For Immediate Release

PriceSmart Announces First Quarter Results and December Sales

 

SAN DIEGO, CA (January 10, 2005) - PriceSmart, Inc. (NASDAQ: PSMT, www.pricesmart.com) today announced its results of operations for the first quarter of fiscal year 2005, which ended November 30, 2004, and December 2004 sales results.

For the first quarter of fiscal year 2005, total revenues increased 5.9% to $156.7 million from $148.0 million in the first quarter of fiscal year 2004.  Net warehouse club sales increased 6.5% to $153.0 million in the current quarter from $143.7 million in the first quarter of fiscal year 2004.  The Company had an operating profit of $1.8 million in the quarter compared to an operating loss of $4.0 million in the first quarter last year.  First quarter fiscal 2005 net loss attributable to common stockholders was $2.5 million or ($0.24) per diluted share compared to a net loss attributable to common stockholders of $7.0 million or ($0.99) per diluted share in the first quarter of fiscal 2004.

The Company had 26 warehouse clubs in operation at the end of the first quarter (excluding 3 unconsolidated warehouse clubs in Mexico that are owned through a 50/50 joint venture).  In the comparable period a year ago, the Company also had 26 warehouse clubs in operation (excluding 3 unconsolidated warehouse clubs in Mexico).  During the quarter, the Company announced that it had entered into an agreement to acquire land in San Jose, Costa Rica for a planned fourth location in that market, which the Company plans to open in the second half of calendar year 2005.

Commenting on the results for the quarter, Robert Price, Chairman and Interim Chief Executive Officer, said, "We have begun the new fiscal year in a positive direction.  I am encouraged by the growth in sales in the first quarter and the sales results for December.  Although there was a net loss of $2.5 million for the quarter, our company registered an operating profit of $1.8 million compared to an operating loss of $4.0 million in last year's first quarter.  It is important to keep in mind that we still have many challenges in certain operations including Mexico and the Philippines.  The financial program, debt restructuring and rights offering, announced in September is on track.  We expect to raise at least $25 million in additional capital from the rights offering which will further strengthen the Company's balance sheet.  I would also like to briefly address some misleading reports that are circulating in the Philippines regarding our operations there.  PriceSmart employs approximately 500 people in the country and considers the Philippines a key market.  We have no plans to close any PriceSmart warehouses in the Philippines and reports that suggest otherwise are baseless.”

Additionally, the Company announced that for the month of December 2004, net sales increased 8.5% to $78.6 million from $72.4 million in December a year earlier.  For the four months ended December 31, 2004, net sales increased 6.9% to $231.9 million from $217.0 million in the same period last year.

For the four weeks ended January 2, 2005, comparable warehouse sales for warehouse clubs open at least 12 full months increased 8.4% compared to the same four-week period last year.  For the seventeen weeks ended January 2, 2005, comparable warehouse sales for stores open at least 12 full months increased 7.4%.

About PriceSmart

PriceSmart, headquartered in San Diego, owns and operates U.S.-style membership shopping warehouse clubs in Central America, the Caribbean, and Asia, selling high quality merchandise at low prices to PriceSmart members.  PriceSmart now operates 26 warehouse clubs in 12 countries and one U.S. territory (four each in Panama and the Philippines; three 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).

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 loss in fiscal 2003, in fiscal 2004 and the first quarter of fiscal 2005 and may continue to incur losses in future periods; the Company is required to comply with financial covenants governing its outstanding indebtedness and is out of compliance with certain covenants, which gives lenders the right to accelerate the Company’s indebtedness; the Company’s financial performance is dependent on international operations; any failure by the Company to manage its widely dispersed operations could adversely affect its business; although the Company has taken steps to significantly improve its internal controls, there may be material weaknesses or significant deficiencies that the Company has not yet identified; the Company is currently defending litigation relating to its financial restatement; the Company faces significant competition; the Company may encounter difficulties in the shipment of and inherent risks in the importation of merchandise to its warehouse clubs; the success of the Company’s business requires effective assistance from local business people; 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 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-K for the fiscal year ended August 31, 2004 filed pursuant to the Securities Exchange Act of 1934 on November 24, 2004.  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 have been reclassified to conform to the current period presentation.

For further information, please contact Robert E. Price, Interim Chief Executive Officer (858) 551-2336; or John M. Heffner, Executive Vice President and Chief Financial Officer (858) 404-8826.

 

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PRICESMART, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED—AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

  

Three Months Ended November 30,

 

 

 

  

2004

 

 

  

2003

 

 

Revenues:

  

 

 

 

  

 

 

 

Sales:

  

 

 

 

  

 

 

 

Net warehouse

  

$

153,026

 

  

$

143,741

 

Export

  

 

233

 

  

 

505

 

Membership income

 

 

2,362

 

 

 

2,113

 

Other income

  

 

1,100

 

  

 

1,600

 

 

 

 

 

 

 

 

 

 

Total revenues

  

 

156,721

 

  

 

147,959

 

 

  

 

 

 

  

 

 

 

Operating expenses:

  

 

 

 

  

 

 

 

Cost of goods sold:

  

 

 

 

  

 

 

 

Net warehouse

  

 

129,522

 

  

 

125,623

 

Export

  

 

228

 

  

 

514

 

Selling, general and administrative:

  

 

 

 

  

 

 

 

Warehouse operations

  

 

19,728

 

  

 

20,423

 

General and administrative

  

 

5,092

 

  

 

5,166

 

Preopening expenses

  

 

—

 

  

 

10

 

Closure costs

 

 

367

 

 

 

220

 

 

  

 

 

 

  

 

 

 

Total operating expenses

  

 

154,937

 

  

 

151,956

 

 

  

 

 

 

  

 

 

 

Operating income (loss)

  

 

1,784

 

  

 

(3,997

) 

 

  

 

 

 

  

 

 

 

Other income (expense):

  

 

 

 

  

 

 

 

Interest income

  

 

596

 

  

 

636

 

Interest expense

  

 

(2,926

)

  

 

(2,849

)

Other income (expense)

  

 

(119

)

  

 

(91

)

 

  

 

 

 

  

 

 

 

Total other expense

  

 

(2,449

)

  

 

(2,304

)

 

  

 

 

 

  

 

 

 

Loss before (provision) benefit for income taxes, losses of unconsolidated affiliate and minority interest

  

 

(665

)

  

 

(6,301

) 

(Provision) benefit for income taxes

  

 

(705

)

  

 

52

 

Losses of unconsolidated affiliate

  

 

(454

)

 

 

(404

)

Minority interest

  

 

(52

)

  

 

512

 

 

 

 

 

 

  

 

 

 

Net income (loss)

  

 

(1,876

)

  

 

(6,141

) 

 

 

 

 

 

  

 

 

 

Preferred dividends

 

 

648

 

  

 

840

 

Net loss attributable to common stockholders

  

$

(2,524

)

  

$

(6,981

 )

 

  

 

 

 

  

 

 

 

Loss per share – common stockholders:

  

 

 

 

  

 

 

 

    Basic

  

$

(0.24

)

  

$

(0.99

) 

    Diluted

  

$

(0.24

)

  

$

(0.99

 )

 

  

 

 

 

  

 

 

 

Shares used in per share computation:

  

 

 

 

 

 

 

 

    Basic

  

 

10,311

 

  

 

7,079

 

    Diluted

 

 

10,311

 

  

 

7,079

 

 

PRICESMART, INC.

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

 

November 30, 2004

 

 

August 31, 2004

 

 

(Unaudited)

 

 

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

 

      Cash and cash equivalents

$

12,705

 

$

34,410

      Short-term restricted cash

 

7,287

 

 

7,255

      Receivables, net of allowance for doubtful accounts of $2,514 and $1,550, respectively

 

1,662

 

 

2,196

      Merchandise inventories

 

86,637

 

 

62,820

      Prepaid expenses and other current assets

 

10,888

 

 

10,185

Total current assets

 

119,179

 

 

116,866

 

 

 

 

 

 

      Long-term restricted cash

 

22,040

 

 

28,422

      Property