SOURCE: PriceSmart, Inc.

November 23, 2005 08:00 ET

PriceSmart Announces Fourth Quarter and Fiscal Year Results of Operations; Opening of New Warehouse Club in Costa Rica and Acquisition of Panama City Real Estate Also Announced

SAN DIEGO, CA -- (MARKET WIRE) -- November 23, 2005 -- PriceSmart, Inc. (NASDAQ: PSMT) (www.pricesmart.com) today announced its results of operations for the fourth quarter and fiscal year 2005 which ended on August 31, 2005.

For the fourth quarter of fiscal 2005 net warehouse sales were $155.4 million, compared to $131.0 million in the fourth quarter of fiscal 2004. Total revenue for the fourth quarter was $158.8 million, compared to $133.9 million in the prior year. The sales and revenue numbers for both years do not include the operational results of the Company's PriceSmart Philippines subsidiary which was sold in August 2005. The Company had 22 warehouse clubs in operation in both years.

The Company recorded an operating loss in the quarter of $465,000, compared to an operating loss of $3.1 million in the prior year. Significant items affecting the operating loss in the period included $2.6 million in asset impairment and closure costs primarily related to a non-cash $2.4 million write down of real estate in the Dominican Republic. The pre-tax loss from continuing operations for the Company in the quarter was $1.2 million, compared to a pre-tax loss from continuing operations of $4.4 million in the prior year.

The net loss attributable to common shareholders for the fourth quarter was $24.1 million or ($0.95) per diluted share. The net loss attributable to common shareholders included: $16.7 million ($0.66 per diluted share) for discontinued operations, net of tax resulting from the sale of the Company's Philippines operation; $1.3 million ($0.05 per diluted share) related to the Company's equity investment in PriceSmart Mexico which was closed in February 2005; and $5.1 million ($0.20 per diluted share) in current period tax provisions and tax contingencies.

Total revenue for fiscal 2005 increased 13.7% to $618.8 million from $544.2 million and net warehouse sales increased 14.1% during that same period. For fiscal year 2005, the Company recorded an operating loss of $5.3 million and a loss from continuing operations before taxes of $9.9 million, both of which were impacted by $11.4 million in charges associated with asset impairment and closure costs. The fiscal 2005 net loss attributable to common shareholders was $63.6 million or ($3.15) per diluted share. Of that amount, $20.6 million ($1.02 per diluted share) is attributable to deemed dividends related to the exchange of common stock for outstanding shares of Series A and Series B preferred stock to common stock in the first quarter of fiscal year 2005; $19.5 million ($0.96 per diluted share) related to discontinued operations, primarily PriceSmart Philippines; and $4.4 million ($0.22 per diluted share) associated with the Company's equity investment in PriceSmart Mexico. For fiscal 2004, the Company recorded an operating loss of $6.7 million and a net loss attributable to common shareholders of $33.3 million, or ($4.57) per diluted share.

Commenting on the fourth quarter and full year results, Robert E. Price, Chairman and Interim Chief Executive Officer, said, "We are encouraged by the improvement in operating results for our Company. Sales increased 18.6% in the most recent quarter, membership sign ups and renewals are very good and expenses have improved. Fiscal year 2005 was an extremely productive year for PriceSmart as operations improved, the balance sheet was strengthened, and losing operations in Mexico and the Philippines were discontinued."

The Company ended the fiscal year with $30.1 million in cash and cash equivalents. The current ratio at year end was 1.28 and the Company was in compliance with all loan covenants. PriceSmart's Chief Financial Officer, John M. Heffner, commented, "The financial decisions that were taken this year had a significant positive impact on strengthening the Company's financial condition. The Company either retired or converted to equity $77.1 million in short and long-term debt, thereby reducing interest expense by nearly $1.3 million in the fourth quarter of fiscal 2005 compared to a year ago, and eliminating $3.4 million in annualized dividend expense. We are pleased with the progress that has been achieved."

PriceSmart also announced that on November 18 the Company successfully opened its fourth warehouse club in Costa Rica. On November 18 the Company acquired for $12.5 million a 35,000 square meter commercial center in Panama City, Panama, which includes an existing operating PriceSmart warehouse club along with additional commercial property which the Company plans to develop.

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 in Panama; four in 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). On August 12, 2005, PriceSmart completed the sale of its interest in its PriceSmart Philippines subsidiary.

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 continue to incur losses in future periods; if the Company fails to comply with covenants governing its indebtedness, the lenders may elect to accelerate the Company's indebtedness and foreclose on the collateral pledged to secure the indebtedness; 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 could 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; potential future impairments under SFAS 144 could adversely affect the Company's future results of operations and financial position; 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 15, 2005. 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.
                   CONSOLIDATED STATEMENTS OF OPERATIONS
               (amounts in thousands, except per share data)


                             Three Months Ended        Twelve Months Ended
                                 August 31,                August 31,
                             2005         2004         2005          2004
                          ---------    ---------    ---------    ---------
Revenues:
   Sales:
     Net warehouse club   $ 155,389    $ 131,007    $ 604,994    $ 530,262
     Export                      31           74          425        1,052
   Membership income          2,549        2,060        9,424        7,939
   Other income                 876          728        3,982        4,938
                          ---------    ---------    ---------    ---------
       Total revenues       158,845      133,869      618,825      544,191
                          ---------    ---------    ---------    ---------

Operating expenses:
   Cost of goods sold:
     Net warehouse club     132,037      111,545      516,611      455,626
     Export                      (2)          92          394        1,090
   Selling, general
    and administrative:
     Warehouse club
      operations             19,848       17,751       73,361       69,846
     General and
      administrative          4,761        6,588       22,310       23,098
   Preopening expenses           57            -           99            -
   Asset impairment and
    closure costs             2,609          952       11,361        1,236
                          ---------    ---------    ---------    ---------
       Total expenses       159,310      136,928      624,136      550,896
                          ---------    ---------    ---------    ---------
Operating loss                 (465)      (3,059)      (5,311)      (6,705)

Other income (expense):
   Interest income              353          464        1,754        1,929
   Interest expense            (496)      (1,755)      (5,385)      (7,930)
   Other expense               (575)         (70)        (994)        (215)
   Income from
    related party                 -            -            -          500
                          ---------    ---------    ---------    ---------
       Total other
        income (expense)       (718)      (1,361)      (4,625)      (5,716)
                          ---------    ---------    ---------    ---------

Loss from continuing
 operations before
 provision for income
 taxes, losses (including
 impairment charges in
 2005 and 2004) of
 unconsolidated affiliate
 and minority interest       (1,183)      (4,420)      (9,936)     (12,421)
Provision for income taxes   (5,099)      (3,056)      (9,140)      (4,236)
Losses (including
 impairment charges of
 $845,000 and $3.1 million
 in 2005 and 2004,
 respectively) of
 unconsolidated affiliate    (1,334)      (3,482)      (4,368)      (4,828)
Minority interest               164          405          566          697
                          ---------    ---------    ---------    ---------
Net loss from
 continuing operations       (7,452)     (10,553)     (22,878)     (20,788)
Discontinued operations,
 net of tax                 (16,675)      (3,003)     (19,459)      (9,194)
                          ---------    ---------    ---------    ---------
Net loss                    (24,127)     (13,556)     (42,337)     (29,982)
Preferred dividends               -         (840)        (648)      (3,360)
Deemed dividend on
 conversion of
 preferred stock                  -            -      (20,647)           -
                          ---------    ---------    ---------    ---------
Net loss attributable to
 common stockholders      $ (24,127)   $ (14,396)   $ (63,632)   $ (33,342)
                          =========    =========    =========    =========

Loss per share -
 common stockholders:
   Basic - continuing
    operations            $   (0.29)   $   (1.44)   $   (1.13)   $   (2.85)
   Basic - discontinued
    operations, net
    of tax                $   (0.66)   $   (0.41)   $   (0.96)   $   (1.26)
   Basic - preferred and
    deemed dividends      $       -    $   (0.11)   $   (1.06)   $   (0.46)
                          ---------    ---------    ---------    ---------
   Basic - attributable
    to common
    stockholders          $   (0.95)   $   (1.96)   $   (3.15)   $   (4.57)

   Diluted - continuing
    operations            $   (0.29)   $   (1.44)   $   (1.13)   $   (2.85)
   Diluted - discontinued
    operations, net
    of tax                $   (0.66)   $   (0.41)   $   (0.96)   $   (1.26)
   Diluted - preferred
    and deemed dividends  $       -    $   (0.11)   $   (1.06)   $   (0.46)
                          ---------    ---------    ---------    ---------
   Diluted - attributable
    to common
    stockholders          $   (0.95)   $   (1.96)   $   (3.15)   $   (4.57)

Shares used in per
 share computation:
   Basic                     25,436        7,356       20,187        7,290
   Diluted                   25,436        7,356       20,187        7,290



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

                                                            August 31,
                                                        2005         2004
                                                   ----------   ----------
ASSETS
Current Assets:
    Cash and cash equivalents                      $   30,147   $   32,910
    Short-term restricted cash                          7,331        7,255
    Receivables, net of allowance for
     doubtful accounts of $2,260 and
     $1,011 in 2005 and 2004, respectively              1,906        1,542
    Receivables from unconsolidated affiliate             811            -
    Merchandise inventories                            65,719       56,357
    Prepaid expenses and other current assets           8,410        9,272
    Assets of discontinued operations                     118       49,442
                                                   ----------   ----------
Total current assets                                  114,442      156,778

   Long-term restricted cash                            1,045       18,222
   Property and equipment, net                        142,310      147,488
   Goodwill, net                                       29,600       23,071
   Deferred tax asset                                  22,260       16,009
   Other assets                                         4,108        3,870
   Long-term receivables from
    unconsolidated affiliate                                -        1,316
   Investment in unconsolidated affiliate               6,089        9,254
                                                   ----------   ----------
Total Assets                                       $  319,854   $  376,008
                                                   ==========   ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Short-term borrowings                           $    1,648   $   12,699
   Accounts payable                                    57,423       50,470
   Accounts payable to and advances
    received from related party                             -       20,273
   Accrued salaries and benefits                        4,513        4,149
   Deferred membership income                           4,773        3,758
   Income taxes payable                                 2,271          746
   Other accrued expenses                              12,704       14,291
   Long-term debt, current portion                      5,417       13,219
   Liabilities of discontinued operations                 506       38,431
                                                   ----------   ----------
Total current liabilities                              89,255      158,036
Long-term deferred tax liability                          958          592
Deferred rent                                           1,427          468
Accrued closure costs                                   3,466        3,378
Long-term debt, related party                               -       25,000
Long-term debt, net of current portion                 23,915       57,172
                                                   ----------   ----------
Total liabilities                                     119,021      244,646

Minority interest                                       2,560        3,483
Commitments and contingencies                               -            -

Stockholders' Equity:
   Preferred stock, $.0001 par value
   (stated at cost), 2,000,000 shares authorized;
     Series A convertible preferred stock-20,000
      shares designated, 0 and 20,000 shares issued
      and outstanding, respectively (liquidation
      preference of $0 and $21,867, respectively)           -       19,914
     Series B convertible preferred stock-30,000
      shares designated, 0 and 22,000 shares issued
      and outstanding, respectively (liquidation
      preference of $0 and $24,014, respectively)           -       21,975
   Common stock, $.0001 par value, 45,000,000
    shares authorized; 26,031,180 and 7,775,655
    shares issued and 25,596,755 and 7,339,810
    shares outstanding (net of treasury shares),
    respectively                                            3            1
   Additional paid-in capital                         340,659      170,255
   Tax benefit from exercise of stock options           3,379        3,379
   Notes receivable from stockholders                     (29)         (33)
   Deferred compensation                               (1,015)      (1,932)
   Accumulated other comprehensive loss               (13,757)     (18,314)
   Accumulated deficit                               (121,534)     (57,902)
   Less: treasury stock at cost; 434,425 and
    435,845 shares, respectively                       (9,433)      (9,464)
                                                   ----------   ----------
Total stockholders' equity                            198,273      127,879
                                                   ----------   ----------
Total Liabilities and Stockholders' Equity         $  319,854   $  376,008
                                                   ==========   ==========

Contact Information

  • For further information, please contact:

    Robert E. Price
    Interim Chief Executive Officer
    (858) 551-2336

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