Ross 2006 Annual Report Download - page 40

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refinance the $70.0 million synthetic lease facility, purchase the distribution center at the amount of the then-outstanding lease
obligation, or arrange a sale of the distribution center to a third party. If the distribution center is sold to a third party for less than
$70.0 million, we have agreed under a residual value guarantee to pay the lessor any shortfall amount up to $56.0 million. Our
contractual obligation of $56.0 million is included in other synthetic lease obligations in the above table.
In accordance with Financial Accounting Standards Board (“FASB”) Interpretation (“FIN”) No. 45, “Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” we have recognized a liabil-
ity and corresponding asset for the fair value of the residual value guarantee in the amount of $8.3 million for the Perris, California
distribution center and $2.1 million for the POS leases. These residual value guarantees are being amortized on a straight-line
basis over the original terms of the leases. The current portion of the related asset and liability is recorded in prepaid expenses
and accrued expenses, respectively, and the long-term portion of the related assets and liabilities is recorded in other long-term
assets and other long-term liabilities, respectively, in the accompanying consolidated balance sheets.
In addition, we lease two separate warehouse facilities for packaway storage in Carlisle, Pennsylvania under operating leases
expiring through 2011. In June 2006, we entered into a two-year lease extension with a one-year option for our warehouse facility
in Fort Mill, South Carolina, extending the term to February 2009. These three leased facilities are being used primarily to store
packaway merchandise.
The synthetic lease facilities described above, as well as our revolving credit facility and senior notes, have covenant restrictions
requiring us to maintain certain interest coverage and leverage ratios. In addition, the interest rates under these agreements
may vary depending on actual interest coverage ratios achieved. As of February 3, 2007, we were in compliance with these
covenants.
Purchase obligations. As of February 3, 2007 we had purchase obligations of $841.8 million. These purchase obligations
primarily consist of merchandise inventory purchase orders, commitments related to store fixtures and supplies, and information
technology service and maintenance contracts. Merchandise inventory purchase orders of $788.1 million represent purchase
obligations of less than one year as of February 3, 2007.
Commercial Credit Facilities
The table below presents our significant available commercial credit facilities at February 3, 2007:
Amount of commitment expiration per period
Total
Less than 1 - 3 3 - 5 After 5 amount
($000) 1 year years years years committed
Commercial Credit Commitments
Revolving credit facility $ − $ − $ 600,000 $ − $ 600,000
Total commercial commitments $ − $ − $ 600,000 $ − $ 600,000
For additional information relating to this credit facility, refer to Note D of Notes to the Consolidated Financial Statements.
Revolving credit facility. We have available a $600.0 million revolving credit facility with our banks, which contains a $300.0
million sublimit for issuance of standby letters of credit, of which $233.6 million was available at February 3, 2007. In July 2006,
we amended this facility to extend the expiration date to July 2011 and change the letter of credit sublimit and interest pricing.
Interest is LIBOR-based plus an applicable margin (currently 45 basis points) and is payable upon borrowing maturity but no less
than quarterly. Our borrowing ability under this credit facility is subject to our maintaining certain interest coverage and leverage
ratios. As of February 3, 2007 we had no borrowings outstanding under this facility and were in compliance with the covenants.
Standby letters of credit. We use standby letters of credit to collateralize certain obligations related to our self-insured work-
ers’ compensation and general liability claims. We had $66.4 million and $61.7 million in standby letters of credit outstanding at
February 3, 2007 and January 28, 2006, respectively.