Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Statements of Earnings

		Year Ended				Year Ended				Year Ended
($000, except per share data)		February 1, 2014				February 2, 2013				January 28, 2012
Sales		$	10,230,353			$	9,721,065			$	8,608,291
Costs and Expenses
Costs of goods sold		7,360,924				7,011,428				6,240,760
Selling, general and administrative		1,526,366				1,437,886				1,304,065
Interest (income) expense, net		(247		)		6,907				10,322
Total costs and expenses		8,887,043				8,456,221				7,555,147
Earnings before taxes		1,343,310				1,264,844				1,053,144
Provision for taxes on earnings		506,006				478,081				395,974
Net earnings		$	837,304			$	786,763			$	657,170
Earnings per share
Basic		$	3.93			$	3.59			$	2.91
Diluted		$	3.88			$	3.53			$	2.86
Weighted average shares outstanding (000)
Basic		212,881				219,130				225,915
Diluted		215,805				222,784				229,982
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Comprehensive Income

		Year Ended				Year Ended				Year Ended
($000)		February 1, 2014				February 2, 2013				January 28, 2012
Net earnings		$	837,304			$	786,763			$	657,170
Other comprehensive income:
Change in unrealized (loss) gain on investments, net of tax		(196		)		(50		)		147
Comprehensive income		$	837,108			$	786,713			$	657,317
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Balance Sheets

($000, except share data)	February 1, 2014				February 2, 2013
Assets
Current Assets
Cash and cash equivalents	$	423,168			$	646,761
Short-term investments	12,006				1,087
Accounts receivable	62,612				59,617
Merchandise inventory	1,257,155				1,209,237
Prepaid expenses and other	101,991				94,318
Deferred income taxes	10,227				20,407
Total current assets	1,867,159				2,031,427
Property and Equipment
Land and buildings	478,973				372,659
Fixtures and equipment	1,678,397				1,551,590
Leasehold improvements	813,972				732,671
Construction-in-progress	510,221				258,691
	3,481,563				2,915,611
Less accumulated depreciation and amortization	1,606,264				1,422,327
Property and equipment, net	1,875,299				1,493,284
Long-term investments	3,710				4,374
Other long-term assets	150,629				141,476
Total assets	$	3,896,797			$	3,670,561
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	779,455			$	807,534
Accrued expenses and other	359,929				320,415
Accrued payroll and benefits	235,324				241,129
Income taxes payable	18,349				53,504
Total current liabilities	1,393,057				1,422,582
Long-term debt	150,000				150,000
Other long-term liabilities	287,567				246,815
Deferred income taxes	58,871				84,301
Commitments and contingencies
Stockholders’ Equity
Common stock, par value $.01 per share	2,134				2,207
Authorized 600,000,000 shares
Issued and outstanding 213,420,000 and
220,721,000 shares, respectively
Additional paid-in capital	935,591				866,519
Treasury stock	(121,559		)		(91,708		)
Accumulated other comprehensive income	389				585
Retained earnings	1,190,747				989,260
Total stockholders’ equity	2,007,302				1,766,863
Total liabilities and stockholders’ equity	$	3,896,797			$	3,670,561
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Stockholders' Equity

									Additional paid-in capital								Accumulated other comprehensive income (loss)
		Common stock								Treasury stock					Retained earnings
(000)		Shares			Amount								Total
Balance at January 29, 2011		236,126			$	2,362			$	739,545			$	(46,408	)		$488			$	636,705			$	1,332,692
Net earnings		—			—				—				—				—			657,170				657,170
Unrealized investment gain, net		—			—				—				—				147			—				147
Common stock issued under stock
plans, net of shares
used for tax withholding		2,002			20				17,270				(15,854		)		—			—				1,436
Tax benefit from equity issuance		—			—				19,040				—				—			—				19,040
Stock-based compensation		—			—				40,404				—				—			—				40,404
Common stock repurchased		(11,264	)		(113		)		(27,364		)		—				—			(422,523		)		(450,000		)
Dividends declared ($0.47 per share)		—			—				—				—				—			(107,877		)		(107,877		)
Balance at January 28, 2012		226,864			$	2,269			$	788,895			$	(62,262	)		$635			$	763,475			$	1,493,012
Net earnings		—			—				—				—				—			786,763				786,763
Unrealized investment loss, net		—			—				—				—				(50	)		—				(50		)
Common stock issued under stock
plans, net of shares
used for tax withholding		1,315			13				19,030				(29,446		)		—			—				(10,403		)
Tax benefit from equity issuance		—			—				29,989				—				—			—				29,989
Stock-based compensation		—			—				48,952				—				—			—				48,952
Common stock repurchased		(7,458	)		(75		)		(20,347		)		—				—			(429,578		)		(450,000		)
Dividends declared ($0.59 per share)		—			—				—				—				—			(131,400		)		(131,400		)
Balance at February 2, 2013		220,721			$	2,207			$	866,519			$	(91,708	)		$585			$	989,260			$	1,766,863
Net earnings		—			—				—				—				—			837,304				837,304
Unrealized investment loss, net		—			—				—				—				(196	)		—				(196		)
Common stock issued under stock
plans, net of shares
used for tax withholding		878			9				19,065				(29,851		)		—			—				(10,777		)
Tax benefit from equity issuance		—			—				27,661				—				—			—				27,661
Stock-based compensation		—			—				46,847				—				—			—				46,847
Common stock repurchased		(8,179	)		(82		)		(24,501		)		—				—			(525,417		)		(550,000		)
Dividends declared ($0.51 per share)		—			—				—				—				—			(110,400		)		(110,400		)
Balance at February 1, 2014		213,420			$	2,134			$	935,591			$	(121,559	)		$389			$	1,190,747			$	2,007,302
The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Statements of Cash Flows

	Year Ended				Year Ended				Year Ended
($000)	February 1, 2014				February 2, 2013				January 28, 2012
Cash Flows From Operating Activities
Net earnings	$	837,304			$	786,763			$	657,170
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	206,111				185,491				159,892
Stock-based compensation	46,847				48,952				40,404
Deferred income taxes	(15,250		)		(39,028		)		21,722
Tax benefit from equity issuance	27,661				29,989				19,040
Excess tax benefit from stock-based compensation	(26,906		)		(29,103		)		(18,180		)
Change in assets and liabilities:
Merchandise inventory	(47,918		)		(79,167		)		(43,153		)
Other current assets	(9,875		)		(14,474		)		(10,329		)
Accounts payable	(4,104		)		40,109				(11,614		)
Other current liabilities	(18,562		)		18,146				(2,109		)
Other long-term, net	26,695				31,966				7,262
Net cash provided by operating activities	1,022,003				979,644				820,105
Cash Flows From Investing Activities
Additions to property and equipment	(550,515		)		(424,434		)		(416,271		)
Increase in restricted cash and investments	(2,895		)		(2,107		)		(60,086		)
Purchases of investments	(12,012		)		(5,430		)		—
Proceeds from investments	1,614				6,247				4,589
Net cash used in investing activities	(563,808		)		(425,724		)		(471,768		)
Cash Flows From Financing Activities
Excess tax benefit from stock-based compensation	26,906				29,103				18,180
Issuance of common stock related to stock plans	19,074				19,043				17,290
Treasury stock purchased	(29,851		)		(29,446		)		(15,854		)
Repurchase of common stock	(550,000		)		(450,000		)		(450,000		)
Dividends paid	(147,917		)		(125,694		)		(102,042		)
Net cash used in financing activities	(681,788		)		(556,994		)		(532,426		)
Net decrease in cash and cash equivalents	(223,593		)		(3,074		)		(184,089		)
Cash and cash equivalents:
Beginning of year	646,761				649,835				833,924
End of year	$	423,168			$	646,761			$	649,835
Supplemental Cash Flow Disclosures
Interest paid	$	9,668			$	9,668			$	9,668
Income taxes paid	$	506,182			$	435,808			$	370,074
The accompanying notes are an integral part of these consolidated financial statements.

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 2013, the Company operated 1,146 Ross Dress for Less® (“Ross”) locations in 33 states, the District of Columbia and Guam, and 130 dd’s DISCOUNTS® stores in 10 states. The Ross and dd's DISCOUNTS stores are supported by four distribution centers. The Company’s headquarters, one buying office, two operating distribution centers, one warehouse, and 25% 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 1, 2014, February 2, 2013 and January 28, 2012 are referred to as fiscal 2013, fiscal 2012, and fiscal 2011, respectively. Fiscal 2012 was 53 weeks. Fiscal 2013 and 2011 were each 52 weeks.

Stock dividend. On December 15, 2011 the Company issued a two-for-one stock split in the form of a 100 percent stock dividend. All share and per share amounts have been adjusted for the two-for-one stock split effective December 15, 2011.

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, and reserves for uncertain tax positions.

Purchase obligations. As of February 1, 2014, the Company had purchase obligations of approximately $1,812 million. These purchase obligations primarily consist of merchandise inventory purchase orders, commitments related to store fixtures and supplies, and information technology service and maintenance contracts.

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. The Company has restricted cash, cash equivalents, and investments that 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 following table summarizes total restricted cash, cash equivalents, and investments which were included in prepaid expenses and other and other long-term assets in the Consolidated Balance Sheet as of February 1, 2014 and February 2, 2013:

Restricted Assets ($000)		2013				2012
Prepaid expenses and other		$	20,734			$	19,941
Other long-term assets		50,763				48,821
Total		$	71,497			$	68,762

The classification between current and long-term is based on the timing of expected payments of the insurance obligations.

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 $423.2 million and $646.8 million, at February 1, 2014 and February 2, 2013, 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 1, 2014 and February 2, 2013, 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 original maturities and the Company’s intent. Investments with an original 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 manufacturer overruns and canceled orders both during and at the end of a season which are referred to as "packaway" inventory. Packaway inventory is purchased with the intent that it will be stored in the Company's warehouses until 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. Packaway inventory accounted for approximately 49% and 47%, of total inventories as of February 1, 2014 and February 2, 2013. 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.

Prepaid expenses and other. Prepaid expenses and other as of February 1, 2014 and February 2, 2013 consisted of the following:

($000)		2013				2012
Restricted cash and investments		$	20,734			$	19,941
Prepaid expenses		81,257				74,377
Total		$	101,991			$	94,318

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 and 20 to 40 years for land improvements and buildings. Depreciation and amortization expense on property and equipment was $206.1 million, $185.5 million, and $159.9 million for fiscal 2013, 2012, and 2011, respectively. The cost of leasehold improvements is amortized over the useful life of the asset or the applicable lease term, whichever is less. Computer hardware and software costs, net of depreciation, of $209.4 million and $166.2 million at February 1, 2014 and February 2, 2013, respectively, are included in fixtures and equipment and are amortized over their estimated useful life, generally ranging from three to seven years. The Company capitalizes interest during the construction period. Interest capitalized was $10.8 million, $3.9 million, and $0.5 million in fiscal 2013, fiscal 2012, and fiscal 2011, respectively. As of February 1, 2014, February 2, 2013, and January 28, 2012 the Company had $61.3 million, $23.7 million, and $11.1 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.

In July 2013, the Company purchased the land and building of its previously leased, 1.3 million square foot Perris, California distribution center for $70 million.

In October 2013, the Company entered into a Sale-Purchase Agreement under which it has the right to purchase the office building where its New York buying office is located for $222 million. The building is subject to a 99 year ground lease through June 2111. The Sale-Purchase Agreement contemplates completion of the sale and purchase of the building on or before September 20, 2014, subject to satisfaction of various closing conditions. Under the Sale-Purchase

Agreement, the Company provided a deposit of 10% of the purchase price. In the event the Company is unable or chooses not to complete the purchase of the building, the Company would forfeit the deposit but have no further liability to the seller or obligation to complete the purchase. In September 2013, the Company deposited $11.1 million and provided an $11.1 million standby letter of credit to meet the 10% deposit obligation. In January 2014, the Company deposited an additional $2.2 million in escrow for the building bringing the total deposit to $13.3 million. The Company plans to finance the purchase of the building in 2014.

Other long-term assets. Other long-term assets as of February 1, 2014 and February 2, 2013 consisted of the following:

($000)		2013				2012
Deferred compensation (Note B)		$	88,269			$	76,911
Restricted cash and investments		50,763				48,821
Goodwill		2,889				2,889
Deposits		3,285				3,185
Other		5,423				9,670
Total		$	150,629			$	141,476

Other assets are principally comprised of prepaid rent and other long-term prepayments.

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 2013, 2012, and 2011, 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. In 2013, the Company closed 11 Ross stores. In 2012, the Company closed eight Ross stores. The lease loss liability was $6.3 million and $3.4 million, as of February 1, 2014 and February 2, 2013, respectively. Operating costs, including depreciation, of stores to be closed are expensed during the period they remain in use.

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 $75.7 million and $82.6 million at February 1, 2014 and February 2, 2013, 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 1, 2014 and February 2, 2013 consisted of the following:

($000)		2013				2012
Workers’ compensation		$	82,223			$	80,079
General liability		34,524				30,670
Medical plans		3,537				3,451
Total		$	120,284			$	114,200

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 1, 2014 and February 2, 2013 consisted of the following:

($000)		2013				2012
Deferred compensation (Note G)		$	88,269			$	76,911
Deferred rent		64,671				62,250
Income taxes (Note F)		104,944				82,483
Tenant improvement allowances		19,744				23,944
Other		9,939				1,227
Total		$	287,567			$	246,815

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 included in Other long-term liabilities and are amortized over the lease term. Changes in 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 and maintains an allowance for estimated future returns. 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. The Company recognizes income from stored value card breakage as a reduction of operating expenses when redemption by a customer is considered to be remote. Income recognized from breakage was not significant in fiscal 2013, 2012, and 2011.

Sales tax collected is not recognized as revenue and is included in Accrued expenses and other.

Allowance for sales returns. An allowance for the gross margin loss on estimated sales returns is included in Accrued expenses and other in the consolidated balance sheets. The allowance for sales returns consists of the following:

($000)		Beginning Balance				Additions				Returns				Ending Balance
Year ended:
February 1, 2014		$	7,165			$	699,835			$	(699,569	)		$	7,431
February 2, 2013		$	6,426			$	680,058			$	(679,319	)		$	7,165
January 28, 2012		$	5,869			$	606,293			$	(605,736	)		$	6,426

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 2013, 2012, and 2011 were $70.2 million, $67.7 million, and $59.9 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 Accounting Standards Codification (“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 also 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 and 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 and restricted stock units.

In fiscal 2013, 2012, and 2011 there were 2,900, 53,900, and 5,900 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
2013
Shares		212,881				2,924				215,805
Amount		$	3.93			$	(0.05	)		$	3.88
2012
Shares		219,130				3,654				222,784
Amount		$	3.59			$	(0.06	)		$	3.53
2011
Shares		225,915				4,067				229,982
Amount		$	2.91			$	(0.05	)		$	2.86

Sales mix. The Company’s sales mix is shown below for fiscal 2013, 2012, and 2011:

	2013			2012			2011
Ladies	29	%		29	%		29	%
Home Accents and Bed and Bath	24	%		24	%		25	%
Accessories, Lingerie, Fine Jewelry, and Fragrances	13	%		13	%		13	%
Shoes	13	%		13	%		12	%
Men's	13	%		13	%		13	%
Children's	8	%		8	%		8	%
Total	100	%		100	%		100	%

Comprehensive income. Comprehensive income includes net earnings and components of other comprehensive income (loss), net of tax, consisting of unrealized investment gains or losses.

Note B: Investments and Restricted Investments

The amortized cost and fair value of the Company’s available-for-sale securities as of February 1, 2014 were:

($000)	Amortized cost				Unrealized gains				Unrealized losses				Fair value					Short-term				Long-term
Investments
Corporate securities	$	3,298			$	325			$	(4	)		$	3,619				$	—			$	3,619
U.S. government and agency securities	12,005				1				—				12,006					12,006				—
Mortgage-backed securities	86				5				—				91					—				91
Total investments	15,389				331				(4		)		15,716					12,006				3,710
Restricted Investments
Corporate securities	110				5				—				115					115				—
U.S. government and agency securities	3,728				266				—				3,994					145				3,849
Total restricted investments	3,838				271				—				4,109					260				3,849
Total	$	19,227			$	602			$	(4	)		$	19,825				$	12,266			$	7,559

The amortized cost and fair value of the Company's available-for-sale securities as of February 2, 2013 were:

($000)	Amortized cost				Unrealized gains				Unrealized losses				Fair value					Short-term				Long-term
Investments
Corporate securities	$	4,715			$	468			$	(14	)		$	5,169				$	1,013			$	4,156
Mortgage-backed securities	276				16				—				292					74				218
Total investments	4,991				484				(14		)		5,461					1,087				4,374
Restricted Investments
Corporate securities	1,360				34				—				1,394					1,275				119
U.S. government and agency securities	3,748				397				—				4,145					—				4,145
Total restricted investments	5,108				431				—				5,539					1,275				4,264
Total	$	10,099			$	915			$	(14	)		$	11,000				$	2,362			$	8,638

The change in fair value of investment securities for fiscal years 2013, 2012, and 2011 was a decrease of $0.3 million and $0.1 million, and an increase of $0.2 million, respectively.

Accounting standards pertaining to fair value measurements establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. This fair value hierarchy also requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Corporate, U.S. government and agency, and mortgage-backed securities are classified within Level 1 or Level 2 because these securities are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

Investments and restricted investments measured at fair value at February 1, 2014 are summarized below:

	Fair Value Measurements at Reporting Date
	February 1, 2014				Quoted prices in active markets for identical assets				Significant other observable inputs				Significant unobservable inputs
($000)		(Level 1)				(Level 2)				(Level 3)
Investments
Corporate securities	$	3,619			$	—			$	3,619			$	—
U.S. government and agency securities	12,006				12,006				—				—
Mortgage-backed securities	91				—				91				—
Total investments	15,716				12,006				3,710				—
Restricted Investments
Corporate securities	115				—				115				—
U.S. government and agency securities	3,994				3,994				—				—
Total restricted investments	4,109				3,994				115				—
Total	$	19,825			$	16,000			$	3,825			$	—

Investments and restricted investments measured at fair value at February 2, 2013 are summarized below:

	Fair Value Measurements at Reporting Date
	February 2, 2013				Quoted prices in active markets for identical assets				Significant other observable inputs				Significant unobservable inputs
($000)		(Level 1)				(Level 2)				(Level 3)
Investments
Corporate securities	$	5,169			$	—			$	5,169			$	—
Mortgage-backed securities	292				—				292				—
Total investments	5,461				—				5,461				—
Restricted Investments
Corporate securities	1,394				—				1,394				—
U.S. government and agency securities	4,145				4,145				—				—
Total restricted investments	5,539				4,145				1,394				—
Total	$	11,000			$	4,145			$	6,855			$	—

The future maturities of investment and restricted investment securities at February 1, 2014 were:

	Investments								Restricted Investments
($000)	Cost basis				Estimated fair value				Cost basis				Estimated fair value
Maturing in one year or less	$	12,005			$	12,006			$	254			$	260
Maturing after one year through five years	3,384				3,710				3,186				3,425
Maturing after five years through ten years	—				—				398				424
Total	$	15,389			$	15,716			$	3,838			$	4,109

The underlying assets in the Company’s non-qualified deferred compensation program as of February 1, 2014 and February 2, 2013 (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:

($ millions)	2013				2012
Level 1	$	76.9			$	65.9
Level 2	11.4				11.0
Total	$	88.3			$	76.9

Fair market value for Level 2 funds is considered to be the sum of participant funds invested under a group annuity contract plus accrued interest.

Note C: Stock-Based Compensation

For fiscal 2013, 2012, and 2011, the Company recognized stock-based compensation expense as follows:

($000)	2013				2012				2011
Restricted stock	$	30,921			$	29,191			$	22,994
Performance awards	13,812				17,872				15,944
ESPP	2,114				1,889				1,466
Total	$	46,847			$	48,952			$	40,404

Capitalized stock-based compensation cost was not significant in any year.

No stock options were granted during fiscal 2013, 2012, and 2011. The Company recognizes expense for ESPP purchase rights equal to the value of the 15% discount given on the purchase date. At February 1, 2014, the Company had one stock-based compensation plan, which is further described in Note H.

Total stock-based compensation recognized in the Company's Consolidated Statements of Earnings for fiscal 2013, 2012, and 2011 is as follows:

Statements of Earnings Classification ($000)	2013				2012				2011
Cost of goods sold	$	24,432			$	22,915			$	17,670
Selling, general and administrative	22,415				26,037				22,734
Total	$	46,847			$	48,952			$	40,404

Note D: Debt

Senior notes. The Company has issued two series of unsecured senior notes in the aggregate principal amount of $150 million, held by various institutional investors. The Series A notes totaling $85 million are due in December 2018 and bear interest at a rate of 6.38%. The Series B notes totaling $65 million are due in December 2021 and bear interest at a rate of 6.53%. The fair value of these notes as of February 1, 2014 of approximately $182 million is estimated by obtaining comparable market quotes which are considered to be Level 1 inputs under the fair value measurements and disclosures guidance. The senior notes are subject to prepayment penalties for early payment of principal.

Revolving credit facility. The Company's $600 million unsecured revolving credit facility expires in June 2017 and contains a $300 million sublimit for issuance of standby letters of credit. Interest on this facility is based on LIBOR plus an applicable margin (currently 100 basis points) and is payable quarterly and upon maturity. As of February 1, 2014

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.

Borrowings under the credit facility and the senior notes are subject to certain covenants, including interest coverage and other financial ratios. In addition, the interest rates under the revolving credit facility may vary depending on actual interest coverage ratios achieved. As of February 1, 2014, the Company was in compliance with these covenants.

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 1, 2014 and February 2, 2013, the Company had $24.3 million and $33.8 million, respectively, in standby letters of credit and $47.2 million and $34.9 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.

As of February 1, 2014, the Company also had an $11.1 million standby letter of credit in connection with the New York buying office Sale-Purchase Agreement.

Trade letters of credit. The Company had $31.6 million and $38.0 million in trade letters of credit outstanding at February 1, 2014 and February 2, 2013, respectively.

Note E: Leases

The Company leases all but three 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.

The Company leases three warehouses. Two of the warehouses are in Carlisle, Pennsylvania with leases expiring in 2016 and 2017. The third warehouse is in Fort Mill, South Carolina, with a lease expiring in 2016. The leases for all three warehouses contain renewal provisions.

The Company leases a 10-acre parcel for trailer parking adjacent to its Perris, California distribution center, that expires in 2017 and a 20-acre facility located in Moreno Valley, California primarily for ancillary truck and trailer parking that expires in 2015. Both of these leases contain renewal provisions.

The Company leases approximately 192,000 square feet of office space for its former headquarters in Pleasanton, California, under several facility leases the majority of which expire in June 2014. The term for the remaining space of approximately 11,000 square feet expires in March 2015. The Company does not plan to renew any of these leases.

The Company leases approximately 411,000 and 52,000, square feet of office space for its New York City and Los Angeles buying offices, respectively. The lease terms for these facilities expire in 2022 and 2017, respectively, and contain renewal provisions. The Company plans to purchase its New York buying office in 2014.

The aggregate future minimum annual lease payments under leases in effect at February 1, 2014 are as follows:

($000)		Total operating leases
2014		$	417,443
2015		430,394
2016		371,341
2017		317,126
2018		252,254
Thereafter		498,371
Total minimum lease payments		$	2,286,929

Total rent expense was $434.9 million, $406.6 million, and $380.0 million in fiscal 2013, 2012, and 2011, respectively.

Note F: Taxes on Earnings

The provision for income taxes consisted of the following:

($000)		2013				2012				2011
Current
Federal		$	486,203			$	485,882			$	343,550
State		35,053				31,227				30,702
		521,256				517,109				374,252
Deferred
Federal		(11,055		)		(37,178		)		25,383
State		(4,195		)		(1,850		)		(3,661		)
		(15,250		)		(39,028		)		21,722
Total		$	506,006			$	478,081			$	395,974

In fiscal 2013, 2012, and 2011, the Company realized tax benefits of $27.7 million, $30.0 million and $19.0 million, respectively, related to employee equity programs that were credited to additional paid-in capital.

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:

		2013			2012			2011
Federal income taxes at the statutory rate		35	%		35	%		35	%
State income taxes (net of federal benefit) and other, net		3	%		3	%		3	%
Total		38	%		38	%		38	%

The components of deferred income taxes at February 1, 2014 and February 2, 2013 are as follows:

($000)		2013				2012
Deferred Tax Assets
Accrued liabilities		$	87,835			$	72,266
Deferred compensation		31,034				28,040
Stock-based compensation		33,048				28,781
Deferred rent		17,888				16,984
California franchise taxes		16,479				13,376
Employee benefits		16,177				18,315
Other		4,992				3,686
		207,453				181,448
Deferred Tax Liabilities
Depreciation		(212,383		)		(210,343		)
Merchandise inventory		(28,558		)		(18,802		)
Supplies		(10,730		)		(9,766		)
Prepaid expenses		(4,426		)		(6,431		)
		(256,097		)		(245,342		)
Net Deferred Tax Liabilities		$	(48,644	)		$	(63,894	)
Classified as:
Current net deferred tax asset		$	10,227			$	20,407
Long-term net deferred tax liability		(58,871		)		(84,301		)
Net Deferred Tax Liabilities		$	(48,644	)		$	(63,894	)

The changes in amounts of unrecognized tax benefits (gross of federal tax benefits and excluding interest and penalties) at fiscal 2013, 2012, and 2011 are as follows:

($000)		2013				2012				2011
Unrecognized tax benefits - beginning of year		$	65,667			$	56,524			$	43,990
Gross increases:
Tax positions in current period		15,591				11,009				9,245
Tax positions in prior period		2,418				4,167				12,193
Gross decreases:
Tax positions in prior periods		(519		)		(1,476		)		(4,491		)
Lapse of statute limitations		(2,274		)		(1,312		)		(682		)
Settlements		(560		)		(3,245		)		(3,731		)
Unrecognized tax benefits - end of year		$	80,323			$	65,667			$	56,524

At the end of fiscal 2013, 2012, and 2011, the reserves for unrecognized tax benefits were $104.9 million, $82.5 million, and $72.4 million inclusive of $24.6 million, $16.8 million, and $15.9 million of related interest and penalties, respectively. The Company accounts for interest and penalties related to unrecognized tax benefits as a part of its provision for taxes on earnings. If recognized, $49.9 million would impact the Company’s effective tax rate. The difference between the total amount of unrecognized tax benefits and the amounts that would impact the effective tax rate relates to amounts attributable to deferred income tax assets and liabilities. These amounts are net of federal and state income taxes.

During the next twelve months, it is reasonably possible that the statute of limitations may lapse pertaining to positions taken by the Company in prior year tax returns. If this occurs, the total amount of unrecognized tax benefits may decrease, reducing the provision for taxes on earnings by up to $4.8 million.

The Company is generally open to audit by the Internal Revenue Service under the statute of limitations for fiscal years 2010 through 2013. The Company’s state income tax returns are generally open to audit under the various statutes of limitations for fiscal years 2009 through 2013. Certain state tax returns are currently under audit by state tax authorities. The Company does not expect the results of these audits to have a material impact on the consolidated financial statements.

Note G: 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 $10.4 million, $9.4 million, and $8.7 million in fiscal 2013, 2012, and 2011, 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 $88.3 million and $76.9 million at February 1, 2014 and February 2, 2013, 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 $88.3 million and $76.9 million at February 1, 2014 and February 2, 2013, 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 $6.8 million and $6.6 million is included in Accrued expenses and other in the accompanying consolidated balance sheets as of February 1, 2014 and February 2, 2013, respectively.

Note H: Stockholders' Equity

Common stock. The Company repurchased 8.2 million, 7.5 million, and 11.3 million shares of common stock for aggregate purchase prices of approximately $550 million, $450 million, and $450 million in fiscal 2013, 2012, and 2011, respectively. In January 2013, the Company’s Board of Directors approved a two-year $1.1 billion stock repurchase program for fiscal 2013 and 2014.

The following table summarizes the Company’s stock repurchase activity in fiscal 2013, 2012, and 2011:

Fiscal Year		Shares repurchased (in millions)			Average repurchase price		Repurchased (in millions)
2013		8.2			$67.24		$550
2012		7.5			$60.34		$450
2011		11.3			$39.95		$450

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. In February 2014, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per common share, payable on March 31, 2014. The Company’s Board of Directors declared cash dividends of $0.17 per common share in January, May, August, and November 2013, cash dividends of $0.14 per common share in January, May, August, and November 2012, and cash dividends of $0.11 per common share in January, May, August, and November 2011.

2008 Equity Incentive Plan. In 2008, the Company’s stockholders approved the adoption of the Ross Stores, Inc. 2008 Equity Incentive Plan (the “2008 Plan”) with an initial share reserve of 16.5 million shares of the Company’s common stock, of which 12.0 million shares can be issued as full value awards. The 2008 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 1, 2014, there were 7.0 million shares that remained available for grant under the 2008 Plan.

A summary of the stock option activity for fiscal 2013 is presented below:

(000, except per share data)		Number of shares			Weighted average exercise price			Weighted average remaining contractual term		Aggregate intrinsic value
Outstanding at February 2, 2013		1,715			$13.79
Granted		—			—
Exercised		(539	)		13.17
Forfeited		(7	)		13.63
Outstanding at February 1, 2014, all vested		1,169			$14.07			1.47		$62,957

The following table summarizes information about the weighted average remaining contractual life (in years) and the weighted average exercise prices for stock options both outstanding and exercisable as of February 1, 2014 (number of shares in thousands):

											Options outstanding and exercisable
Exercise price range											Number of shares			Remaining life		Exercise price
$	11.39			to		$	13.81				240			1.34		$12.90
13.83				to		13.91					286			1.93		13.89
13.92				to		14.33					182			1.24		14.27
14.35				to		14.35					235			1.02		14.35
14.38				to		16.39					226			1.70		15.09
$	11.39			to		$	16.39				1,169			1.47		$14.07

A summary of the restricted stock activity for fiscal 2013 is presented below:

(000, except per share data)		Number of shares			Weighted average grant date fair value
Unvested at February 2, 2013		4,560			$29.96
Awarded		780			58.56
Released		(1,273	)		24.68
Forfeited		(153	)		36.46
Unvested at February 1, 2014		3,914			$37.14

The market value of shares of restricted stock and of the stock underlying restricted stock units at the date of grant is amortized to expense ratably over the vesting period of generally three to five years. The unamortized compensation expense at February 1, 2014 and February 2, 2013 was $74.9 million and $75.8 million, respectively, which is expected to be recognized over a weighted average remaining period of 1.7 years. Intrinsic value for restricted stock, defined as the closing market value on the last business day of fiscal year 2013 (or $67.91), was $265.8 million. A total of 6,986,000, 7,202,000, and 7,811,000 shares were available for new restricted stock awards at the end of fiscal 2013, 2012, and 2011, respectively. During fiscal 2013, 2012, and 2011, shares purchased by the Company for tax withholding totaled 496,000, 505,000, and 442,000 shares, respectively, and are considered treasury shares which are available for reissuance. As of February 1, 2014 and February 2, 2013, the Company held 4,354,000 and 3,858,000 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 or restricted stock units 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 or units then vest over a service period,

generally two to three years from the date the performance award was granted. The release of shares related to restricted stock units earned is deferred generally for one year from the date earned. The Company issued approximately 240,000, 280,000, and 467,000 shares in settlement of the fiscal 2013, 2012, and 2011 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% or $21,250 of their annual base earnings withheld to purchase the Company’s common stock. The purchase price of the stock is 85% of the closing market price on the date of purchase. 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 2013, 2012, and 2011, employees purchased approximately 208,000, 211,000, and 243,000 shares, respectively, of the Company’s common stock under the plan at weighted average per share prices of $57.57, $50.67, and $34.24, respectively. Through February 1, 2014, approximately 19,142,000 shares had been issued under this plan and 858,000 shares remained available for future issuance.

Note I: Related Party Transactions

The Company has a consulting agreement with Norman Ferber, its Chairman of the Board of Directors, under which the Company pays him an annual consulting fee of $1.3 million through May 2016. In addition, the agreement provides for administrative support and health and other benefits for the individual and his dependents, which totaled approximately $0.3 million in fiscal 2013 and 2012 and $0.2 million in 2011, along with amounts to cover premiums through May 2016 on a life insurance policy with a death benefit of $2.0 million. 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. For fiscal 2013, the Company paid Robert Ferber compensation including salary and bonus of approximately $134,000.

Note J: Litigation, Claims, and Assessments

Like many California retailers, the Company has been named in class action lawsuits alleging violation of wage and hour and other employment laws. Class action litigation remains pending as of February 1, 2014.

The Company is also party to various other legal and regulatory proceedings arising in the normal course of business. Actions filed against the Company include commercial, product and product safety, customer, intellectual property, and labor and employment-related claims, including lawsuits in which private plaintiffs or governmental agencies allege that the Company violated local, state or federal laws. Actions against the Company are in various procedural stages. Many of these proceedings raise factual and legal issues and are subject to uncertainties.

In the opinion of management, the resolution of pending class action litigation and other currently pending legal proceedings is not expected to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

Note K: Quarterly Financial Data (Unaudited)

Summarized quarterly financial information for fiscal 2013 and 2012 is presented in the tables below.

Year ended February 1, 2014:

		Quarter Ended
($000, except per share data)		May 4, 2013				August 3, 2013				November 2, 2013				February 1, 2014
Sales		$	2,539,914			$	2,551,277			$	2,398,122			$	2,741,040
Cost of goods sold		1,798,811				1,823,777				1,746,235				1,992,101
Selling, general and administrative		361,968				381,193				381,860				401,345
Interest expense (income), net		209				(175		)		(152		)		(129		)
Total costs and expenses		2,160,988				2,204,795				2,127,943				2,393,317
Earnings before taxes		378,926				346,482				270,179				347,723
Provision for taxes on earnings		144,314				133,361				98,561				129,770
Net earnings		$	234,612			$	213,121			$	171,618			$	217,953
Earnings per share – basic1		$	1.09			$	1.00			$	0.81			$	1.04
Earnings per share – diluted1		$	1.07			$	0.98			$	0.80			$	1.02
Cash dividends declared per share
on common stock		$	—			$	0.17			$	0.17			$	0.17
Stock price
High		$	66.07			$	69.20			$	77.63			$	81.64
Low		$	55.23			$	63.29			$	64.76			$	67.66

1 Quarterly EPS results may not equal full year amounts due to rounding.

Year ended February 2, 2013:

		Quarter Ended
($000, except per share data)		April 28, 2012				July 28, 2012				October 27, 2012				February 2, 2013			3
Sales		$	2,356,841			$	2,340,855			$	2,262,723			$	2,760,646
Cost of goods sold		1,679,127				1,689,643				1,648,997				1,993,661
Selling, general and administrative		337,811				352,089				357,983				390,003
Interest expense, net		2,232				2,086				1,643				946
Total costs and expenses		2,019,170				2,043,818				2,008,623				2,384,610
Earnings before taxes		337,671				297,037				254,100				376,036
Provision for taxes on earnings		129,058				115,013				94,576				139,434
Net earnings		$	208,613			$	182,024			$	159,524			$	236,602
Earnings per share – basic1		$	0.94			$	0.83			$	0.73			$	1.09
Earnings per share – diluted1		$	0.93			$	0.81			$	0.72			$	1.07
Cash dividends declared per share
on common stock		$	—			$	0.14			$	0.14			$	0.31		2
Stock price
High		$	62.22			$	69.23			$	69.98			$	61.15
Low		$	50.70			$	60.35			$	60.32			$	52.39

1 Quarterly EPS results may not equal full year amounts due to rounding.
2 Includes $.14 per share dividend declared in November 2012 and $.17 per share dividend declared in January 2013.
3 The quarter ended February 2, 2013 was a 14-week quarter; all other quarters presented were 13 weeks.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Ross Stores, Inc.

Dublin, California

We have audited the accompanying consolidated balance sheets of Ross Stores, Inc., and subsidiaries (the "Company") as of February 1, 2014 and February 2, 2013, and the related consolidated statements of earnings, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended February 1, 2014. We also have audited the Company's internal control over financial reporting as of February 1, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 1, 2014 and February 2, 2013, and the results of their operations and their cash flows for each of the three years in the period ended February 1, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 1, 2014, based on the criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/DELOITTE & TOUCHE LLP

San Francisco, California

April 1, 2014