Ross 2010 Annual Report Download - page 29

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Contractual Obligations
The table below presents our signifi cant contractual obligations as of January 29, 2011:
Less than 1 1 – 3 3 – 5 After 5
($000) year years years years Total
1
Senior notes $ — $ — $ — $ 150,000 $ 150,000
Interest payment obligations 9,667 19,335 19,335 40,528 88,865
Operating leases:
Rent obligations 348,287 686,203 490,638 447,547 1,972,675
Synthetic leases 5,705 6,045 — — 11,750
Other synthetic lease obligations 1,322 56,499 — — 57,821
Purchase obligations 1,320,471 11,745 — — 1,332,216
Total contractual obligations $ 1,685,452 $ 779,827 $ 509,973 $ 638,075 $ 3,613,327
1 We have a $41.8 million liability for unrecognized tax benefi ts that is included in other long-term liabilities on our consolidated balance sheet. This liability is excluded from the
schedule above as the timing of payments cannot be reasonably estimated.
Senior notes. We have two series of unsecured senior notes with various institutional investors for $150 million. The Series A
notes totaling $85 million are due in December 2018 and bear interest at a rate of 6.38%. The Series B notes totaling $65 million
are due in December 2021 and bear interest at a rate of 6.53%. Interest on these notes is included in Interest payment obligations
in the table above. These notes are subject to prepayment penalties for early payment of principal.
Borrowings under these notes are subject to certain operating and fi nancial covenants, including interest coverage and other
fi nancial ratios. As of January 29, 2011, we were in compliance with these covenants.
Off-Balance Sheet Arrangements
Operating leases. We lease our two buying offi ces, our corporate headquarters, one distribution center, one trailer parking lot,
three warehouse facilities, and all but two of our store locations. Except for certain leasehold improvements and equipment, these
leased locations do not represent long-term capital investments.
We have lease arrangements for certain equipment in our stores for our point-of-sale (“POS”) hardware and software systems.
These leases are accounted for as operating leases for fi nancial reporting purposes. The initial terms of these leases are either
two or three years, and we typically have options to renew the leases for two to three one-year periods. Alternatively, we may
purchase or return the equipment at the end of the initial or each renewal term. We have guaranteed the value of the equipment of
$1.8 million at the end of the respective initial lease terms, which is included in Other synthetic lease obligations in the table above.
We lease a 1.3 million square foot distribution center in Perris, California. The land and building for this distribution center are
fi nanced by the lessor under a $70 million ten-year synthetic lease that expires in July 2013. Rent expense on this center is
payable monthly at a fi xed 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 refi nance 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. As of January 29, 2011, we have accrued approximately $3.5 million related to an estimated shortfall in the residual
value guarantee recorded in accrued expenses and other in the accompanying consolidated balance sheets. The synthetic lease
agreement includes a prepayment penalty for early payoff of the lease. Our contractual obligation of $56 million is included in
Other synthetic lease obligations in the above table.