SOURCE: PriceSmart, Inc.

November 13, 2006 08:00 ET

PriceSmart Announces Fourth Quarter and Fiscal Year Results of Operation

SAN DIEGO, CA -- (MARKET WIRE) -- November 13, 2006 -- PriceSmart, Inc. (NASDAQ: PSMT) (www.pricesmart.com) today announced its results of operations for the fourth quarter and fiscal year 2006 which ended on August 31, 2006.

For the fourth quarter of fiscal 2006 net warehouse sales were $182.7 million, compared to $155.4 million in the fourth quarter of fiscal 2005. Total revenue for the fourth quarter was $186.8 million, compared to $158.8 million in the prior year. The Company had 23 warehouse clubs in operation at the end of fiscal 2006 compared to 22 at the end of fiscal 2005. The net warehouse sales, total revenues, and number of warehouse clubs for the prior year do not include PriceSmart Philippines which was sold in August 2005.

The Company recorded operating income in the quarter of $4.3 million compared to an operating loss of $465,000 in the fourth quarter of fiscal 2005. Fourth quarter 2006 results included asset impairment and closure costs of $1.7 million whereas fourth quarter 2005 asset impairment and closure costs were $2.6 million.

Net income attributable to common stockholders for the fourth quarter was $3.4 million or $0.12 per diluted share compared to a net loss of $24.1 million or ($0.95) per diluted share in the fourth quarter of fiscal 2005. Net income in the current period included $3.0 million of income, net of tax, primarily associated with the collection of a previously fully reserved loan from the Company's former Philippine subsidiary. The loss in the fourth quarter of fiscal 2005 included: $16.7 million ($0.66 per diluted share) for discontinued operations, net of tax resulting from the sale of the Company's interest in the Philippines operation; $1.3 million ($0.05 per diluted share) in charges related to the Company's equity investment in PriceSmart Mexico which was closed in February 2005; and $5.1 million ($.20 per diluted share) in current period tax provisions and reserves for tax contingencies.

Total revenue for fiscal 2006 increased 18.7% to $734.7 million from $618.8 million in fiscal 2005 and net warehouse sales increased 18.9% to $719.6 million during that same period. For fiscal year 2006 the Company recorded operating income of $18.1 million and net income attributable to common stockholders of $11.9 million or $0.43 per diluted share. For fiscal year 2005 the Company recorded a net loss attributable to common stockholders of $63.6 million or ($3.15) per diluted share, of which, $20.6 million ($1.02 per diluted share) was attributable to deemed dividends related to the conversion of Series A and Series B preferred stock to common stock; $19.5 million ($0.96 per diluted share) related to discontinued operations, primarily PriceSmart Philippines; and $4.4 million ($0.22 per diluted share) was related to non-cash charges associated with the write-down of the Company's equity investment in PriceSmart Mexico.

The Company ended the fiscal year with $40.0 million in unrestricted cash and, subsequent to year end, on September 15, 2006 repaid the outstanding balance of $14.9 million on the long-term debt held by the International Finance Corporation.

Commenting on the fourth quarter and full year results, PriceSmart President, Jose Luis Laparte, said, "The operating results reflect the positive business growth we have seen in our warehouse clubs as a result of the merchandise selection and value we bring to our members. We have begun the new fiscal year with the recent opening of our newly relocated warehouse club in San Pedro Sula, Honduras and we completed the expansion of one of our clubs in Panama City, Panama by 1,200 square meters. We are planning to open a third location in Trinidad in July 2007."

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 23 warehouse clubs in 11 countries and one U.S. territory (four each in Panama and Costa Rica; two each in Dominican Republic, El Salvador, Guatemala, Honduras, and Trinidad; 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," "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 had substantial net losses in fiscal 2003, 2004 and 2005, and may not be able to sustain the profitability it achieved in fiscal 2006 in future periods; 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 the Company's business; although the Company has taken and continues to take steps to improve significantly its internal controls, there may be material weaknesses or significant deficiencies that the Company has not yet identified; the Company faces significant competition; the Company faces difficulties in the shipment of and inherent risks in the importation of merchandise to its warehouse clubs; the Company is exposed to weather and other risks associated with international operations; 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 have control over the Company's voting stock, which will make it difficult to complete some corporate transactions without their support and may prevent 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; and the Company faces increased costs and compliance risks associated with compliance with Section 404 of the Sarbanes-Oxley Act of 2002; as well as the other risks detailed in the Company's SEC reports, including the Company's Form 10-Q filed pursuant to the Securities Exchange Act of 1934 on July 14, 2006. 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. Certain prior period amounts may have been reclassified to conform to the current period presentation.



                             PRICESMART, INC.
              UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
               (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)


                                 Three Months Ended   Twelve Months Ended
                                     August 31,            August 31,
                                --------------------  --------------------
                                  2006       2005       2006       2005
                                ---------  ---------  ---------  ---------
 Revenues:
    Sales:
      Net warehouse club        $ 182,720  $ 155,389  $ 719,576  $ 604,994
      Export                           43         31         63        425
    Membership income               3,097      2,549     11,520      9,424
    Other income                      944        876      3,514      3,982
                                ---------  ---------  ---------  ---------
 Total revenues                   186,804    158,845    734,673    618,825
                                ---------  ---------  ---------  ---------
 Operating expenses:
    Cost of goods sold:
      Net warehouse club          153,103    132,037    611,411    516,611
      Export                           63         (2)        86        394
    Selling, general and
     administrative:
      Warehouse club operations    21,228     19,848     78,784     73,361
      General and
       administrative               6,388      4,761     24,079     22,310
    Preopening expenses                13         57        349         99
    Asset impairment and
     closure costs                  1,662      2,609      1,834     11,361
                                ---------  ---------  ---------  ---------
 Total operating expenses         182,457    159,310    716,543    624,136
                                ---------  ---------  ---------  ---------
 Operating income                   4,347       (465)    18,130     (5,311)
 Other income (expense):
    Interest income                   611        353      1,959      1,754
    Interest expense                 (933)      (496)    (3,191)    (5,385)
    Other expense                    (105)      (575)      (151)      (994)
                                ---------  ---------  ---------  ---------
 Total other expense                 (427)      (718)    (1,383)    (4,625)
                                ---------  ---------  ---------  ---------
Income (loss) from continuing
 operations before provision
 for income taxes, loss of
 unconsolidated affiliate and
 minority interest                  3,920     (1,183)    16,747     (9,936)
Provision for income taxes         (3,426)    (5,099)    (8,112)    (9,140)
Loss of unconsolidated
 affiliate                            (41)    (1,334)       (97)    (4,368)
Minority interest                     (93)       164       (354)       566
                                ---------  ---------  ---------  ---------
Income (loss) from continuing
 operations                           360     (7,452)     8,184    (22,878)
Discontinued operations, net of
 tax                                3,024    (16,675)     3,674    (19,459)
                                ---------  ---------  ---------  ---------
Net income (loss)                   3,384    (24,127)    11,858    (42,337)
Preferred dividends                     —          —          —       (648)
Deemed dividend on exchange of
 common stock for preferred
 stock                                  —          —          —    (20,647)
                                ---------  ---------  ---------  ---------
Net income (loss) attributable
 to common stockholders         $   3,384  $ (24,127) $  11,858  $ (63,632)
                                =========  =========  =========  =========
Basic income (loss) per share –
 common stockholders:
    Continuing operations       $    0.01  $   (0.29) $    0.30  $   (1.13)
    Discontinued
     operations, net of tax     $    0.11  $   (0.66) $    0.13  $   (0.96)
    Preferred and deemed
     dividends                  $       —  $       —  $       —  $   (1.06)
                                ---------  ---------  ---------  ---------
    Attributable to
     common stockholders        $    0.12  $   (0.95) $    0.43  $   (3.15)
                                =========  =========  =========  =========
Diluted income (loss) per share
 – common stockholders:
    Continuing operations       $    0.01  $   (0.29) $    0.30  $   (1.13)
    Discontinued
     operations, net of tax     $    0.11  $   (0.66) $    0.13  $   (0.96)
    Preferred and deemed
     dividends                  $       —  $       —  $       —  $   (1.06)
                                ---------  ---------  ---------  ---------
    Attributable to
     common stockholders        $    0.12  $   (0.95) $    0.43  $   (3.15)
                                =========  =========  =========  =========
Shares used in per share
 computations:
    Basic                          28,406     25,436     27,332     20,187
                                =========  =========  =========  =========
    Diluted                        29,145     25,436     27,735     20,187
                                =========  =========  =========  =========




                             PRICESMART, INC.
                  UNAUDITED CONSOLIDATED BALANCE SHEETS
                (amounts in thousands, except share data)



                                                           August 31,
                                                      --------------------
                                                        2006       2005
                                                      ---------  ---------
ASSETS
Current Assets:
  Cash and cash equivalents                           $  39,995  $  30,147
  Short-term restricted cash                              7,651      7,331
  Receivables, net of allowance for doubtful accounts
   of $191 and $2,260 in 2006
   and 2005, respectively                                 3,599      1,759
  Receivables from unconsolidated affiliate                   —        811
  Merchandise inventories                                77,432     65,719
  Prepaid expenses and other current assets               8,985      8,360
  Assets of discontinued operations                       1,594        315
                                                      ---------  ---------
Total current assets                                    139,256    114,442

  Long-term restricted cash                                 531      1,045
  Property and equipment, net                           162,029    142,310
  Goodwill                                               31,870     29,600
  Deferred tax asset                                     20,183     22,260
  Other assets                                            1,903      4,108
  Investment in unconsolidated affiliate                  3,271      6,089
                                                      ---------  ---------
Total Assets                                          $ 359,043  $ 319,854
                                                      =========  =========
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
  Short-term borrowings                               $     158  $   1,648
  Accounts payable                                       65,520     57,423
  Accounts payable to unconsolidated affiliate              381          —
  Accrued salaries and benefits                           5,765      4,513
  Deferred membership income                              5,780      4,773
  Income taxes payable                                    4,098      2,271
  Other accrued expenses                                 15,194     12,547
  Long-term debt, current portion                         5,417      5,417
  Liabilities of discontinued operations                    130        663
                                                      ---------  ---------
Total current liabilities                               102,443     89,255
Deferred tax liability                                    1,101        958
Deferred rent                                             1,730      1,427
Accrued closure costs                                     3,226      3,466
Long-term debt, net of current portion                   13,252     23,915
                                                      ---------  ---------
Total liabilities                                       121,752    119,021

Minority interest                                         2,672      2,560
Commitments and contingencies                                 —          —

Stockholders’ Equity:
  Common stock, $.0001 par value, 45,000,000 shares
   authorized; 29,404,457 and
   26,031,180 shares issued and 28,966,294 and
   25,596,755 shares outstanding (net of treasury
   shares), respectively                                      3          3
  Additional paid-in capital                            364,132    339,644
  Tax benefit from exercise of stock options              3,509      3,379
  Notes receivable from stockholders                          —        (29)
  Accumulated other comprehensive loss                  (13,883)   (13,757)
  Accumulated deficit                                  (109,676)  (121,534)
  Less: treasury stock at cost; 438,163 and 434,425
   shares, respectively                                  (9,466)    (9,433)
                                                      ---------  ---------
Total stockholders’ equity                              234,619    198,273
                                                      ---------  ---------
Total Liabilities and Stockholders’ Equity            $ 359,043  $ 319,854
                                                      =========  =========


Contact Information

  • For further information, please contact:
    Robert E. Price
    Chief Executive Officer
    (858) 551-2336

    or

    John M. Heffner
    Executive Vice President and Chief Financial Officer
    (858) 404-8826