UNITED STATES 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 29, 1995
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)
Delaware (State or other jurisdiction of 94-1390387
incorporation or organization) (I.R.S. Employer
Idendification No.)
8333 Central Avenue, Newark, California 94560-3433
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 505-4400
Former name, former address and former fiscal N/A
year, if 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 __
The number of shares of Common Stock, with $.01
par value, outstanding on August 26, 1995 was 24,683,890.
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ROSS STORES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($000) July 29, January 28, July 30,
ASSETS 1995 1995 1994
(Unaudited) (Note A) (Unaudited)
Current Assets
Cash $ 25,493 $ 23,581 $ 19,012
Accounts receivable 8,206 5,360 11,268
Merchandise inventory 303,659 275,183 297,078
Prepaid expenses and other 11,048 12,157 11,154
_______ _______ ________
Total Current Assets 348,406 316,281 338,512
Property And Equipment
Land and buildings 24,101 23,723 23,615
Fixtures and equipment 148,584 145,427 127,770
Leasehold improvements 115,184 111,615 95,037
Construction-in-progress 9,067 12,490 11,273
_______ _______ _______
296,936 293,255 257,695
Less accumulated depreciation and amortization 128,208 122,004 109,631
_______ _______ _______
168,728 171,251 148,064
Lease rights and other assets 17,962 18,709 16,539
_______ _______ ________
$535,096 $ 506,241 $503,115
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 128,925 $109,589 $ 108,630
Accrued expenses and other 40,574 48,472 34,359
Accrued payroll and benefits 22,916 21,705 16,394
Income taxes payable 7,180 4,739 8,267
_______ _______ _______
Total Current Liabilities 199,595 184,505 167,650
Long-term debt 45,940 46,069 83,091
Deferred income taxes and other liabilities 21,426 21,116 20,247
Stockholders' Equity
Capital stock 246 244 244
Additional paid-in capital 127,026 125,451 121,689
Retained earnings 140,863 128,856 110,194
_______ _______ _______
268,135 254,551 232,127
________ ________ ________
$535,096 $506,241 $503,115
See notes to condensed consolidated financial statements.
3
ROSS STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended Six Months Ended
_____________________ ___________________
($000 except per share data, July 29, July 30, July 29, July 30,
unaudited) 1995 1994 1995 1994
Sales $ 351,202 $ 312,296 $ 648,637 $ 576,503
Costs and Expenses
Cost of goods sold and occupancy 254,230 225,951 472,849 417,538
General, selling and administrative 72,036 64,891 136,695 124,068
Depreciation and amortization 6,758 5,736 13,443 11,291
Interest 951 973 1,979 1,514
________ ________ ________ ________
$333,975 $297,551 $624,966 $554,411
Earnings before taxes 17,227 14,745 23,671 22,092
Provision for taxes on earnings 6,891 5,898 9,468 8,837
________ _______ ________ ________
Net earnings $ 10,336 $ 8,847 $ 14,203 $ 13,255
Net earnings per share:
Primary $ .42 $ .36 $ .58 $ .53
Fully diluted $ .42 $ .36 $ .57 $ .53
Weighted average shares outstanding:
Primary 24,686 24,762 24,670 24,879
Fully diluted 24,726 24,777 24,709 24,913
Stores open at end of period 282 257
See notes to condensed consolidated financial statements.
4
ROSS STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
($000, unaudited) July 29, July 30,
1995 1994
Cash Flows From Operating Activities
Net earnings $ 14,203 $ 13,255
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization of property and equipment 13,443 11,291
Other amortization 2,489 2,411
Change in current assets and current liabilities:
(Increase) in merchandise inventory (28,477) (68,149)
(Increase) in other current assets - net (1,738) (3,185)
Increase in accounts payable 20,806 20,298
Increase (decrease) in other current liabilities - net 3,000 (92)
Other 1,760 (3,221)
_______ ________
Net cash provided by (used in) operating activities 25,486 (27,392)
Cash Flows From Investing Activities
Additions to property and equipment (19,341) (22,938)
________ ________
Net cash used in investing activities (19,341) (22,938)
Cash Flows From Financing Activities
Borrowing under line of credit agreement 0 49,900
(Repayment) of long-term debt (128) (161)
Issuance of common stock related to stock plan 220 1,134
Repurchase of common stock (1,385) (11,374)
Dividends paid (2,940) (2,464)
_______ ________
Net cash provided by (used in) financing activities (4,233) 37,035
________ ________
Net Increase (Decrease) In Cash 1,912 (13,295)
Cash
Beginning of year 23,581 32,307
End of quarter $ 25,493 $ 19,012
See notes to condensed consolidated financial statements.
5
ROSS STORES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended July 29, 1995 and July 30, 1994
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared from the records of the company without audit and,
in the opinion of management, include all adjustments (consisting of
only normal recurring accruals) necessary to present fairly the
financial position at July 29, 1995 and July 30, 1994; the interim
results of operations for the three and six months ended July 29, 1995
and July 30, 1994; and changes in cash flows for the six months then
ended. The balance sheet at January 28, 1995, presented herein, has
been derived from the audited financial statements of the company 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 28, 1995. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted for purposes of the condensed consolidated interim financial
statements. The condensed consolidated financial statements should be
read in conjunction with the audited consolidated financial
statements, including notes thereto, for the year ended January 28,
1995.
The results of operations for the three and six month periods herein
presented are not necessarily indicative of the results to be expected
for the full year.
The condensed consolidated financial statements at July 29, 1995 and
July 30, 1994, and for the three and six months then ended have been
reviewed, prior to filing, by the registrant's independent accountants
whose report covering their review of the financial statements is
included in this report on page 6.
NOTE B - STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES
Total cash paid for interest and income taxes is as follows:
Six Months Ended
($000, unaudited) July 29, 1995 July 30, 1994
Interest $ 2,141 $ 1,721
Income Taxes $ 7,027 $ 6,973
6
INDEPENDENT AUDITORS' REVIEW REPORT
Board of Directors and Stockholders of Ross Stores, Inc.
Newark, California
We reviewed the accompanying condensed consolidated balance sheets of
Ross Stores, Inc. (the "Company") as of July 29, 1995 and July 30,
1994 and the related condensed consolidated statements of earnings for
the three-month period and six-month periods then ended and cash flows
for the six-month periods then ended. These condensed consolidated
financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data, and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, 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 generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Ross Stores,
Inc. as of January 28, 1995, 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 13, 1995,
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 28,
1995 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
Deloitte & Touche LLP
San Francisco, CA
August 18, 1995
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
STORES AND GENERAL
As of July 29, 1995 and July 30, 1994, the company operated a total of
282 stores and 257 stores, respectively. Accordingly, the results of
operations for the three and six months ended July 29, 1995, over the
same periods last year, reflect an increase in the level of operations
which was due to the greater number of open stores during the current
period as well as an increase in comparable store sales.
RESULTS OF OPERATIONS
Sales
During the three and six month periods ended July 29, 1995, sales were
$351 million and $649 million, respectively, an increase of
approximately $39 million and $72 million over the corresponding
periods last year. Comparable store sales for both the three and six
month periods ended July 29, 1995 increased 1% from the same periods
of the prior year.
Costs and Expenses
Cost of goods sold and occupancy as a percentage of sales was 72% and
73%, respectively, for the three and six month periods ended July 29,
1995 compared to 72% for the same periods of 1994. For the three
month period ended July 29, 1995, a slightly higher mark-up combined
with a decline in markdowns as a percent of sales offset an increase
in freight costs. The increase in cost of goods sold for the first
six months of fiscal 1995 resulted from an increase in freight costs
partially offset by lower markdowns.
General selling and administrative expenses as a percentage of sales
was 21% for both the three and six month periods ended July 29, 1995
compared to 21% and 22% for the comparable periods of the prior year.
The slight decline in the six month period of the fiscal year resulted
mainly from the ability to leverage advertising and store expenses
over a larger store base.
Taxes on Earnings
The company's effective tax rate for the second quarter of 1995 and
1994 was 40%. The rate for both periods reflects the applicable
statutory tax rates.
LIQUIDITY AND CAPITAL RESOURCES
The primary uses of cash during the first six months of 1995 were for
capital expenditures for new and existing locations and an increase in
merchandise inventory for new stores partially offset by a related
increase in accounts payable. The company believes it can fund its
capital needs for the remainder of the fiscal year and repurchase
stock under its current one million share stock repurchase
authorization through internally generated cash, trade credit,
established bank lines and lease financing.
8
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on May 25, 1995 ("1995
Annual Meeting"), the stockholders of the company voted on the
following four proposals:
Proposal 1 to reelect three Class III Directors for a three year term;
Proposal 2 to approve amendments to the 1992 Stock Option Plan to (i)
increase the share reserve by 1,200,000 shares and (ii) limit the
number of shares of Common Stock underlying options granted to any
single individual per fiscal year;
Proposal 3 to approve an amendment to the 1988 Restricted Stock Plan
to increase the share reserve by 800,000 shares; and
Proposal 4 to approve an amendment to the Employee Stock Purchase Plan
to increase the share reserve by 400,000 shares.
INFORMATION ON THE BOARD OF DIRECTORS. Norman A. Ferber, Philip
Schlein and Melvin A. Wilmore were the nominees reelected at the 1995
Annual Meeting as the company's Class III directors whose terms expire
in 1998. Donald G. Fisher stepped down from the company's Board of
Directors after the end of the 1995 Annual Meeting. The following are
the company's directors who were not up for reelection and whose term
of office continues after the 1995 Annual Meeting: incumbent Class I
Directors whose term expires in 1996: Stuart G. Moldaw, George P.
Orban and Donald H. Seiler; and incumbent Class II Director whose term
expires in 1997: Donna L. Weaver.
1995 ANNUAL MEETING ELECTION RESULTS
PROPOSAL 1.
ELECTION OF DIRECTORS BROKER
IN FAVOR WITHHELD NON-VOTES
Norman A. Ferber 22,255,315 735,898 n/a
Philip Schlein 22,341,643 649,570 n/a
Melvin A. Wilmore 22,251,357 739,856 n/a
PROPOSALS 2, 3 and 4.
BROKER
IN FAVOR AGAINST ABSTAIN NON-VOTES
AMENDMENTS TO 16,682,754 3,086,205 313,279 2,908,975
1992 STOCK OPTION
PLAN
AMENDMENT TO 1988 14,255,214 5,476,636 350,389 2,908,974
RESTRICTED
STOCK PLAN
AMENDMENT TO 18,351,072 1,285,817 345,180 3,009,144
EMPLOYEE STOCK
PURCHASE PLAN
9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation, as amended, incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form
8-B (the "Form 8-B") filed September 1, 1989 by Ross Stores,
Inc., a Delaware corporation ("Ross Stores").
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.
10.1 Agreement of Lease, dated November 24, 1986, for Ross Stores'
corporate headquarters and distribution center in Newark, CA,
incorporated by reference to Exhibit 10.5 on Form 8-B.
10.2 Revolving Credit Agreement, dated July 31, 1993, among Ross
Stores; Wells Fargo Bank, National Association, Bank of
America, N.T. & S.A., Nationsbank of Texas, N.A., and Banque
Nationale de Paris ("Banks"); and Wells Fargo Bank, National
Association, as agent for Banks ("Revolving Credit
Agreement"), incorporated by reference to Exhibit 10.17 on the
Form 10-Q filed by Ross Stores for its quarter ended July 31,
1993.
10.3 First Amendment to Revolving Credit Agreement, effective on
July 31, 1994 by and among Ross Stores, Banks and Wells Fargo,
National Association, as agent for Banks, incorporated by
reference to Exhibit 10.5 to the Form 10-Q filed by Ross
Stores for its quarter ended July 30, 1994.
10.4 Second Amendment to Revolving Credit Agreement, effective on
June 15, 1995 by and among Ross Stores, Banks and Wells Fargo,
National Association, as agent for Banks.
10.5 Credit Agreement, dated as of June 22, 1994, among Ross
Stores, Bank of America National Trust and Savings Association
as Agent, the Industrial Bank of Japan as Co-Agent and the
other financial institutions party thereto ("Credit
Agreement"), incorporated by reference to Exhibit 10.6 to the
Form 10-Q filed by Ross Stores for its quarter ended July 30,
1994.
10.6 First Amendment to Credit Agreement, dated as of June 20,
1995, among Ross Stores, Bank of America National Trust and
Savings Association as Agent, the Industrial Bank of Japan as
Co-Agent and the several financial institutions party to the
Credit Agreement.
MANAGEMENT CONTRACTS AND COMPENSATORY PLANS
(EXHIBITS 10.7 - 10.18)
10.7 Amended and Restated 1992 Stock Option Plan, incorporated by
reference to the appendix to the Proxy Statement filed by Ross
Stores on April 24, 1995 for its Annual Stockholders Meeting
held May 25, 1995.
10.8 Third Amended and Restated Ross Stores Employee Stock Purchase
Plan, incorporated by reference to the appendix to the Proxy
Statement filed by Ross Stores on April 24, 1995 for its
Annual Stockholders Meeting held May 25, 1995.
10
10.9 Third Amended and Restated Ross Stores 1988 Restricted Stock
Plan, incorporated by reference to the appendix to the Proxy
Statement filed by Ross Stores on April 24, 1995 for its
Annual Stockholders Meeting held May 25, 1995.
10.10 1991 Outside Directors Stock Option Plan, incorporated by
reference to Exhibit 10.13 to the 1991 Form 10-K filed by Ross
Stores for its year ended February 1, 1992.
10.11 Ross Stores Executive Medical Plan, incorporated by reference
to Exhibit 10.13 to the 1993 Form 10-K filed by Ross Stores
for its year ended January 29, 1994 ("1993 Form 10-K").
10.12 Third Amended and Restated Ross Stores Executive Supplemental
Retirement Plan, incorporated by reference to Exhibit 10.14 to
the 1993 Form 10-K.
10.13 Ross Stores Non-Qualified Deferred Compensation Plan,
incorporated by reference to Exhibit 10.15 to the 1993 Form 10-
K.
10.14 Ross Stores Incentive Compensation Plan, incorporated by
reference to Exhibit 10.16 to the 1993 Form 10-K.
10.15 Employment Agreement between Ross Stores, Inc. and Norman A.
Ferber, effective as of June 8, 1994, incorporated by
reference to Exhibit 10.15 to the Form 10-Q filed by Ross
Stores for its quarter ended July 30, 1994.
10.16 Employment Agreement between Ross Stores and Melvin A.
Wilmore, effective as of March 15, 1994, incorporated by
reference to Exhibit 10.20 to the Form 10-Q filed by Ross
Stores for its quarter ended July 30, 1994.
10.17 Employment Agreement between Ross Stores and Michael Balmuth,
effective as of February 1, 1995, incorporated by reference to
Exhibit 10.15 to the Form 10-Q filed by Ross Stores for its
quarter ended April 29, 1995.
10.18 Consulting Agreement between Ross Stores and Stuart G. Moldaw,
effective as of March 16, 1995, incorporated by reference to
Exhibit 10.16 to the Form 10-Q filed by Ross Stores for its
quarter ended April 29, 1995.
11 Statement re: Computation of Per Share Earnings.
15 Letter re: Unaudited Interim Financial Information.
27 Financial Data Schedule (submitted for SEC use only).
(b) Reports on Form 8-K
None.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed by the
undersigned thereunto duly authorized.
ROSS STORES, INC.
Registrant
Date: September 7, 1995 /s/ John M. Vuko
John M. Vuko, Senior Vice President,
Controller and Principal Accounting
Officer
12
INDEX TO EXHIBITS
Exhibit
Number Exhibit
3.1 Certificate of Incorporation, as amended, incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form
8-B (the "Form 8-B") filed September 1, 1989 by Ross Stores,
Inc., a Delaware corporation ("Ross Stores").
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.
10.1 Agreement of Lease, dated November 24, 1986, for Ross Stores'
corporate headquarters and distribution center in Newark, CA,
incorporated by reference to Exhibit 10.5 on Form 8-B.
10.2 Revolving Credit Agreement, dated July 31, 1993, among Ross
Stores, Wells Fargo Bank, National Association, Bank of
America, National Trust and Savings Association, and Security
Pacific National Bank ("Banks"); and Wells Fargo Bank, National
Association, as agent for Banks ("Revolving Credit Agreement"),
incorporated by reference to Exhibit 10.17 on the Form 10-Q
filed by Ross Stores for its quarter ended July 31, 1993.
10.3 First Amendment to Revolving Credit Agreement, effective on
July 31, 1994, by and among Ross Stores, Banks and Wells Fargo
Bank, National Association, as agent for Banks, incorporated by
reference to Exhibit 10.5 to the Form 10-Q filed by Ross Stores
for its quarter ended July 30, 1994.
10.4 Second Amendment to Revolving Credit Agreement, effective on
June 15, 1995 by and among Ross Stores, Banks and Wells Fargo,
National Association, as agent for Banks.
10.5 Credit Agreement, dated as of June 22, 1994, among Ross Stores,
Bank of America National Trust and Savings Association as
Agent, the Industrial Bank of Japan as Co-Agent and the other
financial institutions party thereto ("Credit Agreement"),
incorporated by reference to Exhibit 10.6 to the Form 10-Q
filed by Ross Stores for its quarter ended July 30, 1994.
10.6 First Amendment to Credit Agreement, dated as of June 20, 1995,
among Ross Stores, Bank of America National Trust and Savings
Association as Agent, the Industrial Bank of Japan as Co-Agent
and the several financial institutions party to the Credit
Agreement.
MANAGEMENT CONTRACTS AND COMPENSATORY PLANS
(EXHIBITS 10.7 - 10.18)
10.7 Amended and Restated 1992 Stock Option Plan, incorporated by
reference to the appendix to the Proxy Statement filed by Ross
Stores on April 24, 1995 for its Annual Stockholders Meeting
held May 25, 1995.
10.8 Third Amended and Restated Ross Stores Employee Stock Purchase
Plan, incorporated by reference to the appendix to the Proxy
Statement filed by Ross Stores on April 24, 1995 for its
Annual Stockholders Meeting held May 25, 1995.
13
Exhibit
Number Exhibit
10.9 Third Amended and Restated Ross Stores 1988 Restricted Stock
Plan, incorporated by reference to the appendix to the Proxy
Statement filed by Ross Stores on April 24, 1995 for its
Annual Stockholders Meeting held May 25, 1995.
10.10 1991 Outside Directors Stock Option Plan, incorporated by
reference to Exhibit 10.13 to the 1991 Form 10-K filed by Ross
Stores for its year ended February 1, 1992.
10.11 Ross Stores Executive Medical Plan, incorporated by reference
to Exhibit 10.13 to the 1993 Form 10-K filed by Ross Stores for
its year ended January 29, 1994 ("1993 Form 10-K").
10.12 Third Amended and Restated Ross Stores Executive Supplemental
Retirement Plan, incorporated by reference to Exhibit 10.14 to
the 1993 Form 10-K.
10.13 Ross Stores Non-Qualified Deferred Compensation Plan,
incorporated by reference to Exhibit 10.15 to the 1993 Form 10-
K.
10.14 Ross Stores Incentive Compensation Plan, incorporated by
reference to Exhibit 10.16 to the 1993 Form 10-K.
10.15 Employment Agreement between Ross Stores, Inc. and Norman A.
Ferber, effective as of June 8, 1994, incorporated by reference
to Exhibit 10.15 to the Form 10-Q filed by Ross Stores for its
quarter ended July 30, 1994.
10.16 Employment Agreement between Ross Stores and Melvin A. Wilmore,
effective as of March 15, 1994, incorporated by reference to
Exhibit 10.20 to the Form 10-Q filed by Ross Stores for its
quarter ended July 30, 1994.
10.17 Employment Agreement between Ross Stores and Michael Balmuth,
effective as of February 1, 1995, incorporated by reference to
Exhibit 10.15 to the Form 10-Q filed by Ross Stores for its
quarter ended April 29, 1995.
10.18 Consulting Agreement between Ross Stores and Stuart G. Moldaw,
effective as of March 16, 1995, incorporated by reference to
Exhibit 10.16 to the Form 10-Q filed by Ross Stores for its
quarter ended April 29, 1995.
11 Statement re: Computation of Per Share Earnings.
15 Letter re: Unaudited Interim Financial Information.
27 Financial Data Schedules (submitted for SEC use only).
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
This SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT ("Second
Amendment") is entered into on, and will be effective on, June 15,
1995, and is the second amendment to the Revolving Credit Agreement
dated as of July 31, 1993, as amended by a First Amendment To
Revolving Credit Agreement effective as of July 31, 1994,
("Agreement") by and among Ross Stores, Inc. ("Borrower"), each of the
financial institutions listed in Schedule I to the Agreement, as
amended from time to time, (such financial institutions being referred
to in the Agreement and in this Second Amendment collectively as the
"Banks" and individually as a "Bank"), and Wells Fargo Bank, National
Association ("Wells Fargo"), as agent for the Banks (in such capacity,
"Agent").
RECITALS
WHEREAS Borrower has requested that Banks agree to modify the
Agreement to extend the Maturity Date, modify certain covenants
contained in Articles V and VI of the Agreement and amend the
Agreement in certain other respects;
WHEREAS, Banks have agreed to the above-referenced modifications;
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINITIONS. All capitalized terms used herein and not defined
herein shall have the respective meaning provided such terms in the
Agreement.
2. MATURITY DATE. Borrower and Banks agree that the Maturity Date
shall be extended to July 31, 1998. To that end, the execution by
Banks of this Second Amendment pursuant to the definition of Maturity
Date in Article I of the Agreement, shall serve to extend the Maturity
Date to July 31, 1998.
3. USE OF FUNDS. Borrower and Banks agree that the proceeds of an
Advance or a Loan under the Agreement may be used to repay Borrower's
outstanding indebtedness under the Prior Credit Agreement and for
Borrower's general corporate purposes instead of to repay Borrower's
outstanding indebtedness under the Prior Credit Agreement and to
provide working capital for Borrower. To that end, the sixth sentence
of Section 2.2 of the Agreement is hereby deleted in it entirety and a
new sixth sentence is hereby added to the Agreement as follows:
"The proceeds of each Advance and each Loan shall be used
(a) to repay all indebtedness (except with respect to the
Existing Letters of Credit) outstanding as of the Closing
Date under Borrower's revolving line of credit granted
pursuant to the Prior Credit Agreement, and (b) for
Borrower's general corporate purposes."
4. LEVERAGE RATIO. Borrower and Banks agree that Section 5.8(b) of
the Agreement shall be amended to include the following dates and
ratios at the end of the chart listing "Date of Determination" and
"Leverage Ratios":
2
"Date of Determination Leverage Ratio
End of Third Quarter in Fiscal Year 1997 1.60
December 31, 1997 1.20
End of Fiscal Year 1997 1.35
End of First and Second Quarters in Fiscal 1.50
Year 1998"
In addition, "1997" shall be deleted from the last sentence of
Section 5.8(b) and "1998" shall be inserted in lieu thereof.
5. FIXED CHARGE COVERAGE RATIO. Borrower and Banks agree that the
pre-tax earnings covenant set forth in Section 5.8(c) of the Agreement
shall be deleted in its entirety and a new Fixed Charge Coverage Ratio
shall be added as Section 5.8(c) to the Agreement as follows:
"5.8(c) Borrower will maintain at all times a Fixed Charge
Coverage Ratio of at least 1.25:1. For purposes of this
Section 5.8(c), "Fixed Charge Coverage Ratio" shall mean the
sum of earnings before interest, taxes, depreciation and
amortization, rent expense and lease expense to the sum of
rent expense, lease expense, accrued income taxes, interest,
excess dividends over $5,000,000 paid in the applicable
calculation period and the current portion of long-term
Debt, calculated on a rolling four quarter basis."
6. APPLICABLE MARGIN. Borrower and Banks agree that the ratio of
Debt to EBITDA which determines the Applicable Margin for LIBO Rate
Advances will be increased (a) from less than .75 for the Applicable
Margin of .375% to less than 1.25 for such Applicable Margin, (b) from
.75 to 1.50 for the Applicable Margin of .50% to 1.25 to 1.75 for such
Applicable Margin, and (c) from more than 1.50 for the Applicable
Margin of .75% to more than 1.75 for such Applicable Margin. To that
end, the definition of "Applicable Margin" in Section 1.1 of the
Agreement is hereby deleted in its entirety and a new definition is
hereby added to the Agreement as follows:
"Applicable Margin" shall mean, with respect to each LIBO
Rate Advance, .50% per annum during August 1994, and at all
times thereafter the applicable percentage rate per annum
set forth below in the column entitled "APPLICABLE MARGIN
FOR LIBO RATE ADVANCES."
APPLICABLE
RATIO OF MARGIN FOR
DEBT TO EBITDA LIBO RATE ADVANCES
Less than 1.25 .375%
1.25 to 1.75 .50%
More than 1.75 .75%
The ratio of Debt to EBITDA used to compute the Applicable
Margin shall be the Debt to EBITDA Ratio set forth in the
Compliance Certificate most recently delivered by Borrower
to all the Banks pursuant to Section 5.3(c) of this
Agreement. Changes in the Applicable Margin resulting from
a change in the Debt to EBITDA Ratio shall become effective
on the first day of the calendar month next following the
calendar month in which each new Compliance Certificate is
delivered to the Banks pursuant to Section 5.3(c) of this
Agreement. If Borrower fails to deliver any Compliance
Certificate as required pursuant to Section 5.3(c) of this
Agreement, the Applicable Margin from and including the
first day of the calendar month next following the calendar
month in which Borrower was required to deliver the missing
Compliance Certificate until the first day of the calendar
month next following the calendar month in which Borrower
does deliver such Compliance Certificate shall conclusively
be presumed to equal the highest Applicable Margin set forth
above."
7. COMMITMENT FEE RATE. Borrower and Banks agree that the ratio of
Debt to EBITDA which determines the Commitment Fee Rate will be
increased (a) from less than .75 for the Commitment Fee Rate of .15%
to less than 1.25 for such Commitment Fee Rate, (b) from .75 to 1.50
for the Commitment Fee Rate of .175% to 1.25 to 1.75 for such
Commitment Fee Rate, and (c) from more than 1.50 for the Commitment
Fee Rate of .20% to more than 1.75 for such Commitment Fee Rate. To
that end, the definition of "Commitment Fee Rate" in Section 1.1 of
the Agreement is hereby deleted in its entirety and a new definition
is hereby added to the Agreement as follows:
"Commitment Fee Rate" shall mean .175% per annum during
August 1994 and thereafter the applicable percentage rate
per annum set forth below in the column entitled "COMMITMENT
FEE RATE."
RATIO OF COMMITMENT
DEBT TO EBITDA FEE RATE
Less than 1.25 .15%
1.25 to 1.75 .175%
More than 1.75 .20%
The ratio of Debt to EBITDA used to compute the Commitment
Fee Rate shall be the Debt to EBITDA Ratio set forth in the
Compliance Certificate most recently delivered by Borrower
to all the Banks pursuant to Section 5.3(c) of this Agree
ment. Changes in the Commitment Fee Rate resulting from a
change in the Debt to EBITDA Ratio shall become effective on
the first day of the calendar month next following the
calendar month in which each new Compliance Certificate is
delivered to the Banks pursuant to Section 5.3(c) of this
Agreement. If Borrower fails to deliver any Compliance
Certificate as required pursuant to Section 5.3(c) of this
Agreement, the Commitment Fee Rate from and including the
first day of the calendar month next following the calendar
month in which Borrower was required to deliver the missing
Compliance Certificate until the first day of the calendar
month next following the calendar month in which Borrower
does deliver such Compliance Certificate shall conclusively
be presumed to equal the highest Commitment Fee Rate set
forth above."
4
8. ADVANCES AND LOANS BETWEEN THANKSGIVING DAY AND JANUARY 25.
Borrower and Banks agree that Advances and Loans may be made and
outstanding during the days between the Friday immediately following
Thanksgiving Day and the immediately following January 25 in each of
Borrower's fiscal years. To that end, subsection (a) of Section 2.6
of the Agreement is hereby deleted in its entirety and a new Section
2(a) is hereby added to the Agreement as follows:
"(a) Borrowing and Repayment. Borrower may from time to
time from the Closing Date up to, but not including, the
Maturity Date borrow Advances and Loans, partially or wholly
repay its outstanding Advances and Loans and reborrow
Advances and Loans, subject to all of the limitations, terms
and conditions contained in this Agreement; provided,
however, that the total outstanding borrowings at any time
under the Revolving Credit, whether as Advances or Loans or
undrawn amounts under outstanding Letters of Credit, shall
at no time exceed the Total Commitments at such time."
9. FIXED ASSETS. Borrower and Banks agree that Section 6.4 (c)
shall be deleted from the Agreement in its entirety and a new Section
6.4(c) shall be added to the Agreement as follows:
"(c) additional expenditures not included by Borrower under
Section 6.4(a) hereof, in amounts not to exceed an aggregate
of $10,000,000 for future expansion of Borrower's East Coast
or West Coast distribution and warehouse facilities or
construction of a completely new distribution and warehouse
facility."
10. LOANS. Borrower and Banks agree to add a new sentence to the
end of Section 6.5 of the Agreement. To that end, the following
sentence shall be added to the end of Section 6.5:
"Notwithstanding the foregoing, Borrower shall be permitted
to make a loan to the landlord of Borrower's West Hollywood,
California store location in a principal amount not to
exceed $3,500,000."
11. REPRESENTATIONS AND WARRANTIES. In order to induce Banks to
enter into this Second Amendment and to amend the Agreement in the
manner provided in this Second Amendment, Borrower hereby represents
and warrants that (a) the representations and warranties contained in
Article IV of the Agreement are true and correct on the date of this
Second Amendment, with the same effect as though such representations
and warranties had been made on and as of such date, and (b) no Event
of Default, as specified in Section 7.1 of the Agreement, and no
condition, event or act which with the giving of notice or the passage
of time or both would constitute such an Event of Default, has
occurred, is continuing or is existing on the date of this Second
Amendment.
12. AGREEMENT OTHERWISE UNALTERED. Except as expressly modified by
this Second Amendment, the Agreement shall continue to be and shall
remain in full force and effect.
13. GOVERNING LAW. The validity, construction and effect of this
Second Amendment shall be governed by, and be construed under, the
laws of the State of California.
5
14. COUNTERPARTS. This Second Amendment may be executed in as many
counterparts as may be deemed necessary or convenient, and by the
different parties hereto on separate counterparts (provided that
Borrower shall execute each counterpart), each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment by their duly authorized officers as of the day and year
first above written.
ROSS STORES, NC.
By: /s/ Earl Benson
Title: Sr. Vice President and
Chief Financial Officer
WELLS FARGO BANK,
NATIONAL ASSOCIATION,
individually and as Agent
By: /s/ Alan Barkley
Title: Vice President
BANK OF AMERICA, N.T. & S.A.
By: /s/ Jean A. Brinkmann
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Brooke Bauer
Title: Vice President
BANQUE NATIONALE DE PARIS
By: /s/ Judith A. Dowling /s/ Katherine Wolfe
Title: Vice President Vice President
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT ("Amendment"), dated
as of June 20, 1995, is entered into by and among ROSS STORES,
INC. (the "Company"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as agent for itself and the Banks (the "Agent"), THE
INDUSTRIAL BANK OF JAPAN, LIMITED, as Co-Agent, and the several
financial institutions party to the Credit Agreement
(collectively, the "Banks").
RECITALS
The Company, Banks, and Agent are parties to a Credit
Agreement dated as of June 22, 1994 (the "Credit Agreement")
pursuant to which the Agent and the Banks have extended certain
credit facilities to the Company. The Banks are willing to amend
the Credit Agreement subject to the terms and conditions of this
Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings, if any,
assigned to them in the Credit Agreement.
2. Amendments to Credit Agreement.
(a) The definition of "Maturity Date" in Section 1.01 of
the Credit Agreement shall be amended to read as follows:
"Maturity Date" means June 30, 2000.
(b) The definition of "Revolving Termination Date" in
Section 1.01 of the Credit Agreement shall be amended to read as
follows:
"Revolving Termination Date" means the earlier to occur
of:
(a) June 29, 1996; and
(b) the date on which the Aggregate Revolving
Commitment shall terminate in accordance with the
provisions of this Agreement.
(c) Section 6.03 of the Credit Agreement, entitled
"Leverage Ratio," is amended by adding the following to the end
of the chart therein:
2
Date of Determination Leverage Ratio
End of First, Second and Third 1.50
Quarters in Fiscal Year 1999
December 31, 1999 1.20
End of Fiscal Year 1999 1.30
End of First Quarter in 1.50
Fiscal Year 2000
(d) Section 6.04 of the Credit Agreement, entitled
"Pretax Earnings," is hereby deleted.
(e) Subsection (c) of Section 7.09 of the Credit
Agreement, entitled "Fixed Assets," is amended to read as
follows:
(c) additional expenditures not included by the
Company under subsection (a) hereof, in amounts not to exceed
an aggregate of $10,000,000, for either (i) future expansion
of the Company's East Coast or West Coast distribution and
warehouse facilities, or (ii) new distribution and warehouse
facilities.
(f) Section 7.04, entitled "Loans; Advances;
Investments; Acquisitions; Guarantees," is amended by adding the
following sentence to the end of the Section:
In addition to transactions permitted under the foregoing
sentence, the Company may lend up to Three Million Dollars
($3,000,000) to the landlord of the Company's West Hollywood
location.
(g) Section 10.05 is amended to read as follows:
10.05 Indemnity. Whether or not the transactions
contemplated hereby shall be consummated: The Company shall
pay, indemnify, and hold each Bank, the Agent, the Agent-
Related Persons and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact
(each, an "Indemnified Person") harmless from and against any
and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses or
disbursements (including Attorney Costs) of any kind or
nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement
and any other Loan Documents, or the transactions
contemplated hereby and thereby, and with respect to any
investigation, litigation or proceeding (including any
Insolvency Proceeding or appellate proceeding) related to
this Agreement or the Loans or the use of the proceeds
thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Company shall have no
3
obligation hereunder to any Indemnified Person with respect
to Indemnified Liabilities arising from the gross negligence,
willful misconduct, breach of this Agreement or violation of
any law by such Indemnified Person. The agreements in this
Section shall survive payment of all other Obligations;
provided, however, that this indemnification shall expire on
the fourth anniversary of the final payment in full of all
other Obligations, unless prior to such fourth anniversary an
Indemnified Person has provided notice to the Company of a
dispute, claim or other facts which give rise to an
obligation of the Company to indemnify such Indemnified
Person under this paragraph.
(h) Section 10.16 is amended to read as follows:
10.16 Waiver of Jury Trial. THE COMPANY, THE BANKS AND
THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY
TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY
IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF
OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
3. Representations and Warranties. The Company hereby
represents and warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and is
continuing.
(b) The execution, delivery and performance by the
Company of this Amendment have been duly authorized by all
necessary corporate and other action and do not and will not
require any registration with, consent or approval of, notice to
or action by, any Person (including any Governmental Authority)
in order to be effective and enforceable. The Credit Agreement
as amended by this Amendment constitutes the legal, valid and
binding obligations of the Company, enforceable against it in
accordance with its respective terms, without defense,
counterclaim or offset.
(c) All representations and warranties of the Company
contained in the Credit Agreement are true and correct.
4
(d) The Company is entering into this Amendment on the
basis of its own investigation and for its own reasons, without
reliance upon the Agent and the Banks or any other Person.
4. Effective Date. This Amendment will become effective as
of June 20, 1995 (the "Effective Date"), provided that each of
the following conditions precedent is satisfied:
(a) The Agent has received from the Company and each of
the Banks a duly executed original (or, if elected by the Agent,
an executed facsimile copy) of this Amendment.
(b) The Agent has received from the Company a copy of a
resolution passed by the board of directors of such corporation,
certified by the Secretary or an Assistant Secretary of such
corporation as being in full force and effect on the date hereof,
authorizing the execution, delivery and performance of this
Amendment.
(c) All representations and warranties contained herein
are true and correct as of the Effective Date.
5. Miscellaneous.
(a) Except as herein expressly amended, all terms,
covenants and provisions of the Credit Agreement are and shall
remain in full force and effect and all references therein to
such Credit Agreement shall henceforth refer to the Credit
Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to
the benefit of the parties hereto and thereto and their
respective successors and assigns. No third party beneficiaries
are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all
such counterparts together shall constitute but one and the same
instrument. Each of the parties hereto understands and agrees
that this document (and any other document required herein) may
be delivered by any party thereto either in the form of an
executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy
original, and that receipt by the Agent of a facsimile
transmitted document purportedly bearing the signature of a Bank
or the Company shall bind such Bank or the Company, respectively,
with the same force and effect as the delivery of a hard copy
original. Any failure by the Agent to receive the hard copy
executed original of such document shall not diminish the binding
effect of receipt of the facsimile transmitted executed original
of such document of the party whose hard copy page was not
received by the Agent.
5
(e) This Amendment, together with the Credit Agreement,
contains the entire and exclusive agreement of the parties hereto
with reference to the matters discussed herein and therein. This
Amendment supersedes all prior drafts and communications with
respect thereto.
(f) If any term or provision of this Amendment shall be
deemed prohibited by or invalid under any applicable law, such
provision shall be invalidated without affecting the remaining
provisions of this Amendment or the Credit Agreement,
respectively.
(g) The Company covenants to pay to or reimburse the
Agent and the Banks, upon demand, for all costs and expenses
(including allocated costs of in-house counsel) incurred in
connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment as of the date first above written.
ROSS STORES, INC.
By:/S/Earl Benson
Title:Sr. Vice President & CFO
By:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ Wendy Young
Wendy Young, Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, as Co-Agent and as a Bank
By: /s/Makoto Masuda
Makoto Masuda
Title: Deputy General Manager
By:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: /s/ Jean A. Brinkmann
Jean A. Brinkmann
Vice President
EXHIBIT 11
ROSS STORES, INC.
________________________________________
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Amounts in thousands, except per share amounts)
Three Months Ended
July 29, 1995 July 30, 1994
Fully Fully
Primary Diluted Primary Diluted
Net earnings $10,336 $10,336 $8,847 $8,847
======= ======= ======= =======
Weighted average shares
outstanding:
Common shares 24,566 24,566 24,547 24,547
Common equivalent shares:
Stock options 120 160 215 230
___ ___ ___ ___
Weighted average common and
common
equivalent shares outstanding 24,686 24,726 24,762 24,777
======= ======= ======= =======
Earnings per common and common
equivalent share $.42 $.42 $.36 $.36
==== ==== ==== ====
Six Months Ended
July 29, 1995 July 30, 1994
Fully Fully
Primary Diluted Primary Diluted
Net earnings $ 14,203 $ 14,203 $ 13,255 $ 13,255
======= ======= ======= =======
Weighted average shares
outstanding:
Common shares 24,550 24,550 24,643 24,643
Common equivalent shares:
Stock options 120 159 236 270
___ ___ ___ ___
Weighted average common and
common
equivalent shares outstanding 24,670 24,709 24,879 24,913
======= ======= ======= =======
Earnings per common and common
equivalent share $ .58 $ .57 $ .53 $ .53
EXHIBIT 15
August 28, 1995
Ross Stores, Inc.
Newark, California
We have made a review, in accordance with standards
established by the American Institute of Certified Public
Accountants, of the unaudited condensed consolidated interim
financial statements of Ross Stores, Inc. for the three-
month and six-month periods ended July 29, 1995 and July 30,
1994, as indicated in our independent accountants' review
report dated August 18, 1995; 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 29, 1995, is incorporated by reference
in Registration Statements Nos. 33- 61373, 33-51916, 33-
51896, 33-51898, 33-41415, 33-41413 and 33-29600 of Ross
Stores, Inc. on Form S-8.
We are also aware that the aforementioned report, pursuant
to Rule 436(c) under the Securities Act, is not considered
a part of the Registration Statement 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.
Very truly,
Deloitte & Touche LLP
San Francisco, CA
5
0000745732
ROSS STORES, INC.
1,000
6-MOS
FEB-03-1996
JAN-29-1995
JUL-29-1995
25,493
0
8,206
0
303,659
348,406
296,936
128,208
535,096
199,595
45,940
246
0
0
267,889
535,096
648,637
648,637
472,849
624,966
0
0
1,979
23,671
9,468
14,203
0
0
0
14,203
.58
.57
