SOURCE: PriceSmart, Inc.

July 10, 2006 08:00 ET

PriceSmart Announces Third Quarter Results of Operations

June Sales and Addition to Russell 2000 Index Also Announced

SAN DIEGO, CA -- (MARKET WIRE) -- July 10, 2006 -- PriceSmart, Inc. (NASDAQ: PSMT) today announced its results of operations for the third quarter of fiscal year 2006, which ended on May 31, 2006.

For the third quarter of fiscal year 2006, net warehouse sales increased 19.6% to $180.8 million, from $151.2 million in the third quarter of fiscal year 2005. Total revenue for the third quarter increased 19.5% to $184.6 million, compared to $154.5 million in the prior year. The Company had 23 warehouse clubs in operation as of May 31, 2006, compared to 22 warehouse clubs in operation in the prior year. Net warehouse sales, total revenues and the number of warehouse clubs in operation for both years do not include PriceSmart's Philippines operations which were sold in August 2005.

The Company recorded operating income in the quarter of $4.6 million, compared to an operating loss of $8.0 million in the third quarter of the prior year, which included asset impairment and closure costs of $8.5 million. Net income from continuing operations was $3.1 million, or $0.11 per diluted share, in the third quarter of fiscal year 2006 compared to a net loss from continuing operations of $12.1 million, or ($0.49) per diluted share, in the third quarter of fiscal 2005. Net income available to common stockholders for the third quarter was $3.2 million, or $0.11 per diluted share. In the third quarter of fiscal year 2005, the Company recorded a net loss attributable to common stockholders of $13.1 million, or ($0.53) per diluted share.

For the first nine months of fiscal 2006, net warehouse sales increased 19.4% to $536.9 million from $449.6 million in the first nine months of fiscal 2005. Total revenues for the first nine months of the fiscal year increased 19.1% to $547.9 million from $460.0 million in the same period of the prior year. For the first nine months of fiscal 2006, the Company recorded operating income of $13.8 million and net income and net income available to common stockholders of $8.5 million, or $0.31 per diluted share. During the same nine-month period in fiscal 2005, the Company recorded an operating loss of $4.8 million and a net loss attributable to common stockholders of $39.5 million, or ($2.15) per diluted share.

Additionally, the Company announced that for the month of June 2006, net sales increased 19.0% to $58.6 million from $49.3 million in June 2005. For the 10 months ended June 30, 2006, net sales increased 19.3% to $595.5 million from $499.3 million in the same period last year. There were 23 warehouse clubs in operation at the end of June 2006 compared to 22 warehouse clubs in operation in June 2005. Net sales and the number of warehouse clubs in operation exclude discontinued operations.

For the four weeks ended July 2, 2006, comparable warehouse sales for warehouse clubs open at least 12 full months increased 13.2% compared to the same four-week period last year. For the 43 weeks ended July 2, 2006, comparable warehouse sales, for warehouse clubs open at least 12 full months, increased 16.1% from the same period a year ago. Comparable warehouse sales for the comparable four- and forty-three week periods of 2005 exclude sales from discontinued operations.

The Company also announced that PriceSmart was added to the Russell 2000® Index when Russell Investment Group reconstituted its family of U.S. indexes on June 30, 2006. Annual reconstitution of Russell indexes captures the 3,000 largest U.S. stocks as of the end of May, ranking them by total market capitalization. The largest 1,000 companies in the ranking comprise the Russell 1000 while the remaining 2,000 companies become the widely used Russell 2000. Russell indexes are used by investment managers and institutional investors for index funds and as benchmarks for both passive and active investment strategies.

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 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 April 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     Nine Months Ended
                                     May 31,                May 31,
                                 2006       2005        2006       2005
                               ---------  ---------   ---------  ---------
Revenues:
  Sales:
    Net warehouse club         $ 180,781  $ 151,217   $ 536,856  $ 449,605
    Export                             9         23          20        394
  Membership income                2,961      2,418       8,423      6,875
  Other income                       886        849       2,570      3,106
                               ---------  ---------   ---------  ---------
Total revenues                   184,637    154,507     547,869    459,980
                               ---------  ---------   ---------  ---------
Operating expenses:
  Cost of goods sold:
    Net warehouse club           153,619    129,489     458,309    384,574
    Export                             7         35          23        396
  Selling, general and
   administrative:
    Warehouse club operations     20,068     18,367      57,556     53,513
    General and administrative     6,312      6,162      17,691     17,549
  Preopening expenses                  -         40         336         42
  Asset impairment and closure
   costs                              59      8,460         172      8,752
                               ---------  ---------   ---------  ---------
Total operating expenses         180,065    162,553     534,087    464,826
                               ---------  ---------   ---------  ---------
Operating income (loss)            4,572     (8,046)     13,782     (4,846)
Other income (expense):
  Interest income                    624        360       1,348      1,401
  Interest expense                  (708)    (1,003)     (2,258)    (4,889)
  Other expense, net                 (71)      (318)        (46)      (419)
                               ---------  ---------   ---------  ---------
Total other expense                 (155)      (961)       (956)    (3,907)
                               ---------  ---------   ---------  ---------
Income (loss) from continuing
 operations before provision
 for income taxes, loss of
 unconsolidated affiliate and
 minority interest                 4,417     (9,007)     12,826     (8,753)
Provision for income taxes        (1,192)    (3,020)     (4,686)    (4,041)
Loss of unconsolidated
 affiliate                           (12)      (617)        (56)    (3,034)
Minority interest                    (88)       568        (261)       402
                               ---------  ---------   ---------  ---------
Income (loss) from continuing
 operations                        3,125    (12,076)      7,823    (15,426)
Discontinued operations, net
 of tax                              103     (1,069)        650     (2,784)
                               ---------  ---------   ---------  ---------
Net income (loss)                  3,228    (13,145)      8,473    (18,210)
Preferred dividends                    -          -           -       (648)
Deemed dividend on exchange of
 common stock for preferred
 stock                                 -          -           -    (20,647)
                               ---------  ---------   ---------  ---------
Net income available to (loss
 attributable to) common
 stockholders                  $   3,228  $ (13,145)  $   8,473  $ (39,505)
                               =========  =========   =========  =========
Basic income (loss) per share
 - common stockholders:
  Continuing operations        $    0.11  $   (0.49)  $    0.29  $   (0.84)
  Discontinued operations,
   net of tax                  $       -  $   (0.04)  $    0.02  $   (0.15)
  Preferred and deemed
   dividends                   $       -  $       -   $       -  $   (1.16)
                               ---------  ---------   ---------  ---------
  Available to (attributable
   to) common stockholders     $    0.11  $   (0.53)  $    0.31  $   (2.15)
                               =========  =========   =========  =========
Diluted income (loss) per
 share - common stockholders:
  Continuing operations        $    0.11  $   (0.49)  $    0.29  $   (0.84)
  Discontinued operations,
   net of tax                  $       -  $   (0.04)  $    0.02  $   (0.15)
  Preferred and deemed
   dividends                   $       -  $       -   $       -  $   (1.16)
                               ---------  ---------   ---------  ---------
  Available to (attributable
   to) common stockholders     $    0.11  $   (0.53)  $    0.31  $   (2.15)
                               =========  =========   =========  =========
Shares used in per share
 computations:
  Basic                           28,373     24,850      26,970     18,409
                               =========  =========   =========  =========
  Diluted                         29,067     24,850      27,412     18,409
                               =========  =========   =========  =========


                          PRICESMART, INC.
                    CONSOLIDATED BALANCE SHEETS
             (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
                                                     May 31,    August 31,
                                                      2006         2005
                                                   ----------   ----------
                                                   (Unaudited)
ASSETS
Current assets:
        Cash and cash equivalents                  $   48,533   $   30,147
        Short-term restricted cash                      7,556        7,331
        Receivables, net of allowance for
         doubtful accounts of $2,152 and $2,260,
         respectively                                   3,289        1,759
        Receivables from unconsolidated affiliate           -          811
        Merchandise inventories                        69,102       65,719
        Prepaid expenses and other current assets       7,316        8,360
        Assets of discontinued operations               1,754          315
                                                   ----------   ----------
Total current assets                                  137,550      114,442
                                                   ----------   ----------
        Long-term restricted cash                         587        1,045
        Property and equipment, net                   161,444      142,310
        Goodwill                                       31,883       29,600
        Deferred tax asset                             18,944       22,260
        Other assets                                    2,345        4,108
        Investment in unconsolidated affiliate          3,278        6,089
                                                   ----------   ----------
Total assets                                       $  356,031   $  319,854
                                                   ==========   ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
        Short-term borrowings                      $        -   $    1,648
        Accounts payable                               61,893       57,423
        Accounts payable to unconsolidated
         affiliate                                        107            -
        Accrued salaries and benefits                   5,450        4,513
        Deferred membership income                      5,551        4,773
        Income taxes payable                            1,691        2,271
        Other accrued expenses                         10,536       12,547
        Long-term debt, current portion                 5,417        5,417
      Liabilities of discontinued operations              557          663
                                                   ----------   ----------
Total current liabilities                              91,202       89,255
      Deferred tax liability                              951          958
      Deferred rent                                     1,599        1,427
      Accrued closure costs                             3,273        3,466
      Long-term debt, related party                    12,500            -
      Long-term debt, net of current portion           13,791       23,915
                                                   ----------   ----------
Total liabilities                                     123,316      119,021

Minority interest                                       2,580        2,560

Stockholders' equity:
        Common stock, $.0001 par value, 45,000,000
         shares authorized; 29,392,508 and
         26,031,180 shares issued and 28,954,345
         and 25,596,755 shares outstanding (net of
         treasury shares), respectively                     3            3
        Additional paid-in capital                    367,496      339,644
      Unearned compensation on restricted stock        (4,139)           -
        Tax benefit from exercise of stock
         options                                        3,379        3,379
        Note receivable from stockholder                    -          (29)
        Accumulated other comprehensive loss          (14,077)     (13,757)
        Accumulated deficit                          (113,061)    (121,534)
        Less: treasury stock at cost;  438,163 and
         434,425 shares, respectively                  (9,466)      (9,433)
                                                   ----------   ----------
Total stockholders' equity                            230,135      198,273
                                                   ----------   ----------
Total liabilities and stockholders' equity         $  356,031   $  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