Ross 2009 Annual Report Download - page 49

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The Company also leases 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 facility that expires in July 2013. Rent expense on
this distribution 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, the Company must either refinance the distribution facility, purchase it at the amount of the then-outstanding lease
balance, or sell it to a third party. If the distribution center is sold to a third party for less than $70 million, the Company has
agreed under a residual value guarantee to pay the lessor any shortfall amount up to $56 million. The agreement includes a
prepayment penalty for early payoff of the lease.
The Company has recognized a liability and corresponding asset for the inception date estimated fair value of the residual value
guarantee in the amount of $8.3 million for the Perris, California distribution center and $0.9 million for the POS leases. These
residual value guarantees are 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 other” and “Accrued expenses and other,” 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.
The Company leases two warehouses in Carlisle, Pennsylvania with one lease expiring in 2013 and the other expiring in 2014.
In January 2009, the Company exercised a three-year option for a 255,000 square foot warehouse in Fort Mill, South Carolina,
extending the term to February 2013. In June 2008, the Company purchased a 423,000 square foot warehouse also in Fort Mill,
South Carolina. All four of these properties are used to store the Company’s packaway inventory. The Company also leases a
10-acre parcel that has been developed for trailer parking adjacent to its Perris distribution center.
The synthetic lease facilities described above, as well as the Company’s revolving credit facility and senior notes, have covenant
restrictions requiring the Company to maintain certain interest coverage and other financial ratios. In addition, the interest rates
under the revolving credit facility may vary depending on the Company’s actual interest coverage ratios. As of January 30, 2010,
the Company was in compliance with these covenants.
The Company leases approximately 181,000 square feet of office space for its corporate headquarters in Pleasanton, California,
under several facility leases. The lease terms for these facilities expire between 2011 and 2015 and contain renewal provisions.
The Company leases approximately 197,000 and 26,000 square feet of office space for its New York City and Los Angeles
buying offices, respectively. The lease terms for these facilities expire in 2021 and 2014, respectively and contain renewal
provisions.
The aggregate future minimum annual lease payments under leases in effect at January 30, 2010 are as follows:
Residual
Capital Operating Synthetic value Total
($000) leases leases leases guarantees leases
2010 $ 291 $ 333,077 $ 5,681 $ 1,564 $ 340,613
2011 34 347,150 4,674 714 352,572
2012 11 313,200 4,212 316 317,739
2013 — 276,459 1,705 56,000 334,164
2014 — 225,677 — — 225,677
Thereafter — 500,278 — — 500,278
Total minimum lease payments $ 336 $ 1,995,841 $ 16,272 $ 58,594 $ 2,071,043
Total rent expense for all leases was $336.5 million in 2009, $325.9 million in 2008, and $301.6 million in 2007.