Ross 2007 Annual Report Download - page 46

Download and view the complete annual report

Please find page 46 of the 2007 Ross annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 82

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82

44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A: Summary of Significant Accounting Policies
Business. Ross Stores, Inc. and its subsidiaries (the “Company”) is an off-price retailer of first-quality, name brand apparel, shoes
and accessories for the entire family, as well as gift items, linens and other home-related merchandise. At the end of fiscal 2007,
there were 838 Ross Dress for Less® (“Ross”) locations in 27 states and Guam and 52 dd’s DISCOUNTS® stores in four states,
which are supported by four distribution centers. The Company’s headquarters, two distribution centers and 26% of its stores
are located in California.
Basis of presentation and fiscal year. The consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly-owned. Intercompany transactions and accounts have been eliminated. The Company follows
the National Retail Federation fiscal calendar and utilizes a 52-53 week fiscal year whereby the fiscal year ends on the Saturday
nearest to January 31. The fiscal years ended February 2, 2008, February 3, 2007 and January 28, 2006 are referred to as fiscal
2007, fiscal 2006 and fiscal 2005, respectively. Fiscal 2006 was 53 weeks. Fiscal 2007 and 2005 were 52 weeks.
Use of accounting estimates. The preparation of consolidated financial statements in conformity with Generally Accepted
Accounting Principles in the United States of America (“GAAP”) requires the Company to make estimates and assumptions
that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The Company’s significant accounting estimates include valuation of merchandise
inventory and long-lived assets, and accruals for self-insurance.
Purchase obligations. As of February 2, 2008, the Company had purchase obligations of $771.1 million. These purchase
obligations primarily consist of merchandise inventory purchase orders, commitments related to store fixtures and supplies, and
information technology service and maintenance contracts. Merchandise inventory purchase orders of $692.9 million represent
purchase obligations of less than one year as of February 2, 2008.
Cash and cash equivalents. Cash and cash equivalents are highly liquid, fixed income instruments purchased with an original
maturity of three months or less.
Investments. The Company’s investments are comprised of various debt and equity investment securities. At February 2,
2008 and February 3, 2007, these investments were classified as available-for-sale and are stated at fair value. Investments are
classified as either short-term or long-term based on their original maturities. Investments with an original maturity of less than
one year are classified as short-term. See Note B for additional information.
Merchandise inventory. Merchandise inventory is stated at the lower of cost (determined using a weighted average basis)
or net realizable value. The Company purchases manufacturer overruns and canceled orders both during and at the end of a
season which are referred to as “packaway” inventory. Packaway inventory is purchased with the intent that it will be stored in
the Company’s warehouses until a later date, which may even be the beginning of the same selling season in the following year.
Packaway inventory accounted for approximately 38% of total inventories as of February 2, 2008 and February 3, 2007. The cost
of the Company’s merchandise inventory is reduced by valuation reserves for shortage based on historical shortage experience
from the Company’s physical merchandise inventory counts and cycle counts.
Cost of goods sold. In addition to product costs, the Company includes in cost of goods sold its buying, distribution and
freight expenses as well as occupancy costs, and depreciation and amortization related to the Company’s retail stores, buying
and distribution facilities. Buying expenses include costs to procure merchandise inventories. Distribution expenses include
the cost of operating the Company’s distribution centers. Beginning in fiscal 2006, the portion of stock option and employee
stock purchase plan (“ESPP”) expenses included in stock-based compensation expense for personnel in the merchandising and
distribution organizations is included in cost of goods sold.