Notes to Consolidated Financial Statements
Note A: Summary of Significant Accounting Policies
Business.
Ross Stores, Inc. and its subsidiaries (the “Company”) is an off-price retailer of first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family. At the end of fiscal
2018
, the Company operated
1,480
Ross Dress for Less
®
(“Ross”) locations in
38 states, the District of Columbia, and Guam
, and
237
dd’s DISCOUNTS
®
stores in
18 states
. The Ross and dd’s DISCOUNTS stores are supported by
six
distribution centers. The Company’s headquarters, one buying office, three operating distribution centers, three warehouses, and
23%
of its stores are located in California.
Segment reporting.
The Company has one reportable segment. The Company’s operations include only activities related to off-price retailing in stores throughout the United States.
Basis of presentation and fiscal year.
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. Intercompany transactions and accounts have been eliminated. The Company follows the National Retail Federation fiscal calendar and utilizes a 52-53 week fiscal year whereby the fiscal year ends on the Saturday nearest to January 31. The fiscal years ended
February 2, 2019
,
February 3, 2018
and
January 28, 2017
are referred to as fiscal
2018
, fiscal
2017
, and fiscal
2016
, respectively. Fiscal 2017 was a 53-week year. Fiscal 2018 and 2016 were each 52-week years.
Use of accounting estimates.
The preparation of consolidated financial statements in conformity with Generally Accepted Accounting Principles in the United States of America (“GAAP”) requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant accounting estimates include valuation reserves for inventory shortage, packaway inventory costs, useful lives of fixed assets, insurance reserves, reserves for uncertain tax positions, and legal claims.
Purchase obligations.
As of
February 2, 2019
, the Company had purchase obligations of approximately
$2.6 billion
. These purchase obligations primarily consist of merchandise inventory purchase orders, commitments related to construction projects, store fixtures and supplies, and information technology services, transportation, and maintenance contracts.
Cash and cash equivalents.
Cash equivalents consist of highly liquid, fixed income instruments purchased with an original maturity of three months or less.
Restricted cash, cash equivalents, and investments.
Restricted cash, cash equivalents, and investments serve as collateral for certain insurance obligations of the Company. These restricted funds are invested in bank deposits, money market mutual funds, U.S. Government and agency securities, and corporate securities and cannot be withdrawn from the Company’s account without the prior written consent of the secured parties. The classification between current and long-term is based on the timing of expected payments of the insurance obligations.
The following table provides a reconciliation of cash, cash equivalents, restricted cash and cash equivalents in the Consolidated Balance Sheets that reconcile to the amounts shown on the Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Cash and cash equivalents
|
|
$
|
1,412,912
|
|
|
$
|
1,290,294
|
|
|
$
|
1,111,599
|
|
Restricted cash and cash equivalents included in:
|
|
|
|
|
|
|
Prepaid expenses and other
|
|
11,402
|
|
|
9,412
|
|
|
12,936
|
|
Other long-term assets
|
|
53,765
|
|
|
53,566
|
|
|
51,645
|
|
Total restricted cash and cash equivalents
|
|
65,167
|
|
|
62,978
|
|
|
64,581
|
|
Total cash, cash equivalents and restricted cash and equivalents
|
|
$
|
1,478,079
|
|
|
$
|
1,353,272
|
|
|
$
|
1,176,180
|
|
|
|
|
|
|
|
|
In addition to the restricted cash and equivalents in the table above, the Company has restricted investments included in the Consolidated Balance Sheets as shown below:
|
|
|
|
|
|
|
|
|
|
Restricted Assets ($000)
|
|
2018
|
|
|
2017
|
|
Prepaid expenses and other
|
|
$
|
400
|
|
|
$
|
2,435
|
|
Other long-term assets
|
|
—
|
|
|
403
|
|
Total restricted investments
|
|
$
|
400
|
|
|
$
|
2,838
|
|
Estimated fair value of financial instruments.
The carrying value of cash and cash equivalents, short- and long-term investments, restricted cash and cash equivalents, restricted investments, accounts receivable, other long-term assets, accounts payable, and other long-term liabilities approximates their estimated fair value. See Note B and Note D for additional fair value information.
Cash and cash equivalents were
$1,412.9 million
and
$1,290.3 million
, at
February 2, 2019
and
February 3, 2018
, respectively, and include bank deposits and money market funds for which the fair value was determined using quoted prices for identical assets in active markets, which are considered to be Level 1 inputs under the fair value measurements and disclosures guidance.
Investments.
The Company’s investments are comprised of various debt securities. At
February 2, 2019
and
February 3, 2018
, these investments were classified as available-for-sale and are stated at fair value. Investments are classified as either short- or long-term based on their maturity dates and the Company’s intent. Investments with a maturity of less than one year are classified as short-term. See Note B for additional information.
Merchandise inventory.
Merchandise inventory is stated at the lower of cost (determined using a weighted average basis) or net realizable value. The Company purchases inventory that can either be shipped to stores or processed as packaway merchandise with the intent that it will be warehoused and released to stores at a later date. The timing of the release of packaway inventory to the stores is principally driven by the product mix and seasonality of the merchandise, and its relation to the Company’s store merchandise assortment plans. As such, the aging of packaway varies by merchandise category and seasonality of purchase, but typically packaway remains in storage less than
six months
. Merchandise inventory includes acquisition, processing, and storage costs related to packaway inventory. The cost of the Company’s merchandise inventory is reduced by valuation reserves for shortage based on historical shortage experience from the Company’s physical merchandise inventory counts and cycle counts.
Cost of goods sold.
In addition to
product costs, the Company includes in cost of goods sold its buying, distribution, and freight expenses as well as occupancy costs, and depreciation and amortization related to the Company’s retail stores, buying, and distribution facilities. Buying expenses include costs to procure merchandise inventories. Distribution expenses include the cost of operating the Company’s distribution centers and warehouse facilities.
Property and equipment.
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful life of the asset, typically ranging from three to 12 years for equipment, 20 to 40 years for land improvements and buildings, and three to seven years for computer software costs incurred in developing or obtaining software for internal use. The cost of leasehold improvements is amortized over the useful life of the asset or the applicable lease term, whichever is less. Depreciation and amortization expense on property and equipment was $
330.4 million
,
$313.2 million
, and
$302.5 million
for fiscal
2018
,
2017
, and
2016
, respectively. The Company capitalizes interest during the construction period and during the development and implementation phase of software projects. Interest capitalized was
$2.5 million
,
$0.7 million
and
$0.0 million
in fiscal
2018
,
2017
, and
2016
, respectively. As of
February 2, 2019
,
February 3, 2018
, and
January 28, 2017
the Company had
$33.7 million
,
$24.3 million
, and
$25.7 million
, respectively, of property and equipment purchased but not yet paid. These purchases are included in Property and Equipment and in Accounts payable and Accrued expenses and other in the accompanying Consolidated Balance Sheets.
Other long-term assets.
Other long-term assets as of
February 2, 2019
and
February 3, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
Deferred compensation (Note B)
|
|
$
|
124,558
|
|
|
$
|
120,613
|
|
Restricted cash and investments
|
|
53,765
|
|
|
53,969
|
|
Other
|
|
16,023
|
|
|
13,136
|
|
Total
|
|
$
|
194,346
|
|
|
$
|
187,718
|
|
Property and other long-term assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Intangible assets that are not subject to amortization, including goodwill, are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset may be impaired. Based on the Company’s evaluation during fiscal
2018
,
2017
, and
2016
, no impairment charges were recorded.
Store closures.
The Company continually reviews the operating performance of individual stores. For stores that are closed, the Company records a liability for future minimum lease payments net of estimated sublease recoveries and related ancillary costs at the time the liability is incurred. The lease loss liability was
$0.2 million
and
$0.6 million
, as of
February 2, 2019
and
February 3, 2018
, respectively. Operating costs, including depreciation, of stores to be closed are expensed during the period they remain in use. In fiscal
2018
, the Company closed
four
stores. In fiscal
2017
, the Company closed
seven
stores.
Accounts payable.
Accounts payable represents amounts owed to third parties at the end of the period. Accounts payable includes book cash overdrafts (checks issued under zero balance accounts not yet presented for payment) in excess of cash balances in such accounts of approximately
$83.2 million
and
$74.5 million
at
February 2, 2019
and
February 3, 2018
, respectively. The Company includes the change in book cash overdrafts in operating cash flows.
Insurance obligations.
The Company uses a combination of insurance and self-insurance for a number of risk management activities, including workers’ compensation, general liability, and employee-related health care benefits. The self-insurance and deductible liability is determined actuarially, based on claims filed and an estimate of claims incurred but not yet reported. Self-insurance and deductible reserves as of
February 2, 2019
and
February 3, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
Workers’ compensation
|
|
$
|
89,993
|
|
|
$
|
94,430
|
|
General liability
|
|
42,877
|
|
|
40,763
|
|
Medical plans
|
|
6,515
|
|
|
6,725
|
|
Total
|
|
$
|
139,385
|
|
|
$
|
141,918
|
|
Workers’ compensation and self-insured medical plan liabilities are included in Accrued payroll and benefits and accruals for general liability are included in Accrued expenses and other in the accompanying Consolidated Balance Sheets.
Other long-term liabilities.
Other long-term liabilities as of
February 2, 2019
and
February 3, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
Income taxes (Note F)
|
|
$
|
77,872
|
|
|
$
|
120,660
|
|
Deferred compensation (Note G)
|
|
124,558
|
|
|
120,613
|
|
Deferred rent
|
|
81,442
|
|
|
73,059
|
|
Tenant improvement allowances
|
|
25,418
|
|
|
21,668
|
|
Other
|
|
12,423
|
|
|
12,541
|
|
Total
|
|
$
|
321,713
|
|
|
$
|
348,541
|
|
Lease accounting.
When a lease contains “rent holidays” or requires fixed escalations of the minimum lease payments, the Company records rental expense on a straight-line basis over the term of the lease and the difference between the average rental amount charged to expense and the amount payable under the lease is recorded as deferred rent. The Company begins recording rent expense on the lease possession date. Tenant improvement allowances are amortized over the lease term. Changes in deferred rent and tenant improvement allowances are included as a component of operating activities in the Consolidated Statements of Cash Flows.
Revenue recognition.
The Company recognizes revenue at the point of sale, net of sales taxes collected and an allowance for estimated future returns. As a result of adopting ASU No. 2014-09,
Revenue from Contracts with Customers
(Accounting Standards Codification "ASC" 606), the Company recognizes allowances for estimated sales returns on a gross basis as a reduction to sales. This resulted in an asset recorded for the expected recovery of merchandise inventory of
$10.2 million
and a liability recorded for the refund due to the customer of
$19.8 million
as of February 2, 2019. Prior to the adoption of ASC 606, the Company recognized allowances for sales returns on a net margin basis, which was
$9.9 million
and
$8.4 million
as of February 3, 2018 and January 28, 2017, respectively. Sales taxes collected that are outstanding and the allowance for estimated future returns are included in Accrued expenses and other and the asset for expected recovery of merchandise is included in Prepaid expenses and other in the Consolidated Balance Sheets.
Sales of stored value cards are deferred until they are redeemed for the purchase of Company merchandise. The Company’s stored value cards do not have expiration dates. Based upon historical redemption rates, a small percentage of stored value cards will never be redeemed, which represents breakage. As a result of adopting ASC 606, breakage is estimated and recognized as revenue based upon the historical pattern of customer redemptions. In prior periods, breakage was recorded as a reduction of operating expense when customer redemption was considered remote. Breakage was not material to the consolidated financial statements in fiscal
2018
,
2017
, and
2016
.
The following sales mix table disaggregates revenue by merchandise category for fiscal
2018
,
2017
, and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
2016
|
|
Ladies
|
|
26
|
%
|
|
27
|
%
|
|
28
|
%
|
Home Accents and Bed and Bath
|
|
26
|
%
|
|
26
|
%
|
|
25
|
%
|
Men
’
s
|
|
14
|
%
|
|
13
|
%
|
|
13
|
%
|
Accessories, Lingerie, Fine Jewelry, and Fragrances
|
|
13
|
%
|
|
13
|
%
|
|
13
|
%
|
Shoes
|
|
13
|
%
|
|
13
|
%
|
|
13
|
%
|
Children
’
s
|
|
8
|
%
|
|
8
|
%
|
|
8
|
%
|
Total
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
Store pre-opening.
Store pre-opening costs are expensed in the period incurred.
Advertising.
Advertising costs are expensed in the period incurred and are included in Selling, general and administrative expenses. Advertising costs for fiscal
2018
,
2017
, and
2016
were
$79.9 million
,
$76.4 million
, and
$73.0 million
, respectively.
Stock-based compensation.
The Company recognizes compensation expense based upon the grant date fair value of all stock-based awards, typically over the vesting period. See Note C for more information on the Company’s stock-based compensation plans.
Taxes on earnings.
The Company accounts for income taxes in accordance with ASC 740, “Accounting for Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than changes in the tax law or tax rates. ASC 740 clarifies the criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company’s consolidated financial statements. ASC 740 prescribes a recognition threshold of more-likely-than-not, and a measurement standard for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the consolidated financial statements. See Note F.
Treasury stock.
The Company records treasury stock at cost. Treasury stock includes shares purchased from employees for tax withholding purposes related to vesting of restricted stock grants.
Earnings per share
(“EPS”).
The Company computes and reports both basic EPS and diluted EPS. Basic 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.
In fiscal
2018
,
2017
, and
2016
there were
23,700
,
2,800
, and
2,500
weighted average shares, respectively, that were excluded from the calculation of diluted EPS because their effect would have been anti-dilutive for those years.
The following is a reconciliation of the number of shares (denominator) used in the basic and diluted EPS computations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares in (000s)
|
|
Basic EPS
|
|
|
Effect of dilutive
common stock equivalents
|
|
|
Diluted EPS
|
|
2018
|
|
|
|
|
|
|
Shares
|
|
369,533
|
|
|
3,145
|
|
|
372,678
|
|
Amount
|
|
$
|
4.30
|
|
|
$
|
(0.04
|
)
|
|
$
|
4.26
|
|
2017
|
|
|
|
|
|
|
Shares
|
|
381,174
|
|
|
3,155
|
|
|
384,329
|
|
Amount
|
|
$
|
3.58
|
|
|
$
|
(0.03
|
)
|
|
$
|
3.55
|
|
2016
|
|
|
|
|
|
|
Shares
|
|
392,124
|
|
|
2,834
|
|
|
394,958
|
|
Amount
|
|
$
|
2.85
|
|
|
$
|
(0.02
|
)
|
|
$
|
2.83
|
|
Comprehensive income.
Comprehensive income includes net earnings and components of other comprehensive income (loss), net of tax, consisting of unrealized investment gains or losses.
Recently issued accounting standards.
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02,
Leases (Topic 842),
as amended
.
The ASU requires balance sheet recognition for all leases with lease terms greater than one year including a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company plans to adopt the new leases standard effective February 3, 2019 using the optional transition method on a modified retrospective basis by recognizing a cumulative-effect adjustment to the opening balance of retained earnings and does not plan to restate comparative periods. In addition, the Company does not plan to elect the transitional package of practical expedients or the use of hindsight upon adoption. Upon the adoption of the ASU, the Company does not expect to record a right-of-use asset and related lease liability for leases with an initial term of 12 months or less, and plans to account for lease and non-lease components as a single lease component.
The Company is finalizing the expected effect adoption of this new guidance will have on its consolidated financial statements. The Company’s current estimate of lease liabilities based on the present value of the remaining minimum rental payments, using discount rates as of the effective date, and the corresponding right-of-use assets, is approximately
$2.9 billion
. The expected cumulative-effect adjustment to beginning retained earnings is a decrease of approximately
$20 million
primarily related to the write-off of previously capitalized initial direct costs that are no longer capitalized under the ASU, partially offset by the write-off of the deferred gain on a previous sale-leaseback transaction that meets the sale definition under the ASU. The Company does not believe adoption of this ASU will have a significant impact to its consolidated statements of earnings, stockholders’ equity, and cash flows.
Recently adopted accounting standards.
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers
(Accounting Standards Codification "ASC" 606) which, along with subsequent amendments, supersedes the revenue recognition requirements in “Revenue Recognition (ASC 605).” This guidance provides a five-step analysis of transactions to determine when and how revenue is recognized and requires entities to recognize revenue when the customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The Company adopted ASC 606 as of February 4, 2018, using the modified retrospective method. Results for reporting periods beginning on or after February 4, 2018 are presented under ASC 606, while prior period amounts were not adjusted and continue to be reported in accordance with ASC 605. Upon adoption of ASC 606, the Company recorded a cumulative-effect adjustment to increase beginning retained earnings by
$20 million
as of February 4, 2018, primarily due to the change in the timing of the recognition of stored value card breakage. The impact of applying ASC 606 was not material to the Company's consolidated financial statements for the year ended February 2, 2019.
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
. ASU 2016-18 requires restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts on the statement of cash flows. The standard also requires companies who report cash and restricted cash separately on the balance sheet to reconcile those amounts to the statement of cash flows. The Company adopted ASU 2016-18 as of February 4, 2018, using the retrospective method.
In March 2016, the FASB issued ASU 2016-09,
Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting
. ASU 2016-09 provides for changes to accounting for stock compensation including 1) excess tax benefits and tax deficiencies related to share based payment awards will be recognized as income tax benefit or expense in the reporting period in which they occur (previously such amounts were recognized in additional paid-in capital); 2) excess tax benefits will be classified as an operating activity in the statement of cash flows; and 3) the option to elect to estimate forfeitures or account for them when they occur. The impact of recording excess tax benefits in income taxes in the Company's consolidated statement of earnings may be material, depending upon the Company's future stock price on vest date in relation to the fair value of awards on grant date and the future grants of stock-based compensation.
The Company adopted ASU 2016-09 in the first quarter of fiscal 2017, and elected to apply this adoption prospectively, except for forfeitures which it adopted on a modified retrospective basis. Accordingly, prior periods have not been adjusted. As a result of adoption, for the fiscal year ended February 3, 2018, the Company recognized
$16.3 million
of excess tax benefits related to stock-based payments as a reduction to its provision for income taxes. These items were historically recorded in additional paid-in capital. The Company also presented cash flows related to excess tax benefits as an operating activity in the Consolidated Statement of Cash Flows and elected to account for forfeitures as incurred beginning on January 29, 2017. The impact of this accounting policy election for forfeitures was a cumulative-effect adjustment to decrease retained earnings by
$1.1 million
as of January 29, 2017.
Note B: Investments and Restricted Investments
Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The inputs used to measure fair value include: Level 1, observable inputs such as quoted prices in active markets; Level 2, inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, unobservable inputs in which little or no market data exists. This fair value hierarchy requires the Company to develop its own assumptions and 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.
There were no transfers between Level 1 and Level 2 categories during the fiscal year ended
February 2, 2019
. The fair value of the Company’s financial instruments as of
February 2, 2019
and
February 3, 2018
are as follows:
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
Cash and cash equivalents
(Level 1)
|
|
$
|
1,412,912
|
|
|
$
|
1,290,294
|
|
|
|
|
|
|
Investments
(Level 2)
|
|
$
|
125
|
|
|
$
|
1,224
|
|
|
|
|
|
|
Restricted cash and cash equivalents
(Level 1)
|
|
$
|
65,167
|
|
|
$
|
62,978
|
|
|
|
|
|
|
Restricted investments
(Level 2)
|
|
$
|
400
|
|
|
$
|
2,838
|
|
The underlying assets in the Company’s non-qualified deferred compensation program as of
February 2, 2019
and
February 3, 2018
(included in Other long-term assets and in Other long-term liabilities) primarily consist of participant-directed money market, stable value, stock, and bond funds. The fair value measurement for funds with quoted market prices in active markets (Level 1) and for funds without quoted market prices in active markets (Level 2) are as follows:
|
|
|
|
|
|
|
|
|
($000)
|
2018
|
|
|
2017
|
|
Level 1
|
$
|
114,181
|
|
|
$
|
104,590
|
|
Level 2
|
10,377
|
|
|
16,023
|
|
Total
|
$
|
124,558
|
|
|
$
|
120,613
|
|
Note C: Stock-Based Compensation
For fiscal
2018
,
2017
, and
2016
, the Company recognized stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
($000)
|
2018
|
|
|
2017
|
|
|
2016
|
|
Restricted stock
|
$
|
48,585
|
|
|
$
|
44,356
|
|
|
$
|
38,234
|
|
Performance awards
|
43,450
|
|
|
39,871
|
|
|
33,379
|
|
ESPP
|
3,550
|
|
|
3,190
|
|
|
2,941
|
|
Total
|
$
|
95,585
|
|
|
$
|
87,417
|
|
|
$
|
74,554
|
|
Capitalized stock-based compensation cost was not significant in any year.
At
February 2, 2019
, the Company had
one
active stock-based compensation plan, which is further described in Note H. The Company recognizes expense for ESPP purchase rights equal to the value of the
15%
discount given on the purchase date.
Total stock-based compensation recognized in the Company’s Consolidated Statements of Earnings for fiscal
2018
,
2017
, and
2016
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Earnings Classification ($000)
|
2018
|
|
|
2017
|
|
|
2016
|
|
Cost of goods sold
|
$
|
45,052
|
|
|
$
|
41,067
|
|
|
$
|
34,077
|
|
Selling, general and administrative
|
50,533
|
|
|
46,350
|
|
|
40,477
|
|
Total
|
$
|
95,585
|
|
|
$
|
87,417
|
|
|
$
|
74,554
|
|
The tax benefits related to stock-based compensation expense for fiscal
2018
,
2017
, and
2016
were
$19.6 million
,
$29.5 million
, and
$25.9 million
, respectively.
Note D: Debt
Senior notes.
Unsecured senior debt, net of unamortized discounts and debt issuance costs, as of
February 2, 2019
and
February 3, 2018
consisted of the following:
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
6.38% Series A Senior Notes due 2018
|
|
$
|
—
|
|
|
$
|
84,973
|
|
6.53% Series B Senior Notes due 2021
|
|
64,942
|
|
|
64,922
|
|
3.375% Senior Notes due 2024
|
|
247,498
|
|
|
247,072
|
|
Total long-term debt
|
|
$
|
312,440
|
|
|
$
|
396,967
|
|
|
|
|
|
|
Less: current portion
|
|
—
|
|
|
84,973
|
|
Total due beyond one year
|
|
$
|
312,440
|
|
|
$
|
311,994
|
|
As of
February 2, 2019
, the Company had outstanding unsecured
3.375%
Senior Notes due
September 2024
(the “2024 Notes”) with an aggregate principal amount of
$250 million
. Interest on the 2024 Notes is payable semi-annually.
As of
February 2, 2019
, the Company also had outstanding Series B unsecured Senior Notes in the aggregate principal amount of
$65 million
, held by various institutional investors. The Series B notes are due in
December 2021
and bear interest at a rate of
6.53%
. Borrowings under these Senior Notes are subject to certain financial covenants, including interest coverage and other financial ratios. As of
February 2, 2019
, the Company was in compliance with these covenants.
On December 13, 2018, the Company repaid at maturity the
$85 million
principal amount of the Series A
6.38%
unsecured Senior Notes.
As of
February 2, 2019
and
February 3, 2018
, total unamortized discount and debt issuance costs were
$2.6 million
and
$3.0 million
, respectively, and were classified as a reduction of long-term debt.
The 2024 Notes, and the Series B Senior Notes are subject to prepayment penalties for early payment of principal.
The aggregate fair value of the two outstanding series of Senior Notes was approximately
$316 million
as of February 2, 2019, compared to aggregate fair value of approximately
$411 million
for the three then outstanding series of Senior Notes as of
February 3, 2018
. The fair value is estimated by obtaining comparable market quotes which are considered to be Level 1 inputs under the fair value measurements and disclosures guidance.
The following table shows scheduled annual principal payments on Long-term debt:
|
|
|
|
|
|
|
($000)
|
|
|
|
2019
|
|
|
$
|
—
|
|
2020
|
|
|
$
|
—
|
|
2021
|
|
|
$
|
65,000
|
|
2022
|
|
|
$
|
—
|
|
2023
|
|
|
$
|
—
|
|
Thereafter
|
|
|
$
|
250,000
|
|
The table below shows the components of interest expense and income for fiscal
2018
,
2017
, and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Interest expense on long-term debt
|
|
$
|
17,900
|
|
|
$
|
18,578
|
|
|
$
|
18,573
|
|
Other interest expense
|
|
1,004
|
|
|
979
|
|
|
1,022
|
|
Capitalized interest
|
|
(2,497
|
)
|
|
(710
|
)
|
|
(26
|
)
|
Interest income
|
|
(26,569
|
)
|
|
(11,171
|
)
|
|
(3,081
|
)
|
Interest (income) expense, net
|
|
$
|
(10,162
|
)
|
|
$
|
7,676
|
|
|
$
|
16,488
|
|
Revolving credit facility.
The Company’s existing
$600 million
unsecured revolving credit facility expires in
April 2021
, and contains a
$300 million
sublimit for issuance of standby letters of credit (subject to increase in proportion to any increase in the size of the credit facility). The facility also contains an option allowing the Company to increase the size of its credit facility by up to an additional
$200 million
, with the agreement of the lenders. Interest on any borrowings under this facility is based on LIBOR plus an applicable margin (currently
100
basis points) and is payable quarterly and upon maturity. As of
February 2, 2019
, the Company had
no
borrowings or standby letters of credit outstanding under this facility and the
$600 million
credit facility remains in place and available.
The revolving credit facility is subject to a financial leverage ratio covenant. As of
February 2, 2019
, the Company was in compliance with this covenant.
Standby letters of credit and collateral trust.
The Company uses standby letters of credit outside of its revolving credit facility in addition to a funded trust to collateralize its insurance obligations. As of
February 2, 2019
and
February 3, 2018
, the Company had
$7.3 million
and
$8.7 million
, respectively, in standby letters of credit and
$58.3 million
and
$57.1 million
, respectively, in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash, cash equivalents, and investments.
Trade letters of credit.
The Company had
$13.3 million
and
$20.7 million
in trade letters of credit outstanding at
February 2, 2019
and
February 3, 2018
, respectively.
Note E: Leases
The Company currently leases all but
two
of its store locations with original, non-cancelable terms that in general range from
three
to
ten
years. Store leases typically contain provisions for
three
to
four
renewal options of
five
years each. Most store leases also provide for minimum annual rentals and for payment of certain expenses. In addition, some store leases also have provisions for additional rent based on a percentage of sales.
In November 2017, the Company entered into a sale-leaseback transaction on one of its previously owned stores. The Company received net cash proceeds of
$16.0 million
, recognized a gain on sale of
$6.3 million
, and deferred the residual
$7.5 million
gain over the remaining
ten
-year lease term.
The Company leases
five
warehouses.
Two
of the warehouses are in Carlisle, Pennsylvania with leases expiring in
2019
and
2020
, one is in Fort Mill, South Carolina, with the lease expiring in
2024
, one is in Rock Hill, South Carolina, with the lease expiring in 2028, and one is in Shafter, California, with the lease expiring in 2029. All of the warehouse leases contain renewal provisions.
The Company leases approximately
103,000
and
5,000
square feet of office space for its Los Angeles and Boston buying offices, respectively. The lease term for these facilities expire in
2022
and
2020
, respectively, and contain renewal provisions. In addition, the Company has a ground lease related to its New York buying office.
The aggregate undiscounted future minimum annual lease payments under leases, including the ground lease related to the New York buying office, in effect at
February 2, 2019
are as follows:
|
|
|
|
|
|
($000)
|
|
Total operating leases
|
|
2019
|
|
$
|
555,812
|
|
2020
|
|
580,712
|
|
2021
|
|
499,678
|
|
2022
|
|
424,695
|
|
2023
|
|
339,340
|
|
Thereafter
|
|
1,575,673
|
|
Total minimum lease payments
|
|
$
|
3,975,910
|
|
Rent expense, including contingent rent and net of sublease income, was
$569.8 million
,
$532.4 million
,
and
$505.2 million
in fiscal
2018
,
2017
, and
2016
, respectively. Contingent rent and sublease income was not significant in any year.
Note F: Taxes on Earnings
The provision for income taxes consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Current
|
|
|
|
|
|
|
Federal
|
|
$
|
357,170
|
|
|
$
|
660,017
|
|
|
$
|
632,872
|
|
State
|
|
74,472
|
|
|
52,853
|
|
|
44,333
|
|
|
|
431,642
|
|
|
712,870
|
|
|
677,205
|
|
Deferred
|
|
|
|
|
|
|
Federal
|
|
33,913
|
|
|
(40,468
|
)
|
|
(8,350
|
)
|
State
|
|
(2,136
|
)
|
|
5,565
|
|
|
(353
|
)
|
|
|
31,777
|
|
|
(34,903
|
)
|
|
(8,703
|
)
|
Total
|
|
$
|
463,419
|
|
|
$
|
677,967
|
|
|
$
|
668,502
|
|
The provision for taxes for financial reporting purposes is different from the tax provision computed by applying the statutory federal income tax rate. The differences are reconciled below:
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Federal income taxes at the statutory rate
|
|
21
|
%
|
|
34
|
%
|
|
35
|
%
|
State income taxes (net of federal benefit) and other, net
|
|
3
|
|
|
2
|
|
|
2
|
|
Tax audit settlements
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
Impact of the Tax Act on deferred taxes
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
Total
|
|
23
|
%
|
|
33
|
%
|
|
37
|
%
|
In November 2018, the Company resolved uncertain tax positions related to fiscal 2015 with the Internal Revenue Service. As a result, the Company recognized a tax benefit of approximately
$26.0 million
in the Consolidated Statement of Earnings.
In fiscal 2017, The Tax Cuts and Jobs Act (the “Tax Act” or "tax reform") was signed into law. The Tax Act made significant changes to U.S. corporate taxation including reducing the U.S. federal corporate income tax rate from 35% to 21% effective January 1, 2018, the last month of fiscal 2017. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted. The Company applied a blended U.S. federal income tax rate of approximately
34%
for fiscal 2017. This reduced tax rate resulted in a tax benefit of
$24.9 million
in fiscal 2017. The Company recorded an additional tax benefit of
$55.2 million
due to the remeasurement of its deferred tax assets
and liabilities in fiscal 2017. As a result of the Tax Act, the SEC staff issued Staff Accounting Bulletin 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which provided guidance on accounting for the impact of the Tax Act. As permitted by SAB 118, the Company recorded provisional amounts for both current and deferred income taxes related to the reduced U.S. federal corporate income tax rate in fiscal 2017. The recorded provisional amounts totaling
$80.1 million
of tax benefit reflected assumptions made based upon the Company's interpretation of the Tax Act. The Company did not record any adjustments to the provisional amounts recorded in fiscal 2017. With the completion and filing of the 2017 federal return during the quarter ended November 3, 2018, the Company considered the deferred tax remeasurements and other adjustments related to the Tax Act to be complete.
Also, in fiscal 2017, the Company adopted ASU 2016-09. Prior to adoption of ASU 2016-09, the Company realized tax benefits of
$23.3 million
in 2016, related to employee equity programs that were recorded in additional paid-in capital. As a result of adopting ASU 2016-09, the Company realized tax benefits of
$12.6 million
and
$16.3 million
in 2018 and 2017, respectively, as a reduction to its provision for income taxes.
The components of deferred taxes at
February 2, 2019
and
February 3, 2018
are as follows:
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
Deferred Tax Assets
|
|
|
|
|
Accrued liabilities
|
|
$
|
38,367
|
|
|
$
|
46,489
|
|
Deferred compensation
|
|
30,886
|
|
|
28,094
|
|
Stock-based compensation
|
|
36,118
|
|
|
34,986
|
|
Deferred rent
|
|
19,824
|
|
|
18,013
|
|
State taxes and credits
|
|
20,310
|
|
|
20,206
|
|
Employee benefits
|
|
18,845
|
|
|
15,242
|
|
Other
|
|
1,412
|
|
|
5,224
|
|
Gross Deferred Tax Assets
|
|
165,762
|
|
|
168,254
|
|
Less: Valuation allowance
|
|
(4,639
|
)
|
|
(4,659
|
)
|
Deferred Tax Assets
|
|
161,123
|
|
|
163,595
|
|
|
|
|
|
|
Deferred Tax Liabilities
|
|
|
|
|
Depreciation
|
|
(238,631
|
)
|
|
(217,332
|
)
|
Merchandise inventory
|
|
(25,686
|
)
|
|
(19,055
|
)
|
Supplies
|
|
(10,308
|
)
|
|
(9,529
|
)
|
Other
|
|
(10,806
|
)
|
|
(3,485
|
)
|
Deferred Tax Liabilities
|
|
(285,431
|
)
|
|
(249,401
|
)
|
Net Deferred Tax Liabilities
|
|
$
|
(124,308
|
)
|
|
$
|
(85,806
|
)
|
At the end of fiscal
2018
and
2017
, the Company’s state tax credit carryforwards for income tax purposes were approximately
$13.6 million
and
$14.7 million
, respectively. The state tax credit carryforwards will begin to expire in fiscal
2019
. The Company has provided a valuation allowance of
$4.6 million
as of the end of fiscal
2018
for deferred tax assets related to state tax credits that are not expected to be realized.
The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest and penalties) at fiscal
2018
,
2017
, and
2016
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($000)
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
Unrecognized tax benefits - beginning of year
|
|
$
|
98,666
|
|
|
$
|
81,122
|
|
|
$
|
75,372
|
|
Gross increases:
|
|
|
|
|
|
|
Tax positions in current period
|
|
14,722
|
|
|
26,837
|
|
|
12,394
|
|
Tax positions in prior period
|
|
1,843
|
|
|
—
|
|
|
2,897
|
|
Gross decreases:
|
|
|
|
|
|
|
Tax positions in prior periods
|
|
(40,600
|
)
|
|
(2,755
|
)
|
|
(3,231
|
)
|
Lapse of statutes of limitations
|
|
(8,584
|
)
|
|
(6,068
|
)
|
|
(6,310
|
)
|
Settlements
|
|
(260
|
)
|
|
(470
|
)
|
|
—
|
|
Unrecognized tax benefits - end of year
|
|
$
|
65,787
|
|
|
$
|
98,666
|
|
|
$
|
81,122
|
|
At the end of fiscal
2018
,
2017
, and
2016
, the reserves for unrecognized tax benefits were
$78.8 million
,
$121.3 million
, and
$98.6 million
inclusive of
$13.0 million
,
$22.6 million
, and
$17.5 million
of related reserves for interest and penalties, respectively. In November 2018, the Company resolved uncertain tax positions related to fiscal 2015 with the Internal Revenue Service. As a result, the Company recognized a decrease in reserves for tax positions in prior periods of
$52.4 million
, inclusive of
$12.6 million
of related reserves for interest and penalties. The Company accounts for interest and penalties related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized,
$62.7 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 tax assets and liabilities. These amounts are net of federal and state income taxes.
It is reasonably possible that certain state tax matters may be concluded or statutes of limitations may lapse during the next twelve months. Accordingly, the total amount of unrecognized tax benefits may decrease by up to
$9.1 million
.
The Company is open to audit by the Internal Revenue Service under the statute of limitations for fiscal years
2015
through
2018
. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years
2014
through
2018
. Certain state tax returns are currently under audit by various tax authorities. The Company does not expect the results of these audits to have a material impact on the consolidated financial statements.
Note G: Employee Benefit Plans
The Company has a defined contribution plan that is available to certain employees. Under the plan, employee and Company contributions and accumulated plan earnings qualify for favorable tax treatment under Section 401(k) of the Internal Revenue Code. This plan permits employees to make contributions up to the maximum limits allowable under the Internal Revenue Code. The Company matches up to
4%
of the employee’s salary up to the plan limits. Company matching contributions to the 401(k) plan were
$17.1 million
,
$15.4 million
, and
$13.9 million
in fiscal
2018
,
2017
, and
2016
, respectively.
The Company also has an Incentive Compensation Plan which provides cash awards to key management and employees based on Company and individual performance.
The Company also makes available to management a Non-qualified Deferred Compensation Plan which allows management to make payroll contributions on a pre-tax basis in addition to the 401(k) plan. Other long-term assets include
$124.6 million
and
$120.6 million
at
February 2, 2019
and
February 3, 2018
, respectively, of long-term plan investments, at market value, set aside or designated for the Non-qualified Deferred Compensation Plan (See Note B). Plan investments are designated by the participants, and investment returns are not guaranteed by the Company. The Company has a corresponding liability to participants of
$124.6 million
and
$120.6 million
at
February 2, 2019
and
February 3, 2018
, respectively, included in Other long-term liabilities in the Consolidated Balance Sheets.
In addition, the Company has certain individuals who receive or will receive post-employment medical benefits. The estimated liability for these benefits of
$6.7 million
and
$7.3 million
is included in Accrued expenses and other in the accompanying Consolidated Balance Sheets as of
February 2, 2019
and
February 3, 2018
, respectively.
Note H: Stockholders’ Equity
Common stock.
In February 2017, the Company’s Board of Directors approved a
two
-year
$1.75 billion
stock repurchase program through fiscal 2018. In March 2018, the Company’s Board of Directors approved an increase in the stock repurchase authorization for fiscal 2018 by
$200 million
to
$1.075 billion
, up from the previously available
$875 million
. In March 2019, the Company's Board of Directors approved a new,
2
-year
$2.55 billion
stock repurchase program through fiscal 2020.
The following table summarizes the Company’s stock repurchase activity in fiscal
2018
,
2017
, and
2016
:
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Shares repurchased (in millions)
|
|
|
Average repurchase price
|
|
Repurchased
(in millions)
|
2018
|
|
12.5
|
|
|
$86.19
|
|
$1,075
|
2017
|
|
13.5
|
|
|
$64.87
|
|
$875
|
2016
|
|
11.6
|
|
|
$60.15
|
|
$700
|
Preferred stock.
The Company has
four million
shares of preferred stock authorized, with a par value of
$.01
per share.
No
preferred stock is issued or outstanding.
Dividends.
On
March 5, 2019
, the Company’s Board of Directors declared a quarterly cash dividend of
$0.255
per common share, payable on
March 29, 2019
. The Company’s Board of Directors declared cash dividends of
$0.225
per common share in
March, May, August, and November 2018
, cash dividends of
$0.160
per common share in
February, May, August, and November 2017
, and cash dividends of
$0.135
per common share in
March, May, August, and November 2016
.
2017 Equity Incentive Plan.
On May 17, 2017, the Company’s stockholders approved the Ross Stores, Inc. 2017 Equity Incentive Plan (the “2017 Plan”) which replaced the Company’s 2008 Equity Incentive Plan (“Predecessor Plan”). The 2017 Plan, which was authorized to issue a maximum of
12.0 million
shares, was immediately effective upon approval and no further awards were granted under the Predecessor Plan, which was terminated.
The 2017 Plan has an initial share reserve of
12.0 million
shares of the Company’s common stock which can be increased by a maximum of
5.5 million
shares from certain expired, withheld, or forfeited shares from the 2017 Plan or the Predecessor Plan. The 2017 Plan provides for various types of incentive awards, which may potentially include the grant of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units, and deferred compensation awards. As of
February 2, 2019
, there were
11.2 million
shares available for grant under the 2017 Plan.
As of February 3, 2018, all remaining options under the 2017 Plan or Predecessor Plan had been exercised and there were
no
remaining outstanding and exercisable options.
A summary of restricted stock and performance share award activity for fiscal
2018
is presented below:
|
|
|
|
|
|
|
|
|
|
Number of
shares (000)
|
|
|
Weighted
average
grant date
fair value
|
|
Unvested at February 3, 2018
|
|
5,483
|
|
|
$51.19
|
Awarded
|
|
1,507
|
|
|
79.56
|
|
Released
|
|
(1,771
|
)
|
|
44.29
|
|
Forfeited
|
|
(89
|
)
|
|
59.87
|
|
Unvested at February 2, 2019
|
|
5,130
|
|
|
$62.50
|
The market value of shares of restricted stock and performance shares at the date of grant is amortized to expense over the vesting period of generally
three
to
five
years. The unamortized compensation expense at
February 2, 2019
and
February 3, 2018
was
$138.1 million
and
$114.0 million
, respectively, which is expected to be recognized over a weighted average remaining period of
1.8
years. Intrinsic value for restricted stock, defined as the closing market value on the last business day of fiscal year
2018
(or
$91.73
), was
$470.6 million
. A total of
11.2 million
,
11.9 million
, and
12.1 million
shares were available for new restricted stock awards at the end of fiscal
2018
,
2017
, and
2016
, respectively. During fiscal
2018
,
2017
, and
2016
, shares purchased by the Company for tax withholding totaled
0.7 million
,
0.7 million
, and
0.7 million
shares, respectively, and are considered treasury shares which are available for reissuance. As of
February 2, 2019
and
February 3, 2018
, the Company held
13.2 million
and
12.5 million
shares of treasury stock, respectively.
Performance share awards.
The Company has a performance share award program for senior executives. A performance share award represents a right to receive shares of restricted stock on a specified settlement date based on the Company’s attainment of a profitability-based performance goal during the performance period, which is the Company’s fiscal year. If attained, the restricted stock then vests over a service period, generally
two
to
three
years from the date the performance award was granted. The Company issued approximately
556,000
,
655,000
, and
682,000
shares in settlement of the fiscal
2018
,
2017
, and
2016
awards.
Employee Stock Purchase Plan.
Under the Employee Stock Purchase Plan (“ESPP”), eligible employees participating in the quarterly offering period can choose to have up to the lesser of
10%
of their annual base earnings or the IRS annual share purchase limit of
$25,000
in aggregate market value 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. 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.
During fiscal
2018
,
2017
, and
2016
, employees purchased approximately
0.3 million
,
0.3 million
, and
0.3 million
shares, respectively, of the Company’s common stock under the plan at weighted average per share prices of
$72.89
,
$56.42
, and
$51.86
, respectively. Through
February 2, 2019
, approximately
40.0 million
shares had been issued under this plan and
5.0 million
shares remained available for future issuance.
Note I: Related Party Transactions
The Company has a consulting agreement with Norman Ferber, its Chairman Emeritus of the Board of Directors, under which the Company paid him
$1.9 million
,
$1.6 million
, and
$1.5 million
in fiscal
2018
,
2017
, and
2016
, respectively. In addition, the agreement provides for administrative support and health and other benefits for him and his dependents, which totaled approximately
$0.4 million
,
$0.4 million
, and
$0.4 million
in fiscal
2018
,
2017
, and
2016
, respectively, along with amounts to cover premiums through
May 2020
on a life insurance policy with a death benefit of
$2.0 million
. Mr. Ferber's current consulting agreement pays him an annual consulting fee of
$1.9 million
through
May 2020
. On termination of Mr. Ferber’s consultancy with the Company, the Company will pay Mr. Ferber
$75,000
per year for a period of
10
years.
Robert Ferber, the son of Norman Ferber, is a buyer with the Company. The Company paid Robert Ferber compensation including salary and bonus of approximately
$180,000
,
$159,000
, and
$148,000
in fiscal
2018
,
2017
, and
2016
, respectively.
Note J: Litigation, Claims, and Assessments
Like many retailers, the Company has been named in class action lawsuits, primarily in California, alleging violation of wage and hour laws and consumer protection laws. Class action litigation remains pending as of
February 2, 2019
.
The Company is also party to various other legal and regulatory proceedings arising in the normal course of business. Actions filed against the Company may include commercial, product and product safety, consumer, intellectual property, and labor and employment-related claims, including lawsuits in which private plaintiffs or governmental agencies allege that the Company violated federal, state, and/or local 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 and regulatory proceedings will not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
Note K: Quarterly Financial Data (Unaudited)
Summarized quarterly financial information for fiscal
2018
and
2017
is presented in the tables below.
Year ended
February 2, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
($000, except per share data)
|
|
May 5, 2018
|
|
|
August 4, 2018
|
|
|
November 3, 2018
|
|
|
February 2, 2019
|
|
Sales
|
|
$
|
3,588,619
|
|
|
$
|
3,737,926
|
|
|
$
|
3,549,608
|
|
|
$
|
4,107,388
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
2,522,219
|
|
|
2,666,983
|
|
|
2,547,331
|
|
|
2,989,744
|
|
|
Selling, general and administrative
|
|
524,423
|
|
|
554,581
|
|
|
561,577
|
|
|
575,969
|
|
|
Interest income, net
|
|
(503
|
)
|
|
(1,393
|
)
|
|
(2,953
|
)
|
|
(5,313
|
)
|
|
Total costs and expenses
|
|
3,046,139
|
|
|
3,220,171
|
|
|
3,105,955
|
|
|
3,560,400
|
|
|
Earnings before taxes
|
|
542,480
|
|
|
517,755
|
|
|
443,653
|
|
|
546,988
|
|
|
Provision for taxes on earnings
|
|
124,228
|
|
|
128,351
|
|
|
105,545
|
|
|
105,295
|
|
|
Net earnings
|
|
$
|
418,252
|
|
|
$
|
389,404
|
|
|
$
|
338,108
|
|
|
$
|
441,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic
1
|
|
$
|
1.12
|
|
|
$
|
1.05
|
|
|
$
|
0.92
|
|
|
$
|
1.21
|
|
²
|
Earnings per share – diluted
1
|
|
$
|
1.11
|
|
|
$
|
1.04
|
|
|
$
|
0.91
|
|
|
$
|
1.20
|
|
²
|
Cash dividends declared per share
|
|
|
|
|
|
|
|
|
|
on common stock
|
|
$
|
0.225
|
|
|
$
|
0.225
|
|
|
$
|
0.225
|
|
|
$
|
0.225
|
|
|
|
|
|
¹
|
EPS is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in average quarterly shares outstanding.
|
²
|
Includes a per share benefit of approximately $0.07 from the favorable resolution of a tax matter.
|
Year ended
February 3, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
($000, except per share data)
|
|
April 29, 2017
|
|
|
July 29, 2017
|
|
|
October 28, 2017
|
|
|
February 3, 2018
|
|
|
Sales
|
|
$
|
3,306,429
|
|
|
$
|
3,431,603
|
|
|
$
|
3,328,894
|
|
|
$
|
4,067,806
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
2,329,966
|
|
|
2,420,942
|
|
|
2,369,148
|
|
|
2,922,582
|
|
|
Selling, general and administrative
|
|
474,819
|
|
|
498,276
|
|
|
517,297
|
|
|
553,306
|
|
|
Interest expense, net
|
|
3,169
|
|
|
2,341
|
|
|
1,780
|
|
|
386
|
|
|
Total costs and expenses
|
|
2,807,954
|
|
|
2,921,559
|
|
|
2,888,225
|
|
|
3,476,274
|
|
|
Earnings before taxes
|
|
498,475
|
|
|
510,044
|
|
|
440,669
|
|
|
591,532
|
|
|
Provision for taxes on earnings
|
|
177,457
|
|
|
193,505
|
|
|
166,220
|
|
|
140,785
|
|
|
Net earnings
|
|
$
|
321,018
|
|
|
$
|
316,539
|
|
|
$
|
274,449
|
|
|
$
|
450,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share – basic
1
|
|
$
|
0.83
|
|
|
$
|
0.83
|
|
|
$
|
0.72
|
|
|
$
|
1.20
|
|
²
|
Earnings per share – diluted
1
|
|
$
|
0.82
|
|
|
$
|
0.82
|
|
|
$
|
0.72
|
|
|
$
|
1.19
|
|
²
|
Cash dividends declared per share
|
|
|
|
|
|
|
|
|
|
on common stock
|
|
$
|
0.160
|
|
|
$
|
0.160
|
|
|
$
|
0.160
|
|
|
$
|
0.160
|
|
|
|
|
|
¹
|
EPS is computed independently for each of the quarters presented. The sum of the quarters may not equal the total year amount due to the impact of changes in average quarterly shares outstanding.
|
²
|
Includes a per share benefit of approximately $0.21 from tax reform legislation enacted in December 2017 and $0.10 from the 53rd week.
|