Ross 2009 Annual Report Download - page 41

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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.
Property and equipment. Property and equipment, which include amounts recorded under capital leases, are stated at cost,
less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated
useful life of the asset, typically ranging from five to twelve years for equipment and 20 to 40 years for real property. Depreciation
and amortization expense on property and equipment was $153.1 million, $134.0 million and $120.7 million for fiscal 2009,
2008, and 2007, respectively. The cost of leasehold improvements is amortized over the useful life of the asset or the applicable
lease term, whichever is less. Computer hardware and software costs, net of amortization, of $106.7 million and $125.8 million
at January 30, 2010 and January 31, 2009, respectively, are included in fixtures and equipment and are amortized over their
estimated useful life generally ranging from five to seven years. Capital leases, net of depreciation, of $0.6 million at January 30,
2010 consist of distribution center equipment and have terms of two to three years. The Company capitalizes interest during the
construction period. Interest capitalized was $1.8 million and $3.2 million in fiscal 2009 and fiscal 2008, respectively.
Other long-term assets. Other long-term assets as of January 30, 2010 and January 31, 2009 consisted of the following:
($000) 2009 2008
Deferred compensation (Note B) $ 50,706 $ 37,304
Goodwill 2,889 2,889
Deposits 3,000 3,851
Other 6,744 8,082
Total $ 63,339 $ 52,126
Other assets are principally comprised of prepaid rent and other long term prepayments.
Property, other long-term assets, and certain identifiable intangibles that are subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Intangible
assets that are not subject to amortization, including goodwill, are tested for impairment annually or more frequently if events or
changes in circumstances indicate that the asset may be impaired. Based on the Company’s evaluation during fiscal 2009, fiscal
2008, and fiscal 2007, no impairment charges were recorded.
Store closures. The Company continually reviews the operating performance of individual stores. For stores that are closed,
the Company records a liability for future minimum lease payments net of estimated sublease recoveries and related ancillary
costs at the time the liability is incurred. In 2009, the Company closed three Ross Dress for Less and four dd’s DISCOUNTS
locations. In 2008, the Company closed six Ross Dress for Less and five dd’s DISCOUNTS locations. The lease loss liability
related to certain of these closed stores was $6.2 million and $1.0 million, as of January 30, 2010 and January 31, 2009,
respectively. Operating costs, including depreciation, of stores to be closed are expensed during the period they remain in use.
Accounts payable. Accounts payable represents amounts owed to third parties at the end of the period. Accounts payable
includes book cash overdrafts (checks issued under zero balance accounts not yet presented for payment) in excess of
cash balances in such accounts of approximately $125.7 million and $97.2 million at January 30, 2010 and January 31, 2009,
respectively. The Company includes the change in book cash overdrafts in operating cash flows.