DSW 2008 Annual Report Download - page 21

th
e event we are una
bl
e to secure a
ddi
t
i
ona
l
cre
di
t, our
f
uture
li
qu
idi
ty may
b
e
i
mpacte
d
,w
hi
c
h
cou
ld h
ave
a
m
aterial adverse effect on our financial condition or results of o
p
erations.
T
he liquidity of our investments could fluctuate based on adverse market conditions.
Auction failures have adversel
y
affected the liquidit
y
of auction rate securities as investors have not been able
t
ose
ll
t
h
e
i
r secur
i
t
i
es on t
h
e
i
r auct
i
on
d
ates. We
h
a
v
e
b
een una
bl
etose
ll
certa
i
n auct
i
on rate secur
i
t
i
es at t
h
e
i
r
s
cheduled auction dates. As of Januar
y
31, 2009, $4.3 million, net of impairments of $1.8 million, of ou
r
$102.7 million in total investments was invested in auction rate securities. We have reduced our investment i
n
auction rate securities with a temporary impairment of
$
0.7 million and other-than-temporary impairments o
f
$1.1 million. Due to auction failures limitin
g
the liquidit
y
of our investments, we have presented all of ou
r
i
nvestment in auction rate securities that have under
g
one a failed auction and have not been called as lon
g
-term
i
nvestments as o
f
January 31, 2009
.
If
we are una
bl
eto
li
qu
id
ate t
h
e rema
i
n
i
ng auct
i
on rate secur
i
t
i
es at t
h
e
i
rsc
h
e
d
u
l
e
d
auct
i
on
d
ates, we may not
have access to our funds until the securities under
g
o a distribution of the underl
y
in
g
securities or successfull
y
settl
e
at auction. Further, in the event that it is unlikel
y
that we will be able to receive the full proceeds from thes
e
i
nvestments w
h
en t
h
e secur
i
t
i
es un
d
ergo a
di
str
ib
ut
i
on o
f
t
h
eun
d
er
l
y
i
ng secur
i
t
i
es or success
f
u
ll
y sett
l
e at auct
i
on,
we ma
y
be required to impair the securities. Based on the nature of the impairments, we would record temporar
y
i
mpairments as unrealized losses in other comprehensive income or other-than-temporar
y
impairments in earnin
g
s,
w
hi
c
h
cou
ld
mater
i
a
ll
y
i
mpact our resu
l
ts o
f
operat
i
ons.
We are contro
ll
e
dd
irect
ly by
Retai
l
Ventures an
d
in
d
irect
ly by
SSC an
d
its a
ff
i
l
iates, w
h
ose interests ma
y
d
iffer from our other shareholders.
As of Januar
y
31, 2009, Retail Ventures, a public corporation, owns 100% of our Class B Common Shares
,
which represents approximately
6
2.9% of our outstanding Common Shares. These shares collectively represent
approx
i
mate
l
y 93.1% o
f
t
h
e com
bi
ne
d
vot
i
ng power o
f
our outstan
di
ng Common S
h
ares.
As of Januar
y
31, 2009, SSC and its affiliates, in the a
gg
re
g
ate, owned approximatel
y
52.3% of the outstandin
g
Retail Ventures Common Shares and beneficially owned approximately 60.7% of the outstanding Retail Ventures
Common S
h
ares (assumes t
h
e
i
ssuance o
f
(
i
) 8,333,333 RVI Common S
h
ares
i
ssua
bl
e upon t
h
e exerc
i
se o
f
c
onversion warrants held b
y
SSC, (ii) 1,731,4
6
0 Retail Ventures Common Shares issuable upon the exercise of ter
m
loan warrants held b
y
Schottenstein RVI, LLC and (iii) 342,709 Retail Ventures Common Shares issuable upon th
e
e
xerc
i
se o
f
t
h
e term
l
oan warrants
h
e
ld b
ySc
h
ottenste
i
n RVI, LLC). SSC an
di
ts a
ffili
ates t
h
at own Reta
il
Venture
s
Common S
h
ares are pr
i
vate
l
y
h
e
ld
ent
i
t
i
es contro
ll
e
db
y Jay L. Sc
h
ottenste
i
n, C
hi
e
f
Execut
i
ve O
ffi
cer an
d
Chairman of our Board of Directors, and members of his immediate famil
y
. Given their respective ownership
i
nterests, Reta
il
Ventures an
d
,
i
n
di
rect
l
y, SSC an
di
ts a
ffili
ates, contro
l
or su
b
stant
i
a
ll
y
i
n
fl
uence t
h
e outcome o
f
a
ll
m
atters su
b
m
i
tte
d
to our s
h
are
h
o
ld
ers
f
or approva
l
,
i
nc
l
u
di
ng, t
h
ee
l
ect
i
on o
fdi
rectors, mergers or ot
h
er
b
us
i
nes
s
c
ombinations, and acquisitions or dispositions of assets. The interests of Retail Ventures, SSC and its affiliates ma
y
differ from or be opposed to the interests of our other shareholders, and its control may have the effect of delaying o
r
p
revent
i
ng a c
h
ange
i
n contro
l
t
h
at may
b
e
f
avore
db
yot
h
er s
h
are
h
o
ld
ers.
SSC and Retail Ventures or their affiliates may compete directly against us.
C
orporate opportunities ma
y
arise in the area of potential competitive business activities that ma
y
be attractive
t
o Retail Ventures, SSC, and/or their affiliates and us. Our amended and restated articles of incor
p
oration
p
rovide
th
at Reta
il
Ventures an
d
SSC are un
d
er no o
bli
gat
i
on to commun
i
cate or o
ff
er any corporate opportun
i
ty to us. I
n
addition, Retail Ventures and SSC and/or its affiliates have the ri
g
ht to en
g
a
g
e in similar activities as us, do business
with our suppliers and customers and, except as limited b
y
the master separation a
g
reement, emplo
y
or otherwise
e
ngage any o
f
our o
ffi
cers or emp
l
oyees. SSC an
di
ts a
ffili
ates engage
i
navar
i
ety o
fb
us
i
nesses,
i
nc
l
u
di
ng,
b
ut no
t
li
m
i
te
d
to,
b
us
i
ness an
di
nventor
yli
qu
id
at
i
ons, appare
l
compan
i
es an
d
rea
l
estate acqu
i
s
i
t
i
ons. T
h
e prov
i
s
i
ons a
l
so
out
li
ne
h
ow corporate opportun
i
t
i
es are to
b
e ass
ig
ne
di
nt
h
e event t
h
at our, Reta
il
Ventures’ or SSC’s
di
rectors an
d
officers learn of cor
p
orate o
pp
ortunities.
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