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[COSTCO GRAPHIC]
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
EIN 33-0572969
PIN 004
FINANCIAL STATEMENTS AND SCHEDULE
AS OF DECEMBER 31, 1999 AND 1998
TOGETHER WITH AUDITORS' REPORT
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COSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
FINANCIAL STATEMENTS AND SCHEDULE
DECEMBER 31, 1999 AND 1998
INDEX
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Statements of Net Assets Available for Plan Benefits as of December 31,
1999 and 1998
Statement of Changes in Net Assets Available for Plan Benefits for the Year
Ended December 31, 1999
NOTES TO FINANCIAL STATEMENTS AND SCHEDULE
SUPPLEMENTAL INFORMATION
Schedule I - Schedule of Assets Held for Investment Purposes as of December
31, 1999
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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 the Costco 401(k) Plan for California Union Employees as of December
31, 1999 and 1998, and the related statement of changes in net assets available
for plan benefits for the year ended December 31, 1999. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements and schedule 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 net assets available for plan benefits of the Plan as
of December 31, 1999 and 1998, and the changes in its net assets available for
plan benefits for the year ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes is presented for purposes of additional analysis and is
not a required part of the basic financial statements but is 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 supplemental schedule has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen LLP
Seattle, Washington
April 20, 2000
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COSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS:
Investments at fair value--
Shares of registered investment company funds:
Cash and cash equivalents $ 1,000 $ --
Equity Income Fund 4,608,339 3,670,379
Spectrum Income Fund 2,195,064 1,806,735
Spectrum Growth Fund 6,900,802 4,834,482
New Horizons Fund 1,160,585 521,255
Mid-Cap Growth Fund 2,000,200 914,550
Equity Index Fund 592,263 --
International Stock Fund 91,672 --
Common commingled trust fund:
Stable Value Fund 3,434,846 2,296,522
Costco Wholesale Corporation Common Stock 9,698,227 4,437,131
Participant loans 1,244,481 476,774
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Total investments 31,927,479 18,957,828
Contributions receivable--
Employer 1,353,963 1,309,553
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NET ASSETS AVAILABLE FOR PLAN BENEFITS $33,281,442 $20,267,381
=========== ===========
</TABLE>
The accompanying notes and schedule are an integral part of these statements.
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COSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
Net appreciation in fair value of investments--
Shares of registered investment company funds $ 512,927
Common stock 1,617,669
Interest 80,231
Dividends 1,691,179
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Total net investment income 3,902,006
CONTRIBUTIONS TO THE PLAN:
Employee 7,639,875
Employer 2,176,777
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Total contributions 9,816,652
DISTRIBUTIONS TO PARTICIPANTS:
In-service withdrawals (77,464)
Terminations (627,133)
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Total distributions (704,597)
NET INCREASE IN NET ASSETS AVAILABLE FOR PLAN BENEFITS 13,014,061
NET ASSETS AVAILABLE FOR PLAN BENEFITS, beginning of year 20,267,381
-----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS, end of year $33,281,442
===========
</TABLE>
The accompanying notes and schedule are an integral part of this statement.
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COSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
NOTES TO FINANCIAL STATEMENTS AND SCHEDULE
DECEMBER 31, 1999
1. PLAN DESCRIPTION:
The following description of the Costco 401(k) Plan for California Union
Employees (the Plan) provides only general information. 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).
Participants in the Plan are employees of The Price Company, a wholly owned
subsidiary of Costco Wholesale Corporation ("the Company").
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 are over the age of 18 and have completed one year of
service containing a minimum of 1,000 hours worked. The employees enter the Plan
on the entry date following the fulfillment of these requirements.
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 contribution, up to a maximum employer
matching contribution of $200 per year.
The Company also makes a contribution to all plan participants actively employed
on the last day of the plan year based upon hours worked during the plan year up
to a maximum of 80 hours per pay period (bi-weekly). Participants who reached
their fifth anniversary up to their ninth anniversary during the 1999 plan year
received $.15 per hour. Participants who reached or exceeded their tenth
anniversary during the 1999 plan year received $.25 per hour.
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PARTICIPANT ACCOUNTS
Each participant's account is credited with his or her contributions, employer
matching, Company contributions and an allocation of plan earnings based on the
daily valuation of investments. Allocations are based on participant account
balances as defined by the Plan. The benefit to which a participant is entitled
is the benefit that can be provided from his or her vested account.
VESTING
Participants are immediately vested in their contributions, plus actual earnings
thereon. Vesting in the employer matching and Company contributions is based on
years of service, according to the following schedule:
<TABLE>
<CAPTION>
Years of Service Percentage Vested
---------------- -----------------
<S> <C>
Less than 2 0%
2-3 10
3-4 25
4-5 50
5 or more 100
</TABLE>
FORFEITURES
During 1999, forfeitures of approximately $12,200 were used to reduce the
employer contributions to the Plan. Forfeitures can be restored to a
participant's account if the participant is re-employed by the Company prior to
the expiration of five consecutive breaks in service and repays the full dollar
amount distributed due to the termination within five years of the reemployment
date. As of December 31, 1999 and 1998, forfeitures of approximately $33,600 and
$22,300, respectively, 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
nine investment options consisting of seven registered investment company funds,
a common commingled trust fund and Company stock, as listed on the statements of
net assets available for plan benefits. T. Rowe Price is the trustee of all
investments, serves as investment manager for all registered investment company
and common commingled trust funds and provides recordkeeping of all participant
accounts. Funds may be temporarily invested in a cash account.
Participants may change their investment options and transfer amounts between
funds daily.
DISTRIBUTIONS
Upon termination of employment or death, the vested interest in a participant's
account is payable 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.
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PARTICIPANT LOANS
A participant may borrow the lesser of $50,000 or 45% of his or her vested
account balance, calculated using participant pre-tax, rollover, Company
matching and Company contribution amounts. However, only the participant
pre-tax, rollover and Company matching amounts are eligible to borrow against,
with a minimum loan of $1,000. Loans are payable through payroll deductions over
a period ranging up to 180 months, depending on the purpose of the loan. The
interest rate is determined by the plan administrator based on Bank of America
prime rate on the last day of the calendar quarter. The rates at December 31,
1999 ranged from 8.75% to 10.50%, depending on the type of loan. The loans have
various maturity dates, through 2014.
PLAN ADMINISTRATOR
The Plan is administered by the Benefits 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 netted against net investment income.
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 and common
commingled trust funds, and Costco Wholesale Corporation 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 in fair value of investments 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.
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ADOPTION OF SOP
The Accounting Standards Executive Committee issued Statement of Position 99-3,
"Accounting for and Reporting of Certain Defined Contribution Plan Investments
and Other Disclosure Matters" (SOP), which eliminates the requirement for a
defined contribution plan to disclose participant-directed investment programs.
The 1998 financial statement has been reclassified to eliminate the
participant-directed fund investment program disclosures.
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 30, 1998, that the
Plan is designed in accordance with applicable sections of the Internal Revenue
Code. The Plan has been amended subsequent to receiving a determination letter.
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.
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SCHEDULE I
COSTCO
401(k) PLAN FOR CALIFORNIA UNION EMPLOYEES
EIN: 33-0572969
PIN: 004
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
Identity of Party Involved/
Description of Investments Current Value
-------------------------- -------------
<S> <C>
*T. Rowe Price:
Cash and cash equivalents $ 1,000
Equity Income Fund 4,608,339
Spectrum Income Fund 2,195,064
Spectrum Growth Fund 6,900,802
New Horizons Fund 1,160,585
Mid-Cap Growth Fund 2,000,200
Equity Index Fund 592,263
International Stock Fund 91,672
Stable Value Fund 3,434,846
*Costco Wholesale Corporation Common Stock 9,698,227
*Participant loans, with interest rates of 8.75% to 10.50% maturing
through 2014
1,244,481
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$31,927,479
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</TABLE>
*Represents a party in interest.
The accompanying notes are an integral part of this schedule.
