DSW 2009 Annual Report Download - page 20

of DSW Shoe Warehouse, Inc. In addition, the secured revolving credit facility contains usual and customary
restrictive covenants relating to our management and the operation of our business. These covenants, among other
things, restrict our ability to grant liens on our assets, incur additional indebtedness, open or close stores, pay cash
dividends and redeem our stock, enter into transactions with affiliates and merge or consolidate with another entity.
In addition, if at any time we utilize over 90% of our borrowing capacity under this facility, we must comply with a
fixed charge coverage ratio test set forth in the facility documents. These covenants could restrict our operational
flexibility, and any failure to comply with these covenants or our payment obligations would limit our ability to
borrow under the secured revolving credit facility and, in certain circumstances, may allow the lenders thereunder to
require repayment.
We may be unable to secure a replacement credit facility upon the termination of our existing credit
facility in July 2010 or the terms of a replacement credit facility could be materially different than the
terms we have today.
Our current credit facility expires in July 2010. While we do not currently have borrowings under our credit
facility, we had approximately $17.4 million of letters of credit outstanding as of January 30, 2010. Based upon the
current credit markets, we may be unable to secure a replacement credit facility, or if we are able to secure a
replacement credit facility, the terms of such credit may be materially different from our current terms. Such revised
terms or the price of credit could have a material adverse effect on our business, financial condition or results of
operations. Further, in the event we are unable to secure a replacement credit facility, our future liquidity may be
impacted, which could have a material adverse effect on our financial condition and results of operations.
The investment of our cash and short-term investments are subject to risks that could affect the liquidity
of these investments.
As of January 30, 2010 we had cash and short-term investments of $289.3 million. A portion of these are held
as cash in operating accounts that are with third party financial institutions. While we regularly monitor the cash
balances in our operating accounts and adjust the balances as appropriate to be within Federal Deposit Insurance
Corporation (“FDIC”) insurance limits, these cash balances could be lost or inaccessible if the underlying financial
institutions fail or are subject to other adverse conditions in the financial markets. To date, we have experienced no
loss or lack of access to our cash and equivalents.
We have investments in tax exempt, tax advantaged and taxable bonds, tax exempt term notes, and certificates
of deposit. Certain of these investments are subject to general credit, liquidity, market and interest rate risks. To date,
we have experienced other-than-temporary impairments of $2.9 million, excluding of $0.5 million of realized gains,
and $1.1 million, respectively, in fiscal 2009 and 2008, related to our investments in auction rate securities. Our
investments in auction rate securities have either been sold or fully impaired and no longer represent an impairment
risk.
While we generally invest in lower risk investments, investment risk has been and may further be exacerbated
by credit and liquidity issues that have affected various sectors of the financial markets. As the financial markets
have become more volatile, it has been increasingly difficult to invest in highly rated, low risk investments. We can
provide no assurance that access to our cash and short-term investments, their earning potential or our ability to
invest in highly rated, low risk investments will not be impacted by adverse conditions in the financial markets.
These market risks associated with our cash and short-term investments may have an adverse effect on our business,
financial condition, liquidity and results of operations.
We are controlled directly by Retail Ventures and indirectly by SSC and its affiliates, whose interests may
differ from our other shareholders.
As of January 30, 2010, Retail Ventures, a public corporation, owns 100% of our outstanding Class B Common
Shares, which represents approximately 62.4% of our outstanding Common Shares. These shares collectively
represent approximately 93.0% of the combined voting power of our outstanding Common Shares.
As of January 30, 2010, SSC and its affiliates, in the aggregate, owned approximately 52.0% of the outstanding
Retail Ventures Common Shares and beneficially owned approximately 53.6% of the outstanding Retail Ventures
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