PriceSmart, Inc. (PSMT) Q2 2016 Earnings Report, Transcript and Summary

Good day and welcome to PriceSmart, Inc.’s Earnings Release Conference Call for the Second Quarter of Fiscal Year 2016, the three months period ending on February 29, 2016. 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] Also as a reminder, this conference call is being recorded on Friday, April 8, 2016. A digital replay of this call will be available through April 31, 2016, by dialing toll free 888-203-1112 for domestic callers or 719-457-0820 for international callers. The pass code for the replay is 1201714. I would now like to turn the conference over to John Heffner. Please go ahead, sir.

Thank you and welcome to our earnings call for the second quarter of fiscal year 2016. We’ll be discussing the information we provided in our earnings press release, which we released yesterday, April 7, 2016 along with our 10-Q. The earnings release also included information about our net warehouse and comp sales for March. You can find both the press release and the 10-Q filing 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, 2015 filed with the Securities and Exchange Commission on October 29, 2015. We assume no obligation and expressly disclaim any duty to update any forward-looking statements 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, everyone and thank you for joining us today. I will begin my remarks focused on our second quarter results and will follow that with some comments about March sales which was included in our press release. Sales for the quarter were $759 million, an increase in total sales of 3.7% when compared to the second quarter of last fiscal year. We ended the quarter with 38 warehouse clubs compared to 36 a year ago. Net income for the second quarter of fiscal year 2016 was $25.9 million or $0.85 per share compared to $24.8 million or $0.82 a year ago for the same quarter. I will probably sound a little repetitive as I have been mentioning in the last few calls that the Colombia currency affects many of our comparisons with last year and quarter two was no exception. For example, comparable sales which now include 38 of our 38 clubs had a decrease of 0.9 for the 13 weeks ended February 28, 2016. Three Colombia warehouse clubs were in that calculation for the full 13 weeks and the other three in Colombia were in the calculation for a portion of that period. Extracting those clubs from the calculation, the 13-week comparable sales for the other 30 warehouse clubs was a positive of 2.7%. I will speak more about our Colombian business but let me first touch base on results in our other regions. Our non-Colombia markets performed well in the second quarter. Central America had a total sales growth of 11.5%, which included the positive impact of two additional warehouse clubs, one in Panama opened in June 2015 and one in Nicaragua opened in November 2015. The two new warehouse clubs continued to do well adding members and sales. We saw positive comp sales in our -- in all our Central America countries with the exception of Nicaragua which was impacted by the planned cannibalization of sales in the exiting warehouse club by the new one. Double-digit sales growth was recorded in Panama, Honduras and Nicaragua. In the Caribbean, warehouse sales grew 4.4% in the second quarter compared to the year earlier period with the equivalent number of warehouse clubs 11. Again, all countries in the region of the Caribbean recorded positive sales growth with Jamaica growing above the 10% year-on-year. On the other hand, we started to see some challenges in Trinidad during the quarter. In February, Trinidad increased the BAT on a large number of products which impacted prices and consumer spending. The country in total, a big exporter of oil and natural gas is slipping into a period of its lower economic growth due to low price of those commodities. This is expected to put some pressure on consumer demand, which could impact our business in the next few quarters in a market that has been very good for us over the past two to three years. In Colombia, net warehouse sales declined by 32% when translated to U.S. dollars, reflecting the impact of 37.8 devaluation of the peso compared to the U.S. dollars in the same quarter last year. The average exchange rate for translating Colombia and peso sales to U.S. dollars in the quarter was 3,283 compared to 2,382 a year ago. In local currency, net warehouse sales for the quarter declined 6.5%. The prices on imported merchandise which have a U.S. dollar cost basis is impacting demand which is driving the negative growth for those products. Sales of local products however recorded a 9% positive growth when measured in pesos. It is our goal going forward to comp positive in local currency in Colombia. We did not achieve that in the second quarter. The peso has stabilized somewhat at around 3,100 pesos, latest. A stable currency should help us achieve that goal. From a merchandise perspective for the total Company, we recorded comp sales growth in the period in liquor, health and beauty, pet, produce, fresh meats, automobile, home furniture, office furniture and fashion apparels. Moving on to membership, membership income was $11.3 million for the quarter. We finished the quarter with more than 1,000,460 accounts. While this is an increase of 6% compared to a year ago, it is a reduction of approximately 21,000 accounts from the end of fiscal year 2015, driven by renewal activity in Colombia on the neighbor [ph] service of the opening of the warehouse clubs in Bogotá, Medellin and Pereira. As discussed in our first quarter earnings call, the combination of generally lower renewal rate for first year members and other factors specific to the three newer clubs in Colombia such as the exceptionally large number of preopening sign ups in the Bogotá club and the instance of the Bogotá club to a number of those members resulted in a net reduction of member accounts. We finished the second quarter at an 81% 12-month renewal capture rate for all countries and that would be 88% excluding Colombia. While we have seen some improvement in the monthly renewal rate over the past few months in Colombia, we’re particularly encouraged by an ongoing stream of new member sign ups in our Colombian clubs. Our warehouse clubs in Bogotá, Medellin and Barranquilla have the highest number of new membership sign ups of any of our warehouse clubs in the second quarter. We believe this is a good indication of the acceptance of our concept with these new members that despite the current prices on imported merchandise, they are seeing good value in the overall item mix that we now have between imported and local merchandise. Before I leave the subject of Colombia, let me say a few things about our approach to pricing our imported merchandise during this evaluation that I know I shared a few times already in other earnings calls but is worth repeating. There is no question then that prices of imported merchandise across all retailers in Colombia are going up which negatively impacts consumers demand. We have taken margin reductions in that market in an effort to solidify our position for the future and in addition, we are pleased with the conversion of items to local production that we have been introducing in the last few months, while making sure that the quality of the locally produced products is at least as good as imported goods that we have been offering for sale. It has been a good experience working with local vendors that have demonstrated their ability to produce and supply high quality items for us. Other activities relevant to report as we finished second quarter include the progress of the construction of our new warehouse club in Chia, a municipality in the northern suburb of Bogotá. Our plans remain to open that club around September 2016. We believe this new club will serve not only the Chia community but also residents in the northern portion of Bogotá. Also in Colombia, we’re adding a parking deck at our Barranquilla location. This is part of an overall expansion program in certain live markets. The expansion in Barranquilla will add more parking spaces and extra sales force to our clubs. In other markets, we’re in the process of planning similar actions and in some cases have or expect to acquire some adjacent land to be used for expanded parking at those locations. Finally, as reported in our 10-Q, subsequent to the end of the quarter, we entered into a contract to acquire a build to suit distribution in Miami. Once completed, currently expected in the first half of 2017, we will relocate much of our current distribution operations to this new location. Not only will this new center provide improved operating efficiencies by virtue of its design but it will ensure we have long term control over a strategically critical element of our business. I know John will have a few comments about Q2, so let me now speak to our March sales. March sales decreased 4.2% to $227.8 million and four-week comp sales ending March 27 decreased 5.4%. Excluding Colombia, comp sales decreased 3.1%. This month in which Semana Santa and Easter fall compared to the year earlier period has a measureable effect on the year-to-year comparison, given the base warehouse clubs are closed and the shopping behavior of members in our markets over the Easter weekend. Easter Sunday this year fell in the last day of our comp period, March 27. Easter year last year was in April 5th. As such, we believe it is more instructive to do March and April, together as we have done in prior years. For example, last year, fiscal year 2015, March comps were 7.3 followed by April at 0.2%, all at 3.8% combined. Before I conclude, I would just like to add one more comment. As I travel and visit our operations in our different countries, I always come back optimistic from the things I see and the efforts and dedication of our teams. Even though we face very good competitors in our markets, I am reminded that PriceSmart offers a particularly unique and differentiated shopping experience -- shopping alternative for the small business members and household members. I also see farther opportunities for us to improve our execution of the club philosophy, finding efficiencies in our buying, distribution, operations and our other functional disciplines to best serve our members. Thanks again for joining us today. After John’s remarks, we will take your questions.

Thank you, Jose Luis. Let me highlight a few brief additional items with respect to our financial results for the second quarter. Net income in the quarter of $25.9 million resulted in earnings per share $0.85 compared to $0.82 a year ago. The lower sales and decreased mart merchandise margins as a percent of sales in the Colombian segment resulted in an operating loss of $1.7 million, and a net loss of $2.2 million, or approximately $0.07 per share. While the net loss was an approximate $0.04 per share improvement over last year that improvement was largely from reduced foreign exchange losses. Performance in the non-Colombia segments, when added together, resulted in net income of $28.1 million, or approximately $0.92 per share, approximately $0.01 less than last year. Total consolidated warehouse gross profit margins in the first quarter were 14.2% of net warehouse sales, a reduction of 35 basis points from the same period last year. In Colombia, our efforts to reduce the impact of higher peso prices associated with the strong U.S. dollar, resulted in 132 basis-point reduction in margins in Colombia compared to the year ago quarter. Membership income increased 3.6% on total membership account growth of 6.1%. The disparity primarily reflects the impact of the translation of the Colombian peso price membership when translated back to U.S. dollars. The U.S. dollar membership income recognized for a membership in Colombia in Q2 was 27% less than year ago. Total SG&A expense as a percent of sales increased 34 basis points with two additional warehouse clubs operating in the quarter compared to a year ago. Higher deferred comp expense associated with stock awards granted in the first quarter hit the G&A line along with additional spending in the buying and information technology areas. Of the foreign exchange losses incurred in the quarter, $388,000 related to the devaluation of the Honduran Lempira, including a onetime adjustment related to the re-measurement of a portion of a bank loan in Honduras not covered by non-deliverable forward. We recognized income from unconsolidated affiliates of $429,000 related to the sale of land owned by the Company’s real-estate joint venture in Panama. The effective tax rate for the quarter was 31.7% compared to 35.3% last year. The difference resulted from a reduced loss in Colombia for which no tax benefit is realized and a lower proportion of U.S. taxable income, which has a higher statutory rate, compared to the tax rates in our foreign jurisdictions. We ended the quarter with strong balance sheet and $173 million in cash and equivalents. During the quarter, cash increased $33 million from the end of November. Cash from operations in the quarter contributed $67.7 million, of which $24.5 million was from reductions in inventory, net of accounts payable. We used $14.5 million in the quarter from investing activities in the construction of our Chia Colombia club and other capital projects and we used another $10.6 million in the payment of a cash dividend to shareholders at the end of February. With that, Jose Luis and I’d be happy to take your questions. Operator, I’ll turn things over to you.

Thank you. [Operator Instructions] We’ll go first to Dave King with ROTH Capital Partners.

Thanks, good morning, guys. I guess, first off in terms of the warehouse club gross margin and the outlook for that and obviously with Colombia down, I think 132 basis points here or near, how should we be thinking about -- how to think about that line and then going forward, assuming you’re starting to get some benefits now or at least less pressure, I guess is the better way of saying it, in Colombia and then given some of the initiatives you have to produce more goods locally, how should we be thinking about that over the near-term, have you seen any improvement, maybe since quarter end and then just how you think about it longer term?

Yes. Longer term -- Dave, good morning; longer term, obviously, we’re going continue to improve our margins in Colombia. At this point, we’re definitely committed for the long-term and we don’t really want to start trying to get up even with the comparison of local items. We’re looking at first improving our sales figures. And obviously as you said, if we continue to see more stable currency, we’ll be able to get back some of those margins up, we were at some point lower in Colombia, but at this point, we don’t really have any dramatic change. Our commitment has been really to keep pushing our sales. And even in the local merchandise, the margins are not that higher compared to our import merchandise. Now, it’s not that the conversion of local gives us a higher and higher margin rate, no. Definitely what we’re looking at doing when we compared items to local the first priority is to drive incremental sales and keep pushing that line, Dave.

Dave, I’d add one more thing to that. I think, we’re at this point anniversarying when we started really taking the margins down in Colombia. So, I think as you indicated, 132 basis-point change year-over-year in this past quarter, it was a much higher difference in Q1. And I think we’re now seeing that as we go into Q3 here, and compared to Q3 a year ago, was even a smaller change on a year-over-year basis. So I think, we are coming up to that anniversarying of the actions we took, the pricing actions we took, which we really took into place really, so March, April, May of last year.

Okay, that’s great color, guys. Thank you for that. And then maybe switching gears to the G&A increase, John, I think you touched on that little bit. It sounds like it was deferred comp and then some tax spend. Was the deferred comp -- was that a catch up or is that higher run rate? I guess, how should we be thinking about the level of G&A, was any of that out-sizes as sort of the good -- or is it the sort of the good run rate to be using going forward?

It’s just in the run rate now, David. It was -- grants that we did in Q1 and this will be in the run rate.

And then one for me, and I’ll step back. In terms of the March sales, and the Easter closings, obviously that had an impact, so thanks for sharing that, Jose Luis. Do you guys have any color on how the weakly has trended over the course of the month, was it stronger in the earlier -- what were the weakly comps in the earlier part of the month versus the latter part that where the closing affected; is there any way to guide us towards how to think about the impact so far, before we see April?

I am not sure I understand the question, Jose Louis?

I guess, yes. Obviously the start of April, as people get ready for Semana Santa, we always see some increases. We actually take some -- we see higher sales as people get ready to leave on vacation and they prepare, especially a lot of the clubs where in that main cities where people go out for the week, or for the weekend, we see some incremental sales in preparation for that and then it slows down. So, we definitely saw a stronger comp figure or sales figure at the beginning of the month and then it slowed down, with the effect obviously of the closing dates and everything in the last week, which is what driven the March sales more towards the negative comp. And as I said, last year we comped 7.3%. So, it was a strong month of March last year, so we were going against the opposite…

Because Easter flipped the other way, the year before, right?

Yes.

Easter falling into April or March, we historically see that quite a big difference between March and April because of how that moves.

Yes, that makes sense. And then and you may not have this, but in terms of number, I mean is there a sense of how many days or how many stores were closed in the month of March or how many stores were closed for a day during the month of March?

We closed, all clubs were closed for Good Friday.

It was March 25th I think.

Yes. And then some of our clubs do what they call Easter Monday which obviously that we can be soft on sales and then some of the Caribbean clubs, Jamaica, Barbados and I believe some in other markets closed also for what they call, I think they call it Easter Monday. And that’s basically; it’s more a Caribbean effect rather than Central America where pretty much all clubs operate as well for that Easter Monday.

And those closures will fall into April.

Yes, the April comp.

And then I remember there was a couple of that I think for Holy Saturday I think you’ve called it that close or is that not?

I think were open on Saturday but there was no shopping.

Yes, it is really soft but we’re open. Yes, we were only closed on Friday.

We will take our next question from Pablo Vallejo with Scotiabank.

I got a couple of questions regarding -- first one, when we speak about the product mix, we are aware that imported products are around 52% of COGS. What, given the change in the Colombian peso, what would be that mix for the Colombian stores today or right now?

Interestingly enough, it’s sort of at that level in Colombia. If you went back a year ago, was probably more like 60-40, 60 imported, 40 local. And now we’re right about it, I think 53-47 I think when I looked at latest information.

That’s correct. And obviously Pablo as we keep converting some items, obviously we’re going to see that number on the local side going up. And it is working actually very positive for us as I pointed out. We started seeing an increase in some of the comp increasing local item sales. So, it’s working as we expected.

And moving on to G&A, just to follow-up on G&A with the increase of 14.6% there, you mentioned purchasing in IT was that for the headcount there -- the increase in headcount there, was it for existing capacity or just for seeing what the growth will be and then you allocate this new resources to it?

I think we made some investments there particularly in IT and I think the buying is very much a sort of support the business. I think it quite frankly would have a less impact as a percent of sales if the Colombian sales translated back at a higher rate, I think we wouldn’t be seen that year-over-year basis point increase in what corporate G&A is as a percent of sales. So, I think it is being exacerbated a little bit by the fact that we have a year-over-year decline in U.S. dollar sales in Colombia.

And one last question, we’re aware there is not much guidance in store openings but -- in every jurisdiction, but I was wondering if you can provide any indication of change in efforts that might be undertaking for store expansion in Colombia specifically?

Obviously, we have it. We don’t disclose Pablo, as you correctly mentioned in your first comment. But we keep looking at opportunities definitely. Colombia, obviously we’re trying to focus more on the big cities, Bogotá and Medellin. And in the rest of the markets we’re also looking at opportunities. We are pretty sure very soon, we’ll probably be announcing some positive things on other markets obviously because that’s something we keep doing analyzing markets where we can see an opportunity to continue growing. So, it’s definitely -- we didn’t stop it, permits and all those things take a little longer for the most part. We’re also looking, as I mentioned in my comments, we’re doing a kind of expansions of sales floors and parking decks in existing locations Barranquilla is actually one of the first ones that will be finished, pretty much the first one that will be finished with a bigger parking deck, a parking deck and obviously bigger sales floor, as a result of an analysis that we have done in some particularly clubs and cities. So, we will be working on more and more of those expansions which actually are -- we believe are a good way to keep growing our existing sales without cannibalization. So, it’s a combination of both, looking for new sites and new opportunities in existing markets and we will keep doing things in terms of those kinds of expansion.

I don’t know if you can disclose this or you’ve mentioned before but how much is the expansion in Barranquilla in terms of a square footage or as a percentage of the store?

It is -- in Barranquilla, we’re actually adding about -- let me see, we’re adding about a 70 to 80 parking spaces in that specific location. And in terms of sales floor space, I believe we’re adding like 800 meters, something like that. So, it’s going to be a good expansion in terms of allowing us to provide better exposure to our current merchandise mix. And obviously the parking, which is one of the things that are sometimes a challenge when you look at some of our clubs that get pretty busy in some of the weekends; that’s kind of the plan for these. And we’re trying to do kind of a similar concept in the other locations that we’re looking at opening some. It’s about 8,800 square feet what we’re adding to the building.

[Operator Instructions] We’ll go next to Thomas Vester with LGM Investments.

First question would just be on the distribution center, it is a fair -- fairly big amount of money; I mean clearly, you’ve got the money on the balance sheet, also when subtract your debt, so that’s good to see. But can you just indicate how much savings you’re getting by terminating the lease and your existing distribution facility that if I understand correctly is leased and when you can do that so when that saving will hit the P&L?

Well, we have -- we did enter into this agreement, Thomas, for a purchased -- through a build-to-suit. It is not built yet, so we continue to operate in our current distribution center. And even when it is completed and we move a substantial amount of our operation from our existing site to this site, a new more efficient site, we will remain -- some portion of our operation will remain in that site for some time. The lease runs for a few more years and so we’ll do that. So, we’re working out how we would then sublet the space that we have and to be focused on our new site as well as utilizing some portion of the old site. So, we’re probably a good year, a year plus away from that.

And then just secondly, I mean when we plug in the operating margin rate for Colombia and also the EBITDA rate and you turned EBITDA margin negative now and in Q2 for Colombia. And the operating margin really did a good effort to try and stay positive and trend upwards after your grand opening of the three clubs, but then it really turned around and it’s really gone sharply downwards since in the last couple of quarters. And on top of that, we clearly noticed the negative same-store sales in Colombian peso in Q2. Can you elaborate a little bit on what -- I mean, I guess you’re comfortable with the situation and at least that’s the sense I get from this call and that’s clearly good, but can you get a sense of when you will start getting uncomfortable? Because for the last couple of quarters, I mean clearly if one pluck your same-store sales in Colombian pesos to let’s say actually to the provided public same store sales figures for their concepts in Colombia, you’ve been outperforming them but now we’re looking at a low performance here in Q2. Can you comment a little bit on that, what to expect? And maybe it would be helpful if you could say a little bit about your same-store sales in the mature Colombian stores, so how much of these negative same-store sales in Colombian Q2 was driven by the anniversary effect and how much was driven by the pressure on the consumer in Colombia? I know that was an awfully long question, and just to make it a little bit longer, can you add on a little bit of comment on the actually to bringing in the assigned [ph] format to Colombia if that is something you expect an impact from?

Okay, I’m going to try to elaborate on your 15 questions, Thomas. But let me see, to start, I guess I am not sure I would say that we’re comfortable with what the condition in Colombia; I would say we believe we have things under control. We don’t like obviously looking at local currency, we’re not happy with that decrease that we had in this quarter of 6.5%, although we see we have a lot of things in place that we believe were going to turn around that number into the positive into the black numbers hopefully very soon. That’s we’re putting all efforts, all our efforts on making that happen. And I think we will be more comfortable when we see that number obviously comping positive in local currency, which is our first goal. And again, it doesn’t happen overnight, it’s been a lot of transitional conversion of items, getting the items that we want getting the price in, I think there’s also a lot of adjustments in the Colombian market, even in our successful. I want to say something that is important from us to highlight, even a lot of the U.S. items that went up on prices, a lot of them continue to be very successful items. Obviously, now that consumers and members in Colombia are going through this transition, not only with us, with every item, if you buy a car, if you buy computers, electronics, it doesn’t matter wherever you buy them, the increase compared to a year ago is now about 37%, but if you look at it compared to a year and half ago, it’s more than 70% because of the drastic devaluation they had. So, it’s been quite a transition and it’s taken a little bit longer. Hopefully, and this is something that every day we wake up we hope for the stability of the currencies in kind of a stable, I guess goes along with the oil prices to some degree and it’s been kind of a stable in the last few weeks. So, if we continue in that direction, I think we will put a lot of things -- we have a lot of things in place to drive that positive comp. Every other week, we have some of our clubs, and new clubs, or mature clubs in Colombia reporting individually comp positive sales in local currency. So that is a good indication for the last few days actually some of our clubs, particularly in Medellin also tracking positive comp sales in local currency. So, I think a lot of the actions, we’re seeing the results there in a positive way. Hopefully that answers the first portion of your question. The other one related to assets and the new format. I guess, we obviously, like any competitor, we take those things seriously. That’s a very successful format for powdered sugar [ph] in Brazil; it will compete definitely also in the arena for the small business members for the Tendero for the small shop and macro has been actually improving because macro [ph] is also worried about this new format coming into Brazil, into Colombia. And I think we’re trying to make sure that we’re also ready to be able to compete with them as we have been continuing with macro. So, it’s going to be an interesting period obviously for Colombia with these guys introducing the new concept. But I believe we have good strategies in place to compete with them as soon as they open. Hopefully that answers also your question Thomas.

Yes, thanks a lot, Jose Luis. Maybe just two quick more just in terms of -- on the new site or new club opening, can you comment a little bit more specifically on what has been holding it back? You review many sites; is it the fact that the dollar value of land in Colombia hasn’t come down or in other markets where you look versus the fact that that’s the market that’s dried up or is it just you haven’t found the right match? Can you comment a little bit on more specifically what has been holding it up, because there has been a decrease in new club opening announcements from your side over the last 18 months?

Well, it’s a combination of things. Definitely, we’re not waiting on anything to happen on, specifically on the currency for Colombia or other markets. All markets where we’re looking at sites, the process just tends to be long because you have to have permits and more and more every country has a lot of process or a lot of approvals to be completed before you can get an approval for construction. So, it’s more about process and what we’re doing, we’re best trying to accelerate even also, we do recognize that the process has been a little slow in terms of openness or obviously we’re putting a lot of efforts to try to make them faster and for all the markets where we’re making business realizing that we really see good opportunities going forward. So, hopefully we will be able to announce more of those, Thomas. And it’s not for the lack of trying; we definitely keep trying and trying to get more resources to make things happen in those different markets.

Just the final one and I guess you got to bring up Panama to table, it’s everywhere. But you might think I am joking to bring it up but I mean you have a substantial part of your operation in Panama and you also have a substantial part of your operation in Costa Rica. And I mean Panama has been booming, and from the -- it has sometimes there has been a little bit difficult to understand what has been driving this boom and some of these lease out -- I mean put some clarity on what can drive booms in Panama. I don’t know. But have you any force in that? And then secondly on the Costa Rican colón I mean there is no secret that Costa Rica is pretty sharply tied into Panama and the currency, I mean the Costa Rican colón looks probably a little bit more than expensive on many measures and we’ve clearly seen your taking some debt last quarter in Costa Rican colon, so to try and mitigate that little bit. But do you have any thoughts at all on Panama, Costa Rica that would be helpful.

Well, Panama, you’re right, it’s been very good market for us, I think seems too tight, much as I recall probably since 2007, 2008 when there was a big crisis in the states, those guys didn’t even feel it. There has been a lot of construction, which is a positive thing in Panama, for some of others -- I have been travelling to those markets for the last 10 years, we have seen how many new constructions are coming along. There was a lot of traffic I believe in Panama from Venezuela that are sitting there. We actually keep seeing good sign ups in some of our locations in Panama. And when we look into some of those sign ups and membership, we have found a lot of them are from Venezuelans that are definitely moving out to Panama. In addition, I will say that the expansion of the canal [ph] has been bringing a lot of positive things. Now, is that going to continue, we are -- I am certainly still pretty optimistic that retiring communities also growing in Panama. So there’re a lot of good things happening in Panama, which -- and obviously competition keeps getting better also; we see more stores openings from Ray, [ph] from 99, from the different competitors over there. So, it’s been a good market for a lot of us for all companies and hopefully we’ll continue on that trend. In terms of Costa Rica, we probably have some of the same concerns that they’re sharing. There is a lot of pressure on that economy. But in the meantime, we are still seeing solid growth, tourist remains still quite positive for the country. And hopefully we will be able to continue growing in those two markets, which as you said they are pretty important markets. We are -- a few years ago, we had about 10% devaluation in Costa Rica, the colón went from 500 to 550 then there was a little bit of recovery and that colón got a little stronger. And it’s been holding and hanging in there for a while. So, you have to predict obviously and we are kind of ready for anything that can happen in those -- in any markets -- that’s kind of our overview for those two markets.

We have no further questions at this time. I would like to turn the conference over to Mr. Heffner for any closing remarks.

Well, thank you, Tony. And thank you all for participating with us today. I’ll sign off now. Have a good day and a nice weekend.