SOURCE: PriceSmart, Inc.

April 07, 2006 08:00 ET

PriceSmart Announces Second Quarter Results of Operation

March Sales Also Announced

SAN DIEGO, CA -- (MARKET WIRE) -- April 7, 2006 -- PriceSmart, Inc. (NASDAQ: PSMT) (www.pricesmart.com) today announced its results of operations for the second quarter of fiscal year 2006, which ended on February 28, 2006. For the second quarter of fiscal year 2006, net warehouse sales increased 18.0% to $189.6 million, from $160.6 million in the second quarter of fiscal year 2005. Total revenue for the second quarter increased 17.6% to $193.3 million, compared to $164.4 million in the prior year. The Company had 23 warehouse clubs in operation as of February 28, 2006, compared to 22 warehouse clubs in operation in the prior year. The sales, revenue, and number of warehouse clubs in operation for both years do not include PriceSmart Philippines, which was sold in August 2005.

The Company recorded operating income in the quarter of $6.1 million, compared to operating income of $830,000 in the second quarter of the prior year. Net income from continuing operations was $3.3 million, or $0.12 per diluted share, in the second quarter of fiscal year 2006 compared to a net loss of $2.5 million, or ($0.13) per diluted share, in the second quarter of fiscal 2005. Net income attributable to common stockholders for the second quarter was $3.2 million, or $0.12 per diluted share. In the second quarter of fiscal year 2005, the Company recorded a net loss of $3.2 million, or ($0.16) per diluted share.

For the first six months of fiscal 2006, net warehouse sales increased 19.3% to $356.1 million from $298.4 million in the first six months of fiscal 2005. Total revenues for the first half of the fiscal year increased 18.9% to $363.2 million from $305.5 million in the same period of the prior year. For the first six months of fiscal 2006, the Company recorded an operating income of $9.2 million and a net income attributable to common shareholders of $5.2 million, or $0.20 per diluted share. During the same six-month period in fiscal 2005, the Company recorded operating income of $3.2 million and a net loss attributable to common shareholders of $26.4 million, or ($1.74) per diluted share.

Additionally, the Company announced that for the month of March 2006, net sales increased 17.7% to $59.8 million from $50.8 million in March a year earlier. For the seven months ended March 31, 2006, net sales increased 19.0% to $415.9 million from $349.6 million in the same period last year. There were 23 warehouse clubs in operation at the end of March 2006 compared to 22 warehouse clubs in operation in March 2005. Net sales exclude sales from discontinued operations.

For the four weeks ended April 2, 2006, comparable warehouse sales for warehouse clubs open at least 12 full months increased 13.1% compared to the same four-week period last year. For the thirty weeks ended April 2, 2006, comparable warehouse sales, for warehouse clubs open at least 12 full months, increased 16.2% from the same period a year ago. Comparable warehouse sales for the comparable thirty-week period of 2005 exclude sales from discontinued operations.

Commenting on the second quarter, PriceSmart Inc.'s President, Jose Luis Laparte, said, "The financial results reflect the ongoing improvements we have been making in many areas of the Company, including the quality and selection of merchandise in our 23 warehouse clubs. We had a good holiday season and have continued to see strong sales in the first three months of the new calendar year. The number of membership accounts has grown 18% in the past year, and the new warehouse club we opened in Costa Rica is doing well, contributing positively to the Company's overall results in its first full quarter of operation."

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). 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 a 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 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 January 17, 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.
                      CONSOLIDATED BALANCE SHEETS
               (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

                                                   February 28, August 31,
                                                       2006        2005
                                                    ----------  ----------
                                                    (Unaudited)
ASSETS
Current Assets:
  Cash and cash equivalents                         $   47,957  $   30,147
  Short-term restricted cash                             7,471       7,331
  Receivables, net of allowance for doubtful
   accounts of $2,234 and $2,260, respectively           2,340       1,759
  Receivables from unconsolidated affiliate                 78         811
  Merchandise inventories                               71,225      65,719
  Prepaid expenses and other current assets              8,299       8,360
      Assets of discontinued operations                  1,243         315
                                                    ----------  ----------
Total current assets                                   138,613     114,442
                                                    ----------  ----------
  Long-term restricted cash                                565       1,045
  Property and equipment, net                          158,767     142,310
  Goodwill                                              31,764      29,600
  Deferred tax asset                                    20,276      22,260
  Other assets                                           4,205       4,108
  Investment in unconsolidated affiliate                 3,663       6,089
                                                    ----------  ----------
Total Assets                                        $  357,853  $  319,854
                                                    ==========  ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Short-term borrowings                             $      874  $    1,648
  Accounts payable                                      59,137      57,423
  Accrued salaries and benefits                          4,258       4,513
  Deferred membership income                             5,567       4,773
  Income taxes payable                                   3,404       2,271
  Other accrued expenses                                11,613      12,547
  Long-term debt, current portion                        5,417       5,417
      Liabilities of discontinued operations               550         663
                                                    ----------  ----------
Total current liabilities                               90,820      89,255
Deferred tax liability                                     877         958
Deferred rent                                            1,530       1,427
Accrued closure costs                                    3,338       3,466
Long-term debt, related party                           12,500           -
Long-term debt, net of current portion                  19,813      23,915
                                                    ----------  ----------
Total liabilities                                      128,878     119,021

Minority interest                                        2,496       2,560
Commitments and contingencies

Stockholders' Equity:
  Common stock, $.0001 par value, 45,000,000 shares
   authorized; 29,362,905 and 26,031,180 shares
   issued and 28,928,480 and 25,596,755 shares
   outstanding (net of treasury shares),
   respectively                                              3           3
  Additional paid-in capital                           366,875     339,644
      Unearned compensation on restricted stock         (4,286)          -
  Tax benefit from exercise of stock options             3,379       3,379
  Notes receivable from stockholders                       (30)        (29)
  Accumulated other comprehensive loss                 (13,740)    (13,757)
  Accumulated deficit                                 (116,289)   (121,534)
  Less: treasury stock at cost;  434,425 shares         (9,433)     (9,433)
                                                    ----------  ----------
Total stockholders' equity                             226,479     198,273
                                                    ----------  ----------
Total Liabilities and Stockholders' Equity          $  357,853  $  319,854
                                                    ==========  ==========



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


                              Three Months Ended       Six Months Ended
                                 February 28,            February 28,
                               2006        2005        2006        2005
                            ----------  ----------  ----------  ----------
Revenues:
  Sales:
    Net warehouse club      $  189,562  $  160,587  $  356,075  $  298,388
    Export                          11         138          11         371
  Membership income              2,817       2,303       5,462       4,457
  Other income                     868       1,374       1,684       2,257
                            ----------  ----------  ----------  ----------
Total revenues                 193,258     164,402     363,232     305,473
                            ----------  ----------  ----------  ----------
Operating expenses:
  Cost of goods sold:
    Net warehouse club         162,170     138,836     304,690     255,085
    Export                          16         133          16         361
  Selling, general and
   administrative:
    Warehouse club
     operations                 18,924      18,157      37,178      35,146
    General and
     administrative              5,963       6,295      11,689      11,387
  Preopening expenses                1           2         336           2
  Closure costs                     60         149         113         292
                            ----------  ----------  ----------  ----------
Total operating expenses       187,134     163,572     354,022     302,273
                            ----------  ----------  ----------  ----------
Operating income                 6,124         830       9,210       3,200
Other income (expense):
  Interest income                  412         582         724       1,041
  Interest expense                (829)     (1,505)     (1,550)     (3,886)
  Other expense, net                 1         (61)         25        (101)
                            ----------  ----------  ----------  ----------
Total other expense               (416)       (984)       (801)     (2,946)
                            ----------  ----------  ----------  ----------
Income (loss) from
 continuing operations
 before provision for
 income taxes, loss of
 unconsolidated affiliate
 and minority interest           5,708        (154)      8,409         254
Provision for income taxes      (2,152)       (316)     (3,494)     (1,021)
Loss of unconsolidated
 affiliate                         (80)     (1,962)        (44)     (2,416)
Minority interest                 (129)       (114)       (173)       (166)
                            ----------  ----------  ----------  ----------
Income (loss) from
 continuing operations           3,347      (2,546)      4,698      (3,349)
Discontinued operations,
 net of tax                       (107)       (642)        547      (1,715)
                            ----------  ----------  ----------  ----------
Net income (loss)                3,240      (3,188)      5,245      (5,064)
Preferred dividends                  -           -           -        (648)
Deemed dividend on exchange
 of common stock for
 preferred stock                     -           -           -     (20,647)
                            ----------  ----------  ----------  ----------
Net income (loss)
 attributable to common
 stockholders               $    3,240  $   (3,188) $    5,245  $  (26,359)
                            ==========  ==========  ==========  ==========
Basic income (loss) per
 share - common
 stockholders:
      Continuing operations $     0.12  $    (0.13) $     0.18  $    (0.22)
      Discontinued
       operations, net of
       tax                  $        -  $    (0.03) $     0.02  $    (0.11)
      Preferred and deemed
       dividends            $        -  $        -  $        -  $    (1.41)
                            ----------  ----------  ----------  ----------
      Attributable to common
       stockholders         $     0.12  $    (0.16) $     0.20  $    (1.74)
                            ==========  ==========  ==========  ==========
Diluted income (loss) per
 share - common
 stockholders:
      Continuing operations $     0.12  $    (0.13) $     0.18  $    (0.22)
      Discontinued
       operations, net of
       tax                  $        -  $    (0.03) $     0.02  $    (0.11)
      Preferred and deemed
       dividends            $        -  $        -  $        -  $    (1.41)
                            ----------  ----------  ----------  ----------
      Attributable to common
       stockholders         $     0.12  $    (0.16) $     0.20  $    (1.74)
                            ==========  ==========  ==========  ==========
Shares used in per share
 computations:
      Basic                     26,821      20,014      26,256      15,136
                            ==========  ==========  ==========  ==========
      Diluted                   27,139      20,014      26,569      15,136
                            ==========  ==========  ==========  ==========

Contact Information

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

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