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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) PLAN FOR CALIFORNIA UNION EMPLOYEES
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PRICE/COSTCO, INC.
999 LAKE DRIVE
ISSAQUAH, WASHINGTON 98027
(425) 313-8100
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<PAGE>
PRICECOSTCO
401(k) PLAN FOR CALIFORNIA UNION
EMPLOYEES
EIN 33-0572969
PIN 004
FINANCIAL STATEMENTS AND SCHEDULES
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE>
PRICECOSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
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) Plan for California Union Employees:
We have audited the accompanying statements of net assets available for plan
benefits of PriceCostco 401(k) Plan for California Union Employees 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 and the schedules referred to below are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules 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 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) PLAN FOR CALIFORNIA UNION EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Participant Directed
-----------------------------------------------------------------------
Stable Equity Spectrum Spectrum New
Value Income Income Growth Horizons
Fund Fund Fund Fund Fund
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value-
Registered investment company funds $792,097 $1,200,730 $676,998 $1,812,599 $ -
Price/Costco common stock - 18,510
shares held - - - - -
-------- ---------- -------- ---------- ----
Total investments 792,097 1,200,730 676,998 1,812,599 -
-------- ---------- -------- ---------- ----
Contributions receivable-
Employee 21,367 30,204 17,208 44,122 430
Employer 98 194 118 205 44
-------- ---------- -------- ---------- ----
Total receivables 21,465 30,398 17,326 44,327 474
-------- ---------- -------- ---------- ----
NET ASSETS AVAILABLE FOR PLAN BENEFITS $813,562 $1,231,128 $694,324 $1,856,926 $474
-------- ---------- -------- ---------- ----
-------- ---------- -------- ---------- ----
Participant Directed
--------------------------
Mid Cap Price/Costco
Growth Common
Stock Stock Total
---------- ----------- ----------
<S> <C> <C> <C>
ASSETS:
Investments at fair value-
Registered investment company funds $ - $ - $4,482,424
Price/Costco common stock - 18,510
shares held - 465,074 465,074
---- -------- ----------
Total investments - 465,074 4,947,498
---- -------- ----------
Contributions receivable-
Employee 433 10,866 124,630
Employer 27 153 839
---- -------- ----------
Total receivables 460 11,019 125,469
---- -------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $460 $476,093 $5,072,967
---- -------- ----------
---- -------- ----------
</TABLE>
The accompanying notes and schedules are an integral part of this statement.
<PAGE>
PRICECOSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
Participant Directed
------------------------------------------------------------------------
Stable Equity Spectrum Spectrum Price/Costco
Value Income Income Growth Common
Fund Fund Fund Fund Stock Total
---------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value-
Registered investment company funds $219,879 $328,293 $215,608 $495,216 $ - $1,258,996
Price/Costco common stock - 5,864
shares held - - - - 89,424 89,424
-------- -------- -------- -------- ------- ----------
Total investments 219,879 328,293 215,608 495,216 89,424 1,348,420
-------- -------- -------- -------- ------- ----------
Contributions receivable-
Employee 15,854 22,236 15,209 33,893 6,753 93,945
Employer 584 647 326 840 126 2,523
-------- -------- -------- -------- ------- ----------
Total receivables 16,438 22,883 15,535 34,733 6,879 96,468
-------- -------- -------- -------- ------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $236,317 $351,176 $231,143 $529,949 $96,303 $1,444,888
-------- -------- -------- -------- ------- ----------
-------- -------- -------- -------- ------- ----------
</TABLE>
The accompanying notes and schedules are an integral part of this statement.
<PAGE>
PRICECOSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Participant Directed
----------------------------------------------------------------------
Stable Equity Spectrum Spectrum New
Value Income Income Growth Horizons
Fund Fund Fund Fund Fund
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT RESULTS:
Net appreciation (depreciation) in fair
value of assets $ - $ 81,835 $ 512 $ 88,791 $ -
Interest 28,463 - 37,980 - -
Dividends - 65,076 - 125,973 -
-------- ---------- -------- ---------- ----
Total net investment results 28,463 146,911 38,492 214,764 -
-------- ---------- -------- ---------- ----
CONTRIBUTIONS TO THE PLAN:
Employer 54,373 58,344 37,888 91,452 44
Employee 502,964 698,058 426,179 1,044,015 430
-------- ---------- -------- ---------- ----
Total contributions 557,337 756,402 464,067 1,135,467 474
-------- ---------- -------- ---------- ----
DISTRIBUTIONS TO PARTICIPANTS:
Hardship withdrawals (6,522) (5,852) (4,996) (12,202) -
Terminations (8,510) (23,656) (11,373) (23,169) -
-------- ---------- -------- ---------- ----
Total distributions (15,032) (29,508) (16,369) (35,371) -
-------- ---------- -------- ---------- ----
INTERFUND TRANSFERS 6,477 6,147 (23,009) 12,117 -
-------- ---------- -------- ---------- ----
NET INCREASE IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS 577,245 879,952 463,181 1,326,977 474
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year 236,317 351,176 231,143 529,949 -
-------- ---------- -------- ---------- ----
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $813,562 $1,231,128 $694,324 $1,856,926 $474
-------- ---------- -------- ---------- ----
-------- ---------- -------- ---------- ----
Participant Directed
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Mid Cap Price/Costco
Growth Common
Stock Stock Total
---------- ----------- ----------
<S> <C> <C> <C>
NET INVESTMENT RESULTS:
Net appreciation (depreciation) in fair
value of assets $ - $126,744 $ 297,882
Interest - - 66,443
Dividends - - 191,049
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Total net investment results - 126,744 555,374
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CONTRIBUTIONS TO THE PLAN:
Employer 27 22,825 264,953
Employee 433 240,046 2,912,125
---- -------- ----------
Total contributions 460 262,871 3,177,078
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DISTRIBUTIONS TO PARTICIPANTS:
Hardship withdrawals - (3,409) (32,981)
Terminations - (4,684) (71,392)
---- -------- ----------
Total distributions - (8,093) (104,373)
---- -------- ----------
INTERFUND TRANSFERS - (1,732) -
---- -------- ----------
NET INCREASE IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS 460 379,790 3,628,079
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
beginning of year - 96,303 1,444,888
---- -------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS,
end of year $460 $476,093 $5,072,967
---- -------- ----------
---- -------- ----------
</TABLE>
The accompanying notes and schedules are an integral part of this statement.
<PAGE>
PRICECOSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1996 AND 1995
1. PLAN DESCRIPTION:
The following description of the PriceCostco 401(k) Plan for California
Union Employees (the Plan) provides only general information. Participants
should refer to the plan agreement for a more complete description of the Plan's
provisions. The Price Company and Costco Wholesale Corporation 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) Plan for
California Union Employees.
The Plan is a defined contribution plan subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
ELIGIBILITY
The Plan covers all employees covered by the collective bargaining agreement,
between The Price Company and The International Brotherhood of Teamsters in the
State of California, 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.
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). Participants may also contribute amounts representing
distributions from other qualified benefit or contribution plans (known as
"rollover" contributions). The Company matches 50% of the employee's
contributions, up to the first $250 of participant contributions to the Plan.
PARTICIPANT ACCOUNTS
Each participant's account is credited with his or her contribution, employer
matching 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 his or her
vested account.
<PAGE>
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VESTING
Participants are immediately vested in their contributions, plus actual earnings
thereon. Vesting in the employer matching 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 $3,300 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 due to the termination within five years of the
reemployment date. As of December 31, 1996, forfeitures of approximately $6,700
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 into any of
the five investment options listed below. T. Rowe Price is the
trustee of all investments, serves as investment manager for all funds and
provides record keeping of all participant accounts.
Stable Value Fund - Funds are invested primarily in high-quality insurance
company and bank-issued investment contracts.
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 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.
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.
Price/Costco Common Stock - Funds are invested in common stock of
Price/Costco.
Effective January 1, 1997, two new funds were added to the investment options
listed above. These new funds are the New Horizons Fund and the Mid-Cap Growth
Fund.
Participants may change their investment options daily.
<PAGE>
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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 Units/shares
held at held at
Description of Asset December 31, 1996 December 31, 1995
-------------------- ----------------- -----------------
Price/Costco Common Stock 18,510 5,864
Stable Value Fund 792,097 219,879
Equity Income Fund 53,273 16,406
Spectrum Income Fund 60,446 19,182
Spectrum Growth Fund 119,802 36,707
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.
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.
<PAGE>
- 4 -
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, in 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) PLAN FOR CALIFORNIA UNION EMPLOYEES
EIN: 33-0572969
PIN: 004
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:
Stable Value Fund $ 792,097 $ 792,097
Equity Income Fund 1,104,547 1,200,730
Spectrum Income Fund 670,268 676,998
Spectrum Growth Fund 1,725,826 1,812,599
*Price/Costco Common Stock 350,400 465,074
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$4,643,138 $4,947,498
---------- ----------
---------- ----------
*Represents a party in interest.
The accompanying notes are an integral part of this schedule.
<PAGE>
SCHEDULE II
PRICECOSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Purchases Sales
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Number of Purchase Number of Sale Cost of Gain/
Descriptions of Assets Transactions Price Transactions Price Asset Loss
- ---------------------- ------------ ---------- ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Category (i) - Single transactions in excess of 5% of Plan assets at beginning of year.
Spectrum Growth Fund 1 $ 125,973 - - - -
Category (iii) - Series of transactions in excess of 5% of Plan assets at beginning of year.
Price/Costco Company Stock 61 282,512 36 $36,233 $31,775 $4,458
Stable Value Fund 61 602,352 50 33,317 33,317 -
Equity Income Fund 89 829,910 38 42,549 39,317 3,232
Spectrum Income Fund 61 496,117 46 36,962 36,750 212
Spectrum Growth Fund 84 1,270,159 42 45,166 42,485 2,681
</TABLE>
There were no category (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
