DSW 2014 Annual Report Download - page 49

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Table of Contents


Class A Common Shares, unless the holder of each outstanding RVI common share properly and timely elected to receive a like amount of DSW Class B
Common Shares.
The Merger was accounted for as a reverse merger with RVI as the accounting acquirer and DSW Inc. (the surviving legal entity) as the accounting acquiree.
As this was a transaction between entities under common control under ASC 805, Business Combinations, the Merger was accounted for as an equity
transaction in accordance with ASC 810, Consolidation, as the acquisition of a noncontrolling interest, and purchase accounting was not applied. As a result,
there was no adjustment to RVI's historical cost carrying amounts of assets and liabilities. Pre-merger financial information presented in the DSW Inc.
consolidated financial statements represents consolidated RVI financial information. References to Retail Ventures or RVI refer to the pre-merger entity.

On May 12, 2014, DSW Inc. completed its initial closing of its equity investment in Town Shoes Limited ("Town Shoes"), the largest branded footwear and
accessories retailer in Canada, for $75.1 million Canadian dollars ("CAD") ($68.9 million USD). DSW Inc. acquired a 49% interest in Town Shoes from
certain clients of Alberta Investment Management Corporation and other minority shareholders. DSW Inc.'s initial stake provides 50% voting control and
board representation equal to the primary remaining shareholder, Callisto Capital. Additionally, DSW Inc. will have the right to purchase the balance of
Town Shoes from the remaining shareholders, including Callisto Capital, after four years at a pre-determined earnings before interest, tax, depreciation and
amortization ("EBITDA") multiple. Callisto Capital, on behalf of itself and the remaining shareholders, has the right to put the balance of the company to
DSW Inc. after three years at a pre-determined EBITDA multiple.
Equity Method Investment in Town Shoes- DSW Inc. accounts for its investment in Town Shoes, where it exercises significant influence, but does not have
control, using the equity method. Under the equity method of accounting, DSW Inc. recognizes its share of Town Shoes' net income or loss. The difference
between the purchase price and the Company's interest in Town Shoes' underlying net equity is comprised of intangible assets with both definite and
indefinite lives. The definite lived assets are favorable and unfavorable leases that are being amortized over the lives of the leases. DSW Inc.’s share of net
income or loss of Town Shoes, DSW Inc.'s payment-in-kind interest from the note receivable from Town Shoes and amortization of the definite lived
intangible assets are included in Income from Town Shoes on the consolidated statements of operations and comprehensive income. Related income tax
effects are included in the provision for income taxes. The investment and note receivable in Town Shoes is required to be tested for impairment if there is
determined to be an other than temporary loss in value.
Presented below is activity related to our portion of Town Shoes included in our consolidated balance sheets, consolidated statements of operations and
consolidated statements of comprehensive income as of and for the year ended January 31, 2015.
Fiscal
2014
(in thousands)
Balance at beginning of period $ —
Initial investment 22,339
Acquisition costs 2,897
DSW Inc.'s portion of Town Shoes net income 178
Foreign currency translation adjustments included in "Other comprehensive income" 729
Amortization of purchase price adjustments (256)
Balance at end of period $ 25,887
F- 9
Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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