Ross 2007 Annual Report Download - page 35

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Taxes on earnings. Our effective tax rate for fiscal 2007, 2006 and 2005 was approximately 39%, which represents the
applicable combined federal and state statutory rates reduced by the federal benefit of state taxes deductible on federal
returns. The effective rate is affected by changes in law, location of new stores, level of earnings and the result of tax audits. We
anticipate that our effective tax rate for fiscal 2008 will be in the range of 38% to 40%.
Net earnings. Net earnings as a percentage of sales for fiscal 2007 were higher compared to fiscal 2006 primarily due to lower
cost of goods sold as a percentage of sales, partially offset by higher SG&A expenses as a percentage of sales. Net earnings as
a percentage of sales for fiscal 2006 were higher compared to fiscal 2005 primarily due to lower cost of goods sold and higher
interest income as a percentage of sales while SG&A expenses as a percentage of sales remained unchanged.
Earnings per share. Diluted earnings per share in fiscal 2007 were $1.90, compared to $1.70 in fiscal 2006 on a 53-week basis.
This 12% increase in diluted earnings per share is attributable to an approximate 8% increase in net earnings and a 3% reduction
in weighted average diluted shares outstanding, largely due to the repurchase of common stock under our stock repurchase
program. Diluted earnings per share in fiscal 2006 were $1.70, compared to $1.36 in fiscal 2005. This 25% increase in diluted
earnings per share is attributable to an approximate 21% increase in net earnings and a 3% reduction in weighted average
diluted shares outstanding largely due to the repurchase of common stock under our stock repurchase program.
Financial Condition
Liquidity and Capital Resources
Ourprimarysourcesoffundsforourbusinessactivitiesarecashowsfromoperationsandshort-termtradecredit.Ourprimary
ongoing cash requirements are for seasonal and new store merchandise inventory purchases, capital expenditures in connection
with opening new stores, and investments in distribution centers, information systems and infrastructure. We also use cash to
repurchase stock under our stock repurchase program and to pay dividends.
($000)
2007 2006 2005
Cashowsfromoperatingactivities $ 353,559 $ 506,867 $ 375,191
Cashowsusedininvestingactivities  (244,743) (235,941) (132,396)
Cashowsusedinnancingactivities (218,624) (95,305) (166,359)
Net (decrease) increase in cash and cash equivalents $ (109,808) $ 175,621 $ 76,436
Operating Activities
Net cash provided by operating activities was $353.6 million, $506.9 million and $375.2 million in fiscal 2007, 2006 and 2005,
respectively. The primary source of cash provided by operating activities in fiscal 2007, 2006 and 2005 was net earnings plus
non-cash expenses for depreciation and amortization, partially offset by cash used to finance merchandise inventory. The
increaseincashowfromoperatingactivitiesresultedfromanincreaseinaccountspayablein2006over2005of$221.6million
primarily driven by timing associated with the additional 53rd week in fiscal 2006.
Working capital (defined as current assets less current liabilities) was $387.4 million at the end of fiscal 2007, compared to
$431.7 million at the end of fiscal 2006, and $349.9 million at the end of fiscal 2005. The decrease in working capital in fiscal
2007 compared to fiscal 2006 is primarily due to lower cash and investments and timing associated with the additional 53rd
week in fiscal 2006. The increase in working capital in fiscal 2006 compared to fiscal 2005 is primarily due to higher cash and
investments.
Our primary source of liquidity is the sale of our merchandise inventory. We regularly review the age and condition of our
merchandise and are able to maintain current merchandise inventory in our stores through replenishment processes and
liquidation of slower-moving merchandise through clearance markdowns.