Ross 2008 Annual Report Download - page 30

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We lease a 1.3 million square foot distribution center in Perris, California. The land and building for this distribution center are
financed under a $70 million ten-year synthetic lease that expires in July 2013. Rent expense on this center is payable monthly
at a fixed annual rate of 5.8% on the lease balance of $70 million. At the end of the lease term, we have the option to either
refinance the $70 million synthetic lease facility, purchase the distribution center at the amount of the then-outstanding lease
obligation, or arrange a sale of the distribution center to a third party. If the distribution center is sold to a third party for less
than $70 million, we have agreed under a residual value guarantee to pay the lessor any shortfall amount up to $56 million.
Our contractual obligation of $56 million is included in Other synthetic lease obligations in the above table.
In accordance with Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 45, “Guarantor’s Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” we have recognized
a liability and corresponding asset for the fair value of the residual value guarantee in the amount of $8.3 million for the Perris,
California distribution center and $1.2 million for the POS leases. These residual value guarantees are being amortized on a
straight-line basis over the original terms of the leases. The current portion of the related asset and liability is recorded in prepaid
expenses and accrued expenses, respectively, and the long-term portion of the related assets and liabilities is recorded in other
long-term assets and other long-term liabilities, respectively, in the accompanying consolidated balance sheets.
In November 2001 we entered into a nine-year lease for a 239,000 square foot warehouse and a ten-year lease for a 246,000
square foot warehouse both in Carlisle, Pennsylvania. In January 2009, we exercised a three-year option for a 253,000 square
foot warehouse in Fort Mill, South Carolina, extending the term to February 2013. In June 2008, we purchased a 423,000
square foot warehouse also in Fort Mill, South Carolina. All four of these properties are used to store our packaway inventory.
We also lease a 10-acre parcel of land that has been developed for trailer parking adjacent to our Perris distribution center.
The synthetic lease facilities described above, as well as our revolving credit facility and senior notes, have covenant restrictions
requiring us to maintain certain interest coverage and other financial ratios. In addition, the interest rates under these
agreements may vary depending on actual interest coverage ratios achieved. As of January 31, 2009, we were in compliance
with these covenants.
Purchase obligations. As of January 31, 2009 we had purchase obligations of $621.1 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 $574.0 million represent purchase
obligations of less than one year as of January 31, 2009.
Commercial Credit Facilities
The table below presents our significant available commercial credit facilities at January 31, 2009:
Amount of commitment expiration per period
Total
Less than 1 1 – 3 3 – 5 After 5 Amount
($000) year years years years Committed
Commercial Credit Commitments
Revolving credit facility $ — $ 600,000 $ — $ — $ 600,000
Total commercial commitments $ — $ 600,000 $ — $ — $ 600,000
For additional information relating to this credit facility, refer to Note D of Notes to the Consolidated Financial Statements.