Ross 2011 Annual Report Download - page 28

26
Financial Condition
Liquidity and Capital Resources
Our primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary
ongoing cash requirements are for merchandise inventory purchases, payroll, rent, taxes, capital expenditures in connection with
opening new stores, and investments in distribution centers and information systems. We also use cash to repurchase stock under
our stock repurchase program and to pay dividends.
($ millions) 2011 2010 2009
Cash provided by operating activities $ 820.1 $ 673.0 $ 888.4
Cash used in investing activities (471.8) (196.8) (136.8)
Cash used in financing activities (532.4) (410.6) (304.6)
Net (decrease) increase in cash and cash equivalents $ (184.1) $ 65.6 $ 447.0
Operating Activities
Net cash provided by operating activities was $820.1 million, $673.0 million, and $888.4 million in fiscal 2011, 2010, and 2009,
respectively. The primary sources of cash provided by operating activities in fiscal 2011, 2010, and 2009 were net earnings excluding
non-cash expenses for depreciation and amortization. Our primary source of operating cash flow is the sale of our merchandise
inventory. We regularly review the age and condition of our merchandise and are able to maintain current merchandise inventory in
our stores through replenishment processes and liquidation of slower-moving merchandise through clearance markdowns.
Net cash from operations increased in 2011 compared to 2010 primarily due to higher net earnings and lower working capital
used to purchase additional packaway inventory. We expect to continue to take advantage of packaway inventory opportunities
to deliver bargains to our customers. As a regular part of our business, packaway inventory levels will vary over time based on
availability of compelling opportunities in the marketplace.
Packaway merchandise is purchased with the intent that it will be stored in our warehouses until a later date. The timing of the
release of packaway inventory to our stores is principally driven by the product mix and seasonality of the merchandise, and its
relation to the Company’s store merchandise assortment plans. As such, the aging of packaway varies by merchandise category
and seasonality of purchase, but typically packaway remains in storage less than six months.
Changes in packaway inventory levels impact our operating cash flow. At the end of fiscal 2011, packaway inventory was 49% of
total inventory compared to 47% and 38% at the end of fiscal 2010 and 2009, respectively. Packaway inventory as a percentage
of our total inventory has increased since 2010 as we took advantage of the increased availability of compelling opportunities in the
marketplace.
The change in total merchandise inventory, net of the related change in accounts payable, resulted in a use of cash of
approximately $55 million and $112 million for fiscal 2011 and 2010, respectively.
Accounts payable leverage (defined as accounts payable divided by merchandise inventory) decreased to 67% as of January 28,
2012 from 71% as of January 29, 2011 as a result of higher packaway inventory.
We believe that our existing cash balances, cash flows from operations, available bank credit lines and trade credit are adequate to
meet our liquidity needs for at least the next twelve months.
Investing Activities
Net cash used in investing activities was $471.8 million, $196.8 million, and $136.8 million in fiscal 2011, 2010, and 2009,
respectively. The increase in cash used for investing activities for fiscal 2011, compared to the prior year was primarily due to higher
capital expenditures and a transfer of funds into restricted accounts to serve as collateral for our insurance obligations.