DSW 2014 Annual Report Download - page 29

Table of Contents

Overview
Our primary ongoing cash flow requirements are for inventory purchases and capital expenditures made in connection with our growth strategy, improving
our information technology systems and infrastructure growth. Our working capital and inventory levels typically build seasonally. We believe that we have
sufficient financial resources and access to financial resources at this time. We are committed to a cash management strategy that maintains liquidity to
adequately support the operation of the business, pursue our growth strategy and to withstand unanticipated business volatility. We believe that cash
generated from our operations, together with our current levels of cash and investments as well as availability under our revolving credit facility, should be
sufficient to maintain our ongoing operations, support seasonal working capital requirements, fund capital expenditures related to projected business growth
and continue payments of dividends to our shareholders.
Net Working Capital. Net working capital is defined as current assets less current liabilities. As of January 31, 2015 and February 1, 2014, net working capital
was $484.7 million and $528.4 million, respectively. As of January 31, 2015 and February 1, 2014, the current ratio was 2.7 and 2.9, respectively. The
decrease in net working capital is due to an increase in inventory that was opportunistically purchased for future seasons, or pre-buys, and a decrease in cash
and investments due to the purchase of an equity investment in Town Shoes.
Operating Activities
For fiscal 2014, our net cash provided by operations was $197.0 million compared to $301.4 million for fiscal 2013. The decrease in net cash provided by
operations was driven primarily by changes in working capital, an increase in inventories due to store growth and opportunistic pre-buys, the usage of our net
operating losses in fiscal 2013 and the settlement of the pension plan in fiscal 2013.
Net cash provided by operations in fiscal 2013 increased to $301.4 million from $258.6 million for fiscal 2012. The increase in net cash provided by
operations was driven primarily by changes in working capital and our utilization of net operating losses and tax credits to offset our taxable income, and the
net operating losses were fully utilized in fiscal 2013.
We operate our stores and fulfillment center from leased facilities. All lease obligations are accounted for as operating leases. We disclose the minimum
payments due under operating leases in the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. We own
our corporate office headquarters and our distribution center.
Although our plan for continued expansion could place increased demands on our financial, managerial, operational and administrative resources and result
in increased demands on management, we do not believe that our anticipated growth plan will have an unfavorable impact on our operations or liquidity.
Uncertainty in the United States economy could result in reductions in customer traffic and comparable sales with the resultant increase in inventory levels
and markdowns. Reduced sales may result in reduced operating cash flows if we are not able to appropriately manage inventory levels or leverage expenses.
These potential negative economic conditions may also affect future profitability and may cause us to reduce the number of future store openings, impair
goodwill or impair long-lived assets.
Investing Activities
For fiscal 2014, our net cash used in investing activities was $105.5 million compared to $241.4 million for fiscal 2013. During fiscal 2014, we incurred
$93.3 million for capital expenditures, of which $53.4 million related to stores and $39.9 million related to information technology and business
infrastructure. During fiscal 2014, we had net sales and maturities of short-term and long-term investments of $69.8 million compared to net purchases of
short-term and long-term investments of $148.9 million during fiscal 2013. DSW's net sales and maturities of short-term investments primarily were to fund
DSW's equity investment in Town Shoes in May 2014, share repurchases and the payment of dividends.
For fiscal 2013, cash used in investing activities amounted to $241.4 million compared to $119.4 million for fiscal 2012. During fiscal 2013, we incurred
$83.8 million in capital expenditures, of which $49.8 million related to stores and $34.0 million related to information technology and business
infrastructure. During fiscal 2013, we had net purchases of short-term and long-term investments of $148.9 million compared to net sales and maturities of
short-term and long-term investments of $13.9 million during fiscal 2012.
25
Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.