Ross 2014 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 2014 Ross annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 80

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80

Net earnings. Net earnings as a percentage of sales for fiscal 2014 were higher than fiscal 2013 primarily due to both lower
cost of goods sold and lower SG&A expenses. Net earnings as a percentage of sales for fiscal 2013 were higher compared to
fiscal 2012 primarily due to lower cost of goods sold partially offset by higher SG&A expenses.
Earnings per share. Diluted earnings per share in fiscal 2014 was $4.42 compared to $3.88 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 2013 was $3.88 compared to $3.53 in fiscal 2012. The 10% increase in diluted
earnings per share is attributable to an approximate 6% increase in net earnings and a 4% reduction in weighted average diluted
shares outstanding, largely due to the repurchase of common stock under our stock repurchase program.
Financial Condition
Liquidity and Capital Resources
Our primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary
ongoing cash requirements are for merchandise inventory purchases, payroll, rent, taxes, and capital expenditures in connection
with new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We
also use cash to repurchase stock under our stock repurchase program and to pay dividends.
($ millions) 2014 2013 2012
Cash provided by operating activities $ 1,372.8 $ 1,022.0 $ 979.6
Cash used in investing activities (639.0) (563.8) (425.7)
Cash used in financing activities (460.4) (681.8) (557.0)
Net increase (decrease) in cash and cash equivalents $ 273.4 $ (223.6) $ (3.1)
Operating Activities
Net cash provided by operating activities was $1,372.8 million, $1,022.0 million, and $979.6 million in fiscal 2014, 2013, and
2012 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.
Net cash from operations increased in 2014 compared to 2013 primarily due to higher net earnings and an increase in accounts
payable leverage (defined as accounts payable divided by merchandise inventory). The change in accounts payable net of the
change in merchandise inventory, resulted in a source of cash of approximately $89 million in fiscal 2014 compared to a use of
cash of approximately $52 million and $39 million for fiscal 2013 and 2012, respectively. Accounts payable leverage was 73%,
62%, and 67% as of January 31, 2015, February 1, 2014, and February 2, 2013, respectively. Changes in accounts payable
leverage are primarily driven by the levels and timing of inventory receipts and payments. 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.
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 months. We expect
to continue to take advantage of packaway inventory opportunities to maximize our ability to deliver bargains to our customers.
29