DSW 2010 Annual Report Download - page 37

(1) Many of our operating leases require us to pay contingent rent based on sales, common area maintenance costs
and real estate taxes. Contingent rent, costs and taxes vary year by year and are based almost entirely on actual
amounts incurred. As such, they are not included in the lease obligations presented above. Other non-current
liabilities of $95.6 million are primarily comprised of deferred rent liabilities, construction and tenant
allowances, and uncertain tax positions. Deferred rent, which is included in non-current liabilities, is excluded
from this table as our payment obligations are included in the operating lease obligations. Construction and
tenant allowances, which are included in non-current liabilities, are not contractual obligations as the balance
represents cash allowances from landlords, which are deferred and amortized on a straight-line basis over the
non-cancellable terms of the lease.
(2) Construction commitments include capital items to be purchased for projects that were under construction, or
for which a lease had been signed, as of January 29, 2011.
(3) Many of our purchase obligations are cancelable by us without payment or penalty, and we have excluded such
obligations.
(4) The amount of obligations related to uncertain tax positions as of January 29, 2011 were $3.2 million, including
approximately $0.3 million of accrued interest and penalties. Uncertain tax positions are positions taken or
expected to be taken on an income tax return that may result in additional payments to tax authorities. We may
not be required to settle these obligations. Uncertain tax positions are included in the “More than 5 Years”
column as we are not able to reasonably estimate the timing of the potential future payments.
We had outstanding letters of credit that totaled approximately $19.2 million as of January 29, 2011. If certain
conditions are met under these arrangements, we would be required to satisfy the obligations in cash. Due to the
nature of these arrangements and based on historical experience and future expectations, we do not expect to make
any significant payment outside of terms set forth in these arrangements.
As of January 29, 2011, we have entered into various construction commitments, including capital items to be
purchased for projects that were under construction, or for which a lease has been signed. Our obligations under
these commitments aggregated to approximately $3.4 million as of January 29, 2011. In addition, as of January 29,
2011, we have signed 9 lease agreements for new store locations opening in fiscal 2011 and fiscal 2012 with total
annual rent of approximately $5.6 million. In connection with the new lease agreements, we expect to receive a total
of approximately $5.3 million of construction and tenant allowance reimbursements for expenditures at these
locations.
Recent Accounting Pronouncements
Recent Accounting Pronouncements and their impact on DSW are disclosed in Note 1 to the Consolidated
Financial Statements included in this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
As discussed in Note 1 to our consolidated financial statements included elsewhere in this Annual Report on
Form 10-K, the preparation of our consolidated financial statements in conformity with GAAP requires manage-
ment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
commitments and contingencies at the date of the consolidated financial statements and reported amounts of
revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments,
including, but not limited to, those related to inventory valuation, depreciation, amortization, recoverability of long-
lived assets (including intangible assets), estimates for self-insurance reserves for health and welfare, workers’
compensation and casualty insurance, investments, income taxes and revenue recognition. We base these estimates
and judgments on our historical experience and other factors we believe to be relevant, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. The process of determining significant estimates is fact-specific and takes into account factors such as
historical experience, current and expected economic conditions, product mix, and in some cases, actuarial and
appraisal techniques. We constantly re-evaluate these significant factors and make adjustments where facts and
circumstances dictate.
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