DSW 2009 Annual Report Download - page 24

Common Shares to be able to satisfy its obligations to deliver shares to the holders of the PIES. In addition, in the
event that the PIES were to be accelerated, a payment which is required to be paid to the PIES holders by RVI can be
satisfied by, in lieu of paying cash, using additional Class A Common Shares upon compliance with the terms of the
instruments governing the PIES. The settlement of the PIES will not change the number of DSW Common Shares
outstanding, although shares delivered upon the settlement of the PIES will generally be freely tradable by the
former PIES holders as a result of having been registered in connection with the initial issuance of the PIES.
If Retail Ventures were to require funds to service or refinance its indebtedness or to fund its operations in the
future and could not obtain capital from alternative sources, it could seek to sell some or all of the Common Shares
of DSW that it holds in order to obtain such funds. On January 15, 2010, we entered into a share purchase agreement
with RVI pursuant to which RVI sold to us 320,000 Class B Common Shares, without par value, of DSW, for an
aggregate amount of $8.0 million.
Similarly, SSC and its affiliates, Cerberus and Millennium are not subject to any contractual obligation to
retain Class A Common Shares they may acquire from Retail Ventures. As a result, there can be no assurance
concerning the period of time during which Retail Ventures, SSC and its affiliates, Cerberus and Millennium will
maintain their respective beneficial ownership of Common Shares in the future. Retail Ventures, SSC and its
affiliates, and Cerberus (and any party to whom either of them transfers at least 15% of their interest in registrable
DSW Common Shares) will have registration rights with respect to their respective Common Shares, which would
facilitate any future distribution, and SSC and its affiliates, Cerberus and Millennium will be entitled to participate
in the registrations initiated by the other entities.
RVI has a long-term lease and DSW has agreed to pay two-thirds of the expense related to the lease.
RVI is party to a lease for an office facility in Columbus, Ohio (the “Premises”) as of September 2003. In April
2005, RVI sublet the Premises to a third-party at a rent that was lower than the rent charged to RVI under the lease.
RVI remains liable under the lease through the lease expiration date in 2024. DSW, through the master separation
agreement with RVI, agreed to pay two-thirds of any net expense and receive two-thirds of any net profit from the
lease. In fiscal 2010, DSW expects to pay $0.5 million related to this agreement. In the event the third-party
subtenant defaults under the sublease or vacates the premises, the amount of this increased expense could be
material and may have a negative impact on our results of operations and financial position.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
All DSW stores, our distribution and fulfillment centers, a trailer parking lot and our office facilities are leased
or subleased. As of January 30, 2010, we leased or subleased 19 DSW stores, our corporate office, our primary
distribution center, a trailer parking lot and our dsw.com fulfillment center, from entities affiliated with SSC. The
remaining DSW stores are leased from unrelated entities. Most of the DSW store leases provide for a minimum
annual rent plus a percentage of gross sales over specified breakpoints and are for a fixed term with options for three
to five extension periods, each of which is for a period of four or five years, exercisable at our option.
As of January 30, 2010, we operated 305 DSW stores. See the table on page 4 for a listing of the states where
our DSW stores are located. Our primary distribution facility, our principal executive office and our dsw.com
fulfillment center are located in Columbus, Ohio. The lease for our distribution center and our executive office
space expires in December 2021 and has three renewal options with terms of five years each. The lease for our
dsw.com fulfillment center expires in September 2017 and has two renewal options with terms of five years each.
ITEM 3. LEGAL PROCEEDINGS.
We are involved in various legal proceedings that are incidental to the conduct of our business. We estimate the
range of liability related to pending litigation where the amount of the range of loss can be estimated. We record our
best estimate of a loss when the loss is considered probable. When a liability is probable and there is a range of
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