Good day and welcome to PriceSmart Inc.’s Earnings Release Conference Call for the Second Quarter of Fiscal Year 2017, the six months period ending on February 28, 2017. 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, April 7, 2017. A digital replay will be available through April 14, 2017 following the conclusion of the call by dialing 877-344-7529 for domestic callers, or 412-317-0088 for international callers, and entering replay access code 10102319. I’d 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 2017. We’ll be discussing the information that we provided in our earnings press release, and our 10-Q, both of which we released yesterday, April 6, 2017. Included in our Q2 earnings we also released our March sales. You can find both the press releases and the 10-Q filing on our Web site 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, 2016, filed with the Securities and Exchange Commission on October 27, 2016. 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. We finished the second quarter of our fiscal year 2017 with net warehouse sales of $772 million, an increase of 1.8% compared to the second quarter last year. Comparable warehouse sales for the 13-week period ending March 5, 2017 for the 38 warehouse clubs that have opened at least 13.5 months were 2.1% with the same 13-week period last year. It may look unusual for comp sales to be higher than total sales. Keep in mind that Q2 last year fiscal 2016 included an extra day sales compared to this quarter due to the leap year. 91 days in total compared to 90 days in this quarter -- in the quarter this year. Adjusting for that additional day last year, we estimate that total sales growth will have been 2.7%. Comp sales are measured in equivalent fiscal weeks from period to period. As reported, net income for the quarter was $27.2 million or $0.90 per share compared to $25.9 million or $0.85 per share a year-ago. Similar to the events of the -- on the first quarter, this quarter's net income reflects an overall improvement in the financial results of Colombia, good margin performance in many of our other countries, and a lower effective tax rate, although sales growth in a number of our non-Colombia countries was flat or slightly negative. Looking at sales by segment. Warehouse sales in our Central America segment were down 0.2% to $465 million, largely as a result of -- of result of Costa Rica experiencing an increase of 4.9%. Panama, Guatemala, and Honduras reported positive growth in warehouse sales and El Salvador and Nicaragua were slightly down. The Caribbean had a sales decline of 4.6% when compared to the second quarter of last year.…

Thank you, Jose Luis. Let me cover a few additional items. Total SG&A expenses increased 47 basis points in the quarter as a percent of sales. Similar to what we saw in the first quarter, low or negative comp growth resulted in higher warehouse club operations expense ratios in places like Costa Rica, El Salvador, the Dominican Republic, and Trinidad, along with additional corporate G&A expenses. We had interest income of $549,000 compared to $280,000 last year. We’ve cash on deposit in certain countries, particularly Trinidad, which is allowing us to get some additional income. This was offset by a $108,000 of additional interest expense compared to a year ago as we took on $35.7 million of debt in conjunction with the acquisition of the Miami Distribution Center in the quarter. Foreign exchange transactions and the revaluation of monetary assets and liabilities resulted in a $915,000 currency gain in the quarter compared to a $532,000 loss in Q2 last year. We generally saw devaluing currency movements across most of our countries during the quarter, but resulted in currency gains in those countries that had net U.S dollar asset positions like Costa Rica and the Dominican Republic. In addition, despite higher transaction costs for converting TT dollars, Trinidad dollars into U.S dollars, we took that additional cost into consideration in our pricing model resulting in an overall net currency gain. The relative stability of the Colombian currency also provided a small gain in the quarter. The effective tax rate for the period was 30.6% compared to 31.7% last year. This beneficial change what again largely attributable to the intercompany transactions between PriceSmart Inc., the U.S entity and PriceSmart Colombia related to our ongoing market development efforts in Colombia. We continue to expect to see a benefit of the effect -- to the effective tax rate of approximately 150 to 200 basis points in the upcoming quarter. From a balance sheet perspective, the Company ended the second quarter with cash of a $182 million, an increase of $6.6 million during the quarter. Some of the larger actions impacting cash in Q2 included the payment of a $0.35 per share dividend on February 28, the purchase of land in Costa Rica and the acquisition of the new distribution center in Miami offset with the addition of debt we added to finance the DC. As Jose Luis mentioned, we’ve now moved much of our non-core DC operations from our current facility to the new DC. We have agreements in place for subletting most of the vacated space in the old location. However, we will likely recognize a lease liability charge of approximately $450,000 in the third quarter associated with a difference in cash flows over the remainder of our lease term. With that Jose Luis and I will be happy to take your questions. Laura, I will turn things over to you.

Thank you. [Operator Instructions] And our first question will come from Dave King of ROTH Capital Partners.

Thanks. Good morning, guys.

Good morning, Dave.

Good morning.

In terms of Trinidad, it looks like the lower shipments there was -- the impact from that was a little bit less than the $8 million to $12 million, I think you were originally anticipating. I think the market was down 10% or so in the quarter. I guess, how much do you think that the lower shipments weighed, and then with the sourcing of tradable currencies having improved a little bit recently, how should we be thinking about that impact as we move forward?

Okay. Dave, good morning. I think we -- although we have to tell and we keep looking at different ways of trying to measure how much the fact that we reduced shipments impacted sales, we think it probably impacted less than we expected. Although obviously we did at the high season, I guess, at the middle of our holiday season. So for sure there was something that we lost on the sales. Fortunately, we believe that we're now -- we believe completely that we’re now back in our regular mode of shipping merchandise and we shouldn’t see any more effects. Obviously, we’re also -- our corporate team and our local team has been doing as I mentioned a good job in getting more currency, I guess, on trading more of our TT dollars to either U.S dollars or euro. And we think that in general things improving on those both sides, either from the shipment perspective or from the trading currency perspective, we do recognize that the economy is still a little bit soft, but we’re more optimistic at this point, to anniversary the VAT increases that we have last year. Obviously, little by little things are getting better in the economy and we should start seeing something that -- to some degree improving in the country.

Okay. That’s great color. Thanks, Jose Luis. And then, in terms of gross margin improvement, I guess, year-on-year it was about 40 basis points or so. John, any sense on how much of that improvement was attributable to currency versus I think last year we had a fair amount of markdowns, if I remember both in the quarter you just reported, but I wanted to say also in the quarter you’re in now and in the year-ago period, how should we be thinking about that moving forward and what was sort of the impact in the quarter? Thanks.

I will take that one again, Dave. I think definitely the -- last year, yes, for sure, we have a difficult quarter, a lot of that was related also to Colombia with all the currency changes and the fact that we have to do a lot of markdowns there and in other markets. I think Q2 this year had a much better performance just because, obviously Colombia helped definitely and we’re making a lot of improvement there in margin. And I think we have a cleaner inventory. We had a good holiday sell-through. We have good early start for spring this year. We are now at the middle of cleaning off our inventory for whatever happens and whatever -- any inventory we need after our Easter period. But we are very - we don’t expect to see big changes or swings in our margin in Q3. I think we are going to be basically on -- within our plan and we think we’re in good position to close, obviously, Q3 and Q4. Not any items that would be different to report and hopefully the stability of the currencies will continue in most of the countries which helps us obviously keep that -- keep our prices, I guess sharp and definitely just have a good sell-through.

Okay. That’s helpful and encouraging. And then, maybe one more and I will step back. In terms of the -- so I appreciate the color on the response to the membership increase in Colombia. Just also thoughts around maybe doing the platinum membership taking at some other markets, I guess, what are sort of some of the high-level thoughts around the potential there? What kind of -- sort of markets would it make sense? Would it make sense across all the markets? What are you thinking about -- on that front?

We are actually getting ready for maybe -- a couple of countries to relaunch it in a couple of countries. We are basically working on some changes in our point-of-sale system and we’re happy with what we have seen in Costa Rica. And I believe by the next quarter, for the next call, we will probably be announcing in which countries we will be doing our rollout of these. We are not looking at doing it right now in Colombia per se. Obviously, we are taking various steps there. I think we were happy to see that the increase in membership which we needed, because obviously we have that conversion we were way below our goal of [indiscernible] of $35 that we have in the other countries. So again with the increase we’re still below, but it was a good first step to get our members, I guess, into a higher membership and as I reported it was pretty much transparent. I think we will continue reinforcing our value proposition there making sure that members understand, obviously the membership concept which so far seems that they’re getting there. And then, eventually we may consider platinum even in a market like that one, but at this point it is not on the list of the market.

Okay. Thanks so much for taking my questions. Good luck with the rest of the year.

Thank you, Dave.

Thank you, Dave.

And our next question will come from Ronald Bookbinder of Coker Palmer.

Good morning and nice job on the continuing improving comps. On the new distribution center in Miami, was there any extra cost during the quarter as you bought that in January and the quarter until February?

I guess, the only addition to the cost we have was the additional interest expense, because we closed on the loan during the quarter. So it would be that small increase in interest expense, would have probably been the only thing I could -- we could really attribute to that.

Okay. And on Costa Rica, it's great that you're seeing some improvement now in March there. But is it just traffic in the area or what was causing the weakness and what are you doing differently now to see improvement?

I would say there was an issue specifically in Q2 with some biggest, I guess, traffic issues. There was a -- they closed like a bridge that communicates a big portion of the city with the other one. So that cause a little bit of disruption, no question. We don’t expect only to blaming on those kind of events. Although we recognize that it was harder to get to our location. But I also think in general one of the things we are basically making sure we do is that I think we probably had a little bit of a slowdown in exciting items in Q1 and Q2 and then we want to make sure that going forward we don’t lose that -- the ability to keep shipping obviously good merchandise. And I think that’s what our business is about. So at the end of the day, we believe that improving in some areas of merchandising should help us get back to where we need to be in a market that is -- we have such a loyal member base, and so important for us. Especially now that we’re getting ready with our seventh warehouse in that market, so I don’t think it is anything that we can't change and again we’re pretty optimistic with the initial results even in just a few days in this month of April. So, I think we can get that back and recover some of that lost ground very easily, Ronald.

And in Colombia, in local currency, the average ticket was up 7% or over 7%. What are you offering there that's different? Are they just buying more of items that you have or have you added new items that is getting excitement going there, too?

We have been adding a lot of items in the last year and half there has been special effort in Colombia and obviously looking at local production and I think obviously some items take a little longer, but little by little we’re getting those extra items in the club, and I think it's just a result of, I guess, we’re getting a lot of those new items already in the member's mark baskets. And that will continue to be our trend going forward, just keep adding some items. I remember seeing last week a few reports on our recently launched coffee under our private-label. So a great item that just landed in the clubs in Colombia under our private-label and like that we have many examples of items that are making our selection better. And obviously also the U.S inputs slowing that destabilized currency are helping, obviously improve our stake in both local and U.S. It's all about items at the end, Ronald.

And lastly, in the U.S., everybody has been talking about the shift to e-commerce. You guys have an e-commerce program for Colombia, but what are your plans looking long-term as moving further into e-commerce?

Well, we’ve a couple of things on the works. The first one is we’re going to replace our platform, we’re going to relaunch our platform very soon. It's been taking a little longer than we expected, because it’s a more robust platform that will help to support the operation that we’re doing in Colombia, which actually members can buy merchandise that we sell in the clubs that something we’re going to launch hopefully by the end of Q3 in all our countries. And that’s the first step of having a better platform that can support that. And in addition, we are reviewing our strategy in our whole e-commerce. We do believe there is opportunity to do it a lot better. We don’t -- I mean, we’re looking at what is going on in the -- specifically in the U.S markets and the trends that is growing. And we definitely want to be part of that as it keeps getting into our countries. It is not as important yet, and obviously we’re in some smaller market. But we do recognize that retail is changing and we’ve got to be ready for, I guess, attacking that and competing with other players. Now we don’t have right now big players, I guess, in this e-commerce arena. But, I mean, things are changing and [indiscernible] we will try to do our best on getting that business also. I’m learning, as everybody is learning in this environment, but we’re getting there from it.

Okay. Thank you and good luck going forward.

Thank you.

Thanks, Ron.

And next we have a question from Patricio Danziger of RWC.

Hi. Thank you for taking my questions. Just wanted to understand store openings. In the last years you’ve been opening three stores per year, approximately. And now the pace have stopped. What is the main reason for these and do you think you can accelerate that to something around three, four stores per year?

Okay, Patricio. We don’t have -- I guess, we happen to be opening, I guess, three, four, in average in the last couple of years, obviously with Colombia that added a few. And we don’t necessarily have a goal of three per year. Unfortunately, the permit processing, the permits process has been a lot slower. And that’s the main reason we haven't been able to announce more openings. As I mentioned in my initial comments, we do have a couple of projects, I guess, on the works for that effort and hopefully we will be announcing some of them soon. It is more out of our control at this point. It's not specific that we’ve slowed down any of our plans on openings. We do have a pretty good idea of different countries and places or places where we want to open new clubs and we will -- we’re pretty optimistic that very soon we can get a little bit more on -- in the pipeline.

Great. Thank you.

Thank you.

And the next question will come from Jon Braatz of Kansas City Capital.

Good morning, Jose, John.

Good morning.

One of my questions was just answered, but Jose has there been any -- when you talk a little bit about the weakness in Costa Rica and Dominican Republic. Has there been any change in sort of the competitive landscape? Any new players in those markets?

Not necessarily new players. I’d say the only thing that has -- in Costa Rica, we would say not necessarily new players. I mean, things are business as usual, I would say. I guess, it's nothing -- no one new coming in the market. I think it's just a little bit of more, I guess, competition from other guys opening more stores or places in the country. And that is actually -- it's happening more in DR, and hopeful in the last few years they’ve been very aggressive in terms of super market competition have got very difficult in that market and obviously they’ve been opening more stores. That will probably apply more for the Dominican Republic that has been definitely showing not necessarily new players, but more stores of the current players in different places of the city. And that combined with the traffic makes it a little bit harder sometimes for our members to get access to us, no. But believing in our concept, obviously we’re trying to make the changes we need and try to improve and give the members a reason to shop with us and eventually would be also with our e-commerce platform, hopefully that they will also be able to shop online, we don’t know. So we’re trying to get in different -- I guess, getting different efforts to try to improve the performance in those, but that is not necessarily new market players in any of those markets.

Okay. I guess, the same question, but for the Colombian market, any changes in the competitive landscape there?

No, Colombia has been actually -- the only change that we’ve seen there, there are a couple of new players that started basically at the same time we open there were a few chains that opened these small stores that are competing big time. One in [indiscernible] markets out of Portugal, they have opened a lot of stores in that market. There is also a concept called [indiscernible] D1, that has been opened in a lot of small format stores in those markets and I think they’re going after the same business, obviously, small mom and pop stores. But we haven't seen any effect to our business. I guess, those will be the kind of the new competitors. The rest of the competitors are pretty much the same ones we’ve seen through the years. And I think we’ve been actually learning how to compete with each other. I think the big hypermarkets there, either Exito or Jumbo or Alkosto, all those guys have probably been learning how to compete also with the new guys, which is us. And I think we’re -- nothing has changed. I think this is still competitive market for sure, but nothing that would be so much different at this point, in that market, Jon.

Okay. Thank you. John, one question. You had mentioned that you expect the tax rate to be 150, 200 basis points lower. When I look at last year's third quarter and fourth quarter tax rates, they were 35% and 30.5%, respectively. Are you talking about 150 to 200 basis points reduction, specifically for those -- both those quarters or sort of an average or -- can you clarify that a little bit?

Sure. Yes. Literally I think I was referring to sort of the run rate as we’re going into the third quarter here. In the fourth quarter last year, we had a very low tax rate, because …

Right.

… that was the first quarter we got the impact that -- of the intercompany transaction between the U.S and Colombia. So, we’re sort of comping, if you will, in the next quarter, I guess, a period when we didn’t do that. So once we get to the fourth quarter, we will have anniversaried this issue. So, the -- my comments are specific to the third quarter.

So, basically John, sort of a lower tax rate in the third quarter year-over-year, but more comparable year-over-year in the fourth quarter?

That’s correct. Yes.

Okay. All right. Thank you.

[Operator Instructions] I’m showing no additional questions. I'd like to turn the conference back over to John Heffner for any closing remarks.

Well, thank you, Laura. No closing remarks on this end. This will end our call. Thank you for participating with us today. Have a good day and a nice weekend.

Thank you.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.