<PAGE>
[PRICE COSTCO LOGO]
999 LAKE DRIVE
ISSAQUAH, WASHINGTON 98027
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO OUR STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of the stockholders of
Price/Costco, Inc. (the "Company") will be held at Disneyland Pacific Hotel
(formerly The Pan Pacific Hotel), Ballroom, 1717 South West Street, Anaheim,
California 92802 on Thursday, February 1, 1996 at 10:00 a.m., for the following
purposes:
1. To elect three (3) Class III directors to hold office until the 1999
Annual Meeting of Stockholders and until their successors are elected and
qualified.
2. To consider and ratify the selection of the Company's independent
auditors.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only stockholders of record at the close of business on December 8, 1995 are
entitled to notice of and to vote at the meeting.
All stockholders are requested to be present in person or by proxy. For the
convenience of those stockholders who do not expect to attend the meeting in
person and desire to have their shares voted, a form of proxy and an envelope,
for which no postage is required, are enclosed. Any stockholder who later finds
that he or she can be present at the meeting, or for any reason desires to do
so, may revoke the proxy at any time before it is voted.
Please complete, sign, date and mail promptly the accompanying proxy card in
the return envelope furnished for that purpose, whether or not you plan to
attend the meeting. Your cooperation is appreciated since a majority of the
common stock must be represented, either in person or by proxy, to constitute a
quorum for the conduct of business.
By Order of the Board of Directors,
[LOGO]
Joel Benoliel
SECRETARY
December 20, 1995
<PAGE>
[PRICE COSTCO LOGO]
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
FEBRUARY 1, 1996
SOLICITATION AND REVOCATION OF PROXY
Proxies in the form enclosed are solicited by the Board of Directors of
Price/Costco, Inc. (the "Company" or "PriceCostco") to be voted at the annual
meeting of stockholders to be held on February 1, 1996, or any adjournments
thereof (the "Annual Meeting"). The individuals named as proxies are Jeffrey H.
Brotman and James D. Sinegal. The accompanying notice of meeting, this Proxy
Statement and the form of proxy are being first sent to stockholders on or about
December 20, 1995.
All shares represented by proxies received will be voted in accordance with
instructions contained therein. In the absence of voting instructions, the
shares will be voted for the nominees for director listed herein and on the
proxy and for the ratification of the Company's independent auditors. A
stockholder giving a proxy has the power to revoke it any time before it is
voted.
At the close of business on December 8, 1995, there were 195,293,609 shares
of common stock, par value $.01 per share (the "Common Stock"), outstanding,
which represent all of the voting securities of the Company. Each share of
Common Stock is entitled to one vote. Stockholders do not have cumulative voting
rights in the election of directors. Only stockholders of record at the close of
business on December 8, 1995 (the "Record Date") will be entitled to vote at the
Annual Meeting.
The affirmative vote of at least a majority of the Common Stock represented,
in person or by proxy, at the Annual Meeting is required to approve each of the
proposals. The holders of a majority of the Common Stock issued and outstanding
and entitled to vote at the Annual Meeting, present in person or represented by
proxy, constitute a quorum. Under applicable Delaware law, in determining
whether a proposal has received the requisite number of affirmative votes,
abstentions and broker non-votes will be counted and will have the same effect
as a vote against each of the proposals.
In addition to mailing this material to stockholders, the Company has asked
banks and brokers to forward copies to persons for whom they hold stock of the
Company and request authority for execution of the proxies. The Company will
reimburse the banks and brokers for their reasonable out-of-pocket expenses in
doing so. Officers and regular employees of the Company may, without being
additionally compensated, solicit proxies by mail, telephone, telegram,
facsimile or personal contact. All proxy soliciting expenses will be paid by the
Company in connection with the solicitation of votes for the Annual Meeting. The
Company does not currently intend to employ any other party to assist in the
solicitation process.
1
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding ownership of the Common
Stock by each person known to the Company to own more than 5% of the outstanding
shares of the Common Stock on October 31, 1995. The following is based solely on
statements on filings with the Securities and Exchange Commission (the "SEC") or
other reliable information.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
BENEFICIAL OWNER SHARES PERCENT
------------------------------ ---------- ------
<S> <C> <C>
Fourcar B.V. ................. 21,191,301 10.8
Blaak 28-34
3011 TA Rotterdam,
The Netherlands
</TABLE>
The following table sets forth the shares of the Common Stock owned by each
director of the Company, each nominee for election as a director of the Company
and all directors and executive officers as a group on October 31, 1995.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT
------------------------------ ------------------------- -------
<S> <C> <C>
James D. Sinegal.............. 2,925,885(1) 1.5
Jeffrey H. Brotman............ 3,074,875(2) 1.6
Richard D. DiCerchio.......... 471,046(3) *
Richard A. Galanti............ 303,693(4) *
Daniel Bernard................ 8,000(5) *
Hamilton E. James............. 122,060(6) *
Richard M. Libenson........... 75,640(7) *
John W. Meisenbach............ 309,750(8) *
Frederick O. Paulsell, Jr..... 456,283(9) *
All directors and executive
officers as a group (15
persons)..................... 8,190,087(10) 4.2
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes 131,677 shares issuable under currently exercisable stock options
and options exercisable within sixty days of the Record Date.
(2) Includes 2,922,197 shares held by a trust of which Mr. Brotman is a
principal beneficiary. Mr. Brotman disclaims any beneficial ownership of
such shares. Also includes 152,678 shares issuable under currently
exercisable stock options and options exercisable within sixty days of the
Record Date.
(3) Includes 220,778 shares issuable under currently exercisable stock options
and options exercisable within sixty days of the Record Date.
(4) Includes 103,000 shares issuable under currently exercisable stock options
and options exercisable within sixty days of the Record Date.
(5) Includes 8,000 shares issuable under currently exercisable stock options
and options exercisable within sixty days of the Record Date.
(6) Includes 87,250 shares issuable under currently exercisable stock options
and options exercisable within sixty days of the Record Date.
(7) Includes 16,000 shares issuable under currently exercisable stock options
and options exercisable within sixty days of the Record Date.
2
<PAGE>
(8) Includes 100,000 shares held by a trust of which Mr. Meisenbach is the
principal beneficiary, of which he may be deemed to be beneficial owner, and
209,750 shares issuable under currently exercisable stock options and
options exercisable within sixty days of the Record Date.
(9) Includes 72,250 shares issuable under currently exercisable stock options
and options exercisable within sixty days of the Record Date.
(10) Includes 1,364,744 shares issuable under currently exercisable stock
options and options exercisable within sixty days of the Record Date.
ELECTION OF DIRECTORS
The authorized number of members of the Board of Directors is currently
nine.
The Board is divided into three classes. Initially, Class I directors were
elected for one year, Class II directors for two years and Class III directors
for three years. Successors to the class of directors whose term expires at any
annual meeting shall be elected for three-year terms. Each of Richard D.
DiCerchio, Richard M. Libenson and John W. Meisenbach is nominated as a member
of Class III, to serve for a three-year term until the annual meeting of
stockholders in 1999 and until his successor is elected and qualified.
Each of the nominees has indicated that he is willing and able to serve as a
director. If any nominee becomes unable or unwilling to serve, the accompanying
proxy may be voted for the election of such other person as shall be designated
by the Board of Directors. The proxies being solicited hereby will be voted for
no more than three nominees at the Annual Meeting. Each director will be elected
by a plurality of the votes cast, in person or by proxy, at the Annual Meeting,
assuming a quorum is present. Stockholders do not have cumulative voting rights
in the election of directors.
DIRECTORS
The following table sets forth information regarding each nominee for
election as a director and each director whose term of office will continue
after the Annual Meeting.
<TABLE>
<CAPTION>
CURRENT POSITION WITH THE EXPIRATION OF TERM
NAME COMPANY (1) AGE AS DIRECTOR
---------------------------- ------------------------------ --- ------------------
<S> <C> <C> <C>
James D. Sinegal President, Chief Executive 59 1997
Officer and Director
Jeffrey H. Brotman Chairman of the Board of 53 1997
Directors
Richard D. DiCerchio Executive Vice President and 52 1996
Director
Richard A. Galanti Executive Vice President and 39 1997
Chief Financial Officer and
Director
Daniel Bernard Director 49 1998
Hamilton E. James Director 44 1998
Richard M. Libenson Director 53 1996
John W. Meisenbach Director 59 1996
Frederick O. Paulsell, Jr. Director 56 1998
</TABLE>
- ------------------------
(1) For a description of certain committees of the Board and the members of such
committees, see "Committees of the Board" below.
James D. Sinegal has been President, Chief Executive Officer and a director
of the Company since October 1993 upon consummation of the merger of Costco
Wholesale Corporation ("Costco") and The Price Company (the "Merger"). From
Costco's inception until 1993, he was President and Chief Operating Officer of
Costco and served as Chief Executive Officer of Costco from August 1988 until
October 1993. Mr. Sinegal is a co-founder of Costco and has been a director of
Costco since its inception. Mr. Sinegal is a director of Price Enterprises, Inc.
("Price Enterprises") but his term as a director of Price Enterprises will
expire as of that company's next election of directors on January 16, 1996. Mr.
Sinegal does not intend to stand for reelection to Price Enterprise's Board of
Directors.
3
<PAGE>
Jeffrey H. Brotman is a native of the Pacific Northwest and is a 1967
graduate of the University of Washington Law School. Mr. Brotman was elected
Chairman of the Board of the Company on December 21, 1994. Mr. Brotman was the
Vice Chairman of the Board of the Company from October 1993 (upon consummation
of the Merger) until December 21, 1994. He is a founder of Costco and a number
of other specialty retail chains. Mr. Brotman is a director of Seafirst Bank,
Starbucks Corp., The Sweet Factory and Garden Botanika.
Richard D. DiCerchio has been Executive Vice President and Chief Operating
Officer -- Merchandising, Depot, Construction and Marketing and a director of
the Company since October 1993 (upon consummation of the Merger) and, until
mid-August 1994, also served as Executive Vice President, Chief Operating
Officer -- Northern Division. He was elected Chief Operating Officer -- Western
Region of Costco in August 1992 and was elected Executive Vice President and
director of Costco in April 1986. From June 1985 to April 1986, he was Senior
Vice President, Merchandising of Costco. He joined Costco as Vice President,
Operations in May 1983.
Richard A. Galanti has been a director of the Company since January 1995,
and Executive Vice President -- Finance of the Company since October 1993 (upon
consummation of the Merger). He was Senior Vice President, Chief Financial
Officer and Treasurer of Costco from January 1985 to October 1993, having joined
Costco as Vice President -- Finance in March 1984. From 1978 to February 1984,
Mr. Galanti was an Associate with DLJ. In March 1995, Mr. Galanti settled an
action brought by the SEC alleging a five-year-old violation of Section 10(b) of
the Securities Exchange Act of 1934, as amended and Rule 10b-5 promulgated
thereunder that was unrelated to Mr. Galanti's position with the Company.
Without admitting or denying the allegations of the SEC's complaint, Mr. Galanti
agreed to pay $64,408, and entered into an order requiring him to comply with
the relevant sections of the federal securities laws and rules. Mr. Galanti's
duties as a director and officer of the Company have not been and will not be
affected by the settlement.
Daniel Bernard has been a director of the Company since June 1, 1994. Mr.
Bernard has been the Chief Executive Officer of Carrefour S.A. since the
beginning of 1993. From 1989 to 1992, Mr. Bernard was a member of the executive
board of Metro International, a German retailer.
Hamilton E. James has been a director of the Company since October 1993
(upon consummation of the Merger) and was a director of Costco from August 1988
to October 1993. Mr. James is currently the Chairman of the Banking Group at
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") in charge of its
investment and merchant banking activities. Mr. James also currently serves as a
director of County Seat Stores, Inc.
Richard M. Libenson has been a director of the Company since October 1993
(upon consummation of the Merger). He was a director of The Price Company since
its formation in 1976 until October 1993, and was an executive officer of The
Price Company from 1976 until October 1989, when he retired from active
involvement as an officer of The Price Company. He served as Chief Operating
Officer of The Price Company from August 1986 through October 1988, and Vice
Chairman of its Board from October 1988 through September 1989.
John W. Meisenbach has been a director of the Company since October 1993
(upon consummation of the Merger) and was a director of Costco from its
inception to October 1993. He is President of MCM (Meisenbach Capital
Management) Financial, Inc., a financial services company, which he founded in
1962. He also currently serves as a director of Expeditors International. Mr.
Meisenbach is a trustee of the Elite Fund, an investment company registered
under the Investment Company Act of 1940.
Frederick O. Paulsell, Jr. was a director of the Company from October 1993
(upon consummation of the Merger) until June 1, 1994 and was elected again as a
director of the Company in January 1995. He has been a director of Costco since
its inception. From 1973 through March 1982, he was Executive Vice President of
Foster & Marshall Inc., and he was Executive Vice President of Foster &
Marshall/ American Express Inc. from March 1983 through June 1985. Mr. Paulsell
was President of Foster, Paulsell & Baker, an investment banking firm, between
1985 and 1995. Since early 1995, Mr. Paulsell
4
<PAGE>
has been a Principal of Olympic Capital Partners, L.L.C., a Seattle-based
investment banking firm. Mr. Paulsell currently sits on the boards of various
companies and organizations including TRM Copy Centers, Stewart Title Holding
Company, Seattle Coffee Holdings and the Seattle Chamber of Commerce. Mr.
Paulsell was Chairman of Strategic Direct Inc. and Ballard Computer, which filed
for bankruptcy protection in September 1991 and May 1995 respectively.
COMMITTEES OF THE BOARD
The Audit Committee's function is to review the results of the audit of the
Company performed by the independent public accountants, to review and evaluate
internal accounting controls and to recommend the selection of independent
public accountants. The Audit Committee is also authorized to conduct such
reviews and examinations as it deems necessary with respect to the practices and
policies of, and the relationship between, the Company and its independent
public accountants, including the availability of Company records, information
and personnel. The Audit Committee consists of Messrs. Libenson, Paulsell and
Meisenbach. The Audit Committee met one time during the 1995 fiscal year.
The Board of Directors of the Company also has a Compensation Committee to
review the salaries, bonuses and stock options provided to certain executive
officers of the Company and oversee the overall administration of the Company's
compensation and stock option program. The Compensation Committee consists of
Messrs. James, Paulsell and Meisenbach. The Compensation Committee met several
times to discuss various issues, and acted by unanimous consent on two occasions
during the 1995 fiscal year.
During the Company's last fiscal year, the Company's Board of Directors met
four times. Each member of the Board attended all of the Board meetings. Each
member of the Board who served on one of the committees of the Board attended
all of the meetings of each such committee on which he served.
EXECUTIVE COMPENSATION
The following tables and descriptive materials set forth information
concerning compensation earned for services rendered to the Company by (A) the
Chief Executive Officer of the Company (the "CEO"), and (B) the four other most
highly compensated individuals (other than the CEO) who were serving as
executive officers of the Company at the end of the 1995 fiscal year
(collectively, together with the CEO, the "Named Executive Officers").
SUMMARY OF COMPENSATION
The following table summarizes the compensation earned by the Named
Executive Officers during fiscal 1995, 1994 and 1993.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ----------------
-------------------------------------------- SECURITIES ALL OTHER
FISCAL OTHER ANNUAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($)(A) BONUS COMPENSATION ($)(B) OPTIONS/SARS (#) ($)(C)
- ---------------------------------- --------- ------------ --------- ------------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James D. Sinegal 1995 305,769 0 0 50,000 16,900
President and Chief Executive 1994 300,000 0 0 19,400 10,495
Officer 1993 300,000 0 0 45,000 8,625
Jeffrey H. Brotman 1995 305,769 0 0 50,000 15,820
Chairman of the Board 1994 300,000 0 0 19,400 8,884
1993 300,000 0 0 45,000 7,583
Richard D. DiCerchio 1995 265,000 37,000 0 20,000 15,820
Executive Vice President 1994 256,923 40,000 0 30,900 8,358
1993 240,000 30,000 0 45,000 6,902
Edward B. Maron, Jr. 1995 297,710 44,358 0 20,000 11,110
Executive Vice President 1994 234,086 44,260 78,472 20,000 9,590
1993 219,600 28,657 113,651 0 7,015
Dennis R. Zook 1995 270,819 31,881 0 20,000 11,598
Executive Vice President 1994 235,000 30,000 0 20,000 16,700
1993 235,000 3,000 0 0 16,563
</TABLE>
- ------------------------
(A) Because the Company's fiscal year 1995 was a 53-week year, salary amounts
shown for each Named Executive Officer include one week of compensation in
addition to the amounts otherwise payable on an annualized basis.
(B) Amounts shown for Mr. Maron in 1993 and 1994 represent tax equalization
payments.
(C) In fiscal year 1995, amounts shown for Messrs. Sinegal, Brotman, DiCerchio
and Maron include the Company's matching contributions under a deferred
compensation plan of $5,000 each. In fiscal year 1995, amounts shown for
Messrs. Sinegal, Brotman, DiCerchio and Zook include matching contributions
of $500 each, and Company contributions of $9,000 each, under the
PriceCostco 401(k) Retirement Plan. Amounts shown for each Named Executive
Officer include premiums representing the term insurance portion under the
executive life program of $2,400, $1,320, $1,320, $6,110 and $2,098,
respectively, in fiscal year 1995.
6
<PAGE>
GRANTS OF STOCK OPTIONS
The following table sets forth information concerning the award of stock
options to the Named Executive Officers during fiscal 1995:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (C)
OPTIONS/SARS EMPLOYEES EXERCISE OR EXPIRATION ----------------------
NAME GRANTED (#)(A) FISCAL YEAR (B) BASE PRICE($/SH) DATE 5% ($) 10% ($)
- ------------------------- --------------- ----------------- ---------------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
James D. Sinegal......... 50,000 1.42 13.3125 05/26/05 418,605 1,060,833
Jeffrey H. Brotman....... 50,000 1.42 13.3125 05/26/05 418,605 1,060,833
Richard D. DiCerchio..... 20,000 .57 13.3125 05/26/05 167,442 424,333
Edward B. Maron, Jr...... 20,000 .57 13.3125 05/26/05 167,442 424,333
Dennis R. Zook........... 20,000 .57 13.3125 05/26/05 167,442 424,333
</TABLE>
- ------------------------
(A) These stock options vest 20% per year for five years from the date of grant
and expire ten years from the date of grant. The exercise price for these
stock options equals the fair market value of the Common Stock on the date
of grant.
(B) The total number of stock options granted in fiscal 1995 by the Company was
3,515,776.
(C) These assumed rates of appreciation are provided in order to comply with
requirements of the Securities and Exchange Commission, and do not represent
the Company's expectation as to the actual rate of appreciation of the
Common Stock. The actual value of the options will depend on the performance
of the Common Stock, and may be greater or less than the amounts shown.
EXERCISE OF STOCK OPTIONS
The following table sets forth information concerning the exercise of stock
options during fiscal 1995 by each of the Named Executive Officers and the
fiscal year-end value of unexercised options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/ SARS AT
SHARES FY-END (#) FY-END ($)
ACQUIRED --------------------- ------------------
ON VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($)(A) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------- ---------- -------------- --------------------- ------------------
<S> <C> <C> <C> <C>
James D. Sinegal..................... 0 0 127,797/70,603 0/206,250
Jeffrey H. Brotman................... 0 0 148,798/70,603 0/206,250
Richard D. DiCerchio................. 54,246 672,655 218,598/49,803 1,292,499/119,500
Edward B. Maron, Jr.................. 0 0 44,956/52,500 82,500/156,125
Dennis R. Zook....................... 0 0 51,718/80,516 34,867/132,311
</TABLE>
- ------------------------
(A) Market value of underlying securities at the exercise date, minus the
exercise price of such options.
COMPENSATION OF DIRECTORS
Each non-employee director of the Company earns $30,000 per year for serving
on the Board and $1,000 for each Board meeting and $500 for each committee
meeting attended. In addition, non-
7
<PAGE>
employee directors receive an annual grant of options to purchase 8,000 shares
of common stock, and are reimbursed for travel expenses incurred in connection
with the performance of their duties as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal 1995 were John W.
Meisenbach, Hamilton E. James and Frederick O. Paulsell, Jr.
John W. Meisenbach is a principal shareholder of MCM (Meisenbach Capital
Management) Financial, Inc. MCM provided consulting and insurance services in
managing the Company's employee benefit plans and executive life insurance
programs covering over $70,000,000 in total annual benefit costs, for which MCM
received total compensation from third party insurers of $580,773 in fiscal
1995.
Hamilton E. James is a Managing Director of DLJ. During fiscal 1995, DLJ
represented the Company in connection with the spin-off of certain assets of the
Company to Price Enterprises (the "Exchange Transaction") and also provided
services to the Company in connection with a $300,000,000 Senior Note Offering.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Company (the
"Committee") determined and administered the compensation of the Company's
executive officers during fiscal 1995.
COMPENSATION PHILOSOPHY. The Committee endeavored to ensure that the
compensation programs for executive officers of the Company during fiscal 1995
were effective in attracting and retaining key executives responsible for the
success of the Company and in promoting its long-term interests and those of its
stockholders. The Committee sought to align total compensation for senior
management with corporate performance. The Committee placed emphasis on
variable, performance-based components, such as stock option awards and bonuses,
the value of which could increase or decrease to reflect changes in corporate
and individual performances. These short- and long-term incentive compensation
programs were intended to reinforce management's commitment to enhancement of
profitability and stockholder value.
The Committee took into account various qualitative and quantitative
indicators of corporate and individual performance in determining the level and
composition of compensation for the Company's executive officers during fiscal
1995. While the Committee considered such corporate performance measures as net
income, earnings per common share, comparable warehouse sales, margins and rate
of revenue increase, the Committee did not apply any specific quantitative
formula in making compensation decisions. The Committee also recognized
qualitative factors, such as the ability to meet annual corporate growth and
profits goals and demonstrated leadership ability.
Base salaries for the executive officers were established at levels
considered appropriate in light of the duties and scope of responsibilities of
each officer's position and the salaries paid to comparable officers by
companies which are competitors of the Company. Salaries are reviewed
periodically and adjusted as warranted to reflect sustained individual officer
performance. The Committee focused primarily on total annual compensation,
including incentive awards, rather than base salary alone, as the appropriate
measure of executive officer performance and contribution.
From time to time, executive officers have been eligible to receive
incentive compensation awards under the Company's annual bonus plan and stock
option plan, based upon corporate and individual performance. In approving
grants and awards under the bonus plan and the option plan, the Committee
considered the quantitative and qualitative factors and industry comparisons
outlined above. The factors taken into account in determining awards under the
bonus plan were the corporate performance measures described above.
8
<PAGE>
Awards under the option plan were approved at various times throughout the
year. The number of options previously awarded to and held by executive officers
was reviewed but was not a determinative factor in the size of 1995 option
grants.
In general, compensation payments in excess of $1 million to any of the
Named Executive Officers are subject to a limitation on deductibility for the
Company under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). However, certain performance based compensation is not subject to
such limitation. The Company's stock option plan currently qualifies for such
performance based exception. The Company does not expect that its cash
compensation payable to any of the Named Executive Officers will exceed the $1
million limitation during fiscal 1996.
CHIEF EXECUTIVE OFFICER COMPENSATION. In evaluating the compensation of
James D. Sinegal, President and Chief Executive Officer of the Company for
fiscal 1995, the Committee placed particular emphasis on Mr. Sinegal's superior
leadership in managing the business, and the Company's financial and operating
performance.
The Committee noted that, despite the difficult economic environment which
prevailed for retailers throughout fiscal 1995, the Company's total sales in the
fifty-three week fiscal year increased by 11% from the prior fifty-two week
fiscal year, and comparable warehouse sales for the 1995 fiscal year increased
by 2% from the prior year. Net income from continuing operations for fiscal 1995
was approximately $.18 per share higher than for fiscal 1994 ($1.05 versus
$.87), excluding merger and restructuring charges.
In accordance with the compensation philosophy described above, the
Committee set Mr. Sinegal's base salary at $300,000 for fiscal 1995, which was
the same as his salary for fiscal 1994 and fiscal 1993. In addition, in fiscal
1995, the Committee authorized a grant to Mr. Sinegal of options to acquire
50,000 shares of the Common Stock under the option plan. Mr. Sinegal received no
award with respect to fiscal 1995 under the annual bonus plan.
Compensation Committee
John W. Meisenbach
Hamilton E. James
Frederick O. Paulsell, Jr.
9
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return (stock
price appreciation plus dividends) on the Common Stock with the cumulative total
return of the S&P 500 Index and the following group of peer companies (based on
weighted market capitalization) selected by the Company: Dayton Hudson
Corporation; Home Depot, Inc.; Kmart Corporation; The Limited Inc.; Nordstrom
Inc.; Office Depot, Inc.; Staples Inc.; Toys R Us Inc.; Waban Inc.; and Wal Mart
Stores, Inc. The information is provided for the period from the Company's
inception (upon consummation of the Merger), October 21, 1993, through September
3, 1995, the end of fiscal 1995.
COMPARED CUMULATIVE TOTAL RETURN
AMONG PRICE/COSTCO, INC., S&P 500 INDEX AND PEER GROUP INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PRICE/COSTCO, INC. PEER GROUP INDEX S&P 500 INDEX
<S> <C> <C> <C>
10/21/93 100.00 100.00 100.00
12/31/93 100.72 93.96 100.25
03/31/94 94.84 95.91 96.45
06/30/94 78.16 91.41 96.85
09/30/94 84.04 92.66 101.59
12/30/94 67.37 86.50 101.57
03/31/95 77.18 95.21 111.46
06/30/95 85.03 97.64 122.10
09/03/95 91.24 93.03 126.47
</TABLE>
ASSUMES $100 INVESTED ON OCT. 21, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING SEPT. 03, 1995
10
<PAGE>
CERTAIN TRANSACTIONS
Richard M. Libenson has been engaged as a consultant for the Company. For
such services, a corporation owned by Mr. Libenson was paid $174,996 during
fiscal 1995.
Hamilton E. James is a Managing Director of DLJ. During the 1995 fiscal
year, DLJ represented the Company in connection with the Exchange Transaction
and also provided services to the Company in connection with a $300,000,000
Senior Note Offering.
John W. Meisenbach is a principal shareholder of MCM. MCM provided
consulting and insurance services in managing the Company's employee benefit
plans and executive life insurance programs covering over $70,000,000 in total
annual benefit costs, for which MCM received total compensation from third party
insurers of $580,773 in fiscal 1995.
LEGAL PROCEEDINGS
On December 19, 1994, a Complaint was filed against PriceCostco in an action
entitled SNYDER V. PRICE/COSTCO, INC. ET. AL., Case No. C94-1874Z, United States
District Court, Western District of Washington. On January 4, 1995, a Complaint
was filed against PriceCostco in an action entitled BALSAM V. PRICE/COSTCO, INC.
ET. AL., Case No. C95-0009Z, United States District Court, Western District of
Washington. The Snyder and Balsam Cases were subsequently consolidated and on
March 15, 1995, plaintiffs' counsel filed a First Amended And Consolidated Class
Action And Derivative Complaint. On November 9, 1995, plaintiffs' counsel filed
a Second Amended And Consolidated Class Action And Derivative Complaint. The
Complaint alleges violation of certain state and federal laws arising from the
spin-off and Exchange Transaction and the merger between Price and Costco. The
Company believes that this suit is without merit and will vigorously defend
against this suit. The Company does not believe that the ultimate outcome of
such litigation will have a material adverse effect on the Company's financial
position or results of operations.
STOCK OWNERSHIP AND TRADING REPORTS
Under SEC rules, the Company's directors, executive officers and beneficial
owners of more than 10% of any PriceCostco equity security are required to file
periodic reports of their ownership, and changes in that ownership, with the
SEC. Based solely on its review of copies of these reports and representations
of such reporting persons, PriceCostco believes during fiscal 1995, such SEC
filing requirements were satisfied, except that one report, covering one
transaction during April 1995, was filed late for Mr. DiCerchio.
INDEPENDENT PUBLIC ACCOUNTANTS AND ANNUAL REPORT
Subject to ratification by the stockholders at the Annual Meeting, the Board
of Directors of the Company has selected Arthur Andersen LLP to audit the
consolidated financial statements of the Company and its subsidiaries for the
fiscal year ending September 1, 1996. Arthur Andersen LLP has issued its report,
included in the Company's Form 10-K, on the consolidated financial statements of
the Company for the fiscal year ended September 3, 1995. Arthur Andersen LLP has
served PriceCostco in this capacity since the Merger and Costco since 1984.
Representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement, if they desire to do so,
and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast on this proposal shall
constitute ratification of the appointment of Arthur Andersen LLP.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1997 annual meeting of
stockholders must be received by the Company no later than September 3, 1996.
Proposals may be mailed to the Company, to the attention of the Secretary, 999
Lake Drive, Issaquah, Washington 98027.
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OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matters which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the meeting, it is intended that the persons named in the
proxy will act in respect thereof in accordance with their best judgment.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION WILL BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON
WRITTEN REQUEST DIRECTED TO JOEL BENOLIEL, SECRETARY.
By Order of the Board of Directors,
[LOGO]
Joel Benoliel
SECRETARY
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20548
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [A]
Filed by a Party other that the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PRICECOSTCO, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PRICECOSTCO, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules D-11(c)(1)(ii). 14a-8(i)(1), or 14a-8(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-8(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-8(i)(4) and Q-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule Q-11:-
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is effect as provided by Exchange
Act Rule Q-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
