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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
(Mark One) /X/ Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year ended
August 31, 1999.
/ / Transitional 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 small business issuer in its charter)
DELAWARE 33-0628530
(State of other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4649 MORENA BLVD., SAN DIEGO, CA 92117
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code: (858) 581-4530
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.0001 PAR VALUE
(Title of Class)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of November 23, 1999 was $99,350,213, based on the last reported
sale of $38.50 per share on November 23, 1999.
As of November 23, 1999, total of 5,094,758 shares of Common Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Annual Report for fiscal year ending August 31, 1999,
are incorporated by reference into Part II of this Form 10-K.
Portions of the Company's Proxy Statement for the Annual Meeting of Stockholders
to be held on January 19, 2000 are incorporated by reference into Part III of
this Form 10-K.
TABLE OF CONTENTS
PAGE
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Part I
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Part II
Item 5. Market for Common Stock and Related Stockholder Matters 11
THE INFORMATION REQUIRED BY ITEM 5 IS INCORPORATED HEREIN BY
REFERENCE FROM PRICESMART'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
AUGUST 31, 1999
Item 6. Selected Financial Data 11
THE INFORMATION REQUIRED BY ITEM 6 IS INCORPORATED HEREIN BY
REFERENCE FROM PRICESMART'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
AUGUST 31, 1999
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
THE INFORMATION REQUIRED BY ITEM 7 IS INCORPORATED HEREIN BY
REFERENCE FROM PRICESMART'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
AUGUST 31, 1999
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 11
THE INFORMATION REQUIRED BY ITEM 7A IS INCORPORATED HEREIN BY
REFERENCE FROM PRICESMART'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
AUGUST 31, 1999
Item 8. Financial Statements 11
THE INFORMATION REQUIRED BY ITEM 8 IS INCORPORATED HEREIN BY
REFERENCE FROM PRICESMART'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
AUGUST 31, 1999
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 11
Part III
Item 10. Directors and Executive Officers of the Registrant 12
THE INFORMATION REQUIRED BY ITEM 10 IS INCORPORATED HEREIN BY
REFERENCE FROM PRICESMART'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JANUARY 19, 2000
Item 11. Executive Compensation 12
THE INFORMATION REQUIRED BY ITEM 11 IS INCORPORATED HEREIN BY
REFERENCE FROM PRICESMART'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JANUARY 19, 2000
Item 12. Security Ownership of Certain Beneficial Owners and Management 12
THE INFORMATION REQUIRED BY ITEM 12 IS INCORPORATED HEREIN BY
REFERENCE FROM PRICESMART'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JANUARY 19, 2000
Item 13. Certain Relationships and Related Transactions 12
THE INFORMATION REQUIRED BY ITEM 13 IS INCORPORATED HEREIN BY
REFERENCE FROM PRICESMART'S PROXY STATEMENT FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JANUARY 19, 2000
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 13
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PART I
ITEM 1. BUSINESS
This Form 10-K contains forward-looking statements concerning the Company's
anticipated future revenues and earnings, adequacy of future cash flow, expected
year 2000 readiness 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 risk factors referenced in this Form 10-K.
See "Business Factors Which May Affect Future Performance."
PriceSmart, Inc. ("PriceSmart" or the "Company") owns and operates merchandising
businesses. The Company's primary business is international merchandising
consisting of membership shopping warehouses similar to, but smaller in size
than, warehouse clubs in the United States. As of August 31, 1999, there were
five warehouses in operation of which the Company owns a majority interest.
Also, there were five warehouses in operation (four in China and one in Saipan)
licensed by the Company, but owned and operated by local business people.
Additionally, the Company operates a domestic travel business. The Company's
travel business generates most of its revenue through an agreement with Costco
Companies, Inc. ("Costco") that expires November 30, 1999. The Company currently
is engaged in discussions with Costco to extend the agreement through February
2000, but there can be no assurance the agreement will be extended. The Company
operated a domestic auto referral business, marketed primarily to Costco
members, until April 1, 1999, when the auto referral business was sold.
In June 1997, the Price Enterprises, Inc. ("PEI") Board of Directors approved a
plan to separate PEI's core real estate business from the merchandising
businesses it operated through a number of subsidiaries. To effect such
separation, PEI first transferred to the Company, through a series of
preliminary transactions, the assets listed below. PEI then distributed on
August 29, 1997 all of the Company's common stock pro rata to PEI's existing
stockholders through a special dividend (the "Distribution").
Assets transferred to PriceSmart were comprised of: (i) the merchandising
business segment of PEI; (ii) certain real estate properties held for sale (the
"Properties"); (iii) notes receivable from buyers of properties; (iv) cash and
cash equivalents of approximately $58.4 million; and (v) all other assets and
liabilities not specifically associated with PEI's portfolio of investment
properties, except for current corporate income tax assets and liabilities.
BUSINESS STRATEGY
The Company's strategy is to focus on development of the international
merchandising business and to invest in, acquire or create new merchandising
businesses that leverage existing capabilities and provide appropriate returns
for its stockholders. Specifically, key elements of the Company's business
strategy include:
PROVIDE LOWER PRICES IN THE MARKET PLACE. The Company's principal business
philosophy is to bring lower prices to the consumer. Future development of the
Company's business will be directed to markets in which the Company can compete
effectively by lowering the costs of goods and services to consumers.
INCREASE MARKET SHARE IN DEVELOPING MARKETS. The Company believes that it is
well positioned to profit from the growth in developing markets due to its
capital resources and experience with membership warehouses in Latin America and
Asia. The Company intends to continue to satisfy the growing demand for consumer
goods in such markets by entering into additional joint venture relationships
with local business people and opening additional membership warehouses through
existing and additional joint ventures, principally in Latin America and
Caribbean countries.
INTERNATIONAL MERCHANDISING BUSINESSES
The Company owns and operates U.S.-style membership shopping warehouses under
joint venture arrangements in Latin America using the trade name "PriceSmart"
and, in certain markets, "PriceCostco". During fiscal 1999, the Company opened
three new US-style membership shopping warehouses under joint venture
arrangements in Latin America; one in Guatemala (April 1999), one in Costa Rica
(June 1999) and one in El Salvador (August 1999) bringing the total number of
warehouses owned under joint venture arrangements to five as of August 31, 1999.
The Company's licensee in China opened two warehouses in China during fiscal
1999 bringing the total number of licensee warehouses to five as of August 31,
1999, through which the Company sells product (export sales) and earns royalties
and other fees in connection with certain licensing and technology transfer
agreements.
Subsequent to fiscal 1999, the Company opened two additional warehouses under
joint venture arrangements; one in Honduras (September 1999) and one in Panama
(November 1999).
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The warehouses sell basic consumer goods with an emphasis on quality, low prices
and efficient operations. By offering low prices on brand name and private label
merchandise, the warehouses seek to generate sufficient sales volumes to operate
profitably at relatively low gross margins. The typical no-frills warehouse-type
buildings range in size from 45,000 to 55,000 square feet and are located in
urban areas to take advantage of dense populations and relatively higher levels
of disposable income. Product selection includes perishable foods and basic
consumer products. The target customers are consumers and small businesses. The
shopping format includes an annual membership fee that varies by market from $20
to $30.
Typically, the Company enters into licensing and technology transfer
agreements with either a joint venture company (whose minority stockholders
are local business people) or with local business people as licensees
pursuant to which the Company provides the Company's know-how package, which
includes training and management support, as well as access to the Company's
computer software systems. The license also includes the right to use the
"PriceSmart" mark and certain other trademarks. The Company and its licensees
also enter into product sourcing agreements. The Company believes that the
local business people have been interested in entering into such joint
ventures and obtaining such licenses for a variety of reasons, including the
track record of the Company's management team, the opportunity to purchase
U.S.-sourced products, the benefits of the Company's modern distribution
techniques and the opportunity to obtain exclusive rights to use the
Company's trademarks in the region.
TRAVEL PROGRAM
The Company's Travel Program offers discounted prices on airline tickets,
cruises, travel packages, car rentals and hotels, primarily to Costco members.
The Company's Travel Program generates most of its revenue through an agreement
with Costco that expires November 30, 1999. The Company currently is engaged in
discussions with Costco to extend the agreement through February 2000, but there
can be no assurance the agreement will be extended.
EXPANSION PLANS
The Company's expansion plans focus on opening new stores in foreign markets,
typically through joint venture arrangements, primarily in Latin America and
Caribbean countries. The Company believes such foreign markets offer
significant opportunities for growth because they are often characterized by
(i) significant geographic and logistical barriers to entry, (ii) existing
higher-priced local competitors with minimal experience with modern operating
processes in purchasing, distribution, merchandising and information
technologies, and (iii) a demand for U.S. brand-name products that are not
currently widely available in such markets.
In July 1998, the Company entered into an agreement with a Guatemalan
headquartered company to form a new joint venture for a minimum of two
PriceSmart membership shopping warehouses in Guatemala. PriceSmart owns 66%
of this venture. The first warehouse opened in April 1999.
In September 1998, the Company entered into an agreement with PSC, S.A.,
whose stockholders are Latin American businessmen, to open a minimum of nine
PriceSmart membership shopping warehouses in Costa Rica, the Dominican
Republic, El Salvador, Honduras, and Nicaragua. PriceSmart owns 60% of this
venture. The first two stores under this agreement opened in Costa Rica (June
1999) and El Salvador (August 1999).
During fiscal 1999, the Company entered into an agreement with investors from
The Republic of Trinidad and Tobago to open a minimum of two PriceSmart
membership shopping warehouses in Trinidad. The Company owns 60% of this
venture.
RELATIONSHIP WITH COSTCO
PEI, Costco and certain of their respective subsidiaries, including the Company,
entered into an Agreement Concerning Transfer of Certain Assets (the "Asset
Transfer Agreement") in connection with the settlement of litigation arising
from the spin-off of PEI from Costco and the prior merger between The Price
Company and Costco.
PEI and Costco agreed in the Asset Transfer Agreement to eliminate all
noncompete and operating agreements and to terminate all trademark and
license agreements between the parties, subject to certain exceptions. Costco
agreed to refrain from conducting membership store businesses in the Northern
Mariana Islands, Guam and Panama through October 31, 1999. The Company has an
exclusive royalty-free right (including against Costco), in the Northern
Mariana Islands and Guam to use "Price Club" and "PriceCostco" marks, and in
Panama to use the "PriceCostco" mark, in connection with the development,
operation, advertising and promotion of the Company's business activities in
such areas, subject to certain restrictions. The Asset Transfer Agreement,
however, requires the Company to use diligent and reasonable efforts to
negotiate with its licensee in the Northern Mariana Islands, Guam and Panama
to terminate such right to use the "Price Club" and "PriceCostco" names and
marks at the earliest possible date before December 12, 2009 for the Northern
Mariana Islands and Guam and December 21, 2015 for Panama.
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The Company's right to use such names and marks in Panama are further subject
to the outcome of trademark application proceedings in Panama, which could
result in earlier termination of the Company's rights. The Company expects to
change the name of its warehouses in Panama from "PriceCostco" to
"PriceSmart" during fiscal 2000.
The Asset Transfer Agreement also gives the Company the exclusive right to
operate its Travel Program in certain Costco warehouses. The Company's right
under the Asset Transfer Agreement to conduct the Travel Program in Costco
warehouses expires November 30, 1999. The Company currently is engaged in
discussions with Costco to extend the agreement through February 2000, but there
can be no assurance the agreement will be extended. The Asset Transfer Agreement
requires the Company to pay Costco, for car rentals, hotel bookings and other
travel services other than vacation packages and cruises, 15% of the received
commissions derived from any advertising or promotion via Costco warehouses. For
vacation packages and cruises, the Company is required to pay Costco 1% of the
net sales. The Company is required to use "Costco Travel Program" marks in
connection with sales and promotional activities in Costco warehouses.
Costco has agreed in the Asset Transfer Agreement that PEI and its downstream
affiliates may use the name "Price" in a "PriceSmart" mark, but PEI and its
downstream affiliates may not use a "PriceSmart" mark in connection with a club
business or other membership activity named "PriceSmart" in the United States,
Canada or Mexico; provided that the limitations on the Company's rights to use
the "PriceSmart" name in the United States, Canada and Mexico terminate 24
months after Costco and its downstream affiliates discontinue their use of the
names "PriceCostco" and "Price Club."
CITY NOTES RECEIVABLE
The Company owns certain notes receivable from various municipalities and
agencies (the "City Notes"). As of August 31, 1999, the carrying value of the
City Notes was approximately $19.5 million. The City Notes carry interest
rates that range from 8% to 10%. Repayment of each City Note is generally
based on the relevant municipality's allocation of sales tax revenues
generated by retail businesses located on a particular property associated
with such City Note. For accounting purposes, the carrying value of $19.5
million of such notes represents management's estimate of discounted cash
flow from the City Notes based on the stated interest rate and remaining term
of the notes. Management's analysis of the discounted cash flow from the City
Notes assumes no payment at maturity, because, under the terms of the City
Notes, the unpaid balance of the note is forgiven at its maturity date. If
actions taken by Costco, such as closure or relocation of a particular Costco
warehouse, would entitle the governmental agency to withhold payment, the
Company would be entitled to cause Costco to purchase such City Note at an
amount equal to 72% of the June 5, 1994 book balance, less any subsequent
principal repayments, plus all accrued and unpaid interest from June 5, 1994.
The Company is currently considering selling the City Notes to a third party or
may use the notes as collateral on a bank loan. If realized, the proceeds from
either the sale or collateral of the City Notes may be used to fund the
Company's expansion plans. See "BUSINESS - Expansion Plans."
COMPETITION
The Company's international merchandising businesses compete with exporters,
retailers, wholesalers and trading companies in various international
markets. Specifically, the Company's international merchandising businesses
compete with local store operations and, in certain markets may compete with
other international retailers. The Company's Travel Program competes with a
variety of other providers of travel and travel-related products and
services, including telemarketing travel companies, traditional travel
agencies and various on-line services available on the internet.
Many of the Company's current and potential competitors have longer operating
histories, greater name recognition and significantly greater financial and
marketing resources than the Company. Such competitors could undertake more
aggressive and costly marketing campaigns than the Company, which may adversely
affect the Company's marketing strategies, which, in turn, could have a material
adverse effect on the Company's business, results of operations or financial
condition. There can be no assurance that the Company can compete successfully
against current or future competitors nor can there be any assurance that
competitive pressures faced by the Company will not result in loss of market
share or otherwise will not materially adversely affect its business, results of
operations and financial condition.
INTELLECTUAL PROPERTY RIGHTS
It is the Company's policy to obtain appropriate proprietary rights
protection for trademarks and significant new technologies acquired or
developed by the Company. In addition, the Company relies on copyright and
trade secret laws to protect its proprietary rights. The Company attempts to
protect its trade secrets and other proprietary information through
agreements with its joint venturers, employees, consultants and suppliers,
and other similar measures. There can be no assurance, however, that the
Company will be successful in protecting its proprietary rights. While
management believes that the Company's trademarks, copyrights and other
proprietary know-how have significant value, changing technology and the
competitive marketplace make the Company's future success dependent
principally upon its employees' technical competence and creative skills for
continuing innovation.
5
There can be no assurance that third parties will not assert claims against the
Company with respect to existing and future trademarks, trade names and sales
techniques. In the event of litigation to determine the validity of any third
party's claims, such litigation could result in significant expense to the
Company and divert the efforts of the Company's management, whether or not such
litigation is determined in favor of the Company.
The Company has filed applications to register under various classifications the
mark "PriceSmart" in the U.S. Patent and Trademark Office, and in certain
foreign countries; however, because of objections by one or more parties, there
can be no assurance that the Company will obtain such registrations or that the
Company has proprietary rights to the mark. In addition, as noted above, the
Company has limited rights to use the "PriceCostco" name in connection with its
international merchandising businesses and certain Costco marks with its Travel
Program. The Asset Transfer Agreement requires the Company to attempt to phase
out the use of the "PriceCostco" name and related marks in the Northern Mariana
Islands, Guam and Panama. See "Business - Relationship with Costco."
In August 1999, the Company and Associated Wholesale Grocers, Inc. ("AWG")
entered into an agreement regarding the trademark "PriceSmart" and related marks
containing the name "PriceSmart". The Company has agreed not to use the
"PriceSmart" mark or any related marks containing the name "PriceSmart" in
connection with the sale or offer for sale of any goods or services within AWG's
territory of operations, including the following ten states: Kansas, Missouri,
Arkansas, Oklahoma, Nebraska, Iowa, Texas, Illinois, Tennessee and Kentucky. The
Company, however, may use the mark "PriceSmart" or any mark containing the name
"PriceSmart" on the internet or any other global computer network whether within
or outside said territory, and in any national advertising campaign that cannot
reasonably exclude the territory, and the Company may use the mark in connection
with various travel services. AWG has agreed not to oppose any trademark
applications filed by the Company for registration of the mark "PriceSmart" or
related marks containing the name "PriceSmart", and AWG has further agreed not
to bring any action for trademark infringement against the Company based upon
the Company's use outside the territory (or with respect to the permitted uses
inside the territory) of the mark "PriceSmart" or related marks containing the
name "PriceSmart."
EMPLOYEES
As of August 31, 1999 the Company employed approximately 145 employees, 58 of
which are assigned to the Company's international merchandising business, 33 to
the travel business and 54 in corporate administrative activities. The Company
believes that its future prospects will depend, in part, on its ability to
continue to attract and retain skilled management personnel.
The individuals employed in the cruise division of the Company's travel business
are members of a union. The Company currently has a collective bargaining
agreement with such union with a one-year term, renewable year to year. The
Company has never experienced any business interruption as a result of labor
disputes. The Company believes that its relations with its employees are good.
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.
FACTORS WHICH MAY AFFECT FUTURE PERFORMANCE
RISKS INHERENT IN INTERNATIONAL OPERATIONS. The Company will be increasingly
subject to risks inherent in operating and expanding its international
membership concept. Such risks include the imposition of governmental
controls, the need to comply with a wide variety of foreign regulations and
U.S. export laws, political and economic instability, trade restrictions,
ability to source local merchandise, changes in tariffs and taxes, longer
payment cycles typically associated with international sales, and greater
difficulty and costs of administering business overseas.
Success of the international business is subject to additional factors,
including limitations on U.S. Company ownership in foreign countries, the
availability of suitable sites, the negotiation of acceptable lease or
purchase terms for such sites, permitting and regulatory compliance, the
ability to meet construction schedules, the ability to hire and train
qualified management and store personnel, the financial and other
capabilities of the Company's licensees and business partners, and general
political as well as economic and business conditions. There can be no
assurance that any of these factors will not have a material adverse effect
on the Company's business, financial condition or results of operations. See
"BUSINESS - International Merchandising Businesses."
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DEPENDENCY ON FOREIGN LICENSEES AND BUSINESS PARTNERS AND ASSOCIATED RISKS.
Several of the risks associated with the international merchandising business
will be within the control (in whole or in part) of the Company's licensees and
business partners or may be affected by the acts or omissions of such licensees
and business partners. Certain of the Company's licensees and business partners
have had limited experience operating membership stores that sell consumer
goods. There can be no assurance that the Company's PriceSmart membership store
concept will be implemented effectively or that they will be successful in their
respective markets. In the event one or more licensees or business partners are
displeased with their relationship with the Company, such licensees or business
partners could seek to terminate their relationships with the Company or make
claims against the Company alleging that the Company acted, or failed to act, in
a manner that damaged such licensees or business partners. There can be no
assurance that a dissatisfied licensee or business partner would not file
litigation, that the Company would prevail if any such litigation were filed or
that such litigation would not have a material adverse effect of the Company's
business, financial condition and results of operation. See "BUSINESS -
International Merchandising Businesses."
ABILITY TO MANAGE GROWTH. The Company began an aggressive growth strategy in
fiscal 1999 through the completion of joint venture agreements in Latin
America and the Caribbean that intend to open six to ten new warehouses in
fiscal 2000. The success of this strategy will depend to a significant degree
on the Company's ability to (i) expand its operations through the opening of
new warehouses, (ii) operate new warehouses on a profitable basis, and (iii)
maintain positive comparable warehouse net sales. The Company operated five
warehouses as of August 31, 1999 and plans to open an additional six to ten
new warehouses by the end of fiscal 2000, which represents a significant
increase in the number of warehouses opened and operated by the Company.
These new markets may present operational, competitive, regulatory and
merchandising challenges that are similar to, or different from those
currently encountered by the Company. There can be no assurance that the
Company will be able to adapt its operations to support these expansion plans
or that the Company's new warehouses will be profitable.
The Company's ability to open new warehouses on a timely basis will also depend
on a number of factors, some of which may be beyond the Company's control,
including the ability to (i) locate suitable warehouse sites, (ii) negotiate
acceptable lease or acquisition terms, (iii) construct sites timely, and (iv)
obtain financing timely and with satisfactory terms. Additionally, the Company
relies significantly on the skill and expertise of its joint venture partners
and on-site warehouse managers. The Company will be required to hire, train and
retain skilled managers and personnel to support its growth, and may experience
difficulties hiring employees who possess the training and experience necessary
to operate the Company's new warehouses, particularly in foreign markets where
language, education and cultural factors may impose particular challenges.
Further, the Company has encountered, and may continue to encounter, substantial
delays, increased expenses or loss of potential sites due to the complexities,
cultural differences and local political issues associated with the regulatory
and permitting processes in the foreign markets in which the Company intends to
locate its warehouses. There can be no assurance that the Company will be able
to open the planned number of new warehouses according to its schedule or that
it will be able to continue to attract, develop and retain the personnel
necessary to pursue its growth strategy. Failure to do so could have a material
adverse effect on the Company's business, financial condition and operating
results.
The Company will need to continually evaluate the adequacy of its existing
systems and procedures, including warehouse management, financial and inventory
control and distribution systems. Moreover, as the Company grows, it will need
to continually analyze the sufficiency of its inventory distribution methods and
may require additional facilities in order to support its planned growth. There
can be no assurance that the Company will adequately anticipate all the changing
demands that its expanding operations will impose on such systems. Failure to
update its internal systems or procedures as required could have a material
adverse effect on the Company's business, financial condition and operating
results.
RELIANCE ON COSTCO FOR TRAVEL BUSINESS. The Company's travel business generates
most of its revenue through an agreement with Costco that expires November 30,
1999. The Company currently is engaged in discussions with Costco to extend the
agreement through February 2000, but there can be no assurance the agreement
will be extended.
COMPETITION. The Company's merchandising businesses face competition unique
to its line of business. The Company's international merchandising businesses
compete with exporters, wholesalers, other membership merchandisers, local
retailers and trading companies in various international markets. The
Company's travel business competes with a variety of other providers of
travel and travel-related products and services, including telemarketing
travel companies, traditional travel agencies and various on-line services
available on the Internet. See "BUSINESS - Competition."
NOTES RECEIVABLE. The Company holds the City Notes. Repayment of each City Note
by the relevant municipality is generally made based on that municipality's
allocation of sales tax revenues generated by retail businesses located on a
particular property associated with such City Note. For accounting purposes, the
carrying value of $19.5 million of such notes represents management's estimate
of discounted cash flow from the City Notes. Management's analysis of the
discounted cash flows from the City Notes assumes no payment at maturity,
because, under the terms of most of the City Notes, the unpaid balance of the
note is forgiven at its maturity date. Consequently, there can be no assurance
that the full stated principal amount of the City Notes will be repaid. See
"BUSINESS - City Notes."
CONTROL OF PRICESMART BY CERTAIN STOCKHOLDERS. Robert E. Price, who is Chairman
of the Board of PriceSmart, and Sol Price, a significant stockholder of
PriceSmart and father of Robert E. Price, beneficially owned as of November 23,
1999 an aggregate of 2,368,048 shares, or approximately 46.5%, of the
outstanding PriceSmart common stock. As a result, these stockholders
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will effectively control the outcome of all matters submitted to the
Company's stockholders for approval, including the election of directors. In
addition, such ownership could discourage acquisition of the Company's common
stock by potential investors, and could have an anti-takeover effect,
possibly depressing the trading price of the Company's common stock.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent on the efforts of its
executive management team. The loss of the services of any executive could have
an adverse effect on the operations of the Company.
FOREIGN CURRENCY RISKS. 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. For fiscal 1999, 28% of
the Company's net warehouse sales were in foreign currencies. This amount is
expected to increase significantly in fiscal 2000 to nearly 70%. The Company
plans to open warehouses in additional foreign countries that may involve
similar economic and political risks as well as challenges that may be
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.
Foreign currencies in most of the Latin American and Caribbean countries have
historically devalued against the U.S. dollar and 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 August 31, 1999, the Company had $4.5 million in NDF's
expiring at different dates through November 19, 1999. 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 in, significant risk from unexpected devaluation of local
currencies exist.
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 received statements of year 2000 readiness from its key
hardware, software and imbedded system vendors, and has additionally conducted
internal testing of its transaction processing systems. The Company has assessed
readiness of its custom programs, has modified these programs as needed, and has
tested these modifications for year 2000 readiness. In addition to testing its
programs and systems individually, the Company has performed "end-to-end"
testing of its internal systems involved in its supply chain, including
purchasing, distribution, sales, and accounting. During this testing, 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 test its
hardware, software, and imbedded systems as they are added or modified.
Additionally, the Company has contacted and will continue to contact significant
vendors, suppliers, financial institutions and other third party providers upon
which its business depends in an effort to determine such providers' year 2000
readiness. The Company evaluates the potential business impact of non-responsive
or non-compliant providers and endeavors to make contingency plans as needed.
These efforts are designed to minimize the impact to the Company should these
providers fail to remediate their year 2000 issues. The Company can give no
assurances that such providers or such contingency plans will be successful in
resolving all year 2000 issues, and the failure of such providers to comply on a
timely basis could have an adverse effect on the Company.
The total cost of the year 2000 project is not expected to exceed $100,000. The
costs of the year 2000 project are based on management's best estimates, which
are derived utilizing numerous assumptions. However, there can be no guarantee
that these estimates will be achieved and actual results could differ materially
from the estimates. Specific factors that might cause material differences
include, but are not limited to, the availability and cost of trained personnel,
the ability to locate and correct all relevant computer codes, and similar
uncertainties.
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.
The Company has established a business continuity plan, which addresses the
potential unavailability of its hardware and software systems, facilities and
services (e.g. telephone, electricity, data communications) through a
combination of geographically diverse contracted facilities and equipment,
alternative procedures for processing transactions, system back-up and recovery
procedures, and redundant infrastructure (e.g. generators, alternative voice and
data communications methods). The business continuity plan was successfully
tested in March 1999.
8
ITEM 2. PROPERTIES
WAREHOUSE PROPERTIES. The Company owns or leases all of the warehouse locations
and land through its joint ventures, of which it owns a majority interest. The
following is a summary of the warehouse locations by country that were
operational at August 31, 1999:
Location Date Opened Ownership / Lease
- -------- ----------- -----------------
Costa Rica:
San Jose June 25, 1999 Own land and building
El Salvador:
Santa Elena August 26, 1999 Own land and building
Guatemala:
Mira Flores April 8, 1999 Lease land and building
Panama:
Los Pueblos October 25, 1996 Own land and building
Via Brasil December 4, 1997 Lease land and building
Subsequent to August 31, 1999, the Company opened two warehouses. The first
opened on September 29, 1999, and is located in San Pedro Sula, Honduras, of
which the Company owns the land and the building. The second opened on November
11, 1999 in El Dorado, Panama of which the Company leases the land and building.
PROPERTIES HELD FOR SALE. In connection with the Distribution, PEI transferred
to the Company certain properties historically held for sale by PEI (the
"Properties"). The Properties include improved and unimproved land and totaled
$2.1 million as of August 31, 1999. The Company is currently in the process of,
or under contract to sell, all of the remaining properties held for sale. The
anticipated sales are expected to generate $2.0 million of net proceeds, with no
significant gains or losses. Proceeds from sales of such properties will be used
to fund the Company's businesses and general working capital requirements. The
Company expects such transactions to be completed within the next twelve months;
however, given the nature of such sales activities, there can be no assurance
that these potential sales will be completed by then or that such proceeds will
be fully realized.
ENVIRONMENTAL MATTERS. The Company has agreed to indemnify PEI for all of PEI's
liabilities (including obligations to indemnify Costco with respect to
environmental liabilities) arising out of PEI's prior ownership of the
Properties and the real properties transferred by Costco to PEI that have been
sold prior to the Distribution. The Company's ownership of real properties and
its agreement to indemnify PEI could subject it to certain environmental
liabilities. As discussed below, certain Properties are located in areas of
current or former industrial activity, where environmental contamination may
have occurred.
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and remediate releases or threatened releases of
hazardous or toxic substances or petroleum products located at such property,
and may be held liable to a governmental entity or to third parties for property
damage and for investigation and remediation costs incurred by such parties in
connection with the contamination. Under certain of these laws, liability may be
imposed without regard to whether the owner knew of or caused the presence of
the contaminants. These costs may be substantial, and the presence of such
substances, or the failure to remediate properly the contamination on such
property, may adversely affect the owner's ability to sell or lease such
property or to borrow money using such property as collateral. Certain federal
and state laws require the removal or encapsulation of asbestos-containing
material in poor condition in the event of remodeling or renovation. Other
federal, state and local laws have been enacted to protect sensitive
environmental resources, including threatened and endangered species and
wetlands. Such laws may restrict the development and diminish the value of
property that is inhabited by an endangered or threatened species, is designated
as critical habitat for an endangered or threatened species or is characterized
as wetlands.
In 1994, Costco engaged environmental consultants to conduct Phase I assessments
(involving investigation without soil sampling or groundwater analysis) at each
of the properties that Costco transferred to PEI in 1994, including the
Properties. The Company is unaware of any environmental liability or
noncompliance with applicable environmental laws or regulations arising out of
the Properties or the real properties transferred by Costco to PEI and sold
prior to the Distribution that the Company believes would have a material
adverse effect on its business, assets or results of operations. Nevertheless,
there can be no assurance that the Company's knowledge is complete with regard
to, or that the Phase I assessments have identified, all material environmental
liabilities.
The Company is aware of certain environmental issues, which the Company does not
expect to have a material adverse effect on the Company's business assets or
results of operation, relating to three properties transferred from Costco to
PEI that were sold prior to the Distribution. The Company has agreed to
indemnify PEI for environmental liabilities arising out of such properties. The
Company has
9
reserved approximately $15,000 and $30,000 with respect to potential
environmental liabilities arising from PEI's prior ownership of the Phoenix
(Fry's) property and Silver City property, respectively, discussed below. The
Company has not taken a reserve with respect to the Meadowlands property. Set
forth below are summaries of certain environmental matters relating to the
properties already sold.
Phoenix (Fry's). The Phoenix (Fry's) site is a 37.1 acre site located in
Phoenix, Arizona. The Phoenix (Fry's) site is located within the West Van Buren
Study Area (the "WVBSA"). Volatile organic compounds ("VOCs") and petroleum
hydrocarbons are present in groundwater in the WVBSA. To date, PEI (as successor
to Costco) has not been identified as a potentially responsible party ("PRP")
for the WVBSA. On March 8, 1995, PEI sold the Phoenix (Fry's) site, and retained
responsibility for certain environmental matters. Investigations conducted in
connection with the sale of the property revealed some hydrocarbon contamination
in an area previously occupied by a fuel pump island. Seven underground fuel
storage tanks were removed in 1989. The Arizona Department of Environmental
Quality is requiring some additional testing prior to granting closure of the
site. PEI's prior ownership of the Phoenix (Fry's) site creates the potential of
liability for remediation costs associated with groundwater beneath the site.
Costco previously agreed to indemnify and hold PEI harmless in respect of
one-half of all environmental liabilities relating to the Phoenix (Fry's) site.
Costco has continued to pay its share of the ongoing investigation costs
associated with this site. PEI and the Company lack sufficient information about
the activity of WVBSA PRPs to form an estimate of the equitable share of total
liability, if any, that could be allocated to PEI for its previous ownership of
this site.
Although designated by Arizona law as a "study area," the WVBSA is not a federal
CERCLA site and is not listed on the National Properties List ("NPL").
Immediately to the east of the WVBSA, however, is the East Washington Study Area
(the "EWSA"), which is listed on the NPL. VOCs are also present in groundwater
in the EWSA. If the contamination plumes from the WVBSA and the EWSA merge, the
possibility exists that the two study areas will be merged into one Federal
CERCLA site.
Meadowlands. The Meadowlands site is an unimproved, 12.9 acre site located in
Meadowlands, New Jersey. A prior owner used this site as a debris disposal area.
Elevated levels of heavy metals (including a small area contaminated with
polychlorinated biphenyl) and petroleum hydrocarbons are present in soil at the
Meadowlands site. PEI, however, has not been notified by any governmental
authority, and is not otherwise aware, of any material noncompliance, liability
or claim relating to hazardous or toxic substances or petroleum products in
connection with the Meadowlands site. PEI sold the Meadowlands site on August
11, 1995. Nevertheless, PEI's previous ownership of the Meadowlands site creates
the potential of liability for remediation costs associated with groundwater
beneath the site.
Silver City. The Silver City site contains or has contained petroleum
hydrocarbons in the soil and groundwater. On March 20, 1996, PEI sold the Silver
City site and retained responsibility for certain environmental matters. PEI is
continuing to remediate the soil and groundwater at this property under
supervision of local authorities.
CORPORATE HEADQUARTERS. The Company maintains its headquarters at 4649 Morena
Blvd., San Diego, California 92117. The Company leases 42,000 square feet of
office space from PEI at a rate $25,700 per month pursuant to a triple net
lease. The term of the current lease is two years, commencing September 1, 1999,
with four renewal options of two years each. The Company believes that its
existing facilities are adequate to meet its current needs and that suitable
additional or alternative space will be available on commercially reasonable
terms as needed.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company is involved in legal proceedings, claims and
litigation arising in the ordinary course of business. Management believes,
however, that the ultimate outcome of all such matters should not have a
material adverse effect on the Company's financial position or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders during the
fourth quarter of fiscal 1999. The Company's Annual Meeting of Stockholders is
scheduled for 10:00 a.m. on January 19, 2000, at the Hilton San Diego Mission
Valley in San Diego, California. Matters to be voted on will be included in the
Company's proxy statement to be filed with the Securities and Exchange
Commission and distributed to stockholders prior to the meeting.
10
PART II
ITEM 5. MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required by Item 5 is incorporated herein by reference to page
34 of PriceSmart's Annual Report for the fiscal year ended August 31, 1999.
ITEM 6. SELECTED FINANCIAL DATA
The information required by Item 6 is incorporated herein by reference to page
12 of PriceSmart's Annual Report for the fiscal year ended August 31, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by Item 7 is incorporated herein by reference to pages
13 to 16 of PriceSmart's Annual Report for the fiscal year ended August 31,
1999.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by Item 7A is incorporated herein by reference to page
17 of PriceSmart's Annual Report for the fiscal year ended August 31, 1999.
ITEM 8. FINANCIAL STATEMENTS
The information required by Item 8 is incorporated herein by reference to pages
18 to 33 of PriceSmart's Annual Report for the fiscal year ended August 31,
1999.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated herein by reference from
PriceSmart's Proxy Statement for the Annual Meeting of Stockholders to be held
on January 19, 2000.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference from
PriceSmart's Proxy Statement for the Annual Meeting of Stockholders to be held
on January 19, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by reference from
PriceSmart's Proxy Statement for the Annual Meeting of Stockholders to be held
on January 19, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated herein by reference from
PriceSmart's Proxy Statement for the Annual Meeting of Stockholders to be held
on January 19, 2000.
12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements are incorporated by reference into
Part II, Item 8 of this Form 10-K from the annual report
Report of Independent Auditors
Consolidated Balance Sheets as of August 31, 1999 and 1998
Consolidated Statements of Operations for each of the three years ended
August 31, 1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity for each of the three
years ended August 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for each of the three years August
31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the fourth
quarter of fiscal 1999.
(c) See Exhibit Index and Exhibits attached to this report
(d) Financial Statement Schedules
See "Schedule II: Valuation and Qualifying Accounts" attached to this
report
13
SCHEDULE II
PRICESMART, INC.
VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
Balance at
Beginning of Charged to Costs Balance at
Period and Expenses Deductions End of Period
---------------- ------------------- ----------------- ----------------
PROVISIONS FOR ASSET IMPAIRMENTS
Year ended August 31, 1997 8,042 2,000 (5,247) (1) 4,795
Year ended August 31, 1998 4,795 - (4,570) (2) 225
Year ended August 31, 1999 225 - (225) -
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended August 31, 1997 - 1,000 - 1,000
Year ended August 31, 1998 1,000 116 (702) (3) 414
Year ended August 31, 1999 414 305 (275) 444
(1) Deductions from asset impairments related to the sale of seven properties
and the recovery of prior year write-down of land.
(2) Deductions from asset impairments related to the sale of six properties.
(3) Deductions from allowance for doubtful accounts primarily related to the
recovery of prior year write down on accounts receivable.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: November 29, 1999 PRICESMART, INC.
By: /s/ GILBERT A. PARTIDA
------------------------------
Title President and Chief
-------------------
Executive Officer
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ ROBERT E. PRICE Chairman of the Board November 29, 1999
- -------------------
Robert E. Price
/s/ GILBERT A. PARTIDA President and Chief November 29, 1999
- ---------------------- Executive Officer
Gilbert A. Partida (Principal Executive
Officer)
/s/ ALLAN C. YOUNGBERG Executive Vice President, November 29, 1999
- ---------------------- Chief Financial Officer
Allan C. Youngberg (Principal Financial and
Accounting Officer)
/s/ RAFAEL E. BARCENAS Director November 29, 1999
- ---------------------
Rafael E. Barcenas
/s/ KATHERINE L. HENSLEY Director November 29, 1999
- -----------------------
Katherine L. Hensley
/s/ LEON C. JANKS Director November 29, 1999
- ----------------
Leon C. Janks
/s/ LAWRENCE B. KRAUSE Director November 29, 1999
- ---------------------
Lawrence B. Krause
/s/ JAMES F. CAHILL Director November 29, 1999
- ------------------
James F. Cahill
15
PRICESMART, INC.
EXHIBIT INDEX AND EXHIBITS
Exhibit
Number Description
- ------- -----------
2.1(1) Distribution Agreement dated as of August 26, 1997 between
the Company and Price Enterprises, Inc.
3.1(2) Amended and Restated Certificate of Incorporation of
PriceSmart, Inc.
3.2(2) Amended and Restated Bylaws of PriceSmart, Inc.
10.1(2) 1997 Stock Option Plan of PriceSmart, Inc.
10.2(3) Agreement Concerning Transfer of Certain Assets dated
as of November 1996 by and among Price Enterprises, Inc.,
Costco Companies, Inc. and certain of their respective
subsidiaries
10.3(a)(4) Employment Agreement dated September 20, 1994 between
Price Enterprises, Inc. and Robert M. Gans
10.3(b)(5) Third Amendment to Employment Agreement dated April 28,
1997 between Price Enterprises, Inc. and Robert M. Gans
10.3(c)(2) Fourth Amendment to Employment Agreement dated as of
September 2, 1997 between the Company and Robert M. Gans
10.3(d)(12) Fifth Amendment to Employment Agreement dated as of March
31, 1999 between the Company and Robert M. Gans
10.4(1) Employee Benefits and Other Employment Matters Allocation
Agreement dated as of August 26, 1997 between the Company
and Price Enterprises, Inc.
10.5(1) Tax Sharing Agreement dated as of August 26, 1997 between
the Company and Price Enterprises, Inc.
10.6(1) Asset Management and Disposition Agreement dated as of
August 26, 1997 between the Company and Price Enterprises,
Inc.
10.7(6) Form of Indemnity Agreement
10.8(1) Transitional Services Agreement dated as of August 26,
1997 between the Company and Price Enterprises, Inc.
10.9(2) Assignment and Assumption of Employment Agreement dated
August 29, 1997 between the Company and Price Enterprises,
Inc.
10.10(a)(2) Employment Agreement dated as of September 29, 1997
between the Company and Karen C. Ratcliff
10.10(b)(13) First Amendment of Employment Agreement between the
Company and Karen J. Ratcliff, dated March 31, 1999
10.10(c)(15) Second Amendment of Employment Agreement between the
Company and Karen J. Ratcliff, dated September 1, 1999
10.11(7) Employment Agreement dated December 15, 1997 between the
Company and Gilbert A. Partida
10.12(a)(8) Employment Agreement dated March 31, 1998 between the
Company and Thomas D. Martin
10.12(b)(14) First Amendment to Employment Agreement between Company
and Thomas D. Martin, dated March 31, 1999
10.13(8) Employment Agreement dated August 19, 1998 between the
Company and Kurt A. May
10.14(8) Members' Agreement dated September 14, 1998 between the
Company and PSMT Caribe, Inc. 10.15(8) Auto Referral
Purchase Agreement dated August 18, 1998 between the
Company and Affinity Development Group Incorporated
10.16(a)(9) Promissory Note (Includes schedule showing certain
borrowers, dates of Notes, amounts of Notes and dates of
Pledge Agreements)
10.16(b)(15) First Amendment to Promissory Note between the Company and
Kevin C. Breen, dated June 1, 1999.
10.16(c)(15) First Amendment to Promissory Note between the Company and
Ron deHarte, dated June 1, 1999.
10.16(d)(15) First Amendment to Promissory Note between the Company and
Brud Drachman, dated June 1, 1999.
10.16(e)(15) First Amendment to Promissory Note between the Company and
Thomas D. Martin, dated June 1, 1999.
10.16(f)(15) First Amendment to Promissory Note between the Company and
Kurt A. May, dated June 1, 1999.
10.16(g)(15) First Amendment to Promissory Note between the Company and
Bill Naylon, dated June 1, 1999.
10.16(h)(15) First Amendment to Promissory Note between the Company and
Ed Oats, dated June 1, 1999.
10.16(i)(15) First Amendment to Promissory Note between the Company and
Karen J. Ratcliff, dated June 1, 1999.
10.16(j)(15) Promissory Note between the Company and Allan C.
Youngberg, dated July 27, 1999
10.17(a)(10) Pledge Agreement (Includes schedule showing certain
borrowers, dates of Notes, amounts of Notes and number of
pledged shares)
10.17(b)(15) Pledge Agreement between the Company and Allan C.
Youngberg, dated July 27, 1999
10.18(11) 1998 Equity Participation Plan of PriceSmart, Inc.
10.19(a)(15) Employment Agreement dated as of July 23, 1999 between the
Company and Allan C. Youngberg
10.19(b)(15) First Amendment of Employment Agreement between the
Company and Allan C. Youngberg, dated July 26, 1999
10.20(a)(15) Employment Agreement dated as of March 31, 1998 between
the Company and K. C. Breen
10.20(b)(15) First Amendment of Employment Agreement between the
Company and K. C. Breen, dated March 31, 1999
10.20(c)(15) Second Amendment of Employment Agreement between the
Company and K. C. Breen, dated October 1, 1999
16
PRICESMART, INC.
EXHIBIT INDEX AND EXHIBITS (CONTINUED)
Exhibit
Number Description
- ------ -----------
10.21(15) Trademark Agreement between the Company and Associated
Wholesale Grocers, Inc., dated August 1, 1999
11.1(15) Computation of Net Loss Per Common Share (Basic and
Diluted)
13.1(15) Portions of the Company's Annual Report to Stockholders
for the year ended August 31, 1999
21.1(15) Subsidiaries of PriceSmart, Inc.
23.1(15) Consent of Ernst & Young LLP, Independent Auditors
27.1(15) Financial Data Schedule
Incorporated by reference sources:
(1) Incorporated by reference to the Current Report on Form 8-K filed
September 12, 1997 by Price Enterprises, Inc.
(2) Incorporated by reference to the Annual Report on Form 10-K for the
year ended August 31, 1997 filed with the Commission on November 26,
1997.
(3) Incorporated by reference to Exhibit 10.2 to the Company's Registration
Statement on Form 10 filed July 3, 1997.
(4) Incorporated by reference to Exhibit 10.14 to Amendment No. 1 to the
Registration Statement on Form S-4 of Price Enterprises, Inc. filed
with the Commission on November 3, 1994.
(5) Incorporated by reference to Exhibit 10.4 to the Quarterly Report on
Form 10-Q of Price Enterprises, Inc. for the quarter ended June 8, 1997
filed with the Commission on July 17, 1997.
(6) Incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the
Company's Registration Statement on Form 10 filed with the Commission
on August 1, 1997.
(7) Incorporated by reference to Exhibit 10.13 to the Quarterly Report on
Form 10-Q of PriceSmart, Inc. for the quarter ended February 28, 1998
filed with the Commission on April 14, 1998.
(8) Incorporated by reference to the Annual Report on Form 10-K for the
year ended August 31, 1998 filed with the Commission on November 25,
1998.
(9) Incorporated by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q of Price Enterprises, Inc. for the quarter ended November 30,
1998 filed with the Commission on January 14, 1999.
(10) Incorporated by reference to Exhibit 10.2 to the Quarterly Report on
Form 10-Q of Price Enterprises, Inc. for the quarter ended November 30,
1998 filed with the Commission on January 14, 1999.
(11) Incorporated by reference to Exhibit 10.2 to the Quarterly Report on
Form 10-Q of Price Enterprises, Inc. for the quarter ended February 28,
1999 filed with the Commission on April 14, 1999.
(12) Incorporated by reference to Exhibit 10.1 to the Quarterly Report on
Form 10-Q of Price Enterprises, Inc. for the quarter ended May 31, 1999
filed with the Commission on July 15, 1999.
(13) Incorporated by reference to Exhibit 10.2 to the Quarterly Report on
Form 10-Q of Price Enterprises, Inc. for the quarter ended May 31, 1999
filed with the Commission on July 15, 1999.
(14) Incorporated by reference to Exhibit 10.3 to the Quarterly Report on
Form 10-Q of Price Enterprises, Inc. for the quarter ended May 31, 1999
filed with the Commission on July 15, 1999.
(15) Filed herewith.
17