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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
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/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 333-21093
PRICECOSTCO 401(k) RETIREMENT PLAN
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PRICE/COSTCO, INC.
999 LAKE DRIVE
ISSAQUAH, WASHINGTON 98027
(425) 313-8100
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<PAGE>
PRICECOSTCO
401(k) RETIREMENT PLAN
EIN 33-0572969
PIN 002
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE>
PRICECOSTCO
401(k) RETIREMENT PLAN
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1996 AND 1995
INDEX
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Statements of Net Assets Available for Plan Benefits as of December 31,
1996 and 1995
Statement of Changes in Net Assets Available for Plan Benefits for the Year
Ended December 31, 1996
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
SUPPLEMENTAL INFORMATION
Schedule I, Item 27a - Schedule of Assets Held for Investment Purposes
as of December 31, 1996
Schedule II, Item 27d - Schedule of Reportable Transactions for the Year
Ended December 31, 1996
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Benefits Committee of
the Costco 401(k) Retirement Plan:
We have audited the accompanying statements of net assets available for plan
benefits of PriceCostco 401(k) Retirement Plan as of December 31, 1996 and
1995, and the related statement of changes in net assets available for plan
benefits for the year ended December 31, 1996. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 net assets available for plan benefits of the Plan as
of December 31, 1996 and 1995, and the changes in its net assets available for
benefits for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements, but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in
the statements of net assets available for plan benefits and the statement of
changes in net assets available for plan benefits is presented for purposes of
additional analysis rather than to present the net assets available for plan
benefits and changes in net assets available for plan benefits of each fund.
The supplemental schedules and fund information have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/Arthur Andersen LLP
Seattle, Washington,
May 16, 1997
<PAGE>
PRICECOSTCO
401(k) RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
--------------------------------------------------------------------
Cash Stable Equity Spectrum Spectrum
and Cash Value Income Income Growth
Equivalents Fund Fund Fund
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value-
Registered investment company
funds $42,748 $47,323,062 $53,829,752 $64,681,834 $54,688,418
Price/Costco common stock -
2,170,687 shares held - - - - -
------- ----------- ----------- ----------- -----------
Total investments 42,748 47,323,062 53,829,752 64,681,834 54,688,418
------- ----------- ----------- ----------- -----------
Contributions receivable-
Employer - 12,263,804 6,331,811 2,101,594 6,409,617
Employee - 232,480 298,912 94,382 321,820
------- ----------- ----------- ----------- -----------
Total receivables - 12,496,284 6,630,723 2,195,976 6,731,437
------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS $42,748 $59,819,346 $60,460,475 $66,877,810 $61,419,855
======= =========== =========== =========== ===========
<CAPTION>
PARTICIPANT DIRECTED
-------------------------------------
New Mid-Cap Price/Costco
Horizons Growth Common
Fund Fund Stock Total
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at fair value-
Registered investment
company funds $ - $ - $ - $220,565,814
Price/Costco common stock -
2,170,687 shares held - - 54,538,510 54,538,510
-------- -------- ----------- ------------
Total investments - - 54,538,510 275,104,324
-------- -------- ----------- ------------
Contributions receivable-
Employer 564,570 613,125 5,306,538 33,591,059
Employee 3,354 4,220 193,233 1,148,401
-------- -------- ----------- ------------
Total receivables 567,924 617,345 5,499,771 34,739,460
-------- -------- ----------- ------------
NET ASSETS AVAILABLE FOR PLAN $567,924 $617,345 $60,038,281 $309,843,784
BENEFITS ======== ======== =========== ============
</TABLE>
The accompanying notes and schedules are an integral part of this statement.
<PAGE>
PRICECOSTCO
401(k) RETIREMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
-----------------------------------------------------------------------------------
Cash Stable Equity Spectrum Spectrum Price/Costco
and Cash Value Income Income Growth Common
Equivalents Fund Fund Fund Stock Total
----------- ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value-
Cash and cash equivalents $61,343 $ - $ - $ - $ - $ - $ 61,343
Registered investment
company funds - 28,521,752 28,041,414 70,144,239 27,867,707 - 154,575,112
Price/Costco common stock -
1,748,012 shares held - - - - - 26,657,187 26,657,187
------- ----------- ----------- ----------- ----------- ----------- ------------
Total investments 61,343 28,521,752 28,041,414 70,144,239 27,867,707 26,657,187 181,293,642
------- ----------- ----------- ----------- ----------- ----------- ------------
Contributions receivable-
Employer - 11,986,840 5,152,781 1,213,126 4,903,496 5,001,593 28,257,836
Employee - 220,781 221,796 63,279 213,188 193,592 912,636
------- ----------- ----------- ----------- ----------- ----------- ------------
Total receivables - 12,207,621 5,374,577 1,276,405 5,116,684 5,195,185 29,170,472
------- ----------- ----------- ----------- ----------- ----------- ------------
LIABILITIES:
Excess contributions payable
to participants - (18,458) (20,056) (3,266) (22,626) (23,521) (87,927)
------- ----------- ----------- ----------- ----------- ----------- ------------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $61,343 $40,710,915 $33,395,935 $71,417,378 $32,961,765 $31,828,851 $210,376,187
======= =========== =========== =========== =========== =========== ============
</TABLE>
The accompanying notes and schedules are an integral part of this statement.
<PAGE>
PRICECOSTCO
401(k) RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
--------------------------------------------------------------------
Cash Stable Equity Spectrum Spectrum
and Cash Value Income Income Growth
Equivalents Fund Fund Fund
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT RESULTS:
Net appreciation in fair
value of assets $ - $ - $ 4,868,889 $ (322,583) $ 4,317,312
Interest - 2,515,603 - 5,068,119 -
Dividends - - 3,235,058 - 3,790,799
-------- ----------- ----------- ----------- -----------
Total net investment
results - 2,515,603 8,103,947 4,745,536 8,108,111
-------- ----------- ----------- ----------- -----------
CONTRIBUTIONS TO THE PLAN:
Employer - 14,218,515 7,846,314 2,559,540 7,999,593
Employee - 5,931,328 7,313,907 2,234,027 7,564,149
Rollovers - 77,046 43,061 69,291 97,917
-------- ----------- ----------- ----------- -----------
Total contributions - 20,226,889 15,203,282 4,862,858 15,661,659
-------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO PARTICIPANTS:
Hardship withdrawals - (1,005,196) (616,594) (158,413) (664,195)
Terminations - (1,606,851) (1,535,618) (4,344,751) (1,106,178)
-------- ----------- ----------- ----------- -----------
Total distributions - (2,612,047) (2,152,212) (4,503,164) (1,770,373)
-------- ----------- ----------- ----------- -----------
INTERFUND TRANSFERS (18,595) (1,022,014) 5,909,523 (9,644,798) 6,458,693
-------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS AVAILABLE FOR PLAN
BENEFITS (18,595) 19,108,431 27,064,540 (4,539,568) 28,458,090
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, beginning of year 61,343 40,710,915 33,395,935 71,417,378 32,961,765
-------- ----------- ----------- ----------- -----------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS, end of year $ 42,748 $59,819,346 $60,460,475 $66,877,810 $61,419,855
======== =========== =========== =========== ===========
<CAPTION>
PARTICIPANT DIRECTED
-------------------------------------
New Mid-Cap Price/Costco
Horizons Growth Common
Fund Fund Stock Total
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
NET INVESTMENT RESULTS:
Net appreciation in fair
value of assets $ - $ - $ 20,210,456 $ 29,074,074
Interest - - - 7,583,722
Dividends - - - 7,025,857
-------- -------- ----------- ------------
Total net investment - - 20,210,456 43,683,653
results -------- -------- ----------- ------------
CONTRIBUTIONS TO THE PLAN:
Employer 564,570 613,125 6,450,763 40,252,420
Employee 3,354 4,220 4,903,111 27,954,096
Rollovers - - 34,850 322,165
-------- -------- ----------- ------------
Total contributions 567,924 617,345 11,388,724 68,528,681
-------- -------- ----------- ------------
DISTRIBUTIONS TO PARTICIPANTS:
Hardship withdrawals - - (776,217) (3,220,615)
Terminations - - (930,724) (9,524,122)
-------- -------- ----------- ------------
Total distributions - - (1,706,941) (12,744,737)
-------- -------- ----------- ------------
INTERFUND TRANSFERS - - (1,682,809) -
-------- -------- ----------- ------------
NET INCREASE (DECREASE) IN NET
ASSETS AVAILABLE FOR PLAN
BENEFITS 567,924 617,345 28,209,430 99,467,597
NET ASSETS AVAILABLE FOR PLAN - - 31,828,851 210,376,187
BENEFITS, beginning of year
-------- -------- ----------- ------------
NET ASSETS AVAILABLE FOR PLAN $567,924 $617,345 $60,038,281 $309,843,784
BENEFITS, end of year ======== ======== =========== ============
</TABLE>
The accompanying notes and schedules are an integral part of this statement.
<PAGE>
PRICECOSTCO
401(k) RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1996
1. PLAN DESCRIPTION:
The following description of the PriceCostco 401(k) Retirement Plan (the
Plan) provides only general information, reflecting amendments effective as of
January 1, 1996. Participants should refer to the plan document for a more
complete description of the Plan's provisions.
The Plan is a defined-contribution plan subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
Costco Wholesale Corporation and The Price Company are wholly-owned subsidiaries
of Price/Costco, Inc. (collectively, the Company). Effective January 29, 1997,
Price/Costco, Inc. was renamed Costco Companies, Inc. Effective January 1,
1997, the Plan was renamed Costco 401(k) Retirement Plan.
ELIGIBILITY
The Plan covers certain employees of the Company, who have completed at least
1,000 hours of service within one year, based on their date of hire and who are
age 18 or older. The Price Company employees covered by a collective bargaining
agreement in the state of California are not eligible for participation.
CONTRIBUTIONS
Each year, participants may contribute from 1% to 15% of their compensation
before income taxes, subject to certain limitations set by the Internal Revenue
Service (IRS). Excess contributions returned to participants represented
contributions made in excess of IRS limitations. Participants may also
contribute amounts representing distributions from other qualified benefit or
contribution plans (known as "rollover" contributions).
The Company contributes 50 cents for every $1 contributed by participants, up to
a maximum employer matching contribution of $500. The Company may, at its
discretion, make a qualified nonelective contribution. In addition, for each
plan year, the Company may contribute a discretionary amount to the account of
each participant who is employed by the Company on the last day of the plan
year. The discretionary contribution may range from 3% to 10% of compensation
based on years of service.
<PAGE>
- 2 -
PARTICIPANT ACCOUNTS
Each participant's account is credited with his or her contribution, employer
matching and discretionary contributions, and an allocation of plan earnings.
Allocations are based on participant account balances as defined. The benefit
to which a participant is entitled is the benefit that can be provided from the
participant's vested account.
VESTING
Participants are immediately vested in their contributions and any qualified
nonelective contributions, plus actual earnings thereon. Vesting in the
employer matching and discretionary contributions is based on years of
continuous service, according to the following schedule:
Years of Service Percentage Vested
---------------- -----------------
Less than 2 0%
2-3 10
3-4 25
4-5 50
5 or more 100
FORFEITURES
During 1996, forfeitures of approximately $1,230,000 were used to reduce the
employer contributions to the Plan. Forfeitures can be restored to a
participant's account if the participant is reemployed by the Company prior to
the expiration of five consecutive years of break in service and repays the full
dollar amount distributed because of the termination within five years of the
reemployment date. As of December 31, 1996, forfeitures of approximately
$630,000 had not been used to reduce employer contributions. These forfeitures
will be used to offset future employer contributions.
INVESTMENT OPTIONS
Upon enrollment in the Plan, a participant may direct contributions in any of
the five investment options listed below. T. Rowe Price acts as trustee for all
investments, serves as investment manager for all funds and provides record
keeping of all participant accounts.
T. Rowe Price Stable Value Fund - Funds are invested primarily in high-
quality insurance company and bank-issued investment contracts.
Spectrum Income Fund - Funds are invested in a managed mix of funds
including four domestic bond funds, an international bond fund, a money
market fund and an income-oriented stock fund.
Equity Income Fund - Funds are invested in common stocks of established
companies that pay above-average dividends and have prospects of future
dividend increases.
Spectrum Growth Fund - Funds are invested in a managed mix of funds,
including five U.S. stock funds, an international stock fund and a money
market fund.
<PAGE>
- 3 -
Price/Costco Common Stock Fund - Funds are invested in common stock of
Price/Costco.
Effective January 1, 1997, the New Horizons Fund and the Mid-Cap Growth Fund
were added to the investment options listed above.
Participants may change their investment options daily.
UNIT ACCOUNTING
All contributions to a participant's account and the participant's account
balance are reflected in units of each fund selected or shares of Company stock.
As of December 31, 1996 and 1995, units held by the Plan were as follows:
Units/Shares Held at Units/Shares held at
Description of Asset December 31, 1996 December 31, 1995
- -------------------------- -------------------- --------------------
Price/Costco Common Stock 2,170,687 1,748,012
Stable Value Fund 47,323,062 28,521,750
Equity Income Fund 2,388,188 1,401,370
Spectrum Income Fund 5,775,164 6,240,591
Spectrum Growth Fund 3,614,568 2,065,805
DISTRIBUTIONS
Upon termination of employment, death or total disability, the vested interest
in a participant's account is distributed in a lump sum. Participants may apply
for a distribution of all or a portion of the vested interest at any time after
attainment of age 59-1/2. Participants are also eligible to make hardship
withdrawals from their salary deferral contributions in the event of certain
financial hardships. Following a hardship withdrawal, participants are not
allowed to contribute to the Plan for a one-year period.
PLAN ADMINISTRATOR
The Plan is administered by the Benefits Committee (the Committee), which is
appointed by the Board of Directors of the Company.
ADMINISTRATIVE EXPENSES
All administrative and custodial fees of the Plan are paid by the Company. All
investment management and transaction fees directly related to the plan
investments are shown as a reduction of net investment results.
2. SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual method of
accounting.
USE OF ESTIMATES
The preparation of financial statements requires the use of estimates. Actual
results could differ from those estimates.
<PAGE>
- 4 -
INVESTMENT VALUATION AND INCOME RECOGNITION
Investments are stated at fair value. Registered investment company funds and
Price/Costco common stock are valued using the closing price of the investments
on the last day of business of the plan year.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the ex-
dividend date. Net appreciation (depreciation) in fair value of assets
includes the change in the fair value of assets from one period to the next,
and realized gains and losses, and is computed using the moving average method.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
3. PLAN TERMINATION:
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of plan termination,
participants will become 100% vested in their accounts.
4. TAX STATUS:
The IRS has informed the Company, by a letter dated November 29, 1996, that the
Plan is designed in accordance with applicable sections of the Internal Revenue
Code. The plan administrator and the Plan's counsel believe that the Plan is
currently designed and is being operated in compliance with the applicable
requirements of the IRS.
<PAGE>
SCHEDULE I
PRICECOSTCO
401(k) RETIREMENT PLAN
EIN: 33-0572969
PIN: 002
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1996
Identity of Party Involved/
Description of Investments Cost Current Value
- ----------------------------- ------------ -------------
*T. Rowe Price:
Cash and cash equivalents $ 42,748 $ 42,748
Stable Value Fund 47,323,062 47,323,062
Equity Income Fund 45,603,810 53,829,752
Spectrum Income Fund 59,503,308 64,681,834
Spectrum Growth Fund 47,635,687 54,688,418
*Price/Costco common stock 39,933,981 54,538,510
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$240,042,596 $275,104,324
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*Represents a party in interest.
The accompanying notes are an integral part of this schedule.
<PAGE>
PRICECOSTCO
401(k) RETIREMENT PLAN
EIN: 33-0572969
PIN 002
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Purchases Sales
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Number of Number of
Description of Assets Transactions Purchase Price Transactions Sale Price Cost of Asset Gain
- ------------------------------ ------------ -------------- ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Category (iii) - Series of transactions in excess of 5% of Plan assets at beginning of year.
Price/Costco Common Stock 115 $ 7,936,762 131 $ 5,234,484 $ 4,828,055 $ 406,429
Stable Value Fund 93 13,796,922 160 5,106,974 5,106,974 -
Equity Income Fund 178 22,721,642 72 1,781,848 1,481,973 299,875
Spectrum Income Fund 52 8,477,791 184 13,118,479 12,009,515 1,108,964
Spectrum Growth Fund 188 24,087,803 66 1,571,209 1,300,163 271,046
</TABLE>
There were no Category (i), (ii) or (iv) transactions.
The accompanying notes are an integral part of this schedule.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 11-K, into the Company's previously filed
Registration Statement File No. 333-21093
/s/Arthur Andersen LLP
Seattle, Washington,
June 25, 1997
