CULS Cost-U-Less (MM)

Cost-U-Less, Inc. (the "Company") (Nasdaq:CULS) today announced results for the second fiscal quarter ended July 2, 2006 (Q2 2006). Highlights for Q2 2006 were as follows: -- EPS of $0.11 on net income of $475,000 vs. EPS of $0.12 on net income of $512,000 for the corresponding period a year ago (Q2 2005). -- Operating Income of $915,000, equal to that of Q2 2005. -- Sales of $53.6M vs. $52.3M for Q2 2005, a 2.4% increase. -- Comparable store sales (stores open a full 13 months) increase of 2.8% over Q2 2005. An improvement in gross margin partially offset an increase in store operating and G&A expenses. Store expenses increased 4.9% for Q2 2006 over Q2 2005 due to several factors, over half of which related to higher utility costs. The increase in general and administrative expenses was largely due to an increase in health benefit costs. "We are pleased to maintain our operating margins and profitability levels given the surge in energy costs over the last year," said J. Jeffrey Meder, the Company's President and CEO. "This hits us on two fronts. The cost of running our business continues to escalate, but our customers are facing the same increases, so their disposable income is on the decline." Cost-U-Less currently operates eleven stores in the Caribbean and Pacific region: U.S. Virgin Islands (2), Netherlands Antilles (2), Hawaiian Islands (2), California (1), Guam (2), American Samoa (1), and Republic of Fiji (1). The Company builds its business through delivering high-quality U.S. and local goods, progressive merchandising practices, sophisticated distribution capabilities, and superior customer service, primarily to island markets. Additional information about Cost-U-Less is available at www.costuless.com. Forward Looking Statements This press release contains statements that are forward-looking. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements, including comparable store sales expectations, trends in or expectations regarding the Company's revenue growth, and the Company's growth plans are all based on currently available operating, financial, and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, including that the Company may encounter substantial delays, increased expenses or loss of potential store sites due to the complexities, cultural differences, and local political issues associated with the regulatory and permitting processes in the island markets in which the Company may locate its stores. Prolonged adverse occurrences affecting tourism or air travel, particularly to non-U.S. destinations, including political instability, armed hostilities, terrorism, natural disasters or other activity that involves or affects air travel or the tourism industry generally, could cause actual results to differ materially from historical results or those anticipated. Other risks and uncertainties include the Company's small store base; the mix of geographic and product revenues; relationships with third parties; litigation; the Company's ability to maintain existing credit facilities and obtain additional credit; business and economic conditions and growth in various geographic regions; pricing pressures; political and regulatory instability in various geographic regions; and other risks and uncertainties detailed in the Company's filings with the SEC. -0- *T COST-U-LESS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) (Unaudited) 13 Weeks Ended 26 Weeks Ended ----------------------- ----------------------- July 2, June 26, July 2, June 26, 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Net sales $ 53,568 $ 52,295 $ 108,260 $ 105,534 Merchandise costs 43,515 42,597 88,008 86,262 ---------- ---------- ---------- ---------- Gross profit 10,053 9,698 20,252 19,272 Operating expenses: Store 7,319 6,978 14,535 13,705 General and administrative 1,680 1,513 3,343 3,210 Store openings 139 233 153 264 Store closings 0 59 0 59 ---------- ---------- ---------- ---------- Total operating expenses 9,138 8,783 18,031 17,238 ---------- ---------- ---------- ---------- Operating income 915 915 2,221 2,034 Other income (expense): Interest expense, net (107) (59) (213) (110) Other (3) (34) (15) 82 ---------- ---------- ---------- ---------- Income before income taxes 805 822 1,993 2,006 Income tax provision 330 310 760 760 ---------- ---------- ---------- ---------- Net income $ 475 $ 512 $ 1,233 $ 1,246 ========== ========== ========== ========== Earnings per common share: Basic $ 0.12 $ 0.13 $ 0.31 $ 0.32 ========== ========== ========== ========== Diluted $ 0.11 $ 0.12 $ 0.29 $ 0.30 ========== ========== ========== ========== Weighted average common shares outstanding, basic 4,021,173 3,981,856 4,009,506 3,886,453 ========== ========== ========== ========== Weighted average common shares outstanding, diluted 4,244,038 4,228,017 4,232,807 4,134,133 ========== ========== ========== ========== *T -0- *T COST-U-LESS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited) July 2, January 1, 2006 2006 -------- ---------- ASSETS ------ Current assets: Cash and cash equivalents $ 4,031 $ 5,304 Accounts receivable, net 842 843 Inventories, net 24,565 23,027 Other current assets 1,615 1,136 -------- -------- Total current assets 31,053 30,310 Property and equipment, net 19,858 18,550 Deposits and other assets 713 772 -------- -------- Total assets $ 51,624 $ 49,632 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable $ 15,164 $ 15,062 Accrued expenses and other liabilities 5,680 5,422 Line of credit 389 80 Current portion of long-term debt 267 267 Current portion of capital lease obligations 234 226 -------- -------- Total current liabilities 21,734 21,057 Other long-term liabilities 1,341 1,192 Long-term debt, less current portion 1,877 2,011 Capital lease obligations, less current portion 1,210 1,329 -------- -------- Total liabilities 26,162 25,589 Commitments and contingencies -- -- Shareholders' equity 25,462 24,043 -------- -------- Total liabilities and shareholders' equity $ 51,624 $ 49,632 ======== ======== *T