-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QkjflmPL9XIEjb1wgyENmqnewcoMV93sFKCQh3Lxg0WKkiaP0to+bkvmmApWiSRc FKSjJJBcoy/EpNAtJyQnEw== 0000912057-95-011350.txt : 19951221 0000912057-95-011350.hdr.sgml : 19951221 ACCESSION NUMBER: 0000912057-95-011350 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951208 FILED AS OF DATE: 19951220 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE/COSTCO INC CENTRAL INDEX KEY: 0000909832 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-VARIETY STORES [5331] IRS NUMBER: 330572969 STATE OF INCORPORATION: CA FISCAL YEAR END: 0830 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20355 FILM NUMBER: 95602974 BUSINESS ADDRESS: STREET 1: 4649 MORENA BOULEVARD CITY: SAN DIEGO STATE: CA ZIP: 92117 BUSINESS PHONE: 6195815350 MAIL ADDRESS: STREET 1: 4241 JUTLAND DRIVE #300 CITY: SAN DIEGO STATE: CA ZIP: 92117 DEF 14A 1 PRICE COSTCO NOTICE OF ANNUAL MEETING/PROXY [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 [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 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.
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT ------------------------------ ---------- ------ Fourcar B.V. ................. 21,191,301 10.8 Blaak 28-34 3011 TA Rotterdam, The Netherlands
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.
NAME OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT ------------------------------ ------------------------- ------- 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
- ------------------------ * 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 (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.
CURRENT POSITION WITH THE EXPIRATION OF TERM NAME COMPANY (1) AGE AS DIRECTOR ---------------------------- ------------------------------ --- ------------------ 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
- ------------------------ (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 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 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 SUMMARY COMPENSATION TABLE
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) - ---------------------------------- --------- ------------ --------- ------------------- ---------------- ------------- 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
- ------------------------ (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 $2,098, respectively, in fiscal year 1995. 6 GRANTS OF STOCK OPTIONS The following table sets forth information concerning the award of stock options to the Named Executive Officers during fiscal 1995: OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR UNDERLYING GRANTED TO OPTION TERM (C) OPTIONS/SARS EMPLOYEES EXERCISE OR EXPIRATION ---------------------- NAME GRANTED (#)(A) FISCAL YEAR (B) BASE PRICE($/SH) DATE 5% ($) 10% ($) - ------------------------- --------------- ----------------- ---------------- ---------- --------- ----------- 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
- ------------------------ (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
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 - ------------------------------------- ---------- -------------- --------------------- ------------------ 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
- ------------------------ (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 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 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 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
PRICE/COSTCO, INC. PEER GROUP INDEX S&P 500 INDEX 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
ASSUMES $100 INVESTED ON OCT. 21, 1993 ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING SEPT. 03, 1995 10 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. 11 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 12 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.: (3) Filing Party: (4) Date Filed: -----END PRIVACY-ENHANCED MESSAGE-----