UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 29, 2000 Or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________to ________________ COMMISSION FILE NUMBER 0-22793 PRICESMART, INC. (Exact name of registrant as specified in its charter) Delaware 33-0628530 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4649 Morena Boulevard San Diego, California 92117 (Address of principal executive offices) (858) 581-4530 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X] Yes [ ] No The registrant had 5,147,896 shares of its common stock, par value $.0001 per share, outstanding at February 29, 2000.
<TABLE> <CAPTION> PRICESMART, INC. INDEX TO FORM 10-Q PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PAGE <S> <C> Condensed Consolidated Balance Sheets as of February 29, 2000 (Unaudited) and August 31, 1999 3 Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended February 29, 2000 and February 28, 1999 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended February 29, 2000 and February 28, 1999 5 Condensed Consolidated Statements of Stockholders' Equity (Unaudited) for the six months ended February 29, 2000 6 PriceSmart, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 7-12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13-17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 18 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 19 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 19 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 19 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19 ITEM 5. OTHER INFORMATION 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20 </TABLE> Page 2
<TABLE> <CAPTION> PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PRICESMART, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) February 29, August 31, 2000 1999 ------------ -------------- ASSETS (Unaudited) <S> <C> <C> CURRENT ASSETS: Cash and cash equivalents $ 17,659 $ 14,957 Marketable securities 5,471 17,627 Receivables, net of allowance for doubtful accounts 2,247 4,149 Merchandise inventories 34,946 25,919 Prepaid expenses and other current assets 2,279 2,681 City notes receivable, current portion 2,423 2,500 Property held for sale, net 1,652 2,126 ------------ -------------- Total current assets 66,677 69,959 ------------ -------------- OTHER ASSETS: Property and equipment, net 88,108 48,507 Restricted cash 3,750 10,195 Deposits on land purchases -- 2,112 City notes receivable, less current portion 16,580 17,006 Notes receivable and other 4,437 4,295 ------------ -------------- TOTAL ASSETS $ 179,552 $ 152,074 ------------ -------------- ------------ -------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 22,425 $ 24,679 Accrued salaries, benefits and related 4,473 1,760 Deferred membership income 3,116 1,998 Long-term debt, current portion 7,129 707 Other accrued expenses 3,693 3,369 ------------ -------------- Total current liabilities 40,836 32,513 ------------ -------------- Long-term debt, less current portion 24,074 7,787 ------------ -------------- Total liabilities 64,910 40,300 ------------ -------------- Minority interest 21,600 17,913 Commitments and contingencies -- -- STOCKHOLDERS' EQUITY: Preferred stock, $.0001 par value, 2,000,000 shares authorized, none issued -- -- Common stock, $.0001 par value, 15,000,000 shares authorized, and 6,044,073 and 5,991,256 shares issued at February 29, 2000 and August 31, 1999, respectively 1 1 Additional paid-in capital 112,498 111,483 Notes receivable from stockholders (850) (950) Deferred compensation (980) (1,282) Accumulated other comprehensive loss (309) (453) Accumulated deficit (3,426) (864) Less: Treasury stock at cost, 896,177 and 907,898 shares at February 29, 2000 and August 31, 1999, respectively (13,892) (14,074) ------------ -------------- Total stockholders' equity 93,042 93,861 ------------ -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 179,552 $ 152,074 ------------ -------------- ------------ -------------- </TABLE> See accompanying notes. Page 3
<TABLE> <CAPTION> PRICESMART, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) Three Months Ended Six Months Ended ---------------------------------------------------------------------- February 29, February 28, February 29, February 28, 2000 1999 2000 1999 --------------- --------------- --------------- --------------- <S> <C> <C> <C> <C> REVENUES SALES: Net warehouse $ 75,458 $ 17,544 $125,940 $ 33,662 Export 146 2,019 421 4,328 Membership fees and royalties 1,834 501 3,171 858 Travel and other programs 2,674 1,717 4,569 2,997 Auto -- 1,988 -- 3,945 --------------- --------------- --------------- --------------- TOTAL REVENUES 80,112 23,769 134,101 45,790 --------------- --------------- --------------- --------------- EXPENSES: COST OF GOODS SOLD: Net warehouse 66,131 15,302 110,170 29,340 Export 139 1,950 405 4,194 Selling, general and administrative 12,782 8,188 24,128 15,417 Preopening expenses 1,046 464 3,289 649 --------------- --------------- --------------- --------------- TOTAL EXPENSES 80,098 25,904 137,992 49,600 --------------- --------------- --------------- --------------- OPERATING INCOME (LOSS) 14 (2,135) (3,891) (3,810) --------------- --------------- --------------- --------------- OTHER: Interest income, net 476 1,191 1,123 2,513 Other income (expense) 31 627 (156) 1,531 Minority interest (227) (71) 449 (93) --------------- --------------- --------------- --------------- TOTAL OTHER 280 1,747 1,416 3,951 --------------- --------------- --------------- --------------- Income (loss) before provision for 294 (388) (2,475) 141 income taxes --------------- --------------- --------------- --------------- Provision for income taxes 87 81 87 92 --------------- --------------- --------------- --------------- NET INCOME (LOSS) $ 207 $ (469) $(2,562) $ 49 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- EARNINGS (LOSS) PER SHARE: Basic $ 0.04 $ (0.09) $ (0.50) $ 0.01 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Diluted $ 0.04 $ (0.09) $ (0.50) $ 0.01 --------------- --------------- ------------- --------------- --------------- --------------- --------------- --------------- SHARES USED IN PER SHARE COMPUTATION: Basic 5,114 5,036 5,100 5,175 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Diluted 5,734 5,036 5,100 5,349 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- </TABLE> See accompanying notes. Page 4
<TABLE> <CAPTION> PRICESMART, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED - AMOUNTS IN THOUSANDS) Six Months Ended ------------------------------------- February 29, February 28, 2000 1999 ------------------ ------------------ <S> <C> <C> OPERATING ACTIVITIES Net income (loss) $ (2,562) $ 49 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 1,948 711 Allowance for doubtful accounts (106) 73 Income tax charge 87 92 Minority interest (470) 93 Compensation expense recognized for stock options 302 727 Change in operating assets and liabilities Restricted cash 6,445 (3,074) Accounts receivable and other assets (6,583) 2,764 Accounts payable and other liabilities 1,814 3,645 ------------------ ------------------ Net cash flows provided by operating activities 875 5,080 INVESTING ACTIVITIES Purchases of marketable securities -- (39,672) Sale of marketable securities 12,156 58,114 Additions to property and equipment (39,437) (8,930) Payments of notes receivable 361 1,203 Other 103 -- ------------------ ------------------ Net cash flows provided by (used in) investing activities (26,817) 10,715 FINANCING ACTIVITIES Proceeds from property held for sale 440 1,221 Proceeds (repayment) from bank borrowings, net 22,709 (3,782) Contributions by minority interest shareholders 4,157 813 Proceeds from exercise of stock options 1,197 170 Received payment on officers' notes receivable 100 -- Issuance of common stock -- 84 Purchases of treasury stock -- (6,605) ------------------ ------------------ Net cash flows provided by (used in) financing activities 28,603 (8,099) Effect of exchange rate changes on cash and cash equivalents 41 (31) ------------------ ------------------ Net increase in cash and cash equivalents 2,702 7,665 Cash and equivalents at beginning of period 14,957 5,639 ------------------ ------------------ Cash and equivalents at end of period $ 17,659 $ 13,304 ------------------ ------------------ ------------------ ------------------ Supplemental disclosure of cash flow information Cash paid during the period for: Interest $ 690 $ 58 Income Taxes $ 423 $ 129 </TABLE> See accompanying notes. Page 5
<TABLE> <CAPTION> PRICESMART, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 (UNAUDITED - AMOUNTS IN THOUSANDS) Other Additional Notes Receivable Comprehensive Common stock Paid-in from Deferred Income Shares Amount Capital Stockholders Compensation (Loss) ----------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> Balance at August 31, 1999 5,991 $1 $111,483 $(950) $(1,282) $(453) Exercise of stock options 53 1,015 Amortization of deferred compensation 302 Payment on Officers' Notes 100 Net loss Unrealized gain on marketable securities 103 Translation adjustment 41 Comprehensive loss ----------------------------------------------------------------------------------------- Balance at February 29, 2000 6,044 $1 $112,498 $(850) $ (980) $(309) ========================================================================================= <CAPTION> Less: Retained Treasury stock Total Earnings at Cost Stockholders' (Deficit) Shares Amount Equity ---------------------------------------------------- <S> <C> <C> <C> <C> Balance at August 31, 1999 $(864) 908 $(14,074) $93,861 Exercise of stock options (12) 182 1,197 Amortization of deferred compensation 302 Payment on Officers' Notes 100 Net loss (2,562) (2,562) Unrealized gain on marketable securities 103 Translation adjustment 41 ----------------- Comprehensive loss (2,418) ---------------------------------------------------- Balance at February 29, 2000 $(3,426) 896 $(13,892) $93,042 ==================================================== </TABLE> See accompanying notes. Page 6
PRICESMART, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - COMPANY OVERVIEW AND BASIS OF PRESENTATION COMPANY OVERVIEW: PriceSmart, Inc.'s ("PriceSmart" or the "Company") business is international merchandising consisting of membership shopping stores similar to, but smaller in size than, warehouse clubs in the United States. As of February 29, 2000, there were nine warehouse stores in operation (three in Panama, two in the Dominican Republic, and one each in Guatemala, Costa Rica, El Salvador and Honduras) of which the Company owns a majority interest. Also, there were five warehouse stores in operation (four in China and one in Saipan) licensed to and operated by local business people. Additionally, until March 1, 2000, the Company operated a domestic travel business marketed primarily to Costco Companies, Inc. ("Costco") members (see Note 8 - Subsequent Events). BASIS OF PRESENTATION: The condensed consolidated financial statements include the assets, liabilities and results of operations of the Company and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain amounts in the prior period condensed consolidated financial statements have been reclassified to conform to current period presentation. <TABLE> <CAPTION> - -------------------------------------------------------------------------------- Ownership Basis of Presentation ------------- --------------------- <S> <C> <C> Ventures Services, Inc. 100% Consolidated PriceSmart Guatemala 66% Consolidated PriceSmart Panama 51% Consolidated PriceSmart Trinidad 65% Consolidated PSMT Caribe: Costa Rica 60% Consolidated Dominican Republic 60% Consolidated El Salvador 60% Consolidated Honduras 60% Consolidated - -------------------------------------------------------------------------------- </TABLE> The condensed consolidated interim financial statements of the Company included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and reflect all adjustments that are, in the opinion of management, necessary to fairly present the financial position, results of operations, and cash flows for the interim period presented. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The results for interim periods are not necessarily indicative of the results for the full year. The interim financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's audited consolidated financial statements for the year ended August 31, 1999 filed on Form 10-K. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES FISCAL YEAR: The Company's fiscal year ends August 31. The Company's fiscal quarter ends are November 30, February 28 or in leap year February 29 and May 31. Page 7
PriceSmart, Inc. Notes to Condensed Consolidated Financial Statements (Continued) PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, as follows: Building and improvements 10-25 years Fixtures and equipment 3-7 years MERCHANDISE INVENTORIES: Merchandise inventories, which include merchandise for resale, are valued at the lower of cost (average cost) or market. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. SEGMENT REPORTING: The Financial Accounting Standards Board issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" which the Company adopted in fiscal 1999. SFAS No. 131 amends the requirements to report financial and descriptive information about its reportable operating segments. The financial information is required to be reported on the basis that is used internally for evaluating the segment performance and deciding how to allocate resources to segments. The Company principally operates under one segment in two geographic regions. NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment consist of the following (in thousands): <TABLE> <CAPTION> February 29, August 31, 2000 1999 --------------- --------------- <S> <C> <C> PROPERTY AND EQUIPMENT Land $ 21,398 $ 8,709 Building and improvements 31,464 20,413 Fixtures and equipment 25,817 16,724 Construction in progress 15,840 7,124 --------------- -------------- 94,519 52,970 Less accumulated depreciation (6,411) (4,463) --------------- -------------- Property and equipment, net $ 88,108 $ 48,507 --------------- -------------- --------------- -------------- </TABLE> Page 8
PriceSmart, Inc. Notes to Condensed Consolidated Financial Statements (Continued) NOTE 4 - EARNINGS (LOSS) PER SHARE Basic earnings (loss) per share is computed based on the weighted average shares outstanding in the period. Diluted earnings (loss) per share includes the effect of dilutive securities (options) except where their inclusion is antidilutive. <TABLE> <CAPTION> - -------------------------------------------------------------------------------- Computation of Net Income (Loss) Per Common Share (Basic and Diluted) (Unaudited - amounts in thousands, except per share data) Three Months Ended Six Months Ended ----------------------------------- ---------------------------------- February 29, February 28, February 29, February 28, 2000 1999 2000 1999 ----------------- ---------------- --------------------------------- <S> <C> <C> <C> <C> Net income (loss) used for basic and diluted computation $ 207 $ (469) $ (2,562) $ 49 ----------------- ---------------- --------------------------------- ----------------- ---------------- --------------------------------- Weighted average number of Common shares outstanding 5,114 5,036 5,100 5,175 Add: Assumed exercise of those options that are common stock equivalents 620 -- -- 174 ----------------- ---------------- --------------------------------- Adjusted shares outstanding used for diluted computation 5,734 5,036 5,100 5,349 ----------------- ---------------- --------------------------------- ----------------- ---------------- --------------------------------- Earnings (loss) per share: Basic $ 0.04 $ (0.09) $ (0.50) $ 0.01 ----------------- ---------------- --------------------------------- ----------------- ---------------- --------------------------------- Diluted $ 0.04 $ (0.09) $ (0.50) $ 0.01 ----------------- ---------------- --------------------------------- ----------------- ---------------- --------------------------------- </TABLE> All of the assumed exercises of company stock options into common shares are excluded from diluted loss per share since their effect is antidilutive. - -------------------------------------------------------------------------------- Page 9
PriceSmart, Inc. Notes to Condensed Consolidated Financial Statements (Continued) NOTE 5 - COMPREHENSIVE INCOME (LOSS) During the first quarter of fiscal 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive Income" which requires the disclosure of all components of comprehensive income, including net income and other comprehensive income. Comprehensive income is defined as the change in equity during a period from transactions and other events and circumstances generated from non-owner sources which includes the Company's unrealized gains or losses on marketable securities and foreign currency translation adjustments. Consolidated comprehensive income (loss) was as follows (in thousands): <TABLE> <CAPTION> Three Months Ended Six Months Ended ------------------------------------- ------------------------------- February 29, February 28, February 29, February 28, 2000 1999 2000 1999 ----------------- ---------------- --------------------------------- <S> <C> <C> <C> <C> Net income (loss) $ 207 $ (469) $ (2,562) $ 49 Unrealized gain (loss) on marketable securities (16) 460 103 498 Foreign currency translation adjustments 9 (31) 41 (31) ----------------- ---------------- --------------------------------- Comprehensive income (loss) $ 200 $ (40) $ (2,418) $ 516 ----------------- ---------------- --------------------------------- ----------------- ---------------- --------------------------------- </TABLE> NOTE 6 - LOAN AGREEMENTS In May 1999, the Company, through its joint venture arrangement in Costa Rica, entered into a loan agreement with Banco Bilbao Vizcaya, S.A. for $3.8 million. The term of the loan is for three years and requires quarterly interest payments at 14%. The loan matures on May 31, 2002, at which time the principal amount is due. The loan is secured by a collateral deposit of $3.8 million contributed by the Company and its joint venture arrangement in Costa Rica, which earns interest of 13.75% per annum. In October 1999, the Company, through its joint venture arrangement in Costa Rica, entered into a loan agreement with CitiBank, N.A. for $5.9 million. The term of the loan is for five years and interest is calculated on the basis of six-month LIBOR (6.1575% at February 29, 2000) rate plus 4.0%. Minimum principal payments of approximately $215,000 are due quarterly, with the remaining balance of approximately $1.6 million due at the end of the loan. The loan is collateralized by certain land, building, fixtures and equipment of the Costa Rica joint venture and guaranteed up to 60% by the Company and up to 40% from the Company's joint venture partner. The loan is also subject to certain financial and operating covenants. In December 1999, the Company, through its joint venture arrangement in El Salvador, entered into a loan agreement with CitiBank, N.A. for $5.0 million. The term of the loan is for five years and interest is calculated on the basis of three-month LIBOR (6.10875% at February 29, 2000) rate per annum plus 4.0%. Interest payments are required to be made on a monthly basis. Minimum principal payments of $218,750 are due quarterly, with approximately $1.5 million due at the end of the loan term. The loan is collateralized by certain land, building, fixtures and equipment of the El Salvador joint venture and guaranteed up to 60% by the Company and up to 40% from the Company's joint venture partner. The loan is also subject to certain financial and operating covenants. In December 1999, the Company, through its joint venture arrangement in Panama, entered into a debt agreement with The Chase Manhattan Bank for $11.3 million. Advances will be through a secured revolving credit facility through November 20, 2000. Outstanding borrowings under the facility at November 20, 2000 will be converted to a secured five year term loan. Interest on the debt agreement is calculated on the basis of Page 10
three-month LIBOR rate plus 1.75%. Payments are made on a monthly basis, interest only while a revolving credit facility and interest plus principal payments of $188,333 after the loan is converted to a term loan. The loan is collateralized by certain land and building of the underlying warehouses and guaranteed by the Company to the extent of its ownership interest. As of February 29, 2000, the Company had borrowings of $7.6 million under the revolving credit facility. The loan is also subject to certain financial and operating covenants. In January 2000, the Company established an $8.0 million revolving line of credit with Bank of America, N.A. providing for cash advances and for up to $1 million of letters of credit. The term of the revolving line of credit expires in December 2000 and interest is calculated on the basis of Bank of America, N.A.'s prime rate, LIBOR plus one percentage point, or LIBOR plus one percentage point. The revolving line of credit is secured by marketable securities of the Company. As of February 29, 2000, the Company has full availability under the revolving line of credit and no draws on the line have been made to date. In January 2000, the Company, through its joint venture arrangement in the Dominican Republic, entered into two separate line of credit facilities of $2.0 million each, both of which are due in six months. Interest on both credit facilities is calculated on the basis of six-month LIBOR plus 4.25% and is payable monthly. As of February 29, 2000, the full amount was drawn on the facilities for general working capital. In February 2000, the Company, through its joint venture arrangement in Costa Rica, entered into a loan agreement with the Commercial International Bank & Trust Co. Ltd. for $3.9 million. As of February 29, 2000, the Company has borrowed $900,000 under the loan agreement. The remaining $3 million will be borrowed for future warehouse developments. The term of the loan is for five years and interest is calculated on the basis of the prime rate (8.75% at February 29, 2000) per annum plus 2.0%. Interest payments are required to be made on a monthly basis. Minimum principal payments of $139,286 are due quarterly, with approximately $1.1 million due at the end of the loan term. The loan is collateralized by certain land, building, fixtures and equipment of the Costa Rica joint venture and guaranteed up to 60% by the Company and up to 40% from the Company's joint venture partner. The loan is also subject to certain financial and operating covenants. In February 2000, the Company, through its joint venture arrangement in the Dominican Republic, entered into a loan agreement with Banco Nacional de Credito, S.A. for $4.2 million. The term of the loan is for five years and interest is calculated on the basis of six-month LIBOR rate per annum plus 5.645%. Interest payments are required to be made on a monthly basis. Minimum principal payments of $207,650 are due quarterly. The loan is collateralized by certain land, building, fixtures and equipment of the Dominican Republic joint venture and guaranteed up to 60% by the Company and up to 40% from the Company's joint venture partner. The loan is also subject to certain financial and operating covenants. In late February 2000, the Company, through its joint venture arrangement in Honduras, entered into a loan agreement with CitiBank, N.A. for $3.5 million (proceeds from the loan were received subsequent to February 29, 2000). The term of the loan is for five years and interest is calculated on the basis of three-month LIBOR rate per annum plus 5.125%. Interest payments are required to be made on a monthly basis. Minimum principal payments of $140,000 are due quarterly, with approximately $800,000 due at the end of the loan term. The loan is collateralized by certain land, building, fixtures and equipment of the Costa Rica joint venture and guaranteed up to 60% by the Company and up to 40% from the Company's joint venture partner. The loan is also subject to certain financial and operating covenants. NOTE 7 - COMMITMENTS AND CONTINGENCIES From time to time, the Company is subject to legal proceedings and claims in the ordinary course of business. The Company currently is not aware of any such legal proceedings or claims that it believes will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results. Page 11
PriceSmart, Inc. Notes to Condensed Consolidated Financial Statements (Continued) NOTE 8 - SUBSEQUENT EVENTS ADDITIONAL LOANS: In March 2000, the Company, through its joint venture arrangements in the Dominican Republic, entered into a 180-day bridge loan, which converts to a five-year term loan, with Banco Dominicano del Progreso, S.A. for $7.0 million. Interest on the bridge loan is 11.5% and three month LIBOR plus 4.5% on the term loan. Interest payments are required to be made on a monthly basis. Minimum principal payments of $350,000 are due quarterly. The loan is collateralized by certain land, building, fixtures and equipment of the Dominican Republic joint venture and guaranteed up to 60% by the Company and up to 40% from the Company's joint venture partner. The loan is also subject to certain financial and operating covenants. SALE OF TRAVEL BUSINESS: On March 1, 2000, the Company sold its travel business for $1.5 million to Club-4U under an asset purchase agreement ("purchase agreement"). Club-4U, a California corporation, was formed to purchase the travel business and is owned by Sol Price who is a principal stockholder of the Company. Under the purchase agreement , Club-4U acquired the assets primarily used in connection with the travel business, subject to liabilities under the travel business existing contracts, resulting in a gain of approximately $1.1 million to be recognized in the third quarter of fiscal 2000. ACQUISITION OF PANAMA MINORITY INTEREST: In March 2000, the Company entered into an agreement to acquire sole ownership of the PriceSmart Panama business, which previously has been 51% owned by the Company and 49% owned by BB&M International Trading Group ("BB&M"), whose principals are several Panamanian businessmen, including Rafael Barcenas, a Director of PriceSmart. In return for BB&M's 49% interest, PriceSmart agreed to convey to BB&M's principals 306,748 shares of PriceSmart common stock (which will be restricted from being sold for one year). The Panama operations currently consist of three stores in Panama City with a fourth currently under construction. The acquisition of all the stock held by BB&M will be accounted for by the purchase method of accounting. CITY NOTE SALE: On April 5, 2000, the Company entered into an agreement to sell up to ten notes receivable from various municipalities and agencies, known as the "City Notes" (see "Note 5 - City Notes Receivable" in the notes to the Company's audited consolidated financial statements for the year ended August 31, 1999 filed on Form 10-K), to the Price Family Charitable Trust, a California Trust. Sol Price (a principal stockholder of PriceSmart, Inc.) and Robert Price (a principal stockholder and Chairman of the Board of PriceSmart, Inc.) are trustee and successor trustee, respectively, of the Trust. The aggregate purchase price to be paid by the Trust for the City Notes is $22.5 million. Initially, the Company will sell six of the City Notes to the Trust for $11.5 million. The remaining City Notes will be sold to the Trust upon receipt of consents to assignment of those notes from the municipalities/agencies that issued the notes. The Company expects to receive such consents within 45 days. The Company will recognize a gain of approximately $3.9 million arising from this transaction that will be recognized in the third quarter of fiscal 2000. Page 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report contains 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", and like expressions, and the negative thereof). These statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements, including foreign exchange risks, political or economic instability of host countries, and competition, as well as those risks described in the Company's SEC reports, including the Company's Form 10-K filed pursuant to the Securities and Exchange Act of 1934 on November 29, 1999. The following discussion and analysis compares the results of operations for each of the fiscal quarters ended February 29, 2000 and February 28, 1999, and should be read in conjunction with the condensed consolidated financial statements and the accompanying notes included within this report. In the first quarter of fiscal 2000, the Company opened two new US-style membership shopping warehouses under joint venture arrangements in Latin America; one in Honduras (September 1999) and one in Panama (November 1999). In the second quarter of fiscal 2000, the Company opened two additional new US-style membership shopping warehouses under joint venture arrangements in the Dominican Republic (both in December 1999), bringing the total number of warehouses in operation under joint venture arrangements to nine as of February 29, 2000, compared to two warehouses at the end of the same period last year. Also, there were five warehouse stores in operation (four in China and one in Saipan) licensed to and operated by local business people at the end of the second quarter of fiscal 2000, versus four licensed warehouse stores (three in China and one in Saipan, Micronesia) at the end of the second quarter of fiscal 1999. COMPARISON OF THE THREE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 Net warehouse sales (from the Company's joint venture locations) increased 331% to $75.5 million for the three months ended February 29, 2000 from $17.5 million for the three months ended February 28, 1999. The increase was a result of four new warehouses opened during the first and second quarters of fiscal 2000 and three new warehouses opened during fiscal 1999. The Company's warehouse gross margins (operating under joint venture arrangements) for the three months ended February 29, 2000 decreased slightly to 12.4% from 12.8% for the three months ended February 28, 1999, primarily a result of lower prices at new warehouse openings. Export sales to the Company's licensee warehouses in Asia decreased to $146,000 for the three months ended February 29, 2000 from $2.0 million for the three months ended February 28, 1999, due to the Company's focus on company owned warehouses. Membership fees and royalties increased to $1.8 million for the three months ended February 29, 2000 from $501,000 for the three months ended February 28, 1999. Membership fees (including other warehouse income) increased to $1.6 million for the three months ended February 29, 2000 from $144,000 for the three months ended February 28, 1999. The increase quarter over quarter was primarily a result of the new warehouse openings and an increase in the average memberships per warehouse. Travel and other program revenues increased to $2.7 million for the three months ended February 29, 2000 from $1.7 million for the three months ended February 28, 1999. For the three months ended February 29, 2000, travel revenue was $2.4 million compared to $1.6 million for the same period last year. The travel program generated most of its revenues through an agreement with Costco Companies, Inc. ("Costco") and referral commissions. The auto referral business was sold in April 1999. page 13
Selling, general and administrative expenses include the operating expenses related to the Company's warehouse operations; corporate administrative expenses and operating expenses related to the auto, travel and other programs. Selling, general and administrative expenses increased to $12.8 million for the three months ended February 29, 2000 from $8.2 million for the three months ended February 28, 1999. Warehouse operating expenses increased for the three months ended February 29, 2000, primarily due to the new warehouses opened. Corporate administrative expenses have increased to support the Company's planned expansion of ten additional warehouses throughout fiscal 2000, four of which have opened year-to-date. The Company has also incurred incremental one-time development costs of approximately $575,000 as a part of its planned expansion efforts, which are included in corporate administrative expenses. Preopening expenses, which represent expenses incurred before a warehouse store is opened, increased to $1.0 million for the three months ended February 29, 2000 from $464,000 for the three months ended February 28, 1999. The increase in preopening expenses is a result of the Company's planned expansion of warehouses throughout Latin America. Interest income, net, reflects earnings on marketable securities, cash and cash equivalent balances, city notes receivable and certain secured notes receivable from buyers of formerly owned properties and is reduced by interest expense on bank borrowings at the Company's joint ventures. Interest income, net, decreased to $476,000 for the three months ended February 29, 2000 from $1.2 million for the three months ended February 28, 1999 primarily due to decreased balances in cash and cash equivalents and marketable securities as a result of the use of cash to finance the Company's expansion and increased interest expense on bank borrowings during the second quarter of fiscal 2000. Other income (expense) consists primarily of gain or losses on the sale of marketable securities and the results from the Company's real estate operations. For the three months ended February 29, 2000, other income was $31,000 and consists of a net gain on the sale of marketable securities of $19,000, a loss from the real estate operations of $62,000, and a gain on the sale of assets of $74,000. For the three months ended February 28, 1999, other income was $627,000, and consists of a net loss on the sale of marketable securities of $293,000 and income from the real estate operations of $920,000, which includes gains on sales of property. The Company expects to wind down its remaining real estate operations in fiscal 2000 as it sells its remaining properties held for sale. Minority interest relates to an allocation of the joint venture income (losses) to the minority interest shareholders respective interest. The provision for income taxes relates to taxes on foreign operations. No deferred tax benefit has been recognized on net operating losses and start up costs. Because the realization of such deferred tax assets is not certain, a full valuation allowance was established. Page 14
COMPARISON OF THE SIX MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 Net warehouse sales (from the Company's joint venture locations) increased 274% to $125.9 million for the six months ended February 29, 2000 from $33.7 million for the six months ended February 28, 1999. The increase was primarily a result of four new warehouses opened during the first half of fiscal 2000 and three new warehouses opened during fiscal 1999. The Company's warehouse gross margins (operating under joint venture arrangements) for the six months ended February 29, 2000 decreased slightly to 12.5% from 12.8% for the six months ending February 28, 1999, primarily a result of lower prices at new warehouse openings. Export sales to the Company's licensee warehouses in Asia decreased to $421,000 for the six months ended February 29, 2000 from $4.3 million for the six months ended February 28, 1999, due to the Company's focus on company owned warehouse. Membership fees and royalties increased to $3.2 million for the six months ended February 29, 2000 from $858,000 for the six months ended February 28, 1999. Membership fees (including other warehouse income) increased to $2.8 million for the six months ended February 29, 2000 from $192,000 for the six months ended February 28, 1999. The increase was primarily a result of the new warehouse openings and an increase in the average memberships per warehouse. Travel and other program revenues increased to $4.6 million for the six months ended February 29, 2000 from $3.0 million for the six months ended February 28, 1999. For the six months ended February 29, 2000, travel revenue was $4.0 million compared to $2.8 million for the same period last year. The travel program generated most of its revenues through an agreement with Costco Companies, Inc. ("Costco") and referral commissions. The auto referral business was sold in April 1999. Selling, general and administrative expenses include the operating expenses related to the Company's warehouse operations; corporate administrative expenses and operating expenses related to the auto, travel and other programs. Selling, general and administrative expenses increased to $24.1 million for the six months ended February 29, 2000 from $15.4 million for the six months ended February 28, 1999. Warehouse operating expenses increased for the six months ended February 29, 2000 primarily due to the new warehouses opened. Corporate administrative expenses have increased to support the Company's planned expansion of ten additional warehouses throughout fiscal 2000, four of which have opened year-to-date. The Company has also incurred incremental one-time development costs of approximately $817,000 as a part of its planned expansion efforts, which are included in corporate administrative expenses. Preopening expenses, which represent expenses incurred before a warehouse store is opened, increased to $3.3 million for the six months ended February 29, 2000 from $649,000 for the six months ended February 28, 1999. The increase in preopening expenses is a result of the Company's planned expansion of warehouses throughout Latin America. Interest income, net, reflects earnings on marketable securities, cash and cash equivalent balances, city notes receivable and certain secured notes receivable from buyers of formerly owned properties and is reduced by interest expense on bank borrowings at the Company's joint ventures. Interest income, net, decreased to $1.1 million for the six months ended February 29, 2000 from $2.5 million for the six months ended February 28, 1999 primarily due to decreased balances in cash and cash equivalents and marketable securities as a result of the use of cash to finance the Company's expansion and increased interest expense on bank borrowings during the first half of fiscal 2000. Other income (expense) consists primarily of gain or losses on the sale of marketable securities and the results from the Company's real estate operations. For the six months ended February 29, 2000, other expense was $156,000 and consists of a net loss on the sale of marketable securities of $104,000, a loss from the real estate operations of $126,000 and gain on the sale of assets of $74,000. For the six months ended February 28, 1999, other income was $1.5 million, and consists of a net gain on the sale of marketable securities of $318,000 Page 15
and income from the real estate operations of $1.2 million, which includes gains on sales of property. The Company expects to wind down its remaining real estate operations in fiscal 2000 as it sells its remaining properties held for sale. Minority interest relates to an allocation of the joint venture income (losses) to the minority interest shareholders respective interest. The provision for income taxes relates to taxes on foreign operations. No deferred tax benefit has been recognized on net operating losses and start up costs. Because the realization of such deferred tax assets is not certain, a full valuation allowance was established. LIQUIDITY AND CAPITAL RESOURCES The Company's primary capital requirement is the financing of land acquisition, construction and equipment costs for new warehouses plus the cost of pre-opening and working capital requirements, through investments in foreign joint ventures. During fiscal 2000, management's current intention is to spend an aggregate of approximately $91.0 million (primarily through its foreign joint ventures) for expansion in Latin America and the Caribbean to open up to ten new warehouses. However, actual capital expenditures for new warehouse locations and operations may vary from estimated amounts depending on the number of new warehouses opened, business conditions and other risks and uncertainties to which the Company and its businesses are subject. The Company, primarily through its foreign joint ventures, intends to borrow up to $64.0 million during fiscal 2000 to finance these expenditures which will be secured by the land, building, equipment and inventories at the new warehouses. As of February 29, 2000, the Company has entered into financing arrangements totaling approximately $49.5 million ($26.2 million in term loans and $23.3 million in lines of credit). As of February 29, 2000, the Company had remaining availability under its financing agreements of approximately $18.3 million. In March 2000, the Company, through its joint venture arrangements in the Dominican Republic, entered into a 180-day bridge loan, which converts to a five-year term loan, with Banco Dominicano del Progreso, S.A. for $7.0 million. Interest on the bridge loan is 11.5% and three month LIBOR plus 4.5% on the term loan. Interest payments are required to be made on a monthly basis. Minimum principal payments of $350,000 are due quarterly. The loan is collateralized by the land, building, fixtures and equipment of the Dominican Republic joint venture and guaranteed up to 60% by the Company and up to 40% from the Company's joint venture partner. The loan is also subject to certain financial and operating covenants. On March 1, 2000, the Company sold its travel business for $1.5 million to Club-4U under an asset purchase agreement ("purchase agreement"). Club-4U, a California corporation, was formed to purchase the travel business and is owned by Sol Price who is a principal stockholder of the Company. Under the purchase agreement, Club-4U acquired the assets primarily used in connection with the travel business, subject to liabilities under the travel business existing contracts, resulting in a gain of approximately $1.1 million to be recognized in the third quarter of fiscal 2000. The net proceeds will be used to fund the continued growth of the Company's international membership merchandising warehouse business. On April 5, 2000, the Company entered into an agreement to sell up to ten notes receivable from various municipalities and agencies, known as the "City Notes" (see "Note 5 - City Notes Receivable" in the notes to the Company's audited consolidated financial statements for the year ended August 31, 1999 filed on Form 10-K), to the Price Family Charitable Trust, a California Trust. Sol Price (a principal stockholder of PriceSmart, Inc.) and Robert Price (a principal stockholder and Chairman of the Board of PriceSmart, Inc.) are trustee and successor trustee, respectively, of the Trust. The aggregate purchase price to be paid by the Trust for the City Notes is $22.5 million. Initially, the Company will sell six of the City Notes to the Trust for $11.5 million. The remaining City Notes will be sold to the Trust upon receipt of consents to assignment of those notes from the municipalities/ agencies that issued the Notes. The Company expects to receive such consents within 45 days. The Company will recognize a gain of approximately $3.9 million arising from this transaction that will be recognized in the third quarter of fiscal Page 16
2000. The proceeds of the sale of the City Notes will be used by the Company to fund the continued growth of the Company's international membership merchandising warehouse business. In addition to the above borrowings, the Company is currently evaluating several financing proposals and believes that the financing facilities for the new warehouse locations will be completed. The balance of these expenditures will be financed through a combination of cash, cash equivalents, marketable securities, cash from operations of the Company's businesses, proceeds from the sale of the City Notes and other note receivables. The Company believes that borrowings under its current credit facilities, together with its other sources of liquidity described above, will be sufficient to meet its working capital and capital expenditure requirements for the foreseeable future. However, if such sources of liquidity are insufficient to satisfy the Company's liquidity requirements, the Company may need to sell equity or debt securities or obtain additional credit facilities or reduce the number of anticipated warehouse openings. There can be no assurance that such financing alternatives will be available under favorable terms, if at all. SEASONALITY Historically, the Company's merchandising businesses have experienced moderate holiday retail seasonality in their markets. In addition to seasonal fluctuations, the Company's operating results fluctuate quarter-to-quarter as a result of economic and political events in markets served by the Company, the timing of holidays, weather, timing of shipments, product mix, and currency effects on the cost of U.S.-sourced products which may make these products more expensive in local currencies and less affordable. Because of such fluctuations, the results of operations of any quarter are not indicative of the results that may be achieved for a full fiscal year or any future quarter. In addition, there can be no assurance that the Company's future results will be consistent with past results or the projections of securities analysts. IMPACT OF YEAR 2000 The year 2000 issue results from computer programs and hardware being written with two digits rather than four digits to define the applicable year. As a result, there is a risk that date sensitive software may recognize a date using "00" as the year 1900, rather than the year 2000. This potentially could result in system failure or miscalculations causing disruptions of operations, including a temporary inability to process transactions or engage in normal business activities. The Company has experienced no year 2000 adverse effects on its internal systems or any involved in its supply chain, including purchasing, distribution, sales, and accounting. Also, no errors were found related to date processing before or after January 1, 2000, including treatment of year 2000 as a leap year. The Company will continue to monitor its hardware, software, and imbedded systems as they are added or modified. A significant part of the Company's business is derived from its activities in Latin America and Asia. The Company's business could be adversely impacted in the event business activities in Latin America and Asia are disrupted due to year 2000 issues, with the extent of such impact dependent upon the extent of such disruption, which may vary from country to country. The Company's business could also be adversely impacted by supply chain disruption due to vendor and supplier business interruption. To date there has been no year 2000 adverse effects in the Company's foreign operations. Page 17
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company, through its joint ventures, conducts international operations primarily in Latin America, and as such is subject to both economic and political instabilities that cause volatility in foreign currency exchange. During fiscal 1999, the Company opened warehouses in three foreign countries through joint venture arrangements. Thus far in fiscal 2000, the Company has opened warehouses in two additional foreign countries through joint venture arrangements. For the six months ended February 29, 2000, approximately 71% of the Company's net warehouse sales were in foreign currencies. The Company's future expansion plans anticipate entry into additional foreign countries, which may involve similar economic and political risks as well as challenges that are different from those currently encountered by the Company. The Company believes that because its present operations and expansion plans involve numerous countries and currencies, its exposure from any one currency devaluation would not significantly affect operating results. Nonetheless, there can be no assurance that the Company will not experience a materially adverse effect on the Company's financial condition as a result of the economic and political risks of conducting an international merchandising business. Translation adjustments from the Company's non-U.S. denominated joint venture arrangements in Latin America totaled $204,000 for the six months ended February 29, 2000 compared to $31,000 for the six months ended February 28, 1999. Translation adjustments from the Company's non-U.S. denominated joint venture arrangements in Latin America totaled $245,000 for fiscal 1999. Foreign currencies in most of the Latin American and Caribbean countries have historically devalued against the U.S. dollar and most are expected to continue to devalue. Managing foreign exchange is critical for operating successfully in these markets and the Company manages its risks through a combination of hedging currencies through Non Deliverable Forward Exchange Contracts (NDF) and internal hedging procedures. As of February 29, 2000, the Company had $2.5 million in NDF's expiring at different dates through April 10, 2000. The cost associated with these contracts through February 29, 2000 was not material. The Company will continue to purchase NDF's where necessary to mitigate foreign exchange losses, but due to the volatility and lack of derivative financial instruments in the countries the Company operates, significant risk from unexpected devaluation of local currencies exist. Foreign exchange transaction losses realized for the six months ended February 29, 2000 (including the cost of the NDF's) was approximately $537,000. Page 18
PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders The Company's annual meeting of stockholders was held on January 19, 2000 at the Hilton San Diego Mission Valley in San Diego, California. Stockholders of record at the close of business on November 23, 1999 were entitled to notice of and to vote in person or by proxy at the annual meeting. As of the record date there were 5,094,758 shares outstanding. The matter presented for vote received the required votes for approval and had the following total, for and withheld votes as noted below. 1. To elect directors for the ensuing year, to serve until the next Annual meeting of Stockholders and until their successors are elected and have qualified: <TABLE> <CAPTION> Votes For Votes Withheld <S> <C> <C> Rafael E. Barcenas 4,802,096 85,210 James F. Cahill 4,887,517 2 Katherine L. Hensley 4,886,474 1,045 Leon C. Janks 4,887,519 0 Lawrence B. Krause 4,886,474 1,045 Gilbert A. Partida 4,886,474 1,045 Robert E. Price 4,887,351 168 </TABLE> Item 5. Other Information None Page 19
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.1 Loan agreement by and between CitiBank and PRICSMARLANDCO, S.A., Prismar de Costa Rica. S.A., PSMT Caribe, Inc.. Pricesmart, Inc., P.S.C., S.A., and Venture Services, Inc. dated October 1999 for $5.9 million. 10.2 Line of credit between Bank of America and PriceSmart, Inc. dated January 10, 2000 for $8.0 million. 10.3 Loan agreement by and between CitiBank, N.A. and Imobiliaria PriceSmart, S.A. de C.V., PriceSmart El Salvador, S.A. de C.V., PSMT Caribe, Inc., PriceSmart, Inc., P.S.C., S.A., and Venture Services, Inc. dated December 21, 1999 for $5.0 million. 10.4 (a) Loan agreement by and between The Chase Manhattan Bank and PriceSmart, Inc. and PB Real Estate, S.A. dated December 20, 1999 for $11.3 million (in Spanish). 10.4 (b) Loan agreement by and between The Chase Manhattan Bank and PriceSmart, Inc. and PB Real Estate, S.A. dated December 20, 1999 for $11.3 million (in English). 10.5 (a) Line of Credit for 180 days between Banco Nacional de Credito, S.A. and PriceSmart Dominicana, S.A. January 11, 2000 for $1.0 million (in Spanish). 10.5 (b) Line of Credit for 180 days between Banco Nacional de Credito, S.A. and PriceSmart Dominicana, S.A. dated January 11, 2000 for $1.0 million (in English). 10.5 (c) Line of Credit for 180 days between Banco Nacional de Credito, S.A. and PriceSmart Dominicana, S.A. dated January 11, 2000 for $1.0 million (in Spanish). 10.5 (d) Line of Credit for 180 days between Banco Nacional de Credito, S.A. and PriceSmart Dominicana, S.A. dated January 11, 2000 for $1.0 million (in English). 10.6 (a) Line of Credit for 180 days between Banco Del Progresso, S.A. and PriceSmart Dominicana, S.A. dated December 23, 1999 for $2.0 million (in Spanish). 10.6 (b) Line of Credit for 180 days between Banco Del Progresso and PriceSmart Dominicana, S.A. dated December 23, 1999 for $2.0 million (in English). 10.7(a) Loan agreement by and between Commercial International Bank & Trust Co. Ltd. And PRICMARLANDCO, S.A. (Costa Rica) dated February 4, 2000 for $3.9 million (in Spanish). 10.7(b) Loan agreement by and between Commercial International Bank & Trust Co. Ltd. And PRICMARLANDCO, S.A. (Costa Rica) dated February 4, 2000 for $3.9 million (in English). 10.8(a) Loan agreement by and between Banco Nacional de Credito, S.A. and PriceSmart Dominicana, S.A. dated February 22, 2000 for $4.2 million (in Spanish). 10.8(b) Loan agreement by and between Banco Nacional de Credito, S.A. and PriceSmart Dominicana, S.A. dated February 22, 2000 for $4.2 million (in English). 10.9 Loan agreement by and between CitiBank, N.A. and Inmobiliaria PriceSmart Honduras dated February 25, 2000 for $3.5 million. 10.10 Loan agreement by and between Banco Dominicano del Progreso, S.A., Inmobiliaria PriceSmart, S.A. and PriceSmart Dominicana, S.A. dated March 10, 2000 for $7.0 million. 10.11 Travel Business Purchase Agreement dated March 1, 2000 between the Company and Club-4U. 10.12 Agreement to acquire sole ownership of the Panama PriceSmart business dated March 22, 2000 between the Company and BB&M International Trading Group. 10.13 Loan agreement by and between Banco Bilbao Vizcaya, S.A. and PRICSMARLANDCO, S.A. dated May 27, 1999 for $3.75 million. 10.14 Second Amendment of Employment Agreement between PriceSmart, Inc. and Gilbert A. Partida, dated January 10, 2000. 10.15 Third Amendment of Employment Agreement between PriceSmart, Inc. and Thomas Martin dated January 11, 2000. 10.16 Third Amendment of Employment Agreement between PriceSmart, Inc. and K. C. Breen dated January 11, 2000. 27.1 Financial Data Schedule (b) No reports on Form 8-K were filed for the six months ended February 29, 2000. Page 20
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PriceSmart, Inc. REGISTRANT Date: April 11, 2000 /s/ Gilbert A. Partida ---------------------- Gilbert A. Partida President and Chief Executive Officer Date: April 11, 2000 /s/ Allan C. Youngberg --------------------- Allan C. Youngberg Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) Page 21