PriceSmart Announces Third Quarter Results of Operations

June Sales and Addition to Russell 2000 Index also Announced

 

 

San Diego, California (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.

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.

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