Ross 2005 Annual Report Download - page 47

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The weighted average fair values per share of stock options granted during 2005, 2004 and 2003 were $7.85, $7.49, and $6.53,
respectively. The weighted average fair values of the 2005, 2004, and 2003 employee stock purchase awards were $7.97, $7.30 and
$5.81 per share, respectively.
Earnings per share (“EPS”). SFAS No. 128, “Earnings Per Share,” requires earnings per share to be computed and reported as both
basic EPS and diluted EPS. Basic EPS is computed by dividing net earnings by the weighted average number of common shares out-
standing for the period. Diluted EPS is computed by dividing net earnings by the sum of the weighted average number of common
shares and dilutive common stock equivalents outstanding during the period. Diluted EPS reflects the potential dilution that could
occur if stock options were exercised for shares of common stock.
In 2005, 2004 and 2003 there were 2,777,581, 998,549, and 273,430 shares, respectively, that could potentially dilute basic EPS
in the future that were excluded from the calculation of diluted EPS because their effect would have been anti-dilutive (option exer-
cise price exceeds average stock price) in the periods presented.
The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations (shares in thousands):
Effect of dilutive
Basic common stock Diluted
EPS equivalents EPS
2005
Shares 144,325 2,207 146,532
Amount $1.38 $ (.02) $ 1.36
2004
Shares 147,468 2,912 150,380
Amount $1.15 $ (.02) $ 1.13
2003
Shares 152,165 2,986 155,151
Amount $1.50 $ (.03) $ 1.47
Segment reporting. The Company has one reportable operating segment. The Company’s operations include only activities related to
off-price retailing in stores throughout the United States and, therefore, comprise only one segment.
Comprehensive income. Comprehensive income consists of net earnings and other comprehensive income, principally unrealized invest-
ment gains and losses.
Derivative instruments and hedging activities. SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as
amended, requires the Company to record all derivatives as either assets or liabilities on the balance sheet and to measure those
instruments at fair value. The Company had no derivative instruments as of January 28, 2006 or January 29, 2005.
New accounting pronouncements. In November 2004, the FASB issued the revised SFAS No. 151, “Inventory Costs,” which clarifies
the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). SFAS No. 151
is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company does not believe that the
adoption of SFAS No. 151 will have a material impact on the Company’s operating results or financial position.
In December 2004, the FASB issued the revised SFAS No. 123(R), “Share-Based Payment,” which establishes accounting standards
for transactions in which an entity exchanges its equity instruments for goods or services. SFAS No. 123(R) requires recognition of
stock-based compensation expense in the consolidated financial statements over the period during which an employee is required to
provide service in exchange for the award. SFAS No. 123(R) is effective for fiscal years beginning after June 15, 2005. The Company
will implement the requirements of the standard as of the beginning of its fiscal year 2006.