DSW 2008 Annual Report Download - page 38

i
nvestments as we
ll
as ava
il
a
bili
ty un
d
er our revo
l
v
i
ng cre
di
t
f
ac
ili
ty, w
ill b
esu
ffi
c
i
ent to ma
i
nta
i
n our ongo
i
n
g
operations, support seasonal workin
g
capital requirements and fund capital expenditures related to pro
j
ected
business growth
.
$
150 Million Secured Revolving Credit Facility.
W
e have a $150 million secured revolvin
g
credit facilit
y
that
e
xpires July
5
, 2010. Under this facility, we and our subsidiary, DSWSW, are named as co-borrowers. Our facility
h
as
b
orrow
i
ng
b
ase restr
i
ct
i
ons an
d
prov
id
es
f
or
b
orrow
i
ngs at var
i
a
bl
e
i
nterest rates
b
ase
d
on LIBOR, t
h
epr
i
me
r
ate an
d
t
h
eFe
d
era
l
Fun
d
se
ff
ect
i
ve rate, p
l
us a mar
gi
n. Our o
blig
at
i
ons un
d
er t
hi
s cre
di
t
f
ac
ili
t
y
are secure
dby
a
lien on substantially all of our and our subsidiary’s personal property and a pledge of our shares of DSWSW. In
addition, our secured revolving credit facility contains usual and customary restrictive covenants relating to ou
r
m
ana
g
ement an
d
t
h
e operat
i
on o
f
our
b
us
i
ness. T
h
ese covenants, amon
g
ot
h
er t
hi
n
g
s, restr
i
ct our a
bili
t
y
to
g
rant
liens on our assets, incur additional indebtedness, open or close stores, pa
y
cash dividends and redeem our stock,
e
nter into transactions with affiliates and merge or consolidate with another entity. In addition, if at any time w
e
ut
ili
ze over 90% o
f
our
b
orrow
i
n
g
capac
i
t
y
un
d
er t
hi
s
f
ac
ili
t
y
, we must comp
ly
w
i
t
h
a
fi
xe
d
c
h
ar
g
e covera
g
e rat
io
test set forth in the facilit
y
documents. At Januar
y
31, 2009 and Februar
y
2, 2008, $132.3 million and $134.3 mil-
lion, respectivel
y
, were available under the $150 million secured revolvin
g
credit facilit
y
and no direct borrowin
g
s
were outstanding. At January 31, 2009 and February 2, 2008,
$
17.7 million and
$
15.7 million in letters of credit,
r
espectivel
y
, were issued and outstandin
g
.
We are current
l
y see
ki
ng a new secure
d
revo
l
v
i
ng cre
di
t
f
ac
ili
ty as our current cre
di
t
f
ac
ili
ty w
ill
exp
i
re
i
nJu
l
y
2010. Based upon the current credit markets, the terms of the new credit facilit
y
ma
y
not be as favorable as ou
r
c
urren
tt
erms
.
A
uction Rate
S
ecurities. As of Januar
y
31, 2009, $4.3 million, net of a $0.7 million unrealized loss an
d
$
1.1 million of other-than-temporar
y
impairments, of our $102.7 million in total investments was invested in
auct
i
on rate secur
i
t
i
es. Due to auct
i
on
f
a
il
ures
li
m
i
t
i
ng t
h
e
li
qu
idi
ty o
f
our
i
nvestments, we
h
ave presente
d
$
1.3 million, net of $1.1 million other-than-temporar
y
impairments, of our investment in auction rate securities a
s
lon
g
-term investments as of Januar
y
31, 2009. We believe that the current lack of liquidit
y
and the other-than
-
temporary
i
mpa
i
rment c
h
arges re
l
at
i
ng to our auct
i
on rate secur
i
t
i
es w
ill h
ave no
i
mpact on our a
bili
ty to
f
un
d
our
on
g
o
i
n
g
operat
i
ons an
dg
rowt
hi
n
i
t
i
at
i
ves
.
Net Wor
k
in
g
Capita
l
.
N
et working capital increased
$
13.0 million to
$
295.7 million as of January 31, 2009
from $282.7 million at Februar
y
2, 2008. There are several factors related to net workin
g
capital increase. Our cas
h
and short term investment balance had a net increase of $24.4 million due to operatin
g
cash flow and sales of lon
g
term investments. The decrease in inventory was offset by a corresponding decrease in accounts payable. These
i
tems were part
i
a
lly
o
ff
set
by
t
h
e
d
ecrease
i
n accounts rece
i
va
bl
ere
l
ate
d
to
f
ewer tenant an
d
construct
i
o
n
allowances due to the decrease in planned and committed future store openin
g
s and an increase in the bonus
accrual due to an expected bonus pa
y
out. At Januar
y
31, 2009 and Februar
y
2, 2008, the current ratio was 2.9 an
d
2.7, respect
i
ve
l
y
.
N
et workin
g
capital decreased $16.0 million to $282.7 million at Februar
y
2, 2008 from $298.7 million at
Fe
b
ruary 3, 2007. T
h
e
d
ecrease
i
n net wor
ki
ng cap
i
ta
l
was a resu
l
to
f
t
h
e
d
ecrease
i
n cas
h
an
d
s
h
ort ter
m
i
nvestments due to capital expenditures in fiscal 2007 partiall
y
offset b
y
decrease in bonus accrual as there was n
o
bonus pa
y
ment in fiscal 2007. Current ratios at those dates were 2.7 and 2.9, respectivel
y
.
Op
erating Activitie
s
N
et cash provided b
y
operations in fiscal 2008 was
$
97.1 million, compared to
$
70.9 million for fiscal 2007.
T
he increase in net cash provided b
y
operations durin
g
fiscal 2008 is primaril
y
due to chan
g
es in net workin
g
capita
l
p
art
i
a
ll
yo
ff
set
b
ya
d
ecrease
i
n net
i
ncome
.
N
et cash provided b
y
operations in fiscal 2007 was $70.9 million, compared to $88.2 million for fiscal 2006.
T
he decrease of
$
17.3 million net cash provided by operations during fiscal 2007 as compared to the prior year is
p
r
i
mar
il
y
d
ue to a
d
ecrease
i
n net
i
ncome. Ot
h
er c
h
anges
i
nc
l
u
d
ean
i
ncrease
i
n
i
nventory
d
ue to new stores, a
n
i
ncrease in receivables related to tenant and construction allowances and a decrease in accrued ex
p
enses due to
a
34