Ross 2011 Annual Report Download - page 40

38
Merchandise inventory. Merchandise inventory is stated at the lower of cost (determined using a weighted average basis)
or net realizable value. The Company purchases manufacturer overruns and canceled orders both during and at the end of a
season which are referred to as “packaway” inventory. Packaway inventory is purchased with the intent that it will be stored in the
Company’s warehouses until a later date. The timing of the release of packaway inventory to the 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. Packaway inventory accounted for approximately 49% and 47% of total inventories as of January 28, 2012
and January 29, 2011. Merchandise inventory includes acquisition, processing, and storage costs related to packaway inventory.
The cost of the Company’s merchandise inventory is reduced by valuation reserves for shortage based on historical shortage
experience from the Company’s physical merchandise inventory counts and cycle counts.
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.
Prepaid expenses and other. Prepaid expenses and other as of January 28, 2012 and January 29, 2011 consisted of the
following:
($000) 2011 2010
Restricted cash and investments $ 18,689 $ —
Prepaid expenses 68,673 63,807
Total $ 87,362 $ 63,807
Property and equipment. Property and equipment 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 12 years for equipment and 20 to 40 years for land improvements and buildings. Depreciation and amortization expense on
property and equipment was $159.9 million, $160.7 million, and $159.0 million for fiscal 2011, 2010, and 2009, 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 $137.1 million and $102.0 million at January 28, 2012 and
January 29, 2011, respectively, are included in fixtures and equipment and are amortized over their estimated useful life, generally
ranging from five to seven years. The Company capitalizes interest during the construction period. Interest capitalized was
$0.5 million and $0.1 million in fiscal 2011 and fiscal 2010, respectively.
In the fourth quarter of 2011, the Company purchased the land and building of an existing store location in Southern California
which was previously leased, and acquired the land and buildings for its future corporate headquarters in Dublin, California, for a
combined total of approximately $100 million.