Ross 2014 Annual Report Download - page 35

Revolving credit facility. Our existing $600 million unsecured revolving credit facility expires in June 2017 and contains
a $300 million sublimit for issuance of standby letters of credit. Interest on this facility is based on LIBOR plus an applicable
margin (currently 100 basis points) and is payable quarterly and upon maturity. As of January 31, 2015 we had no borrowings
outstanding or standby letters of credit issued under this facility.
Our revolving credit facility has covenant restrictions requiring us to maintain certain interest coverage and other financial ratios.
In addition, the interest rates under the revolving credit facility may vary depending on actual interest coverage ratios achieved.
As of January 31, 2015 we were in compliance with these covenants.
Standby letters of credit and collateral trust. We use standby letters of credit outside of our revolving credit facility in
addition to a funded trust to collateralize our insurance obligations. As of January 31, 2015 and February 1, 2014, we had $19.5
million and $24.3 million, respectively, in standby letters of credit outstanding and $56.3 million and $47.2 million, respectively,
in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted
cash, cash equivalents, and investments.
Trade letters of credit. We had $32.8 million and $31.6 million in trade letters of credit outstanding at January 31, 2015 and
February 1, 2014, respectively.
Effects of inflation or deflation. We do not consider the effects of inflation or deflation to be material to our financial position
and results of operations.
Other
Critical Accounting Policies
The preparation of our consolidated financial statements requires our management to make estimates and assumptions that
affect the reported amounts. These estimates and assumptions are evaluated on an ongoing basis and are based on historical
experience and on various other factors that management believes to be reasonable. We believe the following critical accounting
policies describe the more significant judgments and estimates used in the preparation of our consolidated financial statements.
Merchandise inventory. Our merchandise inventory is stated at the lower of cost (determined using a weighted average
basis) or net realizable value. We purchase manufacturer overruns and canceled orders both during and at the end of a season
which are referred to as “packaway” inventory. Packaway inventory 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 the Company’s 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. Packaway inventory accounted for approximately 45%, 49%, and 47% of total inventories as of January 31,
2015, February 1, 2014, and February 2, 2013, respectively. Merchandise inventory includes acquisition, processing, and storage
costs related to packaway inventory.
Included in the carrying value of our merchandise inventory is a provision for shortage. The shortage reserve is based on
historical shortage rates as evaluated through our annual physical merchandise inventory counts and cycle counts. If actual
market conditions, markdowns, or shortage are less favorable than those projected by us, or if sales of the merchandise
inventory are more difficult than anticipated, additional merchandise inventory write-downs may be required.
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