DSW 2008 Annual Report Download - page 18

We are re
l
iant on our in
f
ormation s
y
stems an
d
t
h
e
l
oss or
d
isru
p
tion o
f
services cou
ld
a
ff
ect our a
b
i
l
it
y
to
implement our growth strategy and have a material adverse effect on our business
.
Our
i
n
f
ormat
i
on systems are an
i
ntegra
l
part o
f
our growt
h
strategy
i
ne
ffi
c
i
ent
l
y operat
i
ng our stores,
i
n
m
anag
i
ng t
h
e operat
i
ons o
f
a grow
i
ng store
b
ase an
d
reso
l
v
i
ng secur
i
ty r
i
s
k
sre
l
ate
d
to our e
l
ectron
i
c process
i
ng an
d
t
ransmission of confidential customer information. The capital required to keep our information s
y
stems operatin
g
at pea
k
per
f
ormance may
b
e
hi
g
h
er t
h
an ant
i
c
i
pate
d
an
d
cou
ld
stra
i
n
b
ot
h
our cap
i
ta
l
resources, our management o
f
any upgra
d
es an
d
a
bili
ty to protect ourse
l
ves
f
rom any
f
uture secur
i
ty
b
reac
h
es. In a
ddi
t
i
on, any s
i
gn
ifi
can
t
disruption of our data centers could have a material adverse effect on those operations dependent on those s
y
stems,
m
ost spec
ifi
ca
ll
y, store operat
i
ons, our
di
str
ib
ut
i
on center an
d
our merc
h
an
di
s
i
ng team.
While we maintain business interruption and propert
y
insurance, in the event either of our information center
s
were to be shut down, our insurance ma
y
not be sufficient to cover the impact to the business, or insurance proceeds
m
ay not
b
et
i
me
l
ypa
id
to us.
We are part
y
to an Amended and Restated Shared Services A
g
reement with RVI whereb
y
we provide
i
nformation technolo
gy
services to RVI and its subsidiaries, includin
g
Filene’s Basement. Throu
g
h this a
g
reement
,
we prov
id
et
h
e cas
h
re
l
ate
d
to cap
i
ta
l
expense
f
or certa
i
n
i
n
f
ormat
i
on tec
h
no
l
ogy assets
f
or RVI an
di
ts su
b
s
idi
ar
i
es.
W
e expect to recoup our expenditures b
y
char
g
in
g
depreciation to RVI based on the expected lives of the assets. We
are exposed to the risk that RVI ma
y
not be able to reimburse us for these expenditures which could adversel
y
affec
t
our
fi
nanc
i
a
l
per
f
ormance.
T
he loss or disruption of our distribution and fulfillment centers could have a material adverse effect o
n
o
ur
b
usiness an
d
o
p
erations
.
For DSW stores an
dl
ease
dd
epartments, most o
f
our
i
nventor
yi
ss
hi
ppe
ddi
rect
ly f
rom supp
li
ers to ou
r
p
rimar
y
distribution center in Columbus, Ohio, where the inventor
y
is then processed, sorted and shipped to one of
our poo
ll
ocat
i
ons
l
ocate
d
t
h
roug
h
out t
h
e country an
d
t
h
en on to our stores. T
h
roug
h
at
hi
r
d
party, we a
l
so operate a
west coast
b
ypass. For
d
sw.com, our
i
nventory
i
ss
hi
ppe
ddi
rect
l
y
f
rom our
f
u
lfill
ment center to customers’
h
omes
.
O
ur operatin
g
results depend on the orderl
y
operation of our receivin
g
and distribution process, which in tur
n
d
epen
d
sont
hi
r
d
-party ven
d
ors’ a
dh
erence to s
hi
pp
i
ng sc
h
e
d
u
l
es an
d
our e
ff
ect
i
ve management o
f
our
di
str
ib
ut
i
on
f
ac
ili
t
i
es. We may not ant
i
c
i
pate a
ll
t
h
ec
h
ang
i
ng
d
eman
d
st
h
at our expan
di
ng operat
i
ons w
ill i
mpose on ou
r
r
eceivin
g
and distribution s
y
stem, and events be
y
ond our control, such as disruptions in operations due to fire or
ot
h
er catastrop
hi
c events,
l
a
b
or
di
sagreements or s
hi
pp
i
ng pro
bl
ems, may resu
l
t
i
n
d
e
l
ays
i
nt
h
e
d
e
li
very o
f
m
erc
h
an
di
se to our stores.
While we maintain business interruption and propert
y
insurance, in the event our distribution and fulfillments
c
enters were to
b
es
h
ut
d
own
f
or any reason or
if
we were to
i
ncur
hi
g
h
er costs an
dl
onger
l
ea
d
t
i
mes
i
n connect
i
on
w
i
t
h
a
di
srupt
i
on at our
di
str
ib
ut
i
on an
df
u
lfill
ment centers, our
i
nsurance may not
b
esu
ffi
c
i
ent, an
di
nsuranc
e
p
roceeds ma
y
not be timel
y
paid to us
.
Va
l
ue Cit
y
De
p
artment Stores
f
i
l
e
df
or
b
an
k
ru
p
tc
yp
rotection an
d
c
l
ose
d
its remaining stores. Va
l
ue Cit
y
o
wes us approximately
$
6.7 million as of January 31, 2009 and we may not be able to collect this amoun
t
from Value City
.
I
n January 2008, RVI announce
d
t
h
e
di
spos
i
t
i
on o
f
an 81% owners
hi
p
i
nterest
i
nVa
l
ue C
i
ty. As a part o
f
t
hi
s
t
ransaction, RVI a
g
reed to provide certain transition services to Value Cit
y
. On October 26, 2008, Value Cit
y
file
d
for bankruptc
y
protection and announced that it would close its remainin
g
stores. We ne
g
otiated an a
g
reement wit
h
V
a
l
ue C
i
ty to cont
i
nue to prov
id
e serv
i
ces post
b
an
k
ruptcy
fili
ng,
i
nc
l
u
di
ng r
i
s
k
management,
fi
nanc
i
a
l
serv
i
ces
,
benefits administration, pa
y
roll and information technolo
gy
services, in exchan
g
e for a weekl
y
pa
y
ment.
As of Januar
y
31, 2009, Value Cit
y
owes us approximatel
y
$6.7 million for services rendered b
y
us prior to th
e
fili
ng o
fb
an
k
ruptcy. O
f
t
h
ese unpa
id
amounts, we
h
ave not recogn
i
ze
d
revenue or a rece
i
va
bl
ere
l
ate
d
to t
h
ose
s
ervices other than a full
y
reserved receivable of approximatel
y
$0.6 million. We have submitted a proof of claim in
t
he bankruptc
y
proceedin
g
seekin
g
pa
y
ment in full for all amounts owed to us. However, there is no assurance that
we can co
ll
ect a
ll
or any o
f
t
h
e amounts owe
d
to us.
14