DSW 2014 Annual Report Download - page 30

Table of Contents
In addition to our investments in new stores and remodeling stores, we have invested in technology projects to support DSW becoming an omni-channel
retailer. To support business growth, we have invested in the reconfiguration of the Columbus distribution center and the expansion of the dsw.com
fulfillment center. With the purchase of our corporate office headquarters for $72 million in fiscal 2012, we have the ability to gradually expand our campus
as needed. Currently, portions of the properties are leased to unrelated parties for annual rental income. As a transaction between entities under common
control, the net book value of assets transferred to DSW was considered an investing cash flow while the difference between the cash paid and the net book
value of assets transferred to DSW was considered a financing cash flow.
We expect to spend approximately $115 million for capital expenditures in fiscal 2015, with half going into new stores and store remodels and the remainder
going into technology investments, including digital investments, and other business projects. Our future investments will depend primarily on the number
of stores we open and remodel, infrastructure and information technology programs that we undertake and the timing of these expenditures. We plan to open
approximately 35 stores in fiscal 2015. In fiscal 2014, we opened 37 new DSW stores, including five small format stores. The small format stores are smaller
than the typical DSW store and, if successful, they could pave the way for more small format stores. During fiscal 2014, the average investment required to
open a new DSW store was approximately $1.5 million, prior to construction and tenant allowances. Of this amount, gross inventory typically accounted for
$0.5 million, fixtures and leasehold improvements typically accounted for $0.8 million and new store advertising and other new store expenses typically
accounted for $0.2 million.
Financing Activities
For fiscal 2014, net cash used in financing activities of $144.8 million was primarily related to the payment of dividends and the repurchase of DSW Class A
Common Shares under the Company's share repurchase program. For fiscal 2013, net cash used in financing activities of $26.4 million was primarily related
to the payment of dividends partially offset by proceeds from the exercise of stock options. For fiscal 2012, net cash used in financing activities of $137.1
million was primarily related to the payment of dividends and purchase of our corporate office headquarters and distribution center, partially offset by
proceeds from warrant and stock option exercises.
On November 21, 2014, the Board of Directors authorized the repurchase of up to an additional $50 million of DSW Common Shares under the Company's
share repurchase program, which was previously authorized for $100 million. The repurchase program will be funded using our available cash, and we have
no obligation to repurchase any amount of our common shares under the program. As of January 31, 2015, we have repurchased a total of 3.0 million Class A
Common Shares at a cost of $86.9 million under this program, with $63.1 million remaining available.
Our Credit Facility, Letter of Credit Agreement and other liquidity considerations are described more fully below:
$50 Million Secured Credit Facility. On August 2, 2013, we entered into a secured revolving credit agreement (the "Credit Facility"). The Credit Facility,
together with the Letter of Credit Agreement (defined below), amended and restated our prior credit facility, dated June 30, 2010. The Credit Facility reduced
the amount of revolving credit commitments from $100 million to $50 million, allowed us to transfer our outstanding letters of credit and has a term of five
years that will expire on July 31, 2018. The Credit Facility may be increased by up to $100 million upon our request and the increase would be subject to
lender availability, our financial condition and compliance with covenants. The Credit Facility is secured by a lien on substantially all of our personal
property assets and our subsidiaries with certain exclusions and may be used to provide funds for general corporate purposes, to provide for our ongoing
working capital requirements, and to make permitted acquisitions. Revolving credit loans bear interest under the Credit Facility at our option under: (A) a
base rate option at a rate per annum equal to the highest of (i) the Federal Funds Open Rate (as defined in the Credit Facility), plus 0.5%, (ii) the Lender's
prime rate, and (iii) the Daily LIBOR Rate (as defined in the Credit Facility) plus 1.0%, plus in each instance an applicable margin based upon our revolving
credit availability; or (B) a LIBOR option at a rate equal to the LIBOR Rate (as defined in the Credit Agreement), plus an applicable margin, which is
between 1.00 and 1.25, based upon our revolving credit availability. In addition, the Credit Facility contains restrictive covenants relating to our
management and the operation of our business. These covenants, among other things, limit or restrict our ability to grant liens on our assets, limit our ability
to incur additional indebtedness, limit our ability to enter into transactions with affiliates and limit our ability to merge or consolidate with another entity.
The Credit Facility also requires that we meet the minimum cash and short-term investments requirement of $125 million, as defined in the Credit Facility.
An additional covenant limits payments for capital expenditures to $200 million in any fiscal year. We paid $98.1 million for capital expenditures in fiscal
2014. As of January 31, 2015, we had availability under the Credit Facility of $50.0 million.
$50 Million Letter of Credit Agreement. Also on August 2, 2013, we entered into a letter of credit agreement (the “Letter of Credit Agreement”). The Letter of
Credit Agreement provides for the issuance of letters of credit up to $50 million, with a term
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Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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