<Page>
EXHIBIT 13.1
SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT EARNINGS (LOSS) PER SHARE)
The following table sets forth selected consolidated financial data of the
Company for the five fiscal years ended August 31, 2000.
- --------------------------------------------------------------------------------
<Table>
<Caption>
SELECTED CONSOLIDATED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT EARNINGS (LOSS) PER SHARE)
FISCAL YEARS ENDED AUGUST 31 (1)
2000 1999 1998 1997 (2) 1996 (2)
--------- --------- --------- --------- ----------
INCOME STATEMENT DATA:
Net warehouse sales $ 292,013 $ 89,184 $ 48,287 $ 21,750 $ --
Export sales 421 6,773 32,813 37,292 36,211
Membership fees and royalties 8,216 2,008 2,720 3,139 2,164
Travel and auto programs 3,965 10,907 13,368 12,194 9,875
--------- --------- --------- --------- ----------
Total revenues 304,615 108,872 97,188 74,375 48,250
Cost of goods sold 256,652 84,638 74,684 55,947 34,644
Selling, general and administrative (3) 53,772 32,021 26,421 25,993 31,069
Preopening expenses 7,681 4,949 433 614 --
--------- --------- --------- --------- ----------
Operating loss (13,490) (12,736) (4,350) (8,179) (17,463)
Net interest and other income (expense) (4) 7,927 9,034 7,492 1,237 (696)
--------- --------- --------- --------- ----------
Income (loss) before provision (benefit)
for income taxes (5,563) (3,702) 3,142 (6,942) (18,159)
Net income (loss) $ (5,444) $ (3,892) $ 3,028 $ (24,843) $ (11,423)
EARNINGS (LOSS) PER SHARE:
Basic (5) $ (1.01) $ (0.76) $ 0.51 $ (4.20) $ (1.93)
Diluted (5) (1.01) (0.76) 0.50 (4.20) (1.93)
BALANCE SHEET DATA:
Cash and cash equivalents $ 24,503 $ 14,957 $ 5,639 $ 58,383 $ --
Marketable securities 5,482 17,627 56,133 -- --
Total assets 261,400 152,074 124,576 125,885 97,981
Long-term debt 50,532 7,787 -- -- --
Stockholders' equity (6) 131,683 93,861 103,081 107,172 86,990
</Table>
- --------------------------------------------------------------------------------
(1) Effective September 1, 1997, the Company changed its 52/53 week fiscal
year which ends on the Sunday nearest August 31 to a fiscal year end of
August 31. For ease of presentation, all fiscal years in this report are
referred to as having ended on August 31.
(2) Prior to fiscal year 1998, the Company operated as certain subsidiaries of
Price Enterprises, Inc. ("PEI"). Accordingly, the financial data of the
Company during each of the three fiscal years ended August 31, 1997 has
been prepared as though the Company had been a stand-alone business.
(3) Prior to fiscal year 1998, PEI provided administrative services to the
Company. Amounts allocated to the Company for corporate administrative
expenses for fiscal years 1997 and 1996 were $1,065 and $1,350,
respectively.
(4) Net interest and other income (expense) includes interest income, gains
and losses on sale of assets, interest on bank borrowings and minority
interest of shareholders in joint venture businesses.
(5) For fiscal years 1996 and 1997, loss per share is based on the 5,908,235
shares issued in connection with the distribution (see 2).
(6) Prior to fiscal year 1998, stockholders' equity represents the net assets
transferred and the earnings of the businesses and assets comprising
PriceSmart, Inc. on a historical basis.
<Page>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Annual 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", "scheduled", 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 most recent Annual Report on Form 10-K filed pursuant to
the Securities and Exchange Act of 1934.
The following discussion and analysis compares the results of operations for
each of the three fiscal years ended August 31, 2000 and should be read in
conjunction with the consolidated financial statements and the accompanying
notes included elsewhere in this report.
In fiscal 2000, the Company opened eleven new US-style membership shopping
warehouses operating in Central America and the Caribbean, two in Honduras
(September 1999 and May 2000), two in Panama (November 1999 and June 2000), two
in the Dominican Republic (both in December 1999), two in Costa Rica (May and
June 2000), one in El Salvador (April 2000), one in Guatemala (August 2000), and
one in Trinidad (August 2000) bringing the total number of warehouses operating
in seven countries to sixteen as of August 31, 2000. This compares to five
warehouses operating in four countries at the end of fiscal 1999 and two
warehouses operating in one country at the end of fiscal 1998. Subsequent to
fiscal 2000, the Company opened an additional location in Santo Domingo,
Dominican Republic in October 2000. Also, there were six warehouse stores in
operation (five in China and one in Saipan, Micronesia) licensed to and operated
by local business people at the end of fiscal 2000, versus four licensed
warehouse stores at the end of fiscal 1999 and fiscal 1998.
Net warehouse sales increased 227% to $292.0 million in fiscal 2000 from $89.2
million in fiscal 1999. The increase was primarily a result of the eleven new
warehouses opened throughout fiscal 2000 and a full year of operations from
three new warehouses opened in the prior fiscal year. Net warehouse sales
increased 85% to $89.2 million in fiscal 1999 from $48.3 million in fiscal 1998.
The increase was primarily a result of three new warehouses opened during fiscal
1999 and a full year of operations related to a warehouse opened in December
1997.
The Company's warehouse gross margins for fiscal 2000 were slightly lower at
12.3% compared to 12.4% for fiscal 1999. The change between years is primarily a
result of anticipated lower margins during the initial entry into a market,
which resulted from the Company opening eleven new warehouses in fiscal 2000,
compared to three in fiscal year 1999. The lower margins associated with the
opening of new warehouses were offset against increased sales from higher
margins in ancillary businesses, including food services, bakery departments,
tire centers, photo centers, pharmacy and optical services. The Company's
warehouse gross margins for fiscal 1999 were 12.4% compared to 11.7% for fiscal
1998. The increase was primarily due to increased sales from higher margin
ancillary businesses. The Company expects that its warehouse gross margin
percentages will increase in fiscal 2001, reversing a decline from the third and
fourth quarters of fiscal 2000.
Export sales to the Company's licensee warehouses in Asia decreased to $421,000
in fiscal 2000 from $6.8 million and $32.8 million for fiscal years 1999 and
1998, respectively. The Company does not anticipate export sales to its
licensees in future periods as the Company shifted its focus on Company owned
and operated stores.
<Page>
The Company's export sales gross margin for fiscal 2000 was 3.8% compared to
3.2% and 2.3% for fiscal years 1999 and 1998, respectively. The gross margin
percentages on export sales are based on the varying agreements the Company has
with its licensees and the gross margin amount that the Company can earn under
these agreements.
Membership fees and royalties increased 309% to $8.2 million in fiscal 2000 from
$2.0 million in fiscal 1999. Membership fees (including advertising, rental and
other warehouse income) increased 469% to $7.4 million from $1.3 million in
fiscal year 1999. The increase was a result of the eleven new warehouses opened
in fiscal 2000 and an increase in average memberships per warehouse. Royalties
increased to $840,000 in fiscal 2000 from $674,000 in fiscal 1999. The increase
in royalties was primarily due to the increase in number of licensees in fiscal
2000 compared with fiscal 1999. Membership fees and royalties decreased to $2.0
million in fiscal 1999 from $2.7 million in fiscal 1998. Membership fees
(including other warehouse income) increased 30% to $1.3 million in fiscal 1999
from $1.0 million in fiscal 1998. The increase was a result of the three new
warehouses opened in fiscal 1999 and an increase in average memberships per
warehouse. Royalties decreased to $674,000 in fiscal 1999 from $1.7 million in
fiscal 1998. The decrease in royalties was primarily due to the closure of
licensee stores in Indonesia and the Philippines in late fiscal 1998.
Travel and auto program revenues were $4.0 million in fiscal 2000 compared to
$10.9 million in fiscal 1999. The decrease was due to the sale of the travel
program in March 2000 and the sale of the auto referral business in mid-fiscal
1999 (see "Notes to Consolidated Financial Statements"). Travel and auto program
revenues decreased to $10.9 million in fiscal 1999 compared to $13.4 million in
fiscal 1998. The decrease was due to the sale of the auto referral business in
mid fiscal 1999, partially offset by an increase in travel program revenues.
Warehouse operating expenses increased to $34.1 million, or 11.7% of net
warehouse sales, for fiscal 2000 from $9.6 million, or 10.8% of net warehouse
sales, for fiscal 1999. The increase in warehouse operating expenses is
attributable to the eleven additional warehouses opened in fiscal 2000. The
increase in warehouse operating expenses as a percentage of net warehouse sales
is primarily attributable to higher costs realized in the first year of
operations of the eleven warehouses opened in fiscal 2000, and from
cannibalization of sales from additional locations operating in the same
metropolitan markets. Warehouse operating expenses increased to $9.6 million, or
10.8% of net warehouse sales, for fiscal 1999 from $5.7 million, or 11.9% of net
warehouse sales, for fiscal 1998. The increase in warehouse operating expenses
is attributable to the three additional warehouses opened in fiscal 1999.
Warehouse operating expenses as a percentage of net warehouse sales decreased in
fiscal 1999 primarily as a result of operational cost savings achieved from the
two existing stores that were operational before fiscal 1998, offset by higher
costs realized during the first year of operations from the three warehouses
opened in fiscal 1999.
General and administrative expenses increased to $18.1 million, or 6.2% of net
warehouse sales, for fiscal 2000 from $15.5 million, or 17.3% of net warehouse
sales, for fiscal 1999. General and administrative expenses have increased
between periods to support planned expansion efforts and improvements in
building the infrastructure to support the rapid growth. As a percentage of net
warehouse sales, general and administrative expenses have declined due to higher
sales from the additional warehouse openings in fiscal 2000. As the eleven new
warehouses opened during fiscal 2000 continue to move toward operational
efficiencies, the Company expects that the warehouse operating expenses as a
percentage of sales will improve in early fiscal 2001. General and
administrative expenses increased to $15.5 million, or 17.3% of net warehouse
sales, for fiscal 1999 from $10.6 million, or 21.9% of net warehouse sales, for
fiscal 1998. General and administrative expenses increased between periods to
support planned expansion efforts and improvements in building the
infrastructure to support the rapid growth. As a percentage of net warehouse
sales, general and administrative expenses have declined due to higher sales
from added warehouse openings and costs savings realized in fiscal 1998.
<Page>
Travel and auto selling, general and administrative expenses represent the
respective operating expenses incurred by both the travel and auto programs. The
travel program was sold in March 2000 (fiscal 2000) and the auto referral
program was sold in April 1999 (fiscal 1999), accounting for the change between
the periods presented.
Pre-opening expenses, which represent expenses incurred before a warehouse store
is in operation, increased to $7.7 million in fiscal 2000 from $4.9 million in
fiscal 1999 and $433,000 in fiscal 1998. The increases between the periods
presented are a result of opening a total of fourteen new warehouses over the
past two fiscal years and pre-opening expenses associated with additional
warehouses scheduled to open in fiscal 2001.
Interest income reflects earnings on marketable securities, cash and cash
equivalent balances, City Notes (see "Notes to Consolidated Financial
Statements") and certain secured notes receivable from buyers of formerly owned
properties. Interest income decreased to $3.9 million in fiscal 2000 from $5.3
million and $6.2 million in fiscal 1999 and 1998, respectively. The decrease in
interest income is due to the decrease in these interest-bearing instruments
used to finance the Company's expansion.
Interest expense primarily reflects borrowings by the Company's foreign
subsidiaries for the construction of the new warehouses, and was $2.9 million
(net of capitalized interest of $891,000) for fiscal 2000 compared with $143,000
in fiscal 1999. The Company had no borrowings in fiscal 1998.
During fiscal 2000, the Company sold its travel program and City Notes for $1.5
million and $22.5 million, respectively. The Company recognized gains arising
from these transactions of $1.1 million and $3.9 million for the travel program
and City Notes, respectively. In fiscal 1999, the Company sold its auto referral
program and real estate properties resulting in gains of $798,000 and $1.8
million, respectively. In fiscal 1998, the Company recognized a gain of $926,000
from the sale of real estate properties.
The Company recognized an income tax benefit in fiscal 2000 of $119,000, and a
provision for income taxes of $190,000 and $114,000 in fiscal 1999 and 1998,
respectively. The provision (benefit) for income taxes relates to foreign taxes
on the Company's Panamanian operations. A tax benefit was recognized on the net
operating losses of the Panamanian operations, because the Company believes the
benefit of this loss will be realized in fiscal 2001.
<Page>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirement is the financing through investments
in majority or wholly owned subsidiaries of land acquisitions, construction and
equipment costs for new warehouses, pre-opening costs and working capital
requirements.
In fiscal 2001, the Company currently intends to spend an aggregate of
approximately $31.0 million to open six new warehouses (through majority or
wholly owned subsidiaries) in Central America, the Caribbean and Asia.
Specifically, the anticipated six new warehouses are comprised of opening one
warehouse in each of the following locations: the Dominican Republic (opened
October 2000), Guatemala, U.S. Virgin Islands, Philippines, Aruba and Barbados.
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 subsidiaries are subject.
The Company, through its majority or wholly owned subsidiaries, intends to
borrow a total of approximately $28.0 million during fiscal 2001. Approximately
$18.0 million of the total will be used to finance the new warehouse
expenditures and will be secured by the underlying land, building, equipment and
inventories of the borrowings. The Company also intends to secure an additional
$10.0 million in financing related to expenditures incurred for new warehouses
opened during fiscal 2000. The Company is currently evaluating several financing
proposals and believes that the financing facilities for the new warehouse
locations will be completed as required. The balance of the Company's planned
expenditures will be financed through a combination of cash, cash equivalents,
marketable securities and cash from operations of the Company's businesses.
Subsequent to year-end, the Company received commitments from the International
Finance Corporation (IFC) and the Overseas Private Investment Corporation (OPIC)
to loan to the Company a total of $42.0 million. Approximately $28.0 million
will be used to repay certain existing loans outstanding with the remainder to
be used to finance new warehouse expenditures as described in the previous
paragraph. The funding of the IFC and OPIC loans is subject to the execution of
loan agreements and the fulfillment of all approved conditions, which include
the perfection of the underlying security for these loans.
The Company believes that borrowings under its current and future credit
facilities, together with its other sources of liquidity, 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 (including the IFC and OPIC loans),
the Company may need to sell equity or debt securities,
<Page>
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. There is
a risk that date sensitive software may recognize a date using "00" as the year
1900, rather than the year 2000, potentially resulting 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
Central America and Asia. The Company's business could be adversely impacted in
the event business activities in Central 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>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, through its majority or wholly owned subsidiaries, conducts foreign
operations primarily in Central America and the Caribbean, and as such is
subject to both economic and political instabilities that cause volatility in
foreign currency exchange rates or weak economic conditions. At the end of
fiscal 2000, the Company had a total of sixteen warehouses (adding a seventeenth
in October 2000) operating in seven foreign countries. For fiscal 2000, 75% of
the Company's net warehouse sales were in foreign currencies, and is expected to
increase in fiscal 2001 to approximately 80% (Panamanian and U.S. Virgin Islands
operations being U.S. dollar denominated). The Company's expansion plans call
for the Company to enter into additional foreign countries in the future, 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, the effect from any one-currency devaluation may not
significantly impact the overall financial or operating results of the Company.
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.
In fiscal 2000, the foreign currency translation adjustment for the Company's
non-U.S. denominated majority or wholly owned subsidiaries operating in Central
America and the Caribbean increased by $388,000 to $633,000 from $245,000 at the
end of fiscal 1999. The Company did not have any foreign currency translation
adjustments prior to fiscal year 1999.
Foreign currencies in most of the countries where the Company operates 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 (NDFs) and
internal hedging procedures. As of August 31, 2000, the Company had no NDFs
outstanding. However, the Company may purchase NDFs in the future 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, which are included as a part of the costs of goods
sold in the consolidated statements of operations, for fiscal 2000 and fiscal
1999 (including the cost of the NDFs) were $1.3 million and $538,000,
respectively. The Company had no foreign exchange transactions prior to fiscal
1999.
The Company is exposed to changes in interest rates on various bank loan
facilities. A hypothetical 100 basis point adverse change in interest rates
along the entire interest rate yield curve would adversely affect the
Company's pretax net income (loss) by approximately $575,000.
<Page>
FINANCIAL STATEMENTS
PRICESMART, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors
Consolidated Balance Sheets as of August 31, 2000 and 1999
Consolidated Statements of Operations for the three years ended
August 31, 2000
Consolidated Statements of Stockholders' Equity for the three years
ended August 31, 2000
Consolidated Statements of Cash Flows for the three years ended
August 31, 2000
Notes to Consolidated Financial Statements
<Page>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
PRICESMART, INC.
We have audited the accompanying consolidated balance sheets of PriceSmart, Inc.
as of August 31, 2000 and 1999 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended August 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of PriceSmart, Inc.
at August 31, 2000 and 1999 and the consolidated results of its operations and
its cash flows for each of the three years in the period ended August 31, 2000
in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
San Diego, California
October 30, 2000
<Page>
PRICESMART, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<Table>
<Caption>
August 31,
----------------------
2000 1999
--------- ---------
ASSETS
Current assets
Cash and cash equivalents $ 24,503 $ 14,957
Marketable securities 5,482 17,627
Receivables, net of allowance for doubtful accounts of
$41 and $444 in 2000 and 1999, respectively 1,732 4,149
City notes receivable, current portion -- 2,500
Merchandise inventories 54,949 25,919
Prepaid expenses and other current assets 5,405 2,681
Properties held for sale 1,652 2,126
--------- ---------
Total current assets 93,723 69,959
Restricted cash 12,698 12,307
Property and equipment, net 128,985 48,507
Goodwill, net 19,178 --
City notes receivable, less current portion -- 17,006
Note receivable and other 6,816 4,295
--------- ---------
TOTAL ASSETS $ 261,400 $ 152,074
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $ 9,493 $ 707
Accounts payable 43,312 24,679
Accrued salaries and benefits 3,086 1,760
Deferred membership income 3,892 1,998
Other accrued expenses 5,946 3,369
Long-term debt, current portion 8,773 --
--------- ---------
Total current liabilities 74,502 32,513
Long-term debt 50,532 7,787
--------- ---------
Total liabilities 125,034 40,300
Minority interest 4,683 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, 6,812,485 and 5,991,256 shares
issued and outstanding in 2000 and 1999,
respectively 1 1
Additional paid-in capital 148,970 111,483
Notes receivable from stockholders (1,000) (950)
Deferred compensation (679) (1,282)
Accumulated other comprehensive loss (695) (453)
Accumulated deficit (6,308) (864)
Less: Treasury stock at cost
555,093 and 907,898 shares
in 2000 and 1999, respectively (8,606) (14,074)
--------- ---------
Total stockholders' equity 131,683 93,861
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 261,400 $ 152,074
--------- ---------
--------- ---------
</Table>
See accompanying notes.
<Page>
PRICESMART, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
Years Ended August 31,
-----------------------------------
2000 1999 1998
--------- --------- ---------
REVENUES:
Sales:
Net warehouse $ 292,013 $ 89,184 $ 48,287
Export 421 6,773 32,813
Membership fees and royalties 8,216 2,008 2,720
Travel and auto programs 3,965 10,907 13,368
--------- --------- ---------
TOTAL REVENUES 304,615 108,872 97,188
EXPENSES:
Cost of goods sold:
Net warehouse 256,247 78,081 42,616
Export 405 6,557 32,068
Selling, general and administrative:
Warehouse operations 34,133 9,588 5,737
General and administrative 18,119 15,469 10,595
Travel and auto 1,520 6,964 10,089
Preopening expenses 7,681 4,949 433
--------- --------- ---------
TOTAL EXPENSES 318,105 121,608 101,538
--------- --------- ---------
OPERATING LOSS (13,490) (12,736) (4,350)
OTHER:
Interest income 3,891 5,257 6,152
Interest expense (2,866) (143) --
Other income (expense) (61) 452 606
Gain on sale:
Travel (related party) and auto 1,133 798 --
City notes (related party) 3,948 -- --
Real estate properties -- 1,757 926
Minority interest 1,882 913 (192)
--------- --------- ---------
TOTAL OTHER 7,927 9,034 7,492
Income (loss) before provision for income taxes (5,563) (3,702) 3,142
Provision (benefit) for income taxes (119) 190 114
--------- --------- ---------
NET INCOME (LOSS) $ (5,444) $ (3,892) $ 3,028
--------- --------- ---------
--------- --------- ---------
Earnings (loss) per share:
Basic $ (1.01) $ (0.76) $ 0.51
--------- --------- ---------
--------- --------- ---------
Diluted $ (1.01) $ (0.76) $ 0.50
--------- --------- ---------
--------- --------- ---------
Shares used in per share computation:
Basic 5,386 5,120 5,912
--------- --------- ---------
--------- --------- ---------
Diluted 5,386 5,120 6,062
--------- --------- ---------
--------- --------- ---------
</Table>
See accompanying notes.
<Page>
PRICESMART, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED AUGUST 31, 2000
(AMOUNTS IN THOUSANDS)
<Table>
<Caption>
Common Stock Additional Notes
------------- paid-in receivable from Deferred
Shares Amount capital stockholders compensation
------ ------- -------- ------------- -------------
Balance at August 31, 1997 5,908 $ 1 $ 107,171 $ -- $ --
Issuance of common stock for
cash and notes receivable 71 -- 1,093 (697) --
Exercise of stock options 25 -- 214 -- --
Purchase of treasury stock -- -- -- -- --
Stock based compensation -- -- 395 -- --
Net Income -- -- -- -- --
Net unrealized gain on
marketable securities -- -- -- -- --
Comprehensive income -- -- -- -- --
------- -------- --------- -------- ---------
Balance at August 31, 1998 6,004 1 108,873 (697) --
------- -------- --------- -------- ---------
Issuance of common stock for
cash and notes receivable 16 -- 424 (387) --
Exercise of stock options 51 -- 585 -- --
Purchase of treasury stock -- -- -- -- --
Cancellation of notes receivable
from stockholders (4) -- (65) 126 --
Payment on notes receivable
from stockholder -- -- -- 8 --
Deferred compensation related
to grant of stock options -- -- 2,355 -- (2,355)
Amortization of deferred
compensation -- -- -- -- 1,073
Compensation expense related to
the issuance of common stock -- -- 485 -- --
Retirement of common
stock held in treasury (76) -- (1,174) -- --
Net loss -- -- -- -- --
Net unrealized loss on
marketable securities -- -- -- --
Translation adjustment -- -- -- -- --
Comprehensive loss -- -- -- -- --
------- -------- --------- -------- ---------
Balance at August 31, 1999 5,991 1 111,483 (950) (1,282)
------- -------- --------- -------- ---------
Issuance of common stock for
cash and notes receivable -- -- 92 (150) --
Exercise of stock options 142 -- 1,616 -- --
Issuance of stock in exchange for
minority interest 680 -- 35,779 -- --
Amortization of deferred compensation -- -- -- -- 603
Payment on notes receivable from
stockholders -- -- -- 100 --
Net loss -- -- -- -- --
Net unrealized gain on
marketable securities -- -- -- -- --
Translation adjustment -- -- -- -- --
Comprehensive loss -- -- -- -- --
------- -------- --------- -------- ---------
Balance at August 31, 2000 6,813 $ 1 $ 148,970 $ (1,000) $ (679)
------- -------- --------- -------- ---------
------- -------- --------- -------- ---------
</Table>
See accompanying notes.
<Page>
<Table>
<Caption>
Less
Other Treasury Stock
Comprehensive Retained at cost Total
income earnings --------------------- stockholders'
(loss) (deficit) Shares Amount equity
---------- -------- ------- ------- ---------
Balance at August 31, 1997 $ -- $ -- -- $ -- $ 107,172
Issuance of common stock for
cash and notes receivable -- -- -- -- 396
Exercise of stock options -- -- -- -- 214
Purchase of treasury stock -- -- 550 (8,643) (8,643)
Stock based compensation -- -- -- -- 395
Net Income -- 3,028 -- -- 3,028
Net unrealized gain on
marketable securities 519 -- -- -- 519
---------
Comprehensive income -- -- -- -- 3,547
------- -------- --------- -------- ---------
Balance at August 31, 1998 519 3,028 550 (8,643) 103,081
------- -------- --------- -------- ---------
Issuance of common stock for
cash and notes receivable -- -- -- -- 37
Exercise of stock options -- -- -- -- 585
Purchase of treasury stock -- -- 434 (6,605) (6,605)
Cancellation of notes receivable
from stockholders -- -- -- -- 61
Payment on notes receivable
from stockholder -- -- -- -- 8
Deferred compensation related
to grant of stock options -- -- -- -- --
Amortization of deferred
compensation -- -- -- -- 1,073
Compensation expense related to
the issuance of common stock -- -- -- -- 485
Retirement of common
stock held in treasury -- -- (76) 1,174 --
Net loss -- (3,892) -- -- (3,892)
Net unrealized loss on marketable
securities (727) -- -- -- (727)
Translation adjustment (245) -- -- -- (245)
---------
Comprehensive loss -- -- -- -- (4,864)
------- -------- --------- -------- ---------
Balance at August 31, 1999 (453) (864) 908 (14,074) 93,861
------- -------- --------- -------- ---------
Issuance of common stock for
cash and notes receivable -- -- (4) 58 --
Exercise of stock options -- -- (17) 265 1,881
Issuance of stock in exchange for
minority interest -- -- (332) 5,145 40,924
Amortization of deferred compensation -- -- -- -- 603
Payment on notes receivable from
stockholders -- -- -- -- 100
Net loss -- (5,444) -- -- (5,444)
Net unrealized gain on
marketable securities 146 -- -- -- 146
Translation adjustment (388) -- -- -- (388)
---------
Comprehensive loss (5,686)
------- -------- --------- -------- ---------
Balance at August 31, 2000 $ (695) $(6,308) 555 $ (8,606) $ 131,683
------- -------- --------- -------- ---------
------- -------- --------- -------- ---------
</Table>
See accompanying notes.
<Page>
PRICESMART, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<Table>
<Caption>
Years Ended August 31,
---------------------------------------
2000 1999 1998
------ ----- ------
OPERATING ACTIVITIES
Net income (loss) $ (5,444) $ (3,892) $ 3,028
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation 4,610 1,622 1,409
Goodwill amortization 223 -- --
Allowance for doubtful accounts (443) 30 (586)
Gain on sale of City Notes (related party) (3,948) -- --
Gain on sale of travel program (related party) (1,133) -- --
Net loss on disposition of property and equipment -- -- 111
Income tax charge (benefit) (119) 190 114
Minority interest (1,882) (1,096) 192
Compensation expense recognized for stock options 603 1,558 395
Change in operating assets and liabilities
Restricted cash (2,503) (7,191) (3,004)
Accounts receivable and other assets (28,729) (18,778) (5,140)
Accounts payable and other liabilities 24,883 19,721 (1,104)
Other 146 (137) (44)
--------- -------- --------
Net cash flows used in operating activities (13,736) (7,973) (4,629)
INVESTING ACTIVITIES
Purchase of marketable securities -- (44,638) (86,378)
Sale of marketable securities 12,145 82,417 30,801
Additions to property and equipment (79,101) (37,156) (5,094)
Notes receivable, net (2,597) 2,027 1,780
Proceeds from sale of City Notes (related party) 22,534 -- --
Proceeds from sale of travel business (related party) 1,500 -- --
Proceeds from sale of properties 440 2,760 15,027
--------- -------- --------
Net cash flows provided by (used in) investing activities (45,079) 5,410 (43,864)
FINANCING ACTIVITIES
Proceeds from bank borrowings 62,653 8,912 3,782
Repayment of bank borrowings (2,350) (4,200) --
Contributions by minority interest shareholders 6,465 14,547 --
Distributions to minority shareholders -- (1,029) --
Proceeds from exercise of stock options 1,881 585 214
Issuance of common stock -- 37 396
Payment on notes receivable from stockholders 100 8 --
Purchase of treasury stock -- (6,605) (8,643)
Other -- (129) --
--------- -------- --------
Net cash flows provided by financing activities 68,749 12,126 (4,251)
Effect of exchange rate changes on cash and cash equivalents (388) (245) --
--------- -------- --------
Net increase (decrease) in cash and cash equivalents 9,546 9,318 (52,744)
Cash and cash equivalents at beginning of year 14,957 5,639 58,383
Cash and cash equivalents at end of year $ 24,503 $ 14,957 $ 5,639
--------- -------- --------
--------- -------- --------
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest, net of amounts capitalized $ 2,324 $ 143 $ --
Income taxes $ 677 $ 129 $ 21
</Table>
See accompanying notes.
<Page>
PRICESMART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - COMPANY OVERVIEW
PriceSmart, Inc.'s ("PriceSmart" or the "Company") business consists of
international membership shopping stores similar to, but smaller in size
than, warehouse clubs in the United States. As of August 31, 2000, the
Company had sixteen warehouse stores in operation (four in Panama, three in
Costa Rica, two each in the Dominican Republic, El Salvador, Honduras, and
Guatemala and one in Trinidad) of which the Company owns at least a majority
interest. The Company increased its ownership from 51% to 100% in the
operations in Panama on March 27, 2000 and increased its ownership from 60%
to 100% in the operations in Costa Rica, Dominican Republic, El Salvador and
Honduras on July 7, 2000 (see Note 13). In addition, there were six warehouse
stores in operation (five in China and one in Saipan) licensed to and
operated by local business people as of August 31, 2000. Additionally, until
March 1, 2000, the Company operated a domestic travel program (see Note 9)
and until April 1, 1999, the Company operated a domestic auto referral
business (see Note 9).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the assets, liabilities and
results of operations of the Company's majority and wholly owned subsidiaries as
listed below. All significant intercompany accounts and transactions have been
eliminated in consolidation.
<Table>
<Caption>
Ownership Basis of Presentation
------------- -------------------------
Ventures Services, Inc. 100.0% Consolidated
PriceSmart Panama (see Note 13) 100.0% Consolidated
PriceSmart US Virgin Islands 100.0% Consolidated
PriceSmart Guatemala 66.0% Consolidated
PriceSmart Trinidad 62.5% Consolidated
PriceSmart Aruba 60.0% Consolidated
PriceSmart Barbados 60.0% Consolidated
PriceSmart Philippines 60.0% Consolidated
PSMT Caribe, Inc. (see Note 13):
Costa Rica 100.0% Consolidated
Dominican Republic 100.0% Consolidated
El Salvador 100.0% Consolidated
Honduras 100.0% Consolidated
</Table>
<Page>
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.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash and short-term investments with
maturities of three months or less when purchased.
RESTRICTED CASH
Restricted cash represents time deposits that are pledged as collateral for
majority-owned subsidiary loans and amounts deposited in escrow for future asset
acquisitions.
MARKETABLE SECURITIES
In accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Debt and Equity Securities", marketable securities are
classified as available-for-sale. Available-for-sale securities are carried at
fair value, with unrealized gains and losses reported in a separate component of
the stockholders' equity. The amortized cost of securities is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Realized gains and losses in value
judged to be other-than-temporary, if any, on available-for-sale securities are
included in interest income. The cost of securities sold is based on the
specific identification method. Interest and dividends on securities classified
as available-for-sale are included in interest income.
MERCHANDISE INVENTORIES
Merchandise inventories, which include merchandise for resale, are valued at the
lower of cost (average cost) or market.
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 3-15 years
LONG-LIVED ASSETS
<Page>
Long-lived assets are being amortized on a straight-line basis over the periods
that expected economic benefits will be provided. Management estimates such
periods of economic benefits based on undiscounted cash flows, profitability
projections and the ability of the business to perform within those projections.
The Company periodically reviews long-lived assets, including those assets that
are anticipated of being disposed of. No such indicators of impairment were
present in the fiscal years presented.
REVENUE RECOGNITION
The Company recognizes sales revenue when title passes to the customer.
Membership fee income represents annual membership fees paid by the Company's
warehouse members, which are recognized over the 12-month term of the
membership. The historical membership fee refunds have been minimal and,
accordingly, no reserve has been established for membership refunds at
August 31, 2000.
PRE-OPENING COSTS
The Company adopted Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-up Activities" in the first quarter of fiscal 1999. SOP 98-5 requires
pre-opening costs to be charged to expense as incurred. Prior to fiscal 1999,
the Company capitalized pre-opening costs related to warehouse openings and
amortized these costs over twelve months. The adoption of SOP 98-5 did not have
a material impact on the Company's consolidated financial statements.
STOCK-BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation", establishes the use of
fair value based method for stock-based compensation arrangements, under which
compensation is determined using the fair value of stock-based compensation
determined as of the grant date, and is recognized over the periods in which the
related services are rendered. SFAS No. 123 also permits companies to elect to
continue using the current intrinsic value accounting method specified in
Accounting Principles Board Opinion (APB) No. 25 to account for stock-based
compensation. The Company has decided to retain the current intrinsic value
based method, and has disclosed the pro forma effect of using the fair value
based method for its stock-based compensation. When the exercise price of the
stock option is less than the fair value price of the underlying stock on the
grant date, deferred stock compensation is recognized and amortized to
expense in accordance with FASB Interpretation No. 28 over the vesting
period of the individual option.
FOREIGN CURRENCY TRANSLATION
In accordance with SFAS No. 52 "Foreign Currency Translation", the assets and
liabilities of the Company's foreign operations are translated to U.S. dollars
using the exchange rates at balance sheet date and revenues and expenses are
translated at average rates prevailing during the period. Related translation
adjustments are recorded as a component of accumulated comprehensive income.
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
<Page>
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.
BUSINESS COMBINATIONS
For business combinations accounted for under the purchase method of accounting,
the Company includes the results of operations of the acquired business from the
date of acquisition. Net assets of the acquired business are recorded at their
fair value at the date of acquisition. The excess of the purchase price over the
fair value of tangible net assets acquired is included in goodwill in the
accompanying consolidated balance sheets, and is being amortized over a 20 year
period.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities." The new
Statement requires all derivatives to be recorded on the balance sheet at fair
value and establishes accounting treatment for three types of hedges: hedges of
changes in the fair value of assets, liabilities, or firm commitments; hedges of
the variable cash flows of forecasted transactions; and hedges of foreign
currency exposures of net investments in foreign operations. Management does not
believe the impact of Statement No. 133 will be material to the results of
operations or financial position of the Company.
In March 2000, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 44 ("FIN 44"), Accounting of Certain Transactions involving
Stock Compensation, an interpretation of APB Opinion No. 25 ("APB 25"). FIN 44
clarifies the application of APB 25 for (a) the definition of employee for
purposes of applying APB 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination.
FIN 44 is effective July 1, 2000, but certain conclusions cover specific events
that occur after either December 15, 1998 or January 12, 2000. Management
believes that the impact of FIN 44 will not have a material effect on the
financial position or results of operations of the Company.
RECLASSIFICATIONS
Certain amounts in the prior period consolidated financial statements have been
reclassified to conform to current period presentation.
<Page>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<Table>
<Caption>
August 31,
------------------------------
2000 1999
------------ ------------
PROPERTY AND EQUIPMENT:
Land $ 29,779 $ 8,709
Building and improvements 61,649 20,413
Fixtures and equipment 40,299 16,724
Construction in progress 5,712 7,124
------------ ------------
137,439 52,970
Less: accumulated depreciation (8,454) (4,463)
------------ ------------
Property and equipment, net $ 128,985 $ 48,507
============ ============
</Table>
Building includes capitalized interest of $891,000 and none as of August 31,
2000 and 1999, respectively.
NOTE 4 - EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share are computed based on the weighted average
shares outstanding in the period. Diluted earnings (loss) per share is computed
based on the weighted average shares outstanding in the period and the effect of
dilutive securities (options) except where their inclusion is antidilutive
(amounts in thousands, except share data):
<Table>
<Caption>
Years Ended August 31,
---------------------------------------------
2000 1999 1998
---------- ---------- ----------
Net income (loss) used for basic and
diluted computation $ (5,444) $ (3,892) $ 3,028
----------- ----------- -----------
----------- ----------- -----------
Weighted average number of common
shares outstanding 5,386,129 5,119,911 5,912,375
Add:
Assumed exercise of common
stock option equivalents - - 150,085
----------- ----------- -----------
Adjusted shares outstanding used for
diluted computation 5,386,129 5,119,911 6,062,460
----------- ----------- -----------
----------- ----------- -----------
<Page>
Earnings (loss) per share:
Basic $ (1.01) $ (0.76) $ 0.51
----------- ----------- -----------
----------- ----------- -----------
Diluted $ (1.01) $ (0.76) $ 0.50
----------- ----------- -----------
----------- ----------- -----------
</Table>
NOTE 5 - MARKETABLE SECURITIES
The following is a summary of marketable securities classified as
available-for-sale as of August 31, 2000 and 1999 (in thousands):
<Table>
<Caption>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Values
---------- ------------ ------------ ------------
2000
Commercial company bonds $ 5,544 $ - $ (62) $ 5,482
1999
Asset backed bonds $ 3,570 $ - $ (44) $ 3,526
Commercial company bonds 14,265 - (164) 14,101
---------- ------------ ------------ ------------
Total $ 17,835 $ - $ (208) $ 17,627
---------- ------------ ------------ ------------
</Table>
The fair value of the marketable securities is based on quoted market prices for
the same or similar type issues. For fiscal 2000, gross realized losses were
$104,000. For fiscal 1999, gross realized gains were $2.4 million and gross
realized losses were $1.5 million, netting to a realized gain of $959,000.
As of August 31, 2000, the average maturity of outstanding marketable securities
was nine months.
NOTE 6 - RETIREMENT PLAN
PriceSmart offers a defined contribution retirement and 401(k) plans to
employees. Employees become eligible for these plans after one year of
employment. Enrollment in these plans begins on the first of the month following
the employee's one-year anniversary date. Retirement contributions, if any, are
based on a discretionary amount determined by the Board of Directors and are
allocated to each participant based on the relative compensation of the
participant, subject to certain limitations. The Company makes a matching 401(k)
contribution equal to 50% of the participant's contribution up to an annual
maximum matching contribution of $250. Profit sharing contributions were
<Page>
approximately $321,000, $361,000 and $363,000 for fiscal 2000, 1999 and 1998,
respectively. Employer contributions to the 401(k) plan were approximately
$25,000, $27,000 and $26,000 during fiscal 2000, 1999 and 1998, respectively.
NOTE 7 - STOCK OPTION PLAN AND EQUITY PARTICIPATION PLAN
On August 6, 1997, the Company adopted the 1997 Stock Option Plan of PriceSmart,
Inc. (the "1997 Plan") for the benefit of its eligible employees, consultants
and independent directors. Under the 1997 Plan, 700,000 shares of the Company's
common stock are authorized for issuance. The Compensation Committee of the
Board of Directors administers the 1997 Plan with respect to grants to employees
or consultants of the Company, and the full Company Board of Directors
administers the Plan with respect to director options. Options issued under the
1997 Plan typically vest over five years and expire in six years.
In January 1999, the Company adopted the 1998 Equity Participation Plan (the
"Equity Plan") for the benefit of its eligible employees, consultants and
independent directors. The Equity Plan authorizes 700,000 shares of the
Company's common stock for issuance. Options issued under the Equity Plan
typically vest over five years and expire in six years. The Equity Plan also
allows the Company to make loans to participants for the purchase of shares. As
of August 31, 2000, outstanding loans were approximately $1.0 million. The loans
are with full recourse and interest is payable semi-monthly between 5.85% and
6.00% with the principal due in six years.
Total stock option activity relating to the 1997 Plan and Equity Plan was as
follows:
<Table>
<Caption>
Weighted
Average
Shares Exercise Price
------------ --------------
Balance at August 31, 1997 - $ -
Granted 734,500 13.39
Exercised (24,801) 8.63
Cancelled (75,963) 10.40
------------- ----------
Balance at August 31, 1998 633,736 $ 13.94
Granted 729,185 19.45
Exercised (51,253) 11.43
Cancelled (116,867) 15.17
------------- ----------
Balance at August 31, 1999 1,194,801 $ 17.29
Granted 111,900 38.17
Exercised (158,891) 12.13
Cancelled (114,429) 20.97
------------- ----------
Balance at August 31, 2000 1,033,381 $ 19.94
</Table>
<Page>
As of August 31, 2000 options to purchase 380,338 shares were exercisable and
1,165,055 shares of common stock were reserved for future issuance. The
following table summarizes information about stock options outstanding at August
31, 2000:
<Table>
<Caption>
Outstanding Weighted-Average Weighted- Exercisable Weighted-
Range of as of Remaining Average as of Average
Exercise Prices 8/31/00 Contractual Life Exercise Price 8/31/00 Exercise Price
- ------------------ ----------- ---------------- -------------- ------------ --------------
$ 8.25 - $12.38 105,834 1.4 $ 8.98 104,524 $ 8.94
12.38 - 16.50 453,472 3.9 15.63 163,330 15.59
16.50 - 20.63 260,677 3.5 17.67 90,407 17.55
33.00 - 37.13 24,285 4.8 35.04 64 35.00
37.13 - 41.25 189,113 5.2 38.48 22,013 37.81
- ------------------ ----------- ---------------- -------------- ---------- ---------
$ 8.25 - $41.25 1,033,381 3.8 $ 20.09 380,338 $ 15.52
</Table>
The weighted-average fair value of the stock options granted during fiscal 2000
and 1999 were $18.08 and $13.16, respectively.
The Company recorded deferred compensation of $2.4 million in connection with
the grants of certain stock options to employees during fiscal 1999. A total of
552,291 options were issued at a price lower than market on date of grant. On
date of grant the market price was $20.25 while 81,250 options were issued with
an exercise price of $16.25, 446,041 options were issued with an exercise price
of $15.50 and 25,000 options were issued with an exercise price of $14.75. The
deferred compensation is being amortized ratably over the vesting period of the
respective options.
Pro forma information regarding net income (loss) is required by SFAS No. 123
and has been determined as if the Company had accounted for its employee
stock options under the fair value method prescribed by SFAS No. 123. The
fair value of each option grant is estimated on the date of grant using the
"Black-Scholes" option-pricing model with the following weighted average
assumptions used for grants in fiscal 2000, 1999, and 1998:
<Table>
<Caption>
2000 1999 1998
------- ------- -------
Risk free interest rate 6% 6% 6%
Expected life 6 years 6 years 3 years
Expected volatility 42.6% 42.7% 31.5%
Expected dividend yield 0% 0% 0%
</Table>
For the purpose of pro forma disclosures, the estimated fair value of the
options granted is amortized to expense over the options' vesting period. The
Company's pro forma information for the years ended August 31, 2000, 1999 and
1998 were as follows (in thousands):
<Page>
<Table>
<Caption>
2000 1999 1998
------- ------- -------
Pro forma net income (loss) $(6,715) $(5,072) $ 2,558
Pro forma earnings (loss)
per share diluted $ (1.13) $ (0.99) $ 0.42
</Table>
The pro forma effect on net loss for 2000 and 1999 and on net income for 1998 is
not likely to be representative of the pro forma effect on reported earnings in
future years.
NOTE 8 - CITY NOTES RECEIVABLE
The City Notes, with interest rates ranging from 8% to 10%, represent amounts
loaned to U.S. municipalities and agencies to facilitate real property
acquisition and improvements. Repayment of the majority of these notes is
generally based on that municipality's allocation of sales tax revenues
generated by retail businesses located on the particular property associated
with such City Note. City Note repayments are calculated in accordance with
specific revenue sharing agreements, and, under the terms of most City Notes,
the unpaid balance of the note is forgiven on its maturity date. Interest income
is recognized based upon the stated interest rates and amounted to $948,000,
$1.7 million and $1.9 million for the years ended August 31, 2000, 1999 and
1998, respectively. The City Notes were sold in April 2000 (see Note 9).
NOTE 9 - SALE OF ASSETS
On April 5, 2000, the Company sold its City Notes for $22.5 million to the Price
Family Charitable Trust ("Trust"), a California trust (see Note 16). The Company
recognized a gain of approximately $3.9 million arising from this transaction.
On March 1, 2000, the Company sold its travel program for $1.5 million to
Club-4U, Inc. (see Note 16) under an asset purchase agreement ("purchase
agreement"). Under the purchase agreement, Club-4U, Inc. acquired the assets
primarily used in connection with the travel program, subject to liabilities
under the travel program existing contracts, resulting in a gain of
approximately $1.1 million.
In August 1998, the Company entered into an agreement to sell its auto referral
business effective November 1, 1999. On March 29, 1999, the Company entered into
an amendment to the purchase agreement to change the closing date of the sale to
April 1, 1999. The Company operated the auto referral business through March 31,
1999. The sale resulted in a net gain of approximately $798,000.
NOTE 10 - PROPERTY HELD FOR SALE
Property held for sale primarily includes improved and unimproved land, which
the Company expects to dispose of in the next twelve months. Property held for
sale totaled $1.7 and $2.1 million as of August 31, 2000 and 1999, respectively.
<Page>
As the properties are held for sale, the net results of the real estate
operations are included in other income (expense) on the consolidated statements
of operations, and totaled $1.3 million and $1.5 million during fiscal 1999 and
1998, respectively. The results for fiscal 2000 were not material.
NOTE 11 - FOREIGN CURRENCY INSTRUMENTS
PriceSmart transacts business primarily in various Central American foreign
currencies. The Company has established natural hedging programs to manage
reductions in value and volatility of future cash flows caused by changes in
foreign exchange rates, and at times enters into forward currency exchange
contracts. These contracts are generally for short durations of six months or
less and are insignificant to the Company's operations or financial position. As
of August 31, 2000, the Company had no currency forward contracts outstanding.
As of August 31, 1999, the Company had $4.5 million notional contracts
outstanding, which are not reflected on the balance sheet. If the exchange
contracts were recorded based on their fair values, the effect on net loss for
fiscal 1999 would not have been material.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company is committed under eight non-cancelable operating leases for rental
of facilities and land. These leases expire or become subject to renewal between
2001 and 2021. Rental expense charged to operations under operating leases
totaled approximately $2.2 million, $1.4 million, and $580,000 for fiscal years
2000, 1999, and 1998, respectively. Future minimum lease commitments for
facilities under these leases with an initial term in excess of one year are as
follows (in thousands):
<Table>
<Caption>
Fiscal Year Amount
-------------- -----------
2001 $ 3,674
2002 3,869
2003 3,966
2004 4,019
2005 4,019
Thereafter 59,933
-----------
Total $ 79,480
-----------
-----------
</Table>
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.
NOTE 13 - ACQUISITION OF MINORITY INTERESTS
In March 2000, the Company entered into an agreement to acquire the remaining
interest in the PriceSmart Panama majority owned subsidiary, which previously
had 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
<Page>
Barcenas, a director of PriceSmart (see Note 16). In exchange for BB&M's 49%
interest, PriceSmart issued to BB&M's principals 306,748 shares of PriceSmart
common stock. As a result of this acquisition, PriceSmart, Inc. has increased
its guarantee for the outstanding loans related to the Panama operations to
100%.
In July 2000, the Company acquired the 40% interest in PSMT Caribe, Inc. not
held by the Company. PSMT Caribe is the holding company formed by PriceSmart
and PSC, S.A. (a Panamanian company with shareholders representing five
Central American and Caribbean countries) to hold their respective interests
in the PriceSmart membership warehouse clubs operating in Costa Rica, El
Salvador, Honduras and the Dominican Republic. As consideration for the
acquisition of the 40% interest, PriceSmart issued to PSC, S.A. 679,500
shares of PriceSmart common stock, half of which are restricted from sale for
one year. As a result of this acquisition, PriceSmart, Inc. has increased its
guarantee for the outstanding loans related to the warehouses operating in
Costa Rica, El Salvador, Honduras and the Dominican Republic to 100%.
Results from operations of the acquired minority interests have been
included, based on sole ownership, in the financial results of the Company
from the closing date of the transactions, which occurred on March 27, 2000
and July 7, 2000 for Panama and PSMT Caribe, Inc., respectively.
The acquisitions were accounted for as purchases under Accounting Principles
Board Opinion No. 16 (APB No. 16). In accordance with APB No. 16, the Company
allocated the purchase prices of the acquisitions based on the fair value of
the assets acquired. The excess of the purchase price over the fair value of
assets acquired was $19.4 million and is reflected in goodwill, net of
accumulated amortization of $223,000, in the accompanying consolidated
balance sheets and is being amortized on a straight-line basis over a period
of 20 years.
The components of the purchase prices and allocations for the acquisitions
are as follows (in thousands):
<Table>
<Caption>
PSMT
Panama Caribe, Inc. Total
------------ -------------- -----------
Consideration and acquisition costs:
Issuance of common stock $12,914 $27,010 $39,924
Acquisition costs 35 155 190
------- ------- -------
Total $12,949 $27,165 $40,114
------- ------- -------
------- ------- -------
Allocation of purchase price:
Land $ 806 $ 3,093 $ 3,899
Minority interest 6,234 10,580 16,814
<Page>
Goodwill 5,909 13,492 19,401
------- ------- -------
Total $12,949 $27,165 $40,114
------- ------- -------
------- ------- -------
</Table>
In connection with the acquisition of PSMT Caribe, Inc., the Company recorded
the fair value of land based on preliminary independent appraisals. Upon receipt
of the final independent appraisals related to land, the Company will adjust the
purchase price allocation accordingly. Management does not believe that the
final purchase price allocation will produce materially different results than
those reflected herein.
The following unaudited pro forma data summarizes the results of operations for
the periods presented as if the acquisitions of minority interests had been
completed as of September 1, 1998. These pro forma amounts do not purport to be
indicative of the results that would have actually been obtained if the
acquisitions occurred as of the beginning of the periods presented or that may
be obtained in the future (in thousands, except per share data).
<Table>
<Caption>
2000 1999
------- -------
Total revenue $304,615 $108,872
Operating loss (13,490) (12,736)
-------- --------
Net loss $ (7,195) $ (4,341)
-------- --------
-------- --------
Basic loss per share $ (1.13) $ (0.71)
-------- --------
-------- --------
Diluted loss per share $ (1.13) $ (0.71)
-------- --------
-------- --------
</Table>
NOTE 14 - INCOME TAXES
Significant components of the income tax provision (benefit) are as follows (in
thousands):
<Table>
<Caption>
Years Ended August 31,
-------------------------------------------------
2000 1999 1998
------- ------- -------
Current:
Foreign $ (119) $ 190 $ 114
------- ------- -------
Total provision (benefit) $ (119) $ 190 $ 114
------- ------- -------
------- ------- -------
</Table>
The reconciliation of income tax computed at the Federal statutory tax rate to
the provision (benefit) for income taxes is as follows (in thousands):
<Page>
<Table>
<Caption>
2000 1999 1998
------- ------- -------
Federal taxes at statutory rates $(1,891) $(1,259) $ 1,068
State taxes, net of Federal benefit (334) (222) 188
Tax losses (income) of majority owned subsidiaries 319 650 (130)
Increase (decrease) in valuation allowance
for deferred tax assets 2,372 918 (1,027)
All other, net (585) 103 15
-------- -------- --------
Total provision (benefit) $ (119) $ 190 $ 114
-------- -------- --------
-------- -------- --------
</Table>
Significant components of the Company's tax assets as of August 31, 2000, and
1999 are shown below. A valuation allowance of $27.3 million at August 31, 2000,
has been recognized to offset the deferred tax assets as realization of such
assets, is uncertain (in thousands).
<Table>
<Caption>
August 31,
-------------------------------
2000 1999
--------- ---------
Deferred tax assets:
Net operating loss carryforward $ 16,185 $ 11,198
Capital loss carryforward 10,137 -
City notes receivable - 11,710
International 119 112
Deferred compensation 668 427
All other, net 507 1,678
---------- ----------
Total deferred tax assets 27,616 25,125
Deferred tax liabilities:
Unrealized gains on marketable securities (207) (207)
---------- ----------
Total deferred tax liabilities (207) (207)
Valuation allowance (27,290) (24,918)
---------- ----------
Net deferred tax assets $ 119 $ -
---------- ----------
---------- ----------
</Table>
As of August 31, 2000, the Company has Federal and state net operating loss
carry-forwards of approximately $42.7 million and $19.1 million, respectively.
The Federal and state tax loss carry forwards will begin expiring in 2010 and
2001, respectively, unless previously utilized. In addition, the Company
incurred a Federal and state capital loss on the sale of the City Notes in
fiscal 2000 totaling $25.4 million. The associated tax loss carryforward will
expire in 2006.
Pursuant to Section 382 of the Internal Revenue Code, annual use of $11.8
million of the Company's net operating loss carry forwards will be limited
because of cumulative changes in ownership of more than 50% which occurred
during 1995. However, the Company does not believe such change will have a
material impact upon utilization of these carry forwards.
NOTE 15 - DEBT
As of August 31, 2000, the Company had $9.5 million outstanding in short-term
bank borrowings as follows:
In January 2000, the Company, through its Dominican Republic subsidiary, entered
into two separate line of credit facilities of $2.0 million each, both of which
were due in six months and then subsequently renewed. Interest on both
facilities is payable monthly based on six-month LIBOR plus 4.25% (11.08% at
August 31, 2000).
In May 2000, the Company, through its joint venture arrangement in Guatemala
entered into a letter of credit for approximately $1.0 million, which is due in
six months. Interest is payable monthly at 10% per annum. In June 2000, the
Company, through its joint venture arrangement in Guatemala entered into a
letter of credit for approximately $975,000, which is due in six months.
Interest is payable monthly at 10% per annum.
In June 2000, the Company, through its Honduras subsidiary, entered into a line
of credit facility of $2.5 million, which is due in six months. Interest is
payable monthly at 12.5% per annum.
In July 2000, the Company, through its El Salvador subsidiary, entered into a
line of credit facility of $1.0 million, which is due in six months. Interest on
the facility is 12.5% annually and is payable monthly.
As of August 31, 2000, the full amounts were drawn for each of the facilities
listed above. Each of the facilities is secured by certain assets of the
respective subsidiary and $6.5 million of the total are guaranteed by the
Company as of August 31, 2000.
In January 2000, the Company established an $8.0 million revolving line of
credit. As of August 31, 2000, the Company had full availability under the
revolving line of credit. Subsequent to August 31, 2000, the Company cancelled
its $8.0 million line of credit, and entered into a new line of credit for $10
million, which expires in July 2002. Interest is based on the 30-day dealer
commercial paper rate plus 1.65% (8.12% at August 31, 2000) and is payable
monthly.
As of August 31, 1999, the Company, through its wholly owned subsidiary PSMT
Caribe, Inc. entered into a short-term bank loan with a principal amount of
$707,000 and an annual interest rate of 13% which was repaid in October 1999.
<Page>
Long-term debt at August 31, consist of the following (amounts in thousands):
<Table>
<Caption>
2000 1999
------- -------
10.83% Note due October 2004 (six-month LIBOR + 4.0%) $ 5,255 $ -
11.50% Note due June 2005 (prime + 2.0%) 3,900 -
10.83% Note due May 2005 (six-month LIBOR + 5.4%) 5,900 -
14.00% Note due May 2002 3,750 3,750
11.25% Note due August 2003 3,750 -
11.50% Note due upon demand 3,750 -
10.68% Note due December 2004 (three-month LIBOR + 4.0%) 4,560 -
11.81% Note due February 2005 (three-month LIBOR + 5.125%) 3,360 -
11.18% Note due November 2005 (three-month LIBOR + 4.5%) 7,000 -
12.00% Note due February 2005 3,780 -
10.68% Note due June 2007 (three-month LIBOR + 4.0%) 3,000 -
7.95% Note due October 2005 (converted to three-month
LIBOR + 1.75% effective October 2000) 11,300 -
14.00% Note due December 2001 - 4,037
------- ------
Total 59,305 7,787
Less: current portion 8,773 -
------- ------
Long-term debt $50,532 $7,787
======= ======
</Table>
All of the notes are collateralized by certain land, building, fixtures and
equipment of each respective subsidiary and guaranteed by the Company, except
for approximately $11.3 million and $7.8 million at August 31, 2000 and 1999,
respectively, which are secured by a collateral deposit for the same amount and
is included in restricted cash on the consolidated balance sheets. In addition,
$3.0 million was available for advance on one note as of August 31, 2000.
Annual maturities of long-term debt during the next five years are as follows
(amounts in thousands):
<Table>
<Caption>
Fiscal Year Ended Annual
August 31, Maturity
--------------------- ------------
2001 $ 8,773
2002 8,961
2003 8,961
2004 8,961
2005 11,541
Thereafter 12,108
</Table>
The Company has agreed to observe certain covenants under the terms of each of
its note agreements which include, among others, debt service ratio, interest
coverage ratio and leverage ratios.
<Page>
NOTE 16 - RELATED PARTY TRANSACTIONS
In April 2000 the Company sold its City Notes to the Price Family Charitable
Trust ("Trust"), a California trust (see Note 9). Mr. Sol Price (a principal
stockholder of PriceSmart, Inc.) and Mr. Robert Price (a principal stockholder
and Chairman of the Board of PriceSmart, Inc.) are trustee and successor
trustee, respectively, of the Trust. The Company secured an independent
appraisal and marketed the City Notes through a third-party brokerage firm
before selling the City Notes to the Trust.
In March 2000 the Company sold its travel program to Club-4U, Inc. (see Note 9).
Club-4U, Inc. is owned by Mr. Sol Price (a principal stockholder of the Company)
and its directors include Mr. James Cahill and Mr. Murray Galinson, who are also
directors of the Company.
Mr. Edgar Zurcher is a director of the Company and has also been a director and
officer of PSMT Caribe, Inc., a subsidiary of the Company. Mr. Zurcher is also
the managing partner of the law firm Zurcher, Montoya and Zurcher, in Costa
Rica, which the Company has utilized in legal matters. Mr. Zurcher is also
Chairman of the Board of Banca Promerica (Costa Rica), which lent $900,000 as
part of a $5.9 million syndicated loan to the Company. Additionally, Mr. Zurcher
is a director of Banco Promerica (El Salvador), which entered into a $1 million
short-term credit facility with the Company during the year that is due in
January 2001. Mr. Zurcher is also a director of a pasta company from which the
Company purchased approximately $227,000 of product during fiscal 2000.
Mr. Rafael Barcenas is a director of the Company and is also Vice President
of Boyd, Barcenas, S.A., an advertising firm in Panama, to which the Company
paid approximately $187,000 for services rendered during fiscal 2000.
In March 2000, the Company acquired 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 conveyed to BB&M's principals
306,748 shares of PriceSmart common stock.
In January 2000, the Company sold a five percent interest in PSMT
Trinidad/Tobago Limited ("PSMT Trinidad"), which operates the Company's
Trinidad and Tobago business, to Mr. Barcenas for $400,000. Mr. Barcenas
subsequently transferred one-half of his interest in PSMT Trinidad to another
individual.
NOTE 17 - SEGMENTS
The Company, through sole or majority ownership, is principally engaged in
international membership shopping stores operating primarily in Central
America and Caribbean (see Note 1) at the end of fiscal 2000. The Company has
identified segments based on geographic area. All intercompany transactions
between segments have been eliminated. Certain operating
<Page>
costs are incurred at the Company's corporate headquarters and are not
allocated to the segment operating income (loss) presented below (in
thousands).
<Table>
<Caption>
Years Ended August 31,
------------------------------------------------
2000 1999 1998
------------ ------------ ------------
Revenues:
United States $ 5,169 $ 18,933 $ 47,709
Central America/Caribbean 299,446 89,939 49,479
------------ ------------ ------------
$ 304,615 $ 108,872 $ 97,188
------------ ------------ ------------
Operating income (loss):
United States $ (14,874) $ (9,684) $ (4,741)
Central America/Caribbean 1,384 (3,052) 391
------------ ------------ ------------
$ (13,490) $ (12,736) $ (4,350)
------------ ------------ ------------
Identifiable Assets:
United States $ 54,608 $ 52,787 $ 103,778
Central America/Caribbean 206,792 99,287 20,798
------------ ------------ ------------
$ 261,400 $ 152,074 $ 124,576
------------ ------------ ------------
------------ ------------ ------------
</Table>
<Page>
PRICESMART, INC.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been quoted and traded on the NASDAQ National
market under the symbol "PSMT" since September 2, 1997. As of November 10, 2000,
there were approximately 462 holders of record of the common stock.
- -------------------------------------------------------------------------------
<Table>
<Caption>
Dates Stock Price
------------------ --------------------
From To High Low
------ ------- ------- --------
1999 CALENDAR QUARTERS
First Quarter 9/1/98 11/30/98 $17.500 $14.125
Second Quarter 12/1/98 2/28/99 23.000 15.625
Third Quarter 3/1/99 5/31/99 28.625 18.000
Fourth Quarter 6/1/99 8/31/99 46.125 24.500
2000 CALENDAR QUARTERS
First Quarter 9/1/99 11/30/99 42.750 34.500
Second Quarter 12/1/99 2/29/00 48.125 37.375
Third Quarter 3/1/00 5/31/00 49.250 32.688
Fourth Quarter 6/1/00 8/31/00 44.000 35.250
2001 CALENDAR QUARTERS
First Quarter 9/1/00 11/10/00 38.938 33.063
</Table>
- -------------------------------------------------------------------------------
The Company has never declared a cash dividend on its Common Stock and does
not anticipate doing so in the foreseeable future.
<Page>
DIRECTORS
The table below indicates the name, position with the Company and age of each
director:
<Table>
<Caption>
NAME POSITION WITH THE COMPANY AGE
Robert E. Price Chairman of the Board 58
Gilbert A. Partida President, Chief Executive Officer and Director 38
Rafael E. Barcenas Director 56
James F. Cahill Director 45
Murray L. Galinson Director 63
Katherine L. Hensley Director 63
Leon C. Janks Director 51
Lawrence B. Krause Director 70
Jack McGrory Director 51
Edgar A. Zurcher Director 50
</Table>
ROBERT E. PRICE has been Chairman of the Board of the Company since July 1994
and served as President and Chief Executive Officer of the Company from July
1994 until January 1998. Mr. Price also served as Chairman of the Board of Price
Enterprises, Inc. ("PEI") from July 1994 until November 1999 and was President
and Chief Executive Officer of PEI from July 1994 until September 1997. Mr.
Price was Chairman of the Board of Price/Costco, Inc. ("Costco") from October
1993 to December 1994. From 1976 to October 1993, he was Chief Executive Officer
and a director of The Price Company ("TPC"). Mr. Price served as Chairman of the
Board of TPC from January 1989 to October 1993, and as its President from 1976
until December 1990.
GILBERT A. PARTIDA has been a director of the Company since July 1997 and has
been President and Chief Executive Officer of the Company since January 1998.
Mr. Partida was President and Chief Executive Officer of the Greater San Diego
Chamber of Commerce from January 1993 until December 1997. Prior to joining the
Chamber of Commerce, Mr. Partida was an attorney with the law firm of Gray,
Cary, Ames & Frye in San Diego, California from 1987 to 1992.
RAFAEL E. BARCENAS has been a director of the Company since April 1998. Mr.
Barcenas has also been a director and officer of PriceSmart Panama, S.A.
(formerly known as PriceCostco de Panama, S.A.), and PriceSmart Real Estate,
S.A. (formerly known as PB Real Estate, S.A.), which are subsidiaries of the
Company, since their formation in September 1995 and July 1997, respectively.
Additionally, Mr. Barcenas has been a principal of BB&M International Trading
Group, a Panamanian company (which previously owned 49% of both PriceCostco
de Panama, S.A. and P. B. Real Estate, S.A.) from March 1995 until March
2000. Mr. Barcenas also has been Vice President of Boyd, Barcenas, S.A., the
largest advertising agency in Panama, since April 1971.
JAMES F. CAHILL has been a director of the Company since November 1999 and has
served as a director of PEI since August 1997. Additionally, Mr. Cahill has been
Executive Vice President of Price Entities since January 1987. In this position
he has been responsible for the oversight and investment activities of the
financial portfolio of Sol Price, founder of TPC and related entities. Prior to
1987, Mr. Cahill was employed by TPC for ten years, with his last position being
Vice President of Operations.
MURRAY L. GALINSON has been a director of the Company since November 2000. Mr.
Galinson served as a director of PEI from August 1994 until November 1999.
Additionally, Mr. Galinson has been Chairman of the Board of San Diego National
Bank since May 1996 and has served as a director of San Diego National Bank
since its inception in 1981. Mr. Galinson also served as President and Chief
Executive Officer of San Diego National Bank from September 1984 to September
1997, and was Chairman of the Board and Chief Executive Officer of SDNB
Financial Corporation from 1985 to 1997.
KATHERINE L. HENSLEY has been a director of the Company since July 1997 and
served as a director of PEI from December 1994 until July 1997. She is a lawyer
and a retired partner of the law firm of O'Melveny & Myers in Los Angeles,
California. Ms. Hensley joined O'Melveny & Myers in 1978 and was a partner from
1986 to February 1992. Ms. Hensley is a trustee of Security First Trust, an
open-end investment management company registered under the Investment Company
Act of 1940.
LEON C. JANKS has been a director of the Company since July 1997 and served as a
director of PEI from March 1995 until July 1997. He has been a partner in the
accounting firm of Alder, Green, Hasson & Janks in Los Angeles, California since
<Page>
1980. Mr. Janks also serves on the board of directors of Expert Ease
Software, Inc., a privately held corporation. Mr. Janks has extensive
experience in domestic and international business serving a wide variety of
clients in diverse businesses and is a Certified Public Accountant.
LAWRENCE B. KRAUSE has been a director of the Company since July 1997. Mr.
Krause has been a Professor and the Director of the Korea-Pacific Program at the
Graduate School of International Relations and Pacific Studies at the University
of California, San Diego since 1986. He became a Professor Emeritus in 1997. Mr.
Krause also serves on advisory boards for a number of institutions including the
Institute for International Economics, the Korea Economic Institute, the
Committee on Asian Economic Studies and the U.S. National Committee for Pacific
Economic Cooperation.
JACK MCGRORY has been a director of the Company since November 2000. Mr. McGrory
was President and Chief Executive Officer of PEI from September 1997 until
November 1999. Mr. McGrory also serves as a director of the San Diego Padres,
L.P. and was its Executive Vice President and Chief Operating Officer from
September 1999 until August 2000. He is also President of Downtown Development,
Inc., which is responsible for coordinating construction of the new Padres
ballpark and the Padres' commercial real estate activities. From March 1991
through August 1997, Mr. McGrory served as City Manager of San Diego.
EDGAR A. ZURCHER has been a director of the Company since November 2000. Mr.
Zurcher has also been a director and officer of PSMT Caribe, Inc., a subsidiary
of the Company, since its inception in December 1998. Additionally, Mr. Zurcher
has been a principal of PSC, S.A. (which previously owned 49% of PSMT Caribe,
Inc.) since its inception in September 1998. Mr. Zurcher is also the managing
partner of the law firm Zurcher, Montoya and Zurcher in Costa Rica.
Additionally, he is Chairman of Banca Promerica (Costa Rica) and is a director
of Banco Promerica (El Salvador) and a director of Banco Promerica (Honduras).
<Page>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company and their ages as of November 2000 are as
follows:
<Table>
<Caption>
NAME POSITION WITH THE COMPANY AGE
Gilbert A. Partida President and Chief Executive Officer 38
Kevin C. Breen Executive Vice President--Operations 40
Robert M. Gans Executive Vice President, Secretary and General Counsel 51
Thomas D. Martin Executive Vice President--Merchandising 44
Kurt A. May Executive Vice President and Chief Operating Officer 47
Allan C. Youngberg Executive Vice President and Chief Financial Officer 48
</Table>
GILBERT A. PARTIDA has been a director of the Company since July 1997 and has
been President and Chief Executive Officer of the Company since January 1998.
Mr. Partida was President and Chief Executive Officer of the Greater San Diego
Chamber of Commerce from January 1993 until December 1997. Prior to joining the
Chamber of Commerce, Mr. Partida was an attorney with the law firm of Gray,
Cary, Ames & Frye in San Diego, California from 1987 to 1992.
KEVIN C. BREEN has been Executive Vice President of the Company since September
1999 and served as Senior Vice President of the Company from August 1997 to
August 1999. Mr. Breen previously served as Executive Vice President of Price
Ventures, Inc., a subsidiary of PEI, from February 1997 until August 1997,
overseeing operational and construction management areas for the international
merchandising business. Prior to joining PEI as Vice President in August 1994,
Mr. Breen served as Vice President of Costco from October 1993 to December 1994
and previously served in various management roles for TPC.
ROBERT M. GANS has been Executive Vice President, General Counsel and Secretary
of the Company since August 1997 and was Executive Vice President and General
Counsel of PEI from October 1994 until July 1997. Mr. Gans graduated from the
UCLA School of Law in 1975 and actively practiced law in private practice from
1975 until 1994. From 1988 until October 1994, Mr. Gans was the senior member of
the law firm of Gans, Blackmar & Stevens, A.P.C., of San Diego, California.
THOMAS D. MARTIN has been Executive Vice President of the Company since October
1998 and served as Senior Vice President of the Company from August 1997 to
September 1998. Mr. Martin previously served as Vice President of PEI from
August 1994 until July 1997, directing merchandising strategies and product
sourcing for its international merchandising business, in addition to managing
its trading company activities. Prior to joining PEI as Vice President in August
1994, Mr. Martin served as Vice President of Costco from October 1993 to
December 1994 and had served in various management roles for TPC.
KURT A. MAY has been Executive Vice President and Chief Operating Officer of the
Company since October 1998. Prior to joining PriceSmart, Mr. May was employed by
GTE Corporation for twenty-three years, serving in a wide range of corporate
operating functions, including his most recent role as Area President of GTE's
cellular telephone operations since 1995.
ALLAN C. YOUNGBERG has been Executive Vice President and Chief Financial Officer
of the Company since July 1999. From January 1993 until July 1999, Mr. Youngberg
had been Executive Vice President, Chief Financial Officer, Secretary and
Treasurer of Cost-U-Less, Inc. Prior to joining Cost-U-Less, Mr. Youngberg was
President and shareholder of Youngberg & Schumacher, P.S., a certified public
accounting firm in Bellevue, Washington, which Mr. Youngberg founded in 1984 and
sold in December 1992. Mr. Youngberg is a Certified Public Accountant.