Ross 2015 Annual Report Download - page 37

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Net earnings. Net earnings as a percentage of sales for fiscal 2015 were higher than fiscal 2014 primarily due to both lower
cost of goods sold and lower SG&A expenses. Net earnings as a percentage of sales for fiscal 2014 were higher compared
to fiscal 2013 primarily due to both lower cost of goods sold and lower SG&A expenses.
Earnings per share. Diluted earnings per share in fiscal 2015 was $2.51 compared to $2.21 in the prior year period. The
14% increase in diluted earnings per share is attributable to an approximate 10% increase in net earnings and a 4%
reduction in weighted average diluted shares outstanding, largely due to the repurchase of common stock under our stock
repurchase program. Diluted earnings per share in fiscal 2014 was $2.21 compared to $1.94 in fiscal 2013. The 14%
increase in diluted earnings per share is attributable to an approximate 10% increase in net earnings and a 4% reduction in
weighted average diluted shares outstanding, largely due to the repurchase of common stock under our stock repurchase
program.
Financial Condition
Liquidity and Capital Resources
Our primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our
primary ongoing cash requirements are for merchandise inventory purchases, payroll, rent, taxes, and capital expenditures
in connection with new and existing stores, and investments in distribution centers, information systems, and buying and
corporate offices. We also use cash to repurchase stock under our stock repurchase program and to pay dividends.
($ millions)
2015
2014
2013
Cash provided by operating activities
$
1,326.2
$
1,372.8
$
1,022.0
Cash used in investing activities
(362.5
)
(639.0
)
(563.8
)
Cash used in financing activities
(898.7
)
(460.4
)
(681.8
)
Net increase (decrease) in cash and cash equivalents
$
65.0
$
273.4
$
(223.6
)
Operating Activities
Net cash provided by operating activities was $1,326.2 million, $1,372.8 million, and $1,022.0 million in fiscal 2015, 2014,
and 2013, respectively, and was primarily driven by 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.
The decrease in cash flow from operating activities in fiscal 2015 compared to fiscal 2014 was primarily driven by the
changes in packaway inventory levels and the timing of packaway receipts versus last year, partially offset by higher
earnings. Changes in packaway inventory levels and the timing of packaway receipts and related payments versus last year
resulted in lower accounts payable leverage (defined as accounts payable divided by merchandise inventory) which was
67%, 73%, and 62% as of January 30, 2016, January 31, 2015, and February 1, 2014, respectively. Accounts payable
leverage at the end of fiscal 2013 was also impacted due to the timing shift of the dividend declaration from January 2014 to
February 2014.
The increase in cash flow from operating activities in 2014 compared to fiscal 2013 was primarily due to higher net earnings
and an increase in accounts payable leverage.
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 our 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