Ross 2006 Annual Report Download - page 37

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Net earnings. Net earnings as a percentage of sales for fiscal 2006 were higher compared to fiscal 2005 primarily due to lower
cost of goods sold and higher interest income as a percentage of sales, while SG&A expenses as a percentage of sales remained
unchanged. Net earnings as a percentage of sales remained unchanged in fiscal 2005 compared to fiscal 2004 primarily due
to increased cost of goods sold and SG&A expenses as a percentage of sales, partially offset by the absence of an impairment
charge and increased interest income as a percentage of sales.
Earnings per share. Diluted earnings per share in fiscal 2006 was $1.70, compared to $1.36 in fiscal 2005. This 25% increase in
diluted earnings per share is attributable to an approximate 21% increase in net earnings and a 3% reduction in weighted aver-
age diluted shares outstanding, largely due to the repurchase of common stock under our stock repurchase program. Diluted
earnings per share in fiscal 2005 was $1.36, compared to $1.13 in fiscal 2004, inclusive of the $.06 impairment charge related to
the sale of our Newark Facility and $.01 related to lease accounting adjustments attributable to the prior fiscal year. This increase
in diluted earnings per share is due to an approximate 17% increase in net earnings and a 3% reduction in weighted average
diluted shares outstanding.
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 seasonal and new store merchandise inventory purchases, capital expenditures in connec-
tion with opening new stores, and investments in distribution centers, information systems and infrastructure. In 2006 we also
used cash to repay debt, repurchase stock under our stock repurchase program and to pay dividends.
($000) 2006 2005 2004
Cash flows from operating activities $ 506,867 $ 375,191 $ 298,157
Cash flows used in investing activities (235,941) (132,396) (199,541)
Cash flows used in financing activities (95,305) (166,359) (184,831)
Net increase (decrease) in cash and cash equivalents $ 175,621 $ 76,436 $ (86,215)
Operating Activities
Net cash provided by operating activities was $506.9 million, $375.2 million and $298.2 million in fiscal 2006, 2005 and 2004,
respectively. The primary source of cash provided by operating activities in fiscal 2006, 2005 and 2004 was net earnings plus
non-cash expenses for depreciation and amortization, partially offset by cash used to finance merchandise inventory. The
increase in accounts payable in 2006 over 2005 of $221.6 million was primarily driven by timing associated with the additional
53rd week in fiscal 2006.
Working capital (defined as current assets less current liabilities) was $431.7 million at the end of fiscal 2006, compared to
$349.9 million at the end of fiscal 2005, and $416.4 million at the end of fiscal 2004. The increase in working capital in fiscal 2006
compared to fiscal 2005 is primarily a result of higher cash and investments. The decrease in working capital in 2005 compared
to 2004 is primarily due to the inclusion of a $50.0 million term loan in current liabilities due to its near-term maturity.
Our primary source of liquidity 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 liquida-
tion of slower-moving merchandise through clearance markdowns.