, but right now I think what we are focusing our efforts to improve the result is on maintaining good in-stock in the inventory by doing the right things with our merchandize, keep bringing exciting merchandize and paying attention to members. I think that's the way we kind of attack those challenges in the economy. And I want to reinforce as we have seen in the past not only here, but even in the -- not only for our countries, but even in the U.S. and other markets in difficult times is when the member are going to be looking for saving and the clubs are there for that. So as we keep an eye in renewals because that's an important indicator and so far even in these country with challenges that renewals haven’t slowed down, which is a good sign, members are there. Members are as we mentioned, we have the transactions. They are just not spending as much. So we'll keep doing our best to try to get direct side on the basket and obviously with our values and savings for the members try to get the comp sales that we need. I hope that answers your question.

Yes, if I may ask one more question. With your expansion in Columbia and going into new areas, what I do need to sign up new members to your clubs? Well we have people in airports. Right now as we are building, we kind of started a little bit of our marketing efforts. Right now if you go to a lot of our countries, a lot of those cities Pereira, Medellin and Bogotá, obviously we have big buildings already with good products. People are starting to wonder what are they building there. So we have signs out there announcing they are coming soon. We are doing some social media. Also we have emails. We are also in our 15 buildings. We got good traffic especially in Barranquilla of visitors from other cities. So we are working also on marketing efforts from those buildings. So, they are different activities, the members can now sign online. Also we have that already available for those cities. If you live in Bogotá and you want to sign online -- buy your membership today versus waiting for the club opening, you can do that and you can even start shopping because we have already in these three cities we just released the opportunity for members to buy their membership and they can start shopping online and receive it at their home. So those are some of the efforts that we have and we are working on I guess marketing those efforts so that when we open, we can have a good base of members already that sign up and they may even be familiar completely with our concept.

Could you give an indication of how many people have signed up?

We don’t disclose details on membership per club, but if they -- I can tell you that we already have even before opening in Bogotá. We had a good percentage of members that were travelling to Cartagena or Barranquilla on vacation and that they were members of our club, especially from Bogotá and Medellin. So it is a good percentage of members that have been exposed to the PriceSmart brand and have been actually enjoying the purchases we got.

Okay. Thank you.

Thank you.

And we’ll take our next question from Ronald Bookbinder from Benchmark Company.

Thank you for the follow-up. Do you -- you brought up the World Cup and some pros and cons about the World Cup, but overall, do you think the World Cup was a benefit or a hindrance to the June comp?

I think for June in particular, Ron I don’t think it was a benefit -- that big of a benefit because I can tell you that the sport is huge. This football as we call it or soccer as we call it here in the States is so popular in our country and it’s incredible. Some of the games were, the last Costa Rica game was on Saturday, so people just didn’t go out shopping for sure. So I think -- and there was a particular effect this year on World Cup, the hours of the games compared to other years that like four years that they were in South Africa, the hours were either way too early in the morning, so it didn’t really affect that much sales. This year the games were 3 0’ clock Costa Rica time or 1 0’ clock PM Costa Rica time or Columbia time, so they were good for members obviously and people to watch the games. So I will say that in June the effect was probably negative on our traffic in the clubs and our spending. People were just celebrating. And I guess, we’re happy for the employees that a lot of these teams made its way even through that quarter finals. So I will say that that was the affect, Ron.

Okay. And during the quarter you used some cash to put some land on hold, how many parcels of land do you have on hold and can you tell us what countries they might be in?

No. I can’t tell you that, Ron. We do have some on hold as we indicated -- we announced a parcel of land when -- on our site, when we have secured it that sometimes takes some time and in the process we go through, which includes sometimes putting down a deposit and so we have disclosed that we do have those deposits and -- but until we work it through and know that we have control of the site well, our policy is that we don't announce it until then. But it is -- and as Jose Luis mentioned, there are sites in Columbia as well as in our non-Columbian markets that are of interest to us and we continue to look for opportunities for expanding new warehouse clubs.

Okay. And lastly, on the tax rate, you mentioned the benefit from a change in the Colombian taxes, should that continue to benefit taxes going forward or was that more of a one-time thing and we should go back to more historical levels?

That will continue to impact the year-over-year until we probably anniversary this year, because we were -- had tax losses in the past in Columbia and therefore we were not getting, but we were reserving any tax benefit associated with it. And as Colombia continues to do well, we are -- don’t have that level of reserve for tax losses and therefore, we’re getting a little bit of benefit. So the negative aspect of that over the last I guess couple of quarters is sort of resolving itself, so we're sort of anniversarying the -- what the reserve we had in the past, we’re not taking the reserve any more.

Okay. Great. Thank you very much.

Thank you, Ronald.

(Operator Instructions) And it appears there are no further questions at this time. Mr. Heffner, I’d like to turn this call back over to you.

Well, thank you, Hanna. This ends our call. Thank you all for participating with us today. Operator This concludes today's conference. Thank you for your participation.