DSW 2014 Annual Report Download - page 50

Table of Contents
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Fiscal
2014
(in thousands)
Balance at beginning of period
$ —
Purchase of note receivable
46,596
Payment-in-kind interest
3,891
Foreign currency translation adjustments included in "Other comprehensive income"
(7,183)
Balance at end of period
$ 43,304
The note is an unsecured subordinated note that was issued on February 14, 2012 that earns payment-in-kind interest at 12% and matures on February 14,
2022.
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Sales and Revenue Recognition- Revenues from merchandise sales are recognized upon customer receipt of merchandise, are net of returns through period
end, exclude sales tax and are not recognized until collectibility is reasonably assured. Merchandise can be demanded from a store, dsw.com or m.dsw.com.
The demand can be fulfilled from a store, the dsw.com fulfillment center or drop shipped from a supplier's warehouse. If the product is shipped to a customer
from a store, the dsw.com fulfillment center or a supplier's warehouse, DSW Inc. defers revenue for a period of time representing a lag for shipments to be
received by the customer. Revenue from shipping and handling is recorded in net sales while the related costs are included in cost of sales. Revenue from gift
cards is deferred and recognized upon redemption of the gift card. The Company's policy is to recognize income from breakage of gift cards when the
likelihood of redemption of the gift card is remote.
As of January 31, 2015, ABG supplies footwear, under supply arrangements, to four other retailers. Sales for these affiliated businesses are net of returns
through period end and exclude sales tax, and are included in net sales.
Cost of Sales- In addition to the cost of merchandise, which includes markdowns and shrinkage, the Company includes in cost of sales expenses associated
with distribution and fulfillment (including depreciation) and store occupancy (excluding depreciation and including store impairments). Distribution and
fulfillment expenses are comprised of labor costs, rent, depreciation, insurance, utilities, maintenance and other operating costs associated with the operations
of the distribution and fulfillment centers. Distribution and fulfillment expenses also include the transportation of merchandise to the distribution and
fulfillment centers, from the distribution center to stores and from the fulfillment center and from stores to the customer. Store occupancy expenses include
rent, utilities, repairs, maintenance, insurance, janitorial costs and occupancy-related taxes, which are primarily real estate taxes passed to the Company by its
landlords.
Operating Expenses- Operating expenses include expenses related to store management and store payroll costs, advertising, ABG operations, store
depreciation and amortization, new store advertising and other new store costs (which are expensed as incurred) and corporate expenses. Corporate expenses
include expenses related to buying, information technology, depreciation expense for corporate cost centers, marketing, legal, finance, outside professional
services, customer service center expenses, payroll and benefits for associates and payroll taxes.
Stock-Based Compensation- The Company recognizes compensation expense for stock option awards, time-based restricted stock awards and performance-
based restricted stock awards on a straight-line basis over the requisite service period of the award for the awards that vest in accordance with Accounting
Standard Codification ("ASC") 718, Compensation – Stock Compensation. For stock options, the fair value of options granted is estimated on the date of
grant using the Black-Scholes pricing model. This model assumes that the estimated fair value of options is amortized over the options’ vesting periods. The
compensation costs, net of estimated forfeitures, are included in operating expenses in the consolidated statements of operations.
The company grants performance-based restricted stock units and restricted stock units. Compensation cost is measured at fair value on the grant date and
recorded over the vesting period, net of estimated forfeitures. Fair value is determined by multiplying the number of units granted by the grant date closing
market price.
F- 10
Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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