Ross 2007 Annual Report Download - page 54

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Prior to fiscal 2006, the Company had accounted for share-based compensation costs in accordance with APB No. 25, as
permitted by SFAS No. 123. Had compensation costs for the Company’s stock option plans been determined based on the fair
value at the grant dates for awards under those plans consistent with the methods of SFAS No. 123, the Company’s net earnings
and earnings per share would have been reduced to the pro forma amounts indicated below:
($000, except per share data) 2005
Net earnings As reported $ 199,632
Add: Stock-based employee compensation expense
included in reported net earnings, net of tax 10,134
Deduct: Stock-based employee compensation
expense determined under the fair value based
method for all awards, net of tax (19,793)
Net earnings Pro forma $ 189,973
Basic earnings per share As reported $ 1.38
Pro forma $ 1.32
Diluted earnings per share As reported $ 1.36
Pro forma $ 1.30
The weighted average fair values per share of stock options granted during fiscal 2007, 2006 and 2005 were $9.12, $8.52 and
$7.85, respectively. The weighted average fair values per share of employee stock purchase awards for fiscal 2007, 2006 and
2005 were $8.02, $7.72 and $7.97, respectively.
Note D: Debt
Bank credit facilities. In July 2006, the Company amended its existing $600 million revolving credit facility with its banks,
extending the expiration date to July 2011, extending the standby letter of credit sublimit to 50% of the revolving credit, and
changing the interest rate to LIBOR plus 45 basis points. This facility contains a $300 million sublimit for issuance of standby
letters of credit, of which $238.9 million was available at February 2, 2008. Interest is payable upon borrowing maturity but no
less than quarterly. Borrowing under this credit facility is subject to the Company maintaining certain interest coverage and
leverage ratios. The Company had no borrowings outstanding under this facility as of February 2, 2008 and was in compliance
with the covenants.
Term debt. In March 2006, the Company repaid its $50 million term debt in full. The borrowing was made in 2002 to finance
equipment and information systems for the Company’s Perris, California distribution center.
Senior Notes. In October 2006, the Company entered into a Note Purchase Agreement with various institutional investors for
$150 million of unsecured senior notes. The notes were issued in two series and funding occurred in December 2006. Series
A notes were issued, for an aggregate of $85 million, are due in December 2018 and bear interest at a rate of 6.38%. Series B
notes were issued, for an aggregate of $65 million, are due in December 2021 and bear interest at a rate of 6.53%. The fair value
of these notes as of February 2, 2008 of approximately $147 million is estimated by obtaining market quotes. Borrowings under
these notes are subject to certain operating and financial covenants including maintaining certain interest coverage and leverage
ratios. As of February 2, 2008, the Company was in compliance with these covenants.
Letters of credit. The Company uses standby letters of credit to collateralize certain obligations related to its self-insured
workers’ compensation and general liability programs. The Company had $61.1 million and $66.4 million in standby letters
of credit and $20.8 million and $26.0 million in trade letters of credit outstanding at February 2, 2008 and February 3, 2007,
respectively.