PriceSmart Announces Second Quarter Results of Operation

March Sales Also Announced

 

San Diego, California (April 7, 2006) – PriceSmart, Inc. (NASDAQ: PSMT) 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.

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.

PRICESMART, INC.

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

 

February 28, 2006

 

 

August 31, 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

      Note receivable from stockholder

 

(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.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

 

 

Three Months Ended

  

Six Months Ended

 

 

 

February 28,