DSW 2013 Annual Report Download - page 73

Table of Contents
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fiscal years. DSW incurred costs associated with the Plan of $3.1 million, $2.4 million and $2.0 million for fiscal 2013, 2012 and 2011, respectively.
Deferred Compensation Plan- DSW sponsors a non-qualified deferred compensation plan for certain executives and non-employee members of the Board of
Directors that is intended to defer the receipt of compensation. As of February 1, 2014, the plan liability is $2.3 million.
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Legal Proceedings- DSW is involved in various legal proceedings that are incidental to the conduct of its business. Although it is not possible to predict with
certainty the eventual outcome of any litigation, in the opinion of management, the amount of any potential liability with respect to current legal proceedings
will not be material to DSW’s results of operations or financial condition. As additional information becomes available, DSW will assess the potential liability
related to its pending litigation and revise the estimates as needed.
As previously reported, on March 8, 2005, RVI announced that it had learned of the theft of credit card and other information from a portion of DSW's
customers. In fiscal 2005, DSW incurred a loss of approximately $6.0 million related to this incident. DSW filed a claim for coverage with its insurance
carrier, which the insurance carrier denied. DSW brought suit in federal district court and won a ruling that coverage applied and was awarded $6.8 million
in damages. The insurance company appealed that decision, and oral arguments on the appeal occurred in July 2012. On August 23, 2012, DSW received
notification from the Sixth Circuit Court of Appeals that the damages award was affirmed, and in September 2012, DSW received $7.2 million from the
insurance carrier, $1.9 million of which represented accrued interest on the award. As this was a gain contingency resulting from a litigation, DSW recognized
the award at the time of receipt of cash from the insurance carrier. In the statement of operations, $5.3 million was classified as other operating income, which
was included in operating expenses, and $1.9 million related to interest was classified as interest income.
In the first quarter of fiscal 2011, shareholders of RVI filed two putative shareholder class action lawsuits in an Ohio state court captioned as follows:
Steamfitters local #449 Retirement Security Fund v. Schottenstein, et. al (“Steamfitters”), and Farkas v. Retail Ventures, Inc. (“Farkas”). The Steamfitters
action was brought against RVI and its directors and chief executive officer and DSW. The Farkas action was brought against RVI and its directors, and DSW
and Merger Sub. The Steamfitters action alleged, among other things, that RVI and its directors breached their fiduciary duties by approving the merger
agreement and that RVI’s chief executive officer and DSW aided and abetted in these alleged breaches of fiduciary duty. The Farkas action alleged, among
other things, that the RVI board of directors breached its fiduciary duties by approving the merger agreement and failing to disclose certain alleged material
information, and that RVI and DSW aided and abetted these alleged breaches of fiduciary duty. Both complaints sought, among other things, to enjoin the
shareholder vote on the Merger, as well as money damages. On May 9, 2011, the court granted plaintiffs’ motion to consolidate the actions. In order to avoid
the costs associated with the litigation, the parties agreed to a disclosure-based settlement of the lawsuits set forth in an executed memorandum of
understanding that was filed with the court. The memorandum of understanding provided for, among other things, additional public disclosure with respect to
the Merger, which was included in the joint proxy statement/prospectus sent to the shareholders of RVI and DSW. The court approved the settlement, and this
matter was resolved during fiscal 2011.
Guarantees and Liabilities related to Discontinued Operations- As of the effective time of the Merger, a subsidiary of DSW assumed the obligations
under RVI’s guarantees related to discontinued operations. DSW may become subject to various risks related to guarantees and in certain circumstances may
be responsible for certain other liabilities related to discontinued operations. Changes in the amount of guarantees and liabilities related to discontinued
operations are included in the loss from discontinued operations on the statements of operations. DSW records its best estimate of a loss when the loss is
considered probable. When a liability is probable and there is a range of estimated loss, DSW records the most likely estimated liability related to the
guarantee. The decrease in the liability through February 1, 2014 is due to information available indicating that it was probable that DSW's exposure to the
guaranteed liability would be reduced. Additionally, if the underlying obligations are paid down or otherwise liquidated by the primary obligor, subject to
certain statutory requirements, DSW will recognize a reduction of the associated liability.
Value City- RVI completed the disposition of a portion of its ownership interest in its Value City business segment in fiscal 2007. RVI or its wholly owned
subsidiary had guaranteed and in certain circumstances may be responsible for certain liabilities of Value City. There is a guarantee of certain workers
compensation claims for events prior to the disposition date. As of both February 1, 2014 and February 2, 2013, the amount of guarantees of Value City
commitments was $0.1 million.
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Source: DSW Inc., 10-K, March 27, 2014 Powered by Morningstar® Document Research℠
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