UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
(Mark
one)
|
||
| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended July 31, 2010 | ||
| or | ||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the transition period from ________ to ________ | ||
| Commission file number: 0-14678 | ||
Ross Stores, Inc.
(Exact name of registrant as specified in its charter)
(Exact name of registrant as specified in its charter)
| Delaware | 94-1390387 | |
| (State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) | |
| organization) | ||
| 4440 Rosewood Drive, Pleasanton, California | 94588-3050 | |
| (Address of principal executive offices) | (Zip Code) | |
| Registrant's telephone number, including area code | (925) 965-4400 | |
| Former name, former address and former fiscal year, if | N/A | |
| changed since last report. | ||
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes
X No
Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files). Yes
X No
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer X Accelerated filer Non-accelerated filer Smaller reporting company
Large accelerated filer X Accelerated filer Non-accelerated filer Smaller reporting company
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
No
X
The number of shares of Common Stock,
with $.01 par value, outstanding on August 19, 2010 was 120,457,145.
PART I. FINANCIAL
INFORMATION
Item 1. Financial
Statements
Condensed Consolidated Statements of
Earnings
| Three Months Ended | Six Months Ended | |||||||||||
| July 31, | August 1, | July 31, | August 1, | |||||||||
| ($000, except stores and per share data, unaudited) | 2010 | 2009 | 2010 | 2009 | ||||||||
| Sales | $ | 1,911,760 | $ | 1,768,636 | $ | 3,846,538 | $ | 3,460,235 | ||||
| Costs and Expenses | ||||||||||||
| Costs of goods sold | 1,395,785 | 1,311,136 | 2,801,867 | 2,579,845 | ||||||||
| Selling, general and administrative | 303,402 | 286,158 | 597,874 | 558,188 | ||||||||
| Interest expense, net | 2,436 | 1,390 | 4,824 | 3,046 | ||||||||
| Total costs and expenses | 1,701,623 | 1,598,684 | 3,404,565 | 3,141,079 | ||||||||
| Earnings before taxes | 210,137 | 169,952 | 441,973 | 319,156 | ||||||||
| Provision for taxes on earnings | 80,861 | 66,545 | 170,350 | 124,362 | ||||||||
| Net earnings | $ | 129,276 | $ | 103,407 | $ | 271,623 | $ | 194,794 | ||||
| Earnings per share | ||||||||||||
| Basic | $ | 1.09 | $ | 0.84 | $ | 2.28 | $ | 1.57 | ||||
| Diluted | $ | 1.07 | $ | 0.82 | $ | 2.24 | $ | 1.55 | ||||
| Weighted average shares outstanding (000) | ||||||||||||
| Basic | 118,615 | 123,467 | 119,222 | 124,080 | ||||||||
| Diluted | 120,562 | 125,658 | 121,243 | 126,063 | ||||||||
| Dividends | ||||||||||||
| Cash dividends declared per share | $ | 0.16 | $ | 0.11 | $ | 0.16 | $ | 0.11 | ||||
| Stores open at end of period | 1,036 | 990 | 1,036 | 990 | ||||||||
| See notes to condensed consolidated financial statements. | ||||||||||||
2
Condensed Consolidated Balance
Sheets
| July 31, | January 30, | August 1, | |||||||
| ($000, unaudited) | 2010 | 2010 | 2009 | ||||||
| Assets | |||||||||
| Current Assets | |||||||||
| Cash and cash equivalents | $ | 772,671 | $ | 768,343 | $ | 520,424 | |||
| Short-term investments | 2,491 | 1,754 | 1,135 | ||||||
| Accounts receivable | 53,079 | 44,234 | 49,375 | ||||||
| Merchandise inventory | 915,704 | 872,498 | 926,244 | ||||||
| Prepaid expenses and other | 66,653 | 58,618 | 63,926 | ||||||
| Deferred income taxes | 4,249 | - | 13,669 | ||||||
| Total current assets | 1,814,847 | 1,745,447 | 1,574,773 | ||||||
| Property and Equipment | |||||||||
| Land and buildings | 240,706 | 239,688 | 238,141 | ||||||
| Fixtures and equipment | 1,221,915 | 1,189,538 | 1,140,501 | ||||||
| Leasehold improvements | 548,813 | 536,979 | 518,978 | ||||||
| Construction-in-progress | 41,143 | 21,812 | 20,598 | ||||||
| 2,052,577 | 1,988,017 | 1,918,218 | |||||||
| Less accumulated depreciation and amortization | 1,107,242 | 1,045,018 | 975,473 | ||||||
| Property and equipment, net | 945,335 | 942,999 | 942,745 | ||||||
| Long-term investments | 18,535 | 16,848 | 21,752 | ||||||
| Other long-term assets | 72,146 | 63,339 | 61,379 | ||||||
| Total assets | $ | 2,850,863 | $ | 2,768,633 | $ | 2,600,649 | |||
| Liabilities and Stockholders’ Equity | |||||||||
| Current Liabilities | |||||||||
| Accounts payable | $ | 745,461 | $ | 658,299 | $ | 702,977 | |||
| Accrued expenses and other | 244,460 | 259,582 | 219,479 | ||||||
| Accrued payroll and benefits | 181,611 | 218,234 | 172,913 | ||||||
| Income taxes payable | 8,070 | 51,505 | 11,268 | ||||||
| Deferred income taxes | - | 2,894 | - | ||||||
| Total current liabilities | 1,179,602 | 1,190,514 | 1,106,637 | ||||||
| Long-term debt | 150,000 | 150,000 | 150,000 | ||||||
| Other long-term liabilities | 184,324 | 174,543 | 168,558 | ||||||
| Deferred income taxes | 80,088 | 96,283 | 106,032 | ||||||
| Commitments and contingencies | |||||||||
| Stockholders’ Equity | |||||||||
| Common stock | 1,207 | 1,229 | 1,251 | ||||||
| Additional paid-in capital | 713,750 | 681,908 | 660,896 | ||||||
| Treasury stock | (44,306) | (36,864) | (35,366) | ||||||
| Accumulated other comprehensive income (loss) | 562 | 170 | (188) | ||||||
| Retained earnings | 585,636 | 510,850 | 442,829 | ||||||
| Total stockholders’ equity | 1,256,849 | 1,157,293 | 1,069,422 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,850,863 | $ | 2,768,633 | $ | 2,600,649 | |||
| See notes to condensed consolidated financial statements. | |||||||||
3
Condensed Consolidated Statements of Cash
Flows
| Six Months Ended | ||||||
| July 31, | August 1, | |||||
| ($000, unaudited) | 2010 | 2009 | ||||
| Cash Flows From Operating Activities | ||||||
| Net earnings | $ | 271,623 | $ | 194,794 | ||
| Adjustments to reconcile net earnings to net cash provided | ||||||
| by operating activities: | ||||||
| Depreciation and amortization | 80,161 | 75,502 | ||||
| Stock-based compensation | 18,253 | 13,017 | ||||
| Deferred income taxes | (23,337) | 9,400 | ||||
| Tax benefit from equity issuance | 8,801 | 5,256 | ||||
| Excess tax benefit from stock-based compensation | (8,597) | (4,008) | ||||
| Change in assets and liabilities: | ||||||
| Merchandise inventory | (43,206) | (45,186) | ||||
| Other current assets | (16,880) | (16,890) | ||||
| Accounts payable | 106,831 | 180,240 | ||||
| Other current liabilities | (89,771) | (678) | ||||
| Other long-term, net | 959 | 2,521 | ||||
| Net cash provided by operating activities | 304,837 | 413,968 | ||||
| Cash Flows From Investing Activities | ||||||
| Additions to property and equipment | (88,122) | (80,731) | ||||
| Proceeds from sales of property and equipment | - | 10 | ||||
| Purchases of investments | (6,842) | (2,553) | ||||
| Proceeds from investments | 5,020 | 19,364 | ||||
| Net cash used in investing activities | (89,944) | (63,910) | ||||
| Cash Flows From Financing Activities | ||||||
| Excess tax benefit from stock-based compensation | 8,597 | 4,008 | ||||
| Issuance of common stock related to stock plans | 20,366 | 31,745 | ||||
| Treasury stock purchased | (7,442) | (4,546) | ||||
| Repurchase of common stock | (192,982) | (154,371) | ||||
| Dividends paid | (39,104) | (27,825) | ||||
| Net cash used in financing activities | (210,565) | (150,989) | ||||
| Net increase in cash and cash equivalents | 4,328 | 199,069 | ||||
| Cash and cash equivalents: | ||||||
| Beginning of period | 768,343 | 321,355 | ||||
| End of period | $ | 772,671 | $ | 520,424 | ||
| Supplemental Cash Flow Disclosures | ||||||
| Interest paid | $ | 4,834 | $ | 4,834 | ||
| Income taxes paid | $ | 225,628 | $ | 105,012 | ||
| Non-Cash Investing Activities | ||||||
| Increase in fair value of investment securities | $ | 604 | $ | 886 | ||
| See notes to condensed consolidated financial statements. | ||||||
4
Notes to Condensed Consolidated Financial
Statements
Three and Six
Months Ended July 31, 2010 and August 1, 2009
(Unaudited)
(Unaudited)
Note A: Summary of Significant Accounting
Policies
Basis of Presentation.
The accompanying
unaudited interim condensed consolidated financial statements have been prepared
from the records of Ross Stores, Inc. and subsidiaries (the “Company”) without
audit and, in the opinion of management, include all adjustments (consisting of
only normal, recurring adjustments) necessary to present fairly the Company’s
financial position as of July 31, 2010 and August 1, 2009, the results of
operations for the three and six month periods ended July 31, 2010 and August 1,
2009, and cash flows for the six month periods ended July 31, 2010 and August 1,
2009. The Condensed Consolidated Balance Sheet as of January 30, 2010, presented
herein, has been derived from the Company’s audited consolidated financial
statements for the fiscal year then ended.
Accounting
policies followed by the Company are described in Note A to the audited
consolidated financial statements for the fiscal year ended January 30, 2010.
Certain information and disclosures normally included in the notes to annual
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted for purposes of these interim condensed consolidated
financial statements. The interim condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial
statements, including notes thereto, contained in the Company’s Annual Report on
Form 10-K for the year ended January 30, 2010.
The results of
operations for the three and six month periods ended July 31, 2010 and August 1,
2009 presented herein are not necessarily indicative of the results to be
expected for the full fiscal year.
Total comprehensive
income. The
components of total comprehensive income for the three and six month periods
ended July 31, 2010 and August 1, 2009 are as follows (in $000):
| Three Months Ended | Six Months Ended | |||||||||||||
| July 31, | August 1, | July 31, | August 1, | |||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||
| Net income | $ | 129,276 | $ | 103,407 | $ | 271,623 | $ | 194,794 | ||||||
| Change in unrealized gain on investments, | ||||||||||||||
| net of taxes | 364 | 440 | 392 | 576 | ||||||||||
| Total comprehensive income | $ | 129,640 | $ | 103,847 | $ | 272,015 | $ | 195,370 | ||||||
Estimated fair value of financial
instruments. The
carrying value of cash and cash equivalents, short- and long-term investments,
accounts receivable, and accounts payable approximates their estimated fair
value.
5
Sales Mix. The Company’s sales mix is shown below
for the three and six month periods ended July 31, 2010 and August 1, 2009:
| Three Months Ended | Six Months Ended | ||||||||
| July 31, | August 1, | July 31, | August 1, | ||||||
| 2010 | 2009 | 2010 | 2009 | ||||||
| Ladies | 32% | 33% | 32% | 33% | |||||
| Home accents and bed and bath | 24% | 22% | 24% | 22% | |||||
| Shoes | 12% | 12% | 13% | 12% | |||||
| Men's | 13% | 13% | 12% | 13% | |||||
| Accessories, lingerie, fine jewelry, and fragrances | 11% | 12% | 11% | 12% | |||||
| Children's | 8% | 8% | 8% | 8% | |||||
| Total | 100% | 100% | 100% | 100% | |||||
Dividends. Dividends included in the Condensed Consolidated Statements of Cash Flows
reflect dividends paid during the periods shown. Dividends per share shown on
the Condensed Consolidated Statements of Earnings reflect dividends declared
during the periods shown. In January and May 2010 the Company’s Board of
Directors declared a quarterly cash dividend of $.16 per common share that was
paid in March and June 2010, respectively. In January, May, August, and November
2009, the Company’s Board of Directors declared a quarterly cash dividend of
$.11 per common share that was paid in March, June, September, and December
2009, respectively.
In August 2010,
the Company’s Board of Directors declared a cash dividend of $.16 per common
share, payable on September 30, 2010.
Provision for litigation costs and other
legal proceedings. Like many California retailers, the Company has been named in class
action lawsuits regarding wage and hour claims. Class action litigation
involving allegations that hourly associates have missed meal and/or rest break
periods, as well as allegations of unpaid overtime wages to store managers and
assistant store managers at Company stores under state law, remains pending as
of July 31, 2010.
The Company is
also party to various other legal proceedings arising in the normal course of
business. Actions filed against the Company include commercial, product,
customer, intellectual property, and labor and employment-related claims,
including lawsuits in which plaintiffs allege that the Company violated state or
federal laws. Actions against the Company are in various procedural stages. Many
of these proceedings raise factual and legal issues and are subject to
uncertainties.
In the opinion
of management, the resolution of pending class action litigation and other
currently pending legal proceedings is not expected to have a material adverse
effect on the Company’s financial condition, results of operations, or cash
flows.
6
Note B: Investments
The amortized
cost and fair value of the Company’s available-for-sale securities as of July
31, 2010 were:
| Amortized | Unrealized | Unrealized | ||||||||||||||||||
| ($000) | cost | gains | losses | Fair value | Short-term | Long-term | ||||||||||||||
| Corporate securities | $ | 8,157 | $ | 681 | $ | (54) | $ | 8,784 | $ | 1,009 | $ | 7,775 | ||||||||
| U.S. Government and agency | ||||||||||||||||||||
| securities | 10,572 | 174 | (2) | 10,744 | 352 | 10,392 | ||||||||||||||
| Mortgage-backed securities | 1,433 | 65 | - | 1,498 | 1,130 | 368 | ||||||||||||||
| Total | $ | 20,162 | $ | 920 | $ | (56) | $ | 21,026 | $ | 2,491 | $ | 18,535 | ||||||||
The amortized
cost and fair value of the Company’s available-for-sale securities as of January
30, 2010 were:
| Amortized | Unrealized | Unrealized | ||||||||||||||||||
| ($000) | cost | gains | losses | Fair value | Short-term | Long-term | ||||||||||||||
| Auction-rate securities | $ | 1,050 | $ | - | $ | (158) | $ | 892 | $ | - | $ | 892 | ||||||||
| Corporate securities | 9,704 | 567 | (67) | 10,204 | 1,073 | 9,131 | ||||||||||||||
| U.S. Government and agency | ||||||||||||||||||||
| securities | 5,247 | 30 | (187) | 5,090 | - | 5,090 | ||||||||||||||
| Mortgage-backed securities | 2,340 | 79 | (3) | 2,416 | 681 | 1,735 | ||||||||||||||
| Total | $ | 18,341 | $ | 676 | $ | (415) | $ | 18,602 | $ | 1,754 | $ | 16,848 | ||||||||
The amortized
cost and fair value of the Company’s available-for-sale securities as of August
1, 2009 were:
| Amortized | Unrealized | Unrealized | ||||||||||||||||||
| ($000) | cost | gains | losses | Fair value | Short-term | Long-term | ||||||||||||||
| Auction-rate securities | $ | 1,050 | $ | - | $ | - | $ | 1,050 | $ | - | $ | 1,050 | ||||||||
| Asset-backed securities | 791 | 3 | (215) | 579 | 195 | 384 | ||||||||||||||
| Corporate securities | 10,556 | 459 | (224) | 10,791 | 355 | 10,436 | ||||||||||||||
| U.S. Government and agency | ||||||||||||||||||||
| securities | 6,087 | 46 | (199) | 5,934 | - | 5,934 | ||||||||||||||
| Mortgage-backed securities | 4,691 | 217 | (375) | 4,533 | 585 | 3,948 | ||||||||||||||
| Total | $ | 23,175 | $ | 725 | $ | (1,013) | $ | 22,887 | $ | 1,135 | $ | 21,752 | ||||||||
At July 31,
2010, $1.2 million of investments had gross unrealized losses of $0.1 million
that had been in a continuous unrealized loss position for more than twelve
months. These unrealized losses on investments were caused primarily by the
decline in market values of floating rate corporate securities. The Company does
not consider these investments to be other than temporarily impaired at July 31,
2010.
7
In applying the
valuation principles to financial assets and liabilities, a three-tier fair
value hierarchy was used to prioritize the inputs used in the valuation
methodologies as follows:
Level 1—Observable inputs that reflect quoted prices (unadjusted) for
identical assets or liabilities in active markets.
Level 2—Include other inputs that are
directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are
supported by little or no market activity.
This fair value
hierarchy also requires the Company to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. Corporate,
U.S. Government and agency, and mortgage-backed securities are classified within
Level 1 or Level 2 because these securities are valued using quoted market
prices or alternative pricing sources and models utilizing market observable
inputs.
Assets measured
at fair value on a recurring basis at July 31, 2010 are summarized below:
| Fair Value Measurements at Reporting Date | ||||||||||||||
| Quoted | ||||||||||||||
| Prices in | ||||||||||||||
| Active | Significant | |||||||||||||
| Markets for | Other | Significant | ||||||||||||
| Identical | Observable | Unobservable | ||||||||||||
| July 31, | Assets | Inputs | Inputs | |||||||||||
| ($000) | 2010 | (Level 1) | (Level 2) | (Level 3) | ||||||||||
| Corporate securities | $ | 8,784 | $ | - | $ | 8,784 | $ | - | ||||||
| U.S. Government and agency securities | 10,744 | 10,744 | - | - | ||||||||||
| Mortgage-backed securities | 1,498 | - | 1,498 | - | ||||||||||
| Total assets measured at fair value | $ | 21,026 | $ | 10,744 | $ | 10,282 | $ | - | ||||||
Assets measured at fair value
on a recurring basis at January 30, 2010 are summarized below:
| Fair Value Measurements at Reporting Date | ||||||||||||||
| Quoted | ||||||||||||||
| Prices in | ||||||||||||||
| Active | Significant | |||||||||||||
| Markets for | Other | Significant | ||||||||||||
| Identical | Observable | Unobservable | ||||||||||||
| January 30, | Assets | Inputs | Inputs | |||||||||||
| ($000) | 2010 | (Level 1) | (Level 2) | (Level 3) | ||||||||||
| Auction-rate securities | $ | 892 | $ | - | $ | - | $ | 892 | ||||||
| Corporate securities | 10,204 | - | 10,204 | - | ||||||||||
| U.S. Government and agency securities | 5,090 | 5,090 | - | - | ||||||||||
| Mortgage-backed securities | 2,416 | - | 2,416 | - | ||||||||||
| Total assets measured at fair value | $ | 18,602 | $ | 5,090 | $ | 12,620 | $ | 892 | ||||||
8
Assets measured
at fair value on a recurring basis at August 1, 2009 are summarized below:
| Fair Value Measurements at Reporting Date | ||||||||||||||
| Quoted | ||||||||||||||
| Prices in | ||||||||||||||
| Active | Significant | |||||||||||||
| Markets for | Other | Significant | ||||||||||||
| Identical | Observable | Unobservable | ||||||||||||
| August 1, | Assets | Inputs | Inputs | |||||||||||
| ($000) | 2009 | (Level 1) | (Level 2) | (Level 3) | ||||||||||
| Auction-rate securities | $ | 1,050 | $ | - | $ | - | $ | 1,050 | ||||||
| Asset-backed securities | 579 | - | 579 | - | ||||||||||
| Corporate securities | 10,791 | - | 10,791 | - | ||||||||||
| U.S. Government and agency securities | 5,934 | 5,934 | - | - | ||||||||||
| Mortgage-backed securities | 4,533 | - | 4,533 | - | ||||||||||
| Total assets measured at fair value | $ | 22,887 | $ | 5,934 | $ | 15,903 | $ | 1,050 | ||||||
The maturities
of investment securities at July 31, 2010 were:
| Estimated | ||||||||
| ($000) | Cost Basis | Fair Value | ||||||
| Maturing in one year or less | $ | 2,414 | $ | 2,491 | ||||
| Maturing after one year through five years | 9,707 | 10,078 | ||||||
| Maturing after five years through ten years | 8,041 | 8,457 | ||||||
| $ | 20,162 | $ | 21,026 | |||||
The underlying
assets in the Company’s non-qualified deferred compensation program totaling
$59.2 million as of July 31, 2010 (included in Other long-term assets and in
Other long-term liabilities) primarily consist of money market, stable value,
stock, and bond funds. The fair value measurement for funds with quoted market
prices in active markets (Level 1) totaled $48.4 million as of July 31, 2010.
The fair value measurement for funds without quoted market prices in active
markets (Level 2) totaled $10.8 million as of July 31, 2010. Fair market value
for these Level 2 funds is considered to be the sum of participant funds
invested under a group annuity contract plus accrued interest.
Note C: Stock-Based
Compensation
Restricted stock. The Company grants restricted shares to
directors, officers and key employees. The market value of restricted shares at
the date of grant is amortized to expense ratably over the vesting period of
generally three to five years. The unamortized compensation expense at July 31,
2010, January 30, 2010, and August 1, 2009 was $69.9 million, $56.1 million, and
$47.3 million, respectively, which is expected to be recognized over a remaining
weighted-average period of 2.5 years.
9
During the
quarter ended July 31, 2010, shares purchased by the Company for tax withholding
totaled approximately 136,000 shares and are considered treasury shares which
are available for reissuance. As of July 31, 2010, shares subject to repurchase
related to unvested restricted stock totaled 2.9 million shares.
| Weighted | |||||||
| average | |||||||
| Number of | grant date | ||||||
| (000, except per share data) | shares | fair value | |||||
| Unvested at January 30, 2010 | 2,568 | $ | 33.83 | ||||
| Awarded | 745 | $ | 43.27 | ||||
| Released | (364) | $ | 30.82 | ||||
| Forfeited | (13) | $ | 31.11 | ||||
| Unvested at July 31, 2010 | 2,936 | $ | 36.30 | ||||
Performance shares. The Company has a performance share award
program for senior executives. A performance share award represents a right to
receive shares of common stock on a specified settlement date based on the
Company’s attainment of a profitability-based performance goal during a
performance period. If attained, the common stock then granted vests over a
specified remaining service period, generally two years. For the six month
periods ended July 31, 2010 and August 1, 2009, the Company recognized
approximately $2.8 million and $2.4 million, respectively, of expense related to
performance share awards.
Employee stock purchase plan.
Under the Employee
Stock Purchase Plan (“ESPP”), eligible full-time employees participating in the
annual offering period can choose to have up to the lesser of 10% or $21,250 of
their annual base earnings withheld to purchase the Company’s common stock. The
purchase price of the stock is 85% of the closing market price on the date of
purchase. In addition, purchases occur on a quarterly basis (on the last trading
day of each calendar quarter). The Company recognizes expense for ESPP purchase
rights equal to the value of the 15% discount given on the purchase
date.
Stock option activity.
The following table
summarizes stock option activity for the six month period ended July 31, 2010:
| Weighted | |||||||||||
| Weighted | average | ||||||||||
| average | remaining | Aggregate | |||||||||
| Number of | exercise | contractual | intrinsic | ||||||||
| (000, except per share data) | shares | price | term | value | |||||||
| Outstanding at January 30, 2010 | 2,773 | $ | 25.53 | ||||||||
| Granted | - | $ | - | ||||||||
| Exercised | (696) | $ | 24.37 | ||||||||
| Forfeited | (6) | $ | 21.15 | ||||||||
| Outstanding at July 31, 2010 | 2,071 | $ | 25.93 | 4.13 | $ | 55,373 | |||||
| Vested and Expected to Vest at July 31, 2010 | 2,066 | $ | 25.90 | 4.13 | $ | 55,268 | |||||
| Exercisable at July 31, 2010 | 1,914 | $ | 25.24 | 3.93 | $ | 52,499 | |||||
10
The following
table summarizes information about the weighted average remaining contractual
life (in years) and the weighted average exercise prices for stock options both
outstanding and exercisable as of July 31, 2010 (number of shares in thousands):
| Options outstanding | Options exercisable | |||||||||||||||||
| Number | Remaining | Exercise | Number | Exercise | ||||||||||||||
| Exercise price range | of shares | life | price | of shares | price | |||||||||||||
| $ | 7.97 | to | $ | 20.90 | 445 | 1.80 | $ | 16.81 | 445 | $ | 16.81 | |||||||
| 20.90 | to | 27.50 | 430 | 3.75 | 24.84 | 430 | 24.84 | |||||||||||
| 27.54 | to | 28.61 | 551 | 4.95 | 28.03 | 551 | 28.03 | |||||||||||
| 28.62 | to | 32.77 | 434 | 4.66 | 29.59 | 434 | 29.59 | |||||||||||
| 32.85 | to | 34.37 | 211 | 6.63 | 34.37 | 54 | 34.35 | |||||||||||
| $ | 7.97 | to | $ | 34.37 | 2,071 | 4.13 | $ | 25.93 | 1,914 | $ | 25.24 | |||||||
Stock-based compensation.
For the three and six
month periods ended July 31, 2010 and August 1, 2009, the Company recognized
stock-based compensation expense as follows:
| Three Months Ended | Six Months Ended | |||||||||||||
| July 31, | August 1, | July 31, | August 1, | |||||||||||
| ($000) | 2010 | 2009 | 2010 | 2009 | ||||||||||
| Restricted stock and performance awards | $ | 8,709 | $ | 5,920 | $ | 16,975 | $ | 11,302 | ||||||
| ESPP and stock options | 634 | 600 | 1,278 | 1,715 | ||||||||||
| Total | $ | 9,343 | $ | 6,520 | $ | 18,253 | $ | 13,017 | ||||||
Total
stock-based compensation recognized in the Company’s Condensed Consolidated
Statements of Earnings for the three and six month periods ended July 31, 2010
and August 1, 2009 is classified as follows:
| Three Months Ended | Six Months Ended | |||||||||||||
| July 31, | August 1, | July 31, | August 1, | |||||||||||
| Statements of Earnings Classification ($000) | 2010 | 2009 | 2010 | 2009 | ||||||||||
| Cost of goods sold | $ | 4,124 | $ | 2,853 | $ | 8,218 | $ | 5,849 | ||||||
| Selling, general and administrative | 5,219 | 3,667 | 10,035 | 7,168 | ||||||||||
| Total | $ | 9,343 | $ | 6,520 | $ | 18,253 | $ | 13,017 | ||||||
11
Note D: Earnings Per Share
Basic Earnings
Per Share (“EPS”) is computed by dividing net earnings by the weighted average
number of common shares outstanding 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 total potential dilution that could occur from outstanding equity
plan awards, including unexercised stock options and unvested shares of both
performance and non-performance based awards of restricted stock.
For the three
and six month periods ended July 31, 2010, approximately 400 and 600 weighted
average shares were excluded from the calculation of diluted EPS because their
effect would have been anti-dilutive in the periods presented. For the three and
six month periods ended August 1, 2009, approximately 35,800 and 19,100 weighted average shares were
excluded from the calculation of diluted EPS because their effect would have
been anti-dilutive in the periods presented.
The following is
a reconciliation of the number of shares (denominator) used in the basic and
diluted EPS computations:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| Effect of | Effect of | ||||||||||||||||||||||
| Dilutive | Dilutive | ||||||||||||||||||||||
| Common | Common | ||||||||||||||||||||||
| Basic | Stock | Diluted | Basic | Stock | Diluted | ||||||||||||||||||
| Shares in (000s) | EPS | Equivalents | EPS | EPS | Equivalents | EPS | |||||||||||||||||
| July 31, 2010 | |||||||||||||||||||||||
| Shares | 118,615 | 1,947 | 120,562 | 119,222 | 2,021 | 121,243 | |||||||||||||||||
| Amount | $ | 1.09 | $ | (0.02) | $ | 1.07 | $ | 2.28 | $ | (0.04) | $ | 2.24 | |||||||||||
| August 1, 2009 | |||||||||||||||||||||||
| Shares | 123,467 | 2,191 | 125,658 | 124,080 | 1,983 | 126,063 | |||||||||||||||||
| Amount | $ | 0.84 | $ | (0.02) | $ | 0.82 | $ | 1.57 | $ | (0.02) | $ | 1.55 | |||||||||||
12
Note E: Debt
The Company has
a $600 million unsecured revolving credit facility with an expiration date of
July 2011 and interest pricing at LIBOR plus 45 basis points. The credit
facility contains a $300 million sublimit for issuance of standby letters of
credit, of which $216.7 million was available at July 31, 2010. The Company had
no borrowings outstanding under this facility as of July 31, 2010, January 30,
2010, or August 1, 2009.
The Company has
two series of unsecured senior notes with various institutional investors for
$150 million. The Series A notes, totaling $85 million are due in December 2018
and bear interest at a rate of 6.38%. The Series B notes totaling $65 million
are due in December 2021 and bear interest at a rate of 6.53%. The fair value of
these notes as of July 31, 2010 of approximately $177 million is estimated by
obtaining comparable market quotes. The senior notes are subject to prepayment
penalties for early payment of principal.
Borrowings under
the credit facilities and these notes are subject to certain covenants,
including interest coverage and other financial ratios. As of July 31, 2010, the
Company was in compliance with these covenants.
Note F: Taxes on Earnings
As of July 31,
2010 and August 1, 2009, the reserves for unrecognized tax benefits (net of
federal tax benefits) were $36.5 million and $28.2 million inclusive of $11.0
million and $7.2 million of related interest, respectively. The Company accounts
for interest and penalties related to unrecognized tax benefits as a part of its
provision for taxes on earnings. If recognized, $29.8 million would impact the
Company’s effective tax rate. The difference between the total amount of
unrecognized tax benefits and the amounts that would impact the effective tax
rate relates to amounts attributable to deferred income tax assets and
liabilities. These amounts are net of federal and state income taxes.
During the next
twelve months, it is reasonably possible that the statute of limitations may
lapse pertaining to positions taken by the Company in prior year tax returns. If
this occurs, the total amount of unrecognized tax benefits may decrease,
reducing the provision for taxes on earnings by up to $1.4 million.
The Company is
generally open to audit by the Internal Revenue Service under the statute of
limitations for fiscal years 2006 through 2009. The Company’s state income tax
returns are generally open to audit under the various statutes of limitations
for fiscal years 2005 through 2009. Certain state tax returns are currently
under audit by state tax
authorities. The Company does not expect the results of these audits to have a
material impact on the consolidated financial statements.
Note G: Recently Issued Accounting
Standards
In June 2009,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Codification (“ASC”) Topic 810 (originally issued as Statement of Financial
Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)”).
Among other items, ASC 810 responds to concerns about the application of certain
key provisions of FIN 46(R), including those regarding the transparency of the
involvement with variable interest entities. ASC 810 is effective for fiscal
years beginning after November 15, 2009. The Company adopted the standard for
the interim period ended May 1, 2010. Adoption of ASC 810 did not have a
material impact on the Company’s interim consolidated financial
statements.
13
Report of Independent Registered Public
Accounting Firm
To the Board of
Directors and Stockholders of
Ross Stores, Inc.
Pleasanton, California
Ross Stores, Inc.
Pleasanton, California
We have reviewed
the accompanying condensed consolidated balance sheets of Ross Stores, Inc. and
subsidiaries (the "Company") as of July 31, 2010 and August 1, 2009, and the
related condensed consolidated statements of earnings for the three-month and
six-month periods ended July 31, 2010 and August 1, 2009, and cash flows for the
six-month periods ended July 31, 2010 and August 1, 2009. These condensed
consolidated financial statements are the responsibility of the Company’s
management.
We conducted our
reviews in accordance with the standards of the Public Company Accounting
Oversight Board (United States). A review of interim financial information
consists principally of applying analytical procedures and making inquiries of
persons responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our
reviews, we are not aware of any material modifications that should be made to
such condensed consolidated financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board
(United States), the consolidated balance sheet of Ross Stores, Inc. and
subsidiaries as of January 30, 2010, and the related consolidated statements of
earnings, stockholders’ equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 25, 2010, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of January 30, 2010, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
/s/Deloitte
& Touche LLP
San Francisco,
California
September 7, 2010
September 7, 2010
14
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
This section and
other parts of this Form 10-Q contain forward-looking statements that involve
risks and uncertainties. Our actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed in Part II,
Item 1A (Risk Factors) below. The following discussion should be read in
conjunction with the condensed consolidated financial statements and notes
thereto included elsewhere in this Quarterly Report on Form 10-Q and the
consolidated financial statements and notes thereto in our Annual Report on Form
10-K for 2009. All information is based on our fiscal calendar.
Overview
We are the
second largest off-price apparel and home goods retailer in the United States.
As of July 31, 2010, we operated 979 Ross Dress for Less (“Ross”) locations in
27 states and Guam, and 57 dd’s DISCOUNTS stores in five states. Ross offers
first-quality, in-season, name brand and designer apparel, accessories,
footwear, and home fashions at everyday savings of 20 to 60 percent off
department and specialty store regular prices. dd’s DISCOUNTS features a more
moderately-priced assortment of first-quality, in-season, name brand apparel,
accessories, footwear and home fashions at everyday savings of 20 to 70 percent
off moderate department and discount store regular prices.
Results of Operations
The following
table summarizes the financial results for the three and six month periods ended
July 31, 2010 and August 1, 2009:
| Three Months Ended | Six Months Ended | |||||||||||||
| July 31, | August 1, | July 31, | August 1, | |||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||
| Sales | ||||||||||||||
| Sales (millions) | $ | 1,912 | $ | 1,769 | $ | 3,847 | $ | 3,460 | ||||||
| Sales growth | 8.1% | 7.8% | 11.2% | 8.2% | ||||||||||
| Comparable store sales growth | 4% | 3% | 7% | 3% | ||||||||||
| Costs and expenses (as a percent of sales) | ||||||||||||||
| Cost of goods sold | 73.0% | 74.1% | 72.8% | 74.6% | ||||||||||
| Selling, general and administrative | 15.9% | 16.2% | 15.6% | 16.1% | ||||||||||
| Interest expense, net | 0.1% | 0.1% | 0.1% | 0.1% | ||||||||||
| Earnings before taxes | 11.0% | 9.6% | 11.5% | 9.2% | ||||||||||
| Net earnings | 6.8% | 5.8% | 7.1% | 5.6% | ||||||||||
15
Stores. Our expansion strategy is to open
additional stores based on market penetration, local demographic
characteristics, competition, expected store profitability, and the ability to
leverage overhead expenses. We continually evaluate opportunistic real estate
acquisitions and opportunities for potential new store locations. We also
evaluate our current store locations and determine store closures based on
similar criteria.
| Three Months Ended | Six Months Ended | |||||||||
| July 31, | August 1, | July 31, | August 1, | |||||||
| 2010 | 2009 | 2010 | 2009 | |||||||
| Stores at the beginning of the period | 1,021 | 974 | 1,005 | 956 | ||||||
| Stores opened in the period | 17 | 19 | 34 | 38 | ||||||
| Stores closed in the period | (2) | (3) | (3) | (4) | ||||||
| Stores at the end of the period | 1,036 | 990 | 1,036 | 990 | ||||||
Sales. Sales for the three month period ended
July 31, 2010 increased $143.1 million, or 8%, compared to the three month
period ended August 1, 2009, due to the opening of 46 net new stores between
August 1, 2009 and July 31, 2010 and an increase in “comparable” store sales
(defined as stores that have been open for more than 14 complete months) of 4%
on top of a 3% gain last year. Sales for the six month period ended July 31,
2010 increased $386.3 million, or 11%, compared to the six month period ended
August 1, 2009, due to the opening of 46 net new stores between August 1, 2009
and July 31, 2010 and an increase in comparable store sales of 7% on top of a 3%
gain in the prior year.
Our sales mix is
shown below for the three and six month periods ended July 31, 2010 and August
1, 2009:
| Three Months Ended | Six Months Ended | |||||||||
| July 31, | August 1, | July 31, | August 1, | |||||||
| 2010 | 2009 | 2010 | 2009 | |||||||
| Ladies | 32% | 33% | 32% | 33% | ||||||
| Home accents and bed and bath | 24% | 22% | 24% | 22% | ||||||
| Shoes | 12% | 12% | 13% | 12% | ||||||
| Men's | 13% | 13% | 12% | 13% | ||||||
| Accessories, lingerie, fine jewelry, and fragrances | 11% | 12% | 11% | 12% | ||||||
| Children's | 8% | 8% | 8% | 8% | ||||||
| Total | 100% | 100% | 100% | 100% | ||||||
We intend to
address the competitive climate for off-price apparel and home goods by pursuing
and refining our existing strategies and by continuing to strengthen our
organization, to diversify our merchandise mix, and to more fully develop our
organization and systems to improve regional and local merchandise offerings.
Although our strategies and store expansion program contributed to sales gains
for the three and six month periods ended July 31, 2010, we cannot be sure that
they will result in a continuation of sales growth or in an increase in net
earnings.
16
Cost of goods sold. For the three and six month periods ended
July 31, 2010 cost of goods sold increased $84.6 million and $222.0 million,
respectively, as compared to the same periods in the prior year mainly due to
increased sales from the opening of 46 net new stores between August 1, 2009 and
July 31, 2010 and a 4% and 7% increase in comparable store sales, for the same
respective periods.
Cost of goods
sold as a percentage of sales for the three month period ended July 31, 2010
decreased approximately 110 basis points from the same period in the prior year.
This improvement was driven primarily by an 80 basis point increase in
merchandise gross margin, which included a 25 basis point benefit from a lower
shortage accrual. In addition, distribution expenses declined about 40 basis
points due in part to the timing of recognition of acquisition, processing, and
storage costs related to our packaway balances. Occupancy expense benefited the
quarter by about 20 basis points. These favorable comparisons were partially
offset by a 20 basis point increase in freight costs and a 10 basis point
increase in buying and incentive costs compared to the second quarter of
2009.
Cost of goods
sold as a percentage of sales for the six month period ended July 31, 2010
decreased approximately 170 basis points from the same period in the prior year.
This improvement was driven primarily by a 110 basis point increase in
merchandise gross margin, which included a 25 basis point benefit from a lower
shortage accrual. In addition, occupancy expense leveraged by approximately 45
basis points, and distribution costs declined by about 40 basis points compared
to the prior year period. These favorable trends were partially offset by a 15
basis point increase in freight costs and a 10 basis point increase in buying
and incentive costs compared to the same period in 2009.
We cannot be
sure that the gross profit margins realized for the three and six month periods
ended July 31, 2010 will continue in the future.
Selling, general and administrative
expenses. For the
three month and six month periods ended July 31, 2010, selling, general and
administrative expenses increased $17.2 million and $39.7 million, respectively,
as compared to the same periods in the prior year, mainly due to increased store
operating costs reflecting the opening of 46 net new stores between August 1,
2009 and July 31, 2010.
Selling, general
and administrative expenses as a percentage of sales for the three month period
ended July 31, 2010 decreased by approximately 30 basis points over the same
period in the prior year primarily due to leverage on corporate expenses from
the strong gains in comparable store sales.
Selling, general
and administrative expenses as a percentage of sales for the six month period
ended July 31, 2010 decreased by approximately 60 basis points over the same
period in the prior year primarily due to leverage on both store and corporate
expenses from strong gains in comparable store sales.
Interest expense, net.
Net interest expense
increased for the three and six month periods ended July 31, 2010 by
approximately $1.0 million and $1.8 million, respectively, as compared to the
same periods in the prior year primarily due to lower capitalization of
construction interest and lower investment yields.
Taxes on earnings. Our effective tax rate for the three
month periods ended July 31, 2010 and August 1, 2009 was approximately
38% and 39%, respectively. Our effective tax rate for the six month periods
ended July 31, 2010 and August 1, 2009 was approximately
39%. These rates represent the applicable combined federal and state statutory
rates reduced by the federal benefit of state taxes deductible on federal
returns, The effective rate is affected by changes in law, location of new
stores, level of earnings, and the resolution of tax positions with various
taxing authorities. We anticipate that our effective tax rate for fiscal 2010
will be in the range of 38% to 39%.
17
Earnings per share. Diluted
earnings per share for the three month period ended July 31, 2010 was $1.07
compared to $0.82 in the prior year period. The 30% increase in diluted earnings
per share is attributable to a 25% 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 for
the six month period ended July 31, 2010 was $2.24 compared to $1.55 in the
prior year period. The 45% increase in diluted earnings per share is
attributable to a 39% 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, taxes, capital expenditures in
connection with opening new stores, and investments in distribution centers and
information systems. We also use cash to repurchase stock under our stock
repurchase program and to pay dividends.
| Six Months Ended | ||||||||
| ($000) | July 31, 2010 | August 1, 2009 | ||||||
| Cash flows provided by operating activities | $ | 304,837 | $ | 413,968 | ||||
| Cash flows used in investing activities | (89,944) | (63,910) | ||||||
| Cash flows used in financing activities | (210,565) | (150,989) | ||||||
| Net increase in cash and cash equivalents | $ | 4,328 | $ | 199,069 | ||||
Operating Activities
Net cash
provided by operating activities was $304.8 million for the six month period
ended July 31, 2010 compared to $414.0 million for the six month period ended
August 1, 2009. The primary sources of cash provided by operating activities for
the six month periods ended July 31, 2010 and August 1, 2009 were net earnings
plus non-cash expenses for depreciation and amortization and accounts payable
leverage (defined as accounts payable divided by merchandise inventory). The
decrease in cash flow from operating activities for the six month period ended
July 31, 2010 primarily resulted from changes in accounts payable leverage and
payment of incentive bonuses. Accounts payable leverage increased from 75% as of
January 30, 2010 to 81% as of July 31, 2010. Accounts payable leverage increased
from 61% as of January 31, 2009 to 76% as of August 1, 2009. The increases in
accounts payable leverage were due to faster turns on lower inventory
levels.
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
liquidation of slower-moving merchandise through clearance
markdowns.
18
Investing Activities
During the six
month periods ended July 31, 2010 and August 1, 2009, our capital expenditures
were approximately $88.1 million and $80.7 million, respectively. Our capital
expenditures included fixtures and leasehold improvements to open new stores,
information technology systems, building or expanding distribution centers, and
various other expenditures related to our stores, buying, and corporate offices.
We opened 34 and 38 new stores on a gross basis during the six month periods
ended July 31, 2010 and August 1, 2009, respectively.
We are
forecasting approximately $215 million in capital expenditures in fiscal year
2010 to fund expenditures for fixtures and leasehold improvements to open new
Ross and dd’s DISCOUNTS stores, for the relocation or upgrade of existing
stores, for investments in store and merchandising systems, buildings, equipment
and systems, and for various buying and corporate office expenditures. We expect
to fund these expenditures with available cash and cash flows from
operations.
Financing Activities
During the six
month periods ended July 31, 2010 and August 1, 2009, our liquidity and capital
requirements were provided by available cash and cash flows from operations. Our
buying offices, our corporate headquarters, one distribution center, one trailer
parking lot, three warehouse facilities, and all but two of our store locations
are leased and, except for certain leasehold improvements and equipment, do not
represent capital investments. We own one distribution center in each of the
following cities: Carlisle, Pennsylvania; Moreno Valley, California; and Fort
Mill, South Carolina, and one warehouse facility in Fort Mill, South
Carolina.
In January 2010,
our Board of Directors approved a two-year $750 million stock repurchase program
for fiscal 2010 and 2011. We repurchased 3.6 million shares of common stock for
an aggregate purchase price of approximately $193 million during the six month
period ended July 31, 2010. We repurchased 4.2 million shares of common stock
for approximately $154.4 million during the six month period ended August
1, 2009.
For the six
month periods ended July 31, 2010 and August 1, 2009, we paid dividends of $39.1
million and $27.8 million, respectively.
Short-term trade
credit represents a significant source of financing for merchandise inventory.
Trade credit arises from customary payment terms and trade practices with our
vendors. We regularly review the adequacy of credit available to us from all
sources and expect to be able to maintain adequate trade, bank, and other credit
lines to meet our capital and liquidity requirements, including lease payment
obligations in 2010.
Our $600 million
credit facility remains in place and available as of July 31, 2010 and expires
in July 2011.
We estimate that
cash flows from operations, bank credit lines, and trade credit are adequate to
meet operating cash needs, fund our planned capital investments, repurchase
common stock, and make quarterly dividend payments for at least the next twelve
months.
19
Contractual
Obligations
The table below
presents our significant contractual obligations as of July 31,
2010:
| ($000) | Less | ||||||||||||||||
| than 1 | 1 – 3 | 3 – 5 | After 5 | ||||||||||||||
| Contractual Obligations | Year | Years | Years | Years | Total1 | ||||||||||||
| Senior notes | $ | -- | $ | -- | $ | -- | $ | 150,000 | $ | 150,000 | |||||||
| Interest payment obligations | 9,668 | 19,335 | 19,335 | 45,361 | 93,699 | ||||||||||||
| Capital leases | 98 | 28 | -- | -- | 126 | ||||||||||||
| Operating leases: | |||||||||||||||||
| Rent obligations | 343,371 | 678,311 | 501,555 | 504,789 | 2,028,026 | ||||||||||||
| Synthetic leases | 5,802 | 8,528 | -- | -- | 14,330 | ||||||||||||
| Other synthetic lease obligations | 604 | 57,607 | -- | -- | 58,211 | ||||||||||||
| Purchase obligations | 1,309,733 | 7,727 | -- | -- | 1,317,460 | ||||||||||||
| Total contractual obligations | $ | 1,669,276 | $ | 771,536 | $ | 520,890 | $ | 700,150 | $ | 3,661,852 | |||||||
1We have a $36.5 million
liability for unrecognized tax benefits that is included in Other long-term
liabilities on our interim condensed consolidated balance sheet. This liability
is excluded from the schedule above as the timing of payments cannot be
reasonably estimated.
Senior notes. We have two series of unsecured senior
notes outstanding with various institutional investors for $150 million. The
Series A notes totaling $85 million are due in December 2018 and bear interest
at a rate of 6.38%. The Series B notes totaling $65 million are due in December
2021 and bear interest at a rate of 6.53%. Interest on these notes is included
in Interest payment obligations in the table above. These notes are subject to
prepayment penalties for early payment of principal.
Borrowings under
these notes are subject to certain operating and financial covenants, including
maintaining certain interest coverage and other financial ratios. As of July 31,
2010, we were in compliance with these covenants.
Capital leases. The obligations under capital leases
relate to distribution center equipment and have terms of two to three
years.
Off-Balance Sheet
Arrangements
Operating leases. We lease our two buying offices, our
corporate headquarters, one distribution center, one trailer parking lot, three
warehouse facilities, and all but two of our store locations. Except for certain
leasehold improvements and equipment, these leased locations do not represent
long-term capital investments.
20
We have lease arrangements for certain
equipment in our stores for our point-of-sale (“POS”) hardware and software
systems. These leases are accounted for as operating leases for financial
reporting purposes. The initial terms of these leases are either two or three
years, and we typically have options to renew the leases for two to three
one-year periods. Alternatively, we may purchase or return the equipment at the
end of the initial or each renewal term. We have guaranteed the value of the
equipment of $2.2 million at the end of the respective initial lease terms,
which is included in Other synthetic lease obligations in the table above.
We lease
approximately 181,000 square feet of office space for our corporate headquarters
in Pleasanton, California, under several facility leases. The terms for these
leases expire between 2011 and 2015 and contain renewal provisions.
We lease
approximately 197,000 and 26,000 square feet of office space for our New York
City and Los Angeles buying offices, respectively. The lease terms for these
facilities expire in 2021 and 2014, respectively, and contain renewal
provisions.
We lease a 1.3
million square foot distribution center in Perris, California. The land and
building for this distribution center are financed under a $70 million ten-year
synthetic lease that expires in July 2013. Rent expense on this center is
payable monthly at a fixed annual rate of 5.8% on the lease balance of $70
million. At the end of the lease term, we have the option to either refinance
the $70 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 million, we have agreed under a residual value
guarantee to pay the lessor any shortfall amount up to $56 million. The
agreement includes a prepayment penalty for early payoff of the lease. Our
contractual obligation of $56 million is included in Other synthetic lease
obligations in the above table.
We have
recognized a liability and corresponding asset for the inception date estimated
fair value of the residual value guarantee in the amount of $8.3 million for our
Perris, California distribution center and $0.9 million for our POS leases.
These residual value guarantees are 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 other and Accrued expenses and
other, 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 condensed consolidated balance
sheets.
We lease two
warehouses in Carlisle, Pennsylvania with one lease expiring in 2013 and the
other expiring in 2014. In January 2009, we exercised a three-year option for a
255,000 square foot warehouse in Fort Mill, South Carolina, extending the lease
term to February 2013. We also own a 423,000 square foot warehouse also in Fort
Mill, South Carolina. All four of these properties are used to store our
packaway inventory. We also lease a 10-acre parcel of land that has been
developed for trailer parking adjacent to our Perris distribution
center.
The Perris,
California distribution synthetic lease facility described above, as well as our
revolving credit facility and senior notes, have 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 July 31, 2010 we
were in compliance with these covenants.
Purchase obligations. As of July 31, 2010 we had purchase
obligations of $1,317 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 $1,310 million represent purchase
obligations of less than one year as of July 31, 2010.
21
Commercial Credit
Facilities
The table below
presents our significant available commercial credit facilities at July 31,
2010:
| Amount of Commitment Expiration Per Period | Total | ||||||||||||||||
| Less than | 1 – 3 | 3 – 5 | After 5 | amount | |||||||||||||
| ($000) | 1 year | years | years | years | committed | ||||||||||||
| Revolving credit facility | $ | 600,000 | $ | -- | $ | -- | $ | -- | $ | 600,000 | |||||||
| Total commercial commitments | $ | 600,000 | $ | -- | $ | -- | $ | -- | $ | 600,000 | |||||||
Revolving credit facility.
We have available a $600 million
revolving credit facility with our banks, which contains a $300 million sublimit
for issuance of standby letters of credit, of which $216.7 million was available
at July 31, 2010. This credit facility which expires in July 2011 has a
LIBOR-based interest rate plus an applicable margin (currently 45 basis points)
and is payable upon maturity but not less than quarterly. Our borrowing ability
under this credit facility is subject to our maintaining certain financial
ratios. As of July 31, 2010 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 workers’
compensation and general liability claims. We had $83.3 million and $72.4
million in standby letters of credit outstanding at July 31, 2010 and August 1,
2009, respectively.
Trade letters of credit.
We had $47.3 million and $28.9
million in trade letters of credit outstanding at July 31, 2010 and August 1,
2009, respectively.
Dividends. In August 2010, our Board of Directors
declared a cash dividend of $.16 per common share, payable on September 30,
2010. Our Board of Directors declared quarterly cash dividends of $.16 per
common share in January and May 2010, and $.11 per common share in January, May,
August, and November 2009.
Critical Accounting
Policies
Management’s
Discussion and Analysis of Financial Condition and Results of Operations is
based on our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of our condensed 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. Actual results may differ
significantly from these estimates. During the second quarter of fiscal 2010,
there have been no significant changes to the policies discussed in our Annual
Report on Form 10-K for the year ended January 30, 2010.
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.
22
New Accounting
Pronouncements
In June 2009,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Codification (“ASC”) Topic 810 (originally issued as Statement of Financial
Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R)”).
Among other items, ASC 810 responds to concerns about the application of certain
key provisions of FIN 46(R), including those regarding the transparency of the involvement with variable interest
entities. ASC 810 is effective for fiscal years beginning after November 15,
2009. The adoption of this standard during the interim period ended May 1, 2010
did not have a material impact on our interim consolidated financial statements.
Forward-Looking
Statements
This report may
contain a number of forward-looking statements regarding, without limitation,
planned store growth, new markets, expected sales, projected earnings levels,
capital expenditures, and other matters. These forward-looking statements
reflect our then current beliefs, projections and estimates with respect to
future events and our projected financial performance, operations, and
competitive position. The words “plan,” “expect,” “target,” “anticipate,”
“estimate,” “believe,” “forecast,” “projected,” “guidance,” “looking ahead” and
similar expressions identify forward-looking statements.
Future economic
and industry trends that could potentially impact revenue, profitability, and
growth remain difficult to predict. As a result, our forward-looking statements
are subject to risks and uncertainties which could cause our actual results to
differ materially from these forward-looking statements and our previous
expectations and projections. Refer to Part II, Item 1A in this Quarterly Report
on Form 10-Q for a more complete discussion of risk factors. The factors
underlying our forecasts are dynamic and subject to change. As a result, any
forecasts or forward-looking statements speak only as of the date they are given
and do not necessarily reflect our outlook at any other point in time. We
disclaim any obligation to update or revise these forward-looking
statements.
Other risk
factors are detailed in our filings with the Securities and Exchange Commission
including, without limitation, our Annual Report on Form 10-K for 2009.
Item 3. Quantitative and Qualitative
Disclosures about Market Risk
We are exposed
to market risks, which primarily include changes in interest rates. We do not
engage in financial transactions for trading or speculative
purposes.
We occasionally
use forward contracts to hedge against fluctuations in foreign currency prices.
We had no material outstanding forward contracts as of July 31, 2010.
Interest that is
payable on our revolving credit facility is based on variable interest rates and
is, therefore, affected by changes in market interest rates. As of July 31,
2010, we had no borrowings outstanding under our revolving credit facility. In
addition, lease payments under certain of our synthetic lease agreements are
determined based on variable interest rates and are, therefore, affected by
changes in market interest rates.
In addition, we
issued unsecured notes to institutional investors in two series: Series A for
$85 million accrues interest at 6.38% and Series B for $65 million accrues
interest at 6.53%. The amount outstanding under these notes as of July 31, 2010
is $150 million.
Interest is
receivable on our short- and long-term investments. Changes in interest rates
may impact interest income recognized in the future, or the fair value of our
investment portfolio.
23
A hypothetical
100 basis point increase or decrease in prevailing market interest rates would
not have materially impacted our consolidated financial position, results of
operations, cash flows, or the fair values of our short- and long-term
investments as of and for the three month period ended July 31, 2010. We do not
consider the potential losses in future earnings and cash flows from reasonably
possible, near term changes in interest rates to be material.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our management,
with the participation of our Chief Executive Officer and Chief Financial
Officer, conducted an evaluation of the effectiveness of our “disclosure
controls and procedures” (as defined in Exchange Act Rule 13a-15(e)) as of the
end of the period covered by this report. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of the end of the period covered by
this report.
It should be
noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the
system will be met. In addition, the design of any control system is based in
part upon certain assumptions about the likelihood of future events.
Quarterly Evaluation of Changes in
Internal Control Over Financial Reporting
Our management,
with the participation of our Chief Executive Officer and Chief Financial
Officer, also conducted an evaluation of our internal control over financial
reporting to determine whether any change occurred during the second fiscal
quarter of 2010 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting. Based on that
evaluation, our management concluded that there was no such change during the
second fiscal quarter.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
The matters
under the caption “Provision for litigation costs and other legal proceedings”
in Note A of Notes to Condensed Consolidated Financial Statements are
incorporated herein by reference.
Item 1A. Risk Factors
Our Quarterly
Report on Form 10-Q for our second fiscal quarter of 2010, and information we
provide in our press releases, telephonic reports, and other investor
communications, including those on our corporate website, may contain
forward-looking statements with respect to anticipated future events and our
projected financial performance, operations and competitive position that are
subject to risks and uncertainties that could cause our actual results to differ
materially from those forward-looking statements and our prior expectations and
projections. Refer to Management’s Discussion and Analysis for a more complete
identification and discussion of “Forward-Looking Statements.”
24
Our financial condition, results of operations, cash flows, and the
performance of our common stock may be adversely affected by a number of risk
factors. Risks and uncertainties that apply to both Ross and dd’s DISCOUNTS
include, without limitation, the following:
We are subject to the economic and
industry risks that affect large retailers operating in the United States.
Our business is
exposed to the risks of a large, multi-store retailer, which must continually
and efficiently obtain and distribute a supply of fresh merchandise throughout a
large and growing network of stores. These risk factors include:
- An increase in the level of competitive pressures in the apparel or home-related merchandise industry.
- Changes in the level of consumer spending on or preferences for apparel or home-related merchandise, including the potential impact from the macro-economic environment, uncertainty in financial and credit markets, and changes in geopolitical conditions.
- Unseasonable weather trends that could affect consumer demand for seasonal apparel and apparel-related products.
- A change in the availability, quantity, or quality of attractive brand-name merchandise at desirable discounts that could impact our ability to purchase product and continue to offer customers a wide assortment of merchandise at competitive prices.
- Potential disruptions in the supply chain that could impact our ability to deliver product to our stores in a timely and cost-effective manner.
- A change in the availability, quality, or cost of new store real estate locations.
- A downturn in the economy or a natural disaster in California or in another region where we have a concentration of stores or a distribution center. Our corporate headquarters, Los Angeles buying office, two distribution centers, and 26% of our stores are located in California.
We are subject to operating risks as we
attempt to execute on our merchandising and growth strategies.
The continued
success of our business depends, in part, upon our ability to increase sales at
our existing store locations, to open new stores, and to operate stores on a
profitable basis. Our existing strategies and store expansion programs may not
result in a continuation of our anticipated revenue or profit growth. In
executing our off-price retail strategies and working to improve efficiencies,
expand our store network, and reduce our costs, we face a number of operational
risks, including:
- Our ability to attract and retain personnel with the retail talent necessary to execute our strategies.
- Our ability to effectively operate our various supply chain, core merchandising, and other information systems.
- Our ability to improve our merchandising capabilities through the recent implementation of new processes and systems enhancements.
- Our ability to improve new store sales and profitability, especially in newer regions and markets.
- Our ability to achieve and maintain targeted levels of productivity and efficiency in our distribution centers.
- Our ability to lease or acquire acceptable new store sites with favorable demographics and long term financial returns.
- Our ability to identify and to successfully enter new geographic markets.
- Our ability to achieve planned gross margins, by effectively managing inventories, markdowns, and shrink.
- Our ability to effectively manage all operating costs of the business, the largest of which are payroll and benefit costs for store and distribution center employees.
25
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
Information
regarding shares of common stock we repurchased during the second quarter of
fiscal 2010 is as follows:
| Maximum number (or | ||||||||||||
| Total number of | approximate dollar | |||||||||||
| Total | shares (or units) | value) of shares (or | ||||||||||
| number of | Average | purchased as part | units) that may yet be | |||||||||
| shares (or | price paid | of publicly | purchased under the | |||||||||
| units) | per share | announced plans or | plans or programs | |||||||||
| Period | purchased1 | (or unit) | programs | ($000)2 | ||||||||
| May | 419,184 | $ | 53.03 | 413,673 | $ | 634,000 | ||||||
| (5/2/2010-5/29/2010) | ||||||||||||
| June | 791,655 | $ | 55.73 | 787,093 | $ | 590,000 | ||||||
| (5/30/2010-7/3/2010) | ||||||||||||
| July | 613,224 | $ | 53.81 | 610,368 | $ | 557,000 | ||||||
| (7/4/2010-7/31/2010) | ||||||||||||
| Total | 1,824,063 | $ | 54.47 | 1,811,134 | $ | 557,000 | ||||||
1We purchased 12,929 of
these shares during the quarter ended July 31, 2010 from employees for tax
withholding purposes related to vesting of restricted stock grants. All
remaining shares were repurchased under our publicly announced stock repurchase
program.
2In January 2010 our
Board of Directors approved a two-year $750 million stock repurchase program for
fiscal 2010 and 2011.
Item 6. Exhibits
Incorporated
herein by reference to the list of exhibits contained in the Index to Exhibits
within this Report.
26
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned thereunto duly
authorized.
| ROSS STORES, INC. | |||
| (Registrant) | |||
| Date: September 8, 2010 | By: | /s/ J. Call | |
| John G. Call | |||
| Senior Vice President, Chief Financial Officer and | |||
| Principal Accounting Officer | |||
27
INDEX TO EXHIBITS
| Exhibit | |||
| Number | Exhibit | ||
| 3.1 | Amendment of Certificate of Incorporation dated May 21, 2004 and Amendment of Certificate of Incorporation dated June 5, 2002 and Corrected First Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Form 10-Q filed by Ross Stores for its quarter ended July 31, 2004. | ||
| 3.2 | Amended By-laws, dated August 25, 1994, incorporated by reference to Exhibit 3.2 to the Form 10-Q filed by Ross Stores for its quarter ended July 30, 1994. | ||
| 15 | Letter re: Unaudited Interim Financial Information from Deloitte & Touche LLP dated September 7, 2010 | ||
| 31.1 | Certification of Chief Executive Officer Pursuant to Sarbanes-Oxley Act Section 302(a). | ||
| 31.2 | Certification of Chief Financial Officer Pursuant to Sarbanes-Oxley Act Section 302(a). | ||
| 32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350. | ||
| 32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350. | ||
| 101.INS¹ | XBRL Instance Document | ||
| 101.SCH¹ | XBRL Taxonomy Extension Schema | ||
| 101.CAL¹ | XBRL Taxonomy Extension Calculation Linkbase | ||
| 101.DEF¹ | XBRL Taxonomy Extension Definition Linkbase | ||
| 101.LAB¹ | XBRL Taxonomy Extension Label Linkbase | ||
| 101.PRE¹ | XBRL Taxonomy Extension Presentation Linkbase | ||
¹Furnished, not
filed.
28
EXHIBIT 15
September 7,
2010
Ross Stores,
Inc.
Pleasanton, California
Pleasanton, California
We have
reviewed, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the unaudited interim financial information of
Ross Stores, Inc. and subsidiaries for the periods ended July 31, 2010 and
August 1, 2009, as indicated in our report dated September 7, 2010; because we
did not perform an audit, we expressed no opinion on that information.
We are aware
that our report referred to above, which is included in your Quarterly Report on
Form 10-Q for the quarter ended July 31, 2010, is incorporated by reference in
Registration Statements No. 333-151116, No. 33-61373, No. 33-51916, No.
33-51896, No. 33-51898, No. 33-41415, No. 33-41413, No. 33-29600, No. 333-56831,
No. 333-06119, No. 333-34988, No. 333-51478, and No. 333-115836 of Ross Stores,
Inc. and subsidiaries, all on Form S-8.
We also are
aware that the aforementioned report, pursuant to Rule 436(c) under the
Securities Act of 1933, is not considered a part of the Registration Statements
prepared or certified by an accountant or a report prepared or certified by an
accountant within the meaning of Sections 7 and 11 of that Act.
Yours
truly,
/s/Deloitte
& Touche LLP
San Francisco, California
San Francisco, California
29
EXHIBIT 31.1
Ross Stores,
Inc.
Certification of Chief Executive Officer
Pursuant to Sarbanes-Oxley Act Section 302(a)
Certification of Chief Executive Officer
Pursuant to Sarbanes-Oxley Act Section 302(a)
I, Michael
Balmuth, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Ross Stores, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| (a) Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
||
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
| (a) All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
||
| Date: September 8, 2010 | /s/Michael Balmuth | |
| Michael Balmuth | ||
| Vice Chairman and Chief Executive Officer | ||
30
EXHIBIT 31.2
Ross Stores, Inc.
Certification of Chief Financial Officer
Pursuant to Sarbanes-Oxley Act Section 302(a)
I, John G. Call, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Ross Stores, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
| (a) Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
||
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): | |
| (a) All significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial
information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
||
| Date: September 8, 2010 | /s/J. Call | |
| John G. Call | ||
| Senior Vice President, Chief Financial Officer and | ||
| Principal Accounting Officer | ||
31
EXHIBIT 32.1
Certification of
Chief Executive Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection
with the Quarterly Report of Ross Stores, Inc. (the “Company”) on Form 10-Q for
the quarter ended July 31, 2010 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Michael Balmuth, as Chief
Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(“Section 906”), that, to the best of my knowledge:
(1) The Report fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78m); and
(2) The information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
| Date: | September 8, 2010 | /s/Michael Balmuth | |
| Michael Balmuth | |||
| Vice Chairman and Chief Executive Officer | |||
32
EXHIBIT 32.2
Certification of
Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection
with the Quarterly Report of Ross Stores, Inc. (the “Company”) on Form 10-Q for
the quarter ended July 31, 2010 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, John G. Call, as Chief
Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(“Section 906”), that, to the best of my knowledge:
(1) The Report fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78m); and
(2) The information contained in the Report
fairly presents, in all material respects, the financial condition and results
of operations of the Company.
| Date: | September 8, 2010 | /s/J. Call | |
| John G. Call | |||
| Senior Vice President, Chief Financial Officer | |||
| and Principal Accounting Officer | |||
33