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DSW INC.
FORM 10-K
(Annual Report)
Filed 03/27/12 for the Period Ending 01/28/12
Address 810 DSW DRIVE
COLUMBUS, OH 43219
Telephone (614) 237-7100
CIK 0001319947
Symbol DSW
SIC Code 5661 - Shoe Stores
Industry Retail (Apparel)
Sector Services
Fiscal Year 02/03
http://www.edgar-online.com
© Copyright 2012, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ...FORM 10-K (Annual Report) Filed 03/27/12 for the Period Ending 01/28/12 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 810 DSW DRIVE COLUMBUS, OH 43219 (614) 237-7100 0001319947 DSW 5661 - Shoe Stores Retail (Apparel) Services 02/03 http://www.edgar-online.com © Copyright 2012...

  • Page 2
    ... ACT OF 1934 For the Fiscal Year Ended January 28, 2012 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-32545 DSW INC. (Exact name of registrant as specified in its charter) Ohio (State or other jurisdiction of incorporation...

  • Page 3

  • Page 4
    ... about Market Risk 8. Financial Statements and Supplementary Data 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 9A. Controls and Procedures 9B. Other Information PART III 10. Directors, Executive Officers and Corporate Governance 11. Executive Compensation...

  • Page 5
    ... OF CONTENTS TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Index to...

  • Page 6
    ... Ventures"). RVI common shares, without par value, which traded under the symbol "RVI", were delisted from the New York Stock Exchange on May 26, 2011. We own many trademarks and service marks. This Annual Report on Form 10-K may contain trade dress, tradenames and trademarks of other companies. Use...

  • Page 7
    ... of brand name and designer dress, casual and athletic footwear for women and men, as well as accessories through our DSW stores and dsw.com. We also offer kids' shoes exclusively on dsw.com. In addition, we operate 336 leased departments for three other retailers as of January 28, 2012 . Our...

  • Page 8
    ... and dsw.com sell a large assortment of brand name, designer and private label merchandise. We purchase directly from approximately 500 domestic and foreign vendors, primarily in-season footwear found in specialty and department stores and branded make-ups (shoes made exclusively for a retailer...

  • Page 9
    ... to support our growth strategy. Expanding Our Business We opened 17 DSW stores in fiscal 2011 , plan to open 35 to 40 DSW stores in fiscal 2012 and plan to open 15 to 20 DSW stores in each of the following three to five years. Our plan is to open stores in both new and existing markets, with...

  • Page 10
    ... a fulfillment center in Columbus, Ohio to process orders for dsw.com, which are shipped directly to customers using a third party logistics provider. Competition We view our primary competitors to be department stores and brand-oriented discounters. However, the fragmented shoe market means we face...

  • Page 11
    ... DSW stores on a profitable basis. During fiscal 2011 , 2010 and 2009 , we opened 17 , 9 and 9 new DSW stores, respectively. We plan to open 35 to 40 stores in fiscal 2012 and plan to open 15 to 20 stores each year for the following three to five years. As of January 28, 2012 , we have signed leases...

  • Page 12
    ... were to terminate our supply agreements, close a significant number of stores or liquidate, it could have a material adverse effect on our business. We rely on our good relationships with vendors to purchase brand name and designer merchandise at favorable prices. If these relationships were...

  • Page 13
    ... and operations. For our DSW stores and leased businesses, the majority of our inventory is shipped directly from suppliers to our primary distribution center in Columbus, Ohio, where the inventory is then processed, sorted and shipped to one of our pool locations located throughout the country and...

  • Page 14
    ... customer traffic, sales and loyalty. "DSW Rewards" members earn reward certificates that offer discounts on future purchases. In fiscal 2011 , shoppers in the loyalty program generated approximately 88% of DSW store and dsw.com sales versus approximately 87% of DSW store and dsw.com sales in fiscal...

  • Page 15
    ... may be effectively illiquid, unless such DSW Class B Common Shares are converted into DSW Class A Common Shares. There is currently no public market for DSW Class B Common Shares. DSW does not intend to list the Class B Common Shares on any securities exchange or any automated quotation system. As...

  • Page 16
    ... Affiliates' directors and officers learn of opportunities. Risks Relating to our Merger with Retail Ventures, Inc. An annual limitation on DSW's ability to use net operating loss income tax carryforwards may be imposed if there is a change in ownership of DSW. After the Merger, the combined...

  • Page 17
    ...On November 2, 2011, Syms and Filene's Basement filed for bankruptcy protection. RVI guaranteed the obligations of Filene's Basement in connection with three leases for retail store locations. Merger Sub is responsible for any obligations of RVI under these guarantees. These leases expire in January...

  • Page 18
    ... SSC. The remaining DSW stores are leased from unrelated entities. ITEM 3. LEGAL PROCEEDINGS. Litigation relating to the merger of DSW and RVI - In the first quarter of fiscal 2011, shareholders of RVI filed two putative shareholder class action lawsuits in an Ohio state court captioned as follows...

  • Page 19
    Table of Contents liability with respect to these proceedings will not be material to our results of operations or financial condition. ITEM 4. MINE SAFETY DISCLOSURES. Not Applicable. 14

  • Page 20
    ..., associates, corporations, or other entities identified in security position listings maintained by depositories. The following table provides our quarterly market prices of our Class A Common Shares as reported on the NYSE and cash dividends per share for 2011 and 2010: Market Price High Fiscal...

  • Page 21
    ... of Contents Total number of shares withheld October 30, 2011 to November 26, 2011 November 27, 2011 to December 31, 2011 January 1, 2012 to January 28, 2012 Average price paid per share Total number of shares purchased as part of publicly announced programs Approximate dollar value of shares...

  • Page 22
    ...in Item 7 of this Annual Report on Form 10K. For the fiscal years ended (1) 1/29/2011 1/30/2010 1/31/2009 2/2/2008 1/28/2012 (dollars in thousands, except per share and net sales per average gross square foot) Statement of Operations Data (2) : Net sales (3) Gross profit (4) Change in fair value of...

  • Page 23
    ...$ Number of leased departments at end 336 352 356 of period (10) Total comparable sales change 8.3% 13.2% 3.2% _____ (1) See Note 1 for a discussion of the impact of the Merger on DSW's consolidated financial statements. ( 2 ) All fiscal years are based on a 52 week year. For the fiscal years ended...

  • Page 24
    ... statements as a result of various factors, including but not limited to those listed under "Risk Factors" and included elsewhere in this Annual Report on Form 10-K. Executive Summary - Fiscal 2011 During fiscal 2011 , we generated a 8.3% increase in comparable sales and a 11.1% increase in total...

  • Page 25
    ... year ended January 29, 2011 Increase in comparable sales Net increase from non-comparable and closed store sales Net sales for the fiscal year ended January 28, 2012 The following table summarizes our sales by reportable segment and in total: DSW segment Leased business division segment Total DSW...

  • Page 26
    ...in fiscal 2011 from 31.0% in fiscal 2010 . By reportable segment and in total, gross profit as a percentage of net sales was: Fiscal years ended January 28, 2012 January 29, 2011 33.4% 31.9% 19.4% 21.4% 32.3% 31.0% DSW segment Leased business division segment Total DSW Inc. DSW segment merchandise...

  • Page 27
    ... from non-comparable and closed store sales Net sales for the fiscal year ended January 29, 2011 The following table summarizes our sales by reportable segment and in total: DSW segment Leased business division segment Total DSW Inc. The following table summarizes our comparable sales change by...

  • Page 28
    ... in the fall season margin rate was expected as a result of our inventory being positioned to achieve double digit comparable sales growth. Store occupancy expense for the DSW segment decreased as a percentage of net sales to 11.1% for fiscal 2010 from 12.9% for last year primarily as a result...

  • Page 29
    ... adjusting for non-cash charges, increased but was offset by income tax related items and the planned inventory increase net of the related increase in accounts payable. We operate all our stores, our distribution and fulfillment centers and our office facilities from leased facilities. All lease...

  • Page 30
    ... We plan to open approximately 35 to 40 stores in fiscal 2012 . In addition to our investments in new stores and remodeling stores, we will invest in the reconfiguration of the Columbus distribution center and the expansion of the dsw.com fulfillment center to support business growth. In fiscal 2011...

  • Page 31
    ... of the PIES received a number of DSW Class A Common Shares per $50.00 principal amount of PIES equal to the "exchange ratio" described in the RVI prospectus filed with the SEC on August 11, 2006. During fiscal 2011, 2010 and 2009, DSW, and prior to the Merger, RVI, recorded a non-cash charge of $41...

  • Page 32
    ... would close its remaining stores. RVI may become subject to risks associated with the bankruptcy filing by Value City, if creditors whose obligations RVI has guaranteed are not paid. Filene's Basement Disposition. On April 21, 2009, RVI sold all of the outstanding capital stock of Filene's Basement...

  • Page 33
    ... under these commitments aggregated to approximately $4.9 million as of January 28, 2012 . In addition, as of January 28, 2012 , we have signed 22 lease agreements for new store locations opening in fiscal 2012 and 2013 with total annual rent of approximately $16.7 million . In connection with the...

  • Page 34
    ... time the retail value of the inventory is lowered through the use of markdowns, which are reductions in prices due to customers' perception of value. Hence, earnings are negatively impacted as the merchandise is marked down prior to sale. Markdowns establish a new cost basis for inventory. Changes...

  • Page 35
    ... increase or decrease our self-insurance accrual by $0.1 million. Customer Loyalty Program. We maintain a customer loyalty program for the DSW stores and dsw.com sales channels in which program members earn reward certificates that result in discounts on future purchases. Upon reaching the target...

  • Page 36
    ...using current market rates and records all derivatives on the balance sheet at fair value. As of January 28, 2012 , DSW had warrants outstanding to purchase up to 753,185 DSW Common Shares. During fiscal 2011 , DSW, and prior to the Merger, RVI, recorded a total non-cash charge related to the change...

  • Page 37
    ... of financial reporting and the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America. Management assessed the effectiveness of our internal control system as of January 28, 2012 . In making its assessment, we used the...

  • Page 38
    ... under the captions "EXECUTIVE OFFICERS", "ELECTION OF DIRECTORS" and "OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE INFORMATION" in our definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 17, 2012 , to be filed with the SEC pursuant...

  • Page 39
    Table of Contents ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. In accordance with General Instruction G(3), the information contained under the caption "AUDIT AND OTHER SERVICE FEES" in the Proxy Statement is incorporated herein by reference. 34

  • Page 40
    ... Financial Statements The documents listed below are filed as part of this Form 10-K: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of January 28, 2012 and January 29, 2011 Consolidated Statements of Operations for the years ended January 28, 2012, January...

  • Page 41
    ... by the undersigned, thereunto duly authorized. DSW INC. March 27, 2012 By: /s/ Douglas J. Probst Douglas J. Probst, Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the...

  • Page 42
    36

  • Page 43
    ... of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of DSW Inc. Columbus, Ohio We have audited the accompanying consolidated balance sheets of DSW Inc. and its subsidiaries (the "Company") as of January 28, 2012 and January 29, 2011, and...

  • Page 44
    Table of Contents in cash upon conversion (including partial cash settlement) and noncontrolling interests in consolidated financial statements, which became effective February 1, 2009. /s/ DELOITTE & TOUCHE LLP Columbus, Ohio March 27, 2012 F-2

  • Page 45
    ...,477 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable Accounts payable to related parties Accrued expenses: Compensation Taxes Other Gift cards and merchandise credits Conversion feature of short-term debt Warrant liability Current maturities of long-term debt Total current liabilities 307,549...

  • Page 46
    Total liabilities and shareholders' equity The accompanying Notes are an integral part of the Consolidated Financial Statements. $ 1,207,900 $ 1,041,477 F-3

  • Page 47
    ... YEARS ENDED JANUARY 28, 2012, JANUARY 29, 2011 AND JANUARY 30, 2010 (in thousands, except per share amounts) Net sales Cost of sales Operating expenses Change in fair value of derivative instruments Operating profit (loss) Interest expense Interest income Interest expense, net Non-operating...

  • Page 48
    ...CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED JANUARY 28, 2012 , JANUARY 29, 2011 AND JANUARY 30, 2010 (in thousands ) Number of Shares Class A Common Shares Balance, January 31, 2009 (Loss) income from continuing operations Total income from discontinued operations, net of tax Change...

  • Page 49
    ... STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED JANUARY 28, 2012 , JANUARY 29, 2011 AND JANUARY 30, 2010 (continued) (in thousands ) Number of Shares Class A Common Shares Balance, January 30, 2010 Income from continuing operations Total income from discontinued operations, net of tax Change...

  • Page 50
    Table of Contents DSW INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED JANUARY 28, 2012 , JANUARY 29, 2011 AND JANUARY 30, 2010 (continued) (in thousands ) Number of Shares Class A Common Shares Balance, January 29, 2011 21,873 Class B Common Shares Class A Common Shares 3$ 330,022...

  • Page 51
    ...units, net of settlement of taxes Excess tax benefit related to stock option exercises Exchange of Class B Common Shares for Class A Common Shares Settlement of PIES with Class A Common Shares Dividends paid and accrued ($2.30 per share) Balance, January 28, 2012 10 255 255 339 339 4,099 4,099...

  • Page 52
    ... charges on receivables from Filene's Basement 57,884 Excess tax benefits related to stock option exercises (6,872) (458) 2,895 Other-than-temporary impairment charges on investments Other 14,522 15,279 15,628 Change in working capital: Accounts receivable, net Inventories Prepaid expenses and other...

  • Page 53
    ... for income taxes Proceeds from construction and tenant allowances Non-cash operating, investing and financing activities: Balance of accounts payable and accrued expenses due to property and equipment purchases (Adjustment) capital contribution to subsidiary Amortization of investment discounts and...

  • Page 54
    ... that were publicly held prior to the Merger; RVI declared and implemented a reverse stock split at an exchange ratio of 0.435 applicable to all outstanding Common Shares; RVI established a new class of unregistered common shares, Class B Common Shares, with special voting rights. DSW Class A Common...

  • Page 55
    ... leased business division segment. DSW offers a wide assortment of brand name dress, casual and athletic footwear and accessories for women and men. As of January 28, 2012 , DSW operated a total of 326 stores located in 40 states. During fiscal 2011 , 2010 and 2009 , DSW opened 17 , 9 and 9 new DSW...

  • Page 56
    ... as of January 28, 2012 or January 29, 2011 . DSW does not hold or issue derivative financial instruments for trading purposes. DSW, and prior to the Merger, RVI, estimates the fair values of derivatives based on the Black-Scholes pricing model using current market information. See Note 7 for...

  • Page 57
    ... of businesses acquired. As of both January 28, 2012 and January 29, 2011 , the balance of goodwill related to the DSW stores was $25.9 million. Goodwill is tested for impairment at least annually. Management evaluates the fair value of the reporting unit using market-based analysis to review market...

  • Page 58
    ... income from gift card breakage during fiscal 2011 , 2010 and 2009 , respectively. As of January 28, 2012 , the Company supplies footwear, under supply arrangements, to three retailers. Sales for these leased businesses are net of returns through period end and exclude sales tax, as reported by the...

  • Page 59
    ... to buying, information technology, depreciation expense for corporate cost centers, marketing, legal, finance, outside professional services, customer service center expenses, payroll and benefits for associates and payroll taxes. DSW conformed RVI's accounting policies and recast its pre-merger or...

  • Page 60
    ...class of assets and liabilities that use fair value measurements. Except for the detailed level 3 disclosures, the new standard was effective for DSW and RVI for the first quarter of fiscal 2010 and both DSW and RVI adopted the remaining provisions of the standard in the first quarter of fiscal 2011...

  • Page 61
    ...of directors, prior to the Merger. All outstanding principal and accrued but unpaid interest under the RVI Credit Facility became due and payable in full two business days after the closing of the Merger. DSW repaid RVI's borrowings of $11.0 million under the RVI Credit Facility on May 31, 2011. The...

  • Page 62
    ...average assumptions used in the Black-Scholes pricing model for DSW options granted in each of the periods presented: Fiscal years ended January 29, 2011 2.5% 56.9% 5 years 0.0% January 28, 2012 Assumptions: Risk-free interest rate Annual volatility of DSW common stock Expected option term Dividend...

  • Page 63
    ...CONSOLIDATED FINANCIAL STATEMENTS Fiscal years ended January 28, 2012 WAEP Shares 2,657 $ 20.04 363 $ 38.11 73 $ 26.27 114 (545) (154) 2,508 1,125 January 29, 2011 Shares WAEP 2,504 $ 18.20 522 $ 26.56 January 30, 2010 Shares WAEP 2,125 $ 22.04 946 $ 10.17 Outstanding beginning of year Granted RVI...

  • Page 64
    ... meeting of shareholders for the purpose of electing directors. Each non-employee director is granted stock units based on the fair market value of DSW Class A Common Shares on the date of the annual meeting. In addition, each director eligible to receive compensation for board service may elect...

  • Page 65
    ... 29, 2011 , the Company had no capital leases. As of January 28, 2012 , the Company leased or had other agreements with entities affiliated with Schottenstein Affiliates for 22 store locations, one office facility, a trailer parking lot, one fulfillment center and one distribution center for a total...

  • Page 66
    Table of Contents DSW INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fiscal years 2012 2013 2014 2015 2016 Future years Total minimum lease payments $ Total 149,886 147,923 143,194 129,186 109,834 337,463 1,017,486 $ Unrelated Party (in thousands) $ 134,651 132,806 128,084 114,...

  • Page 67
    ... as of January 28, 2012 or January 29, 2011 . DSW does not hold or issue derivative financial instruments for trading purposes. DSW, and prior to the Merger, RVI, estimates the fair values of derivatives based on the Black-Scholes pricing model using current market information. $143.75 Million...

  • Page 68
    ... periods presented: January 29, 2011 0.9% 46.8% 0.6 years 0.0% Assumptions: Risk-free interest rate Expected volatility of DSW common stock Expected term Expected dividend yield Warrants - The warrants issued by RVI on July 5, 2005 in connection with previously paid credit facilities qualified as...

  • Page 69
    ...interest rate Expected volatility of common stock Expected term Expected dividend yield January 28, 2012 0.1% 43.5% 0.4 years 1.3% January 29, 2011 0.5% 49.4% 1.4 years 0.0% The fair values and balance sheet locations of DSW's, and prior to the Merger, RVI's, derivative liabilities are as follows...

  • Page 70
    ... and investments in money market funds held with financial institutions, as well as credit card receivables that generally settle within three days. Available-for-sale and held-to maturity investments are valued using a market-based approach using level 2 inputs such as prices of similar assets in...

  • Page 71
    ... Activity related to equity investment - related party Carrying value at the end of the period Fiscal years ended January 28, 2012 January 29, 2011 (in thousands) $ 952 $ 1,151 199 (199) $ 1,151 $ 952 Non-Financial Assets and Liabilities- DSW periodically evaluates the carrying amount of its long...

  • Page 72
    ... presented: Fiscal years ended January 28, 2012 Weighted average shares outstanding Assumed exercise of dilutive RVI SARs Assumed exercise of dilutive DSW stock options Assumed exercise of dilutive DSW RSUs Assumed exercise of dilutive RVI stock options Assumed exercise of dilutive PIES Number of...

  • Page 73
    ...: Fiscal years ended January 28, 2012 RVI SARs RVI stock options DSW stock options Total potentially dilutive instruments 10. PENSION BENEFIT PLAN 3 7 243 253 January 29, 2011 (in thousands) 52 64 116 January 30, 2010 53 81 134 Merger Sub is responsible for the Filene's Basement defined benefit...

  • Page 74
    ...2012 January 29, 2011 (in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year Interest cost Benefits paid Actuarial loss Projected benefit obligation at end of year Accumulated benefit obligation at end of year Change in plan assets: Fair market value...

  • Page 75
    Table of Contents DSW INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 28, 2012 Interest cost Expected return on plan assets Amortization of transition asset Amortization of net loss Net periodic benefit cost $ 1,003 (945) 296 354 $ Fiscal years ended January 29, 2011 (in thousands) $ 990 ...

  • Page 76
    ... cap funds Exchange traded funds Fair market value at end of year 11. OTHER BENEFIT PLANS $ $ The Company sponsors a 401(k) Plan. Eligible employees may contribute up to fifty percent of their compensation to the 401(k) Plan, on a pre-tax basis, subject to Internal Revenue Service limitations. As...

  • Page 77
    ...of Contents DSW INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fiscal years ended January 28, 2012 Gain on sale Income from discontinued operations, net of tax - Value City $ $ 183 183 January 29, 2011 (in thousands) $ 2,733 $ 2,733 January 30, 2010 $ $ 9,513 9,513 Filene's Basement - On April...

  • Page 78
    ... FINANCIAL STATEMENTS Fiscal years ended January 28, 2012 Net sales Loss before income taxes Income tax (expense) benefit (Loss) gain on sale (Loss) income from discontinued operations, net of tax - Filene's Basement 13 . COMMITMENTS AND CONTINGENCIES $ $ (5,038) $ (5,038) $ January 29, 2011...

  • Page 79
    ... RVI guaranteed Filene's Basement's obligations for the Broadway location when RVI owned Filene's Basement. DSW assumed this lease through the bankruptcy auction process and the obligation is included in DSW's future minimum lease payments as DSW plans to open a store at this location in fiscal 2012...

  • Page 80
    ...operations for the periods presented: Fiscal years ended January 28, 2012 Current: Federal State and local Total current tax expense Deferred: Federal State and local Total deferred tax (benefit) expense Income tax (benefit) provision $ $ 35,811 10,938 46,749 January 29, 2011 (in thousands) $ 49,446...

  • Page 81
    ... CONSOLIDATED FINANCIAL STATEMENTS based upon the statutory federal income tax rate: Fiscal years ended January 28, 2012 Income tax expense at federal statutory rate State and local taxes-net Warrants PIES Merger related items Valuation allowance Provision to return adjustments Change in subsidiary...

  • Page 82
    ... FINANCIAL STATEMENTS January 29, 2011 January 28, 2012 (in thousands) Deferred tax assets: Federal net operating loss Federal tax credits State net operating loss and tax credits Inventory Construction and tenant allowances Stock-based compensation Benefit from uncertain tax positions Guarantees...

  • Page 83
    ... consolidated statements of operations. As of January 28, 2012 and January 29, 2011 , $0.4 million and $0.3 million, respectively, was accrued for the payment of interest and penalties. The Company is no longer subject to U.S federal income tax examination and state income tax examinations for years...

  • Page 84
    ... quarterly financial information is as follows: April 30, 2011 Net sales Cost of sales Operating expenses Change in fair value of derivative instruments Operating profit Interest expense Interest income Interest expense, net Income from continuing operations before income taxes Income tax benefit...

  • Page 85
    ... FINANCIAL STATEMENTS May 1, 2010 Net sales Cost of sales Operating expenses Change in fair value of derivative instruments Operating profit Interest expense Interest income Interest expense, net Non-operating income Income from continuing operations before income taxes Income tax provision...

  • Page 86
    Table of Contents DSW INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS dividends and related distributions provided that DSW meets the minimum cash and short-term investments requirement, as defined in the Credit Facility, of $125.0 million. F-42

  • Page 87
    ... no. 1-32545) filed March 22, 2011. First Amendment, dated August 10, 2011, to the $100,000,000 Revolving Credit Facility Credit Agreement, between DSW Inc. and DSW Shoe Warehouse, Inc., as the Borrowers, and PNC Bank, National Association., as Administrative Agent, PNC Capital Markets LLC, as Sole...

  • Page 88
    ..., 2001, by and between Jubilee-Springdale, LLC, an affiliate of Schottenstein Stores Corporation, and Shonac Corporation d/b/a DSW Shoe Warehouse, re: Springdale, OH DSW store. Incorporated by reference to Exhibit 10.50 to Retail Ventures' Form 10-K (file no. 1-10767) filed April 14, 2005. F-44 10...

  • Page 89
    ...DSW Shoe Warehouse, Inc., as assignee re: Chesapeake, VA DSW store. Incorporated by reference to Exhibit 10.52.1 to Retail Ventures' Form 10-K/A (file no. 1-10767) filed May 12, 2005. Ground Lease Agreement, dated April 30, 2002, by and between Polaris Mall, LLC, a Delaware limited liability company...

  • Page 90
    ... City Department Stores LLC, as assignor, and DSW Shoe Warehouse, Inc., as assignee, re: Merrillville, IN DSW Store. Incorporated by reference to Exhibit 10.43.1 to Form 10K (file no. 1-32545) filed April 17, 2008. Form of Indemnification Agreement between DSW Inc. and its officers and directors...

  • Page 91
    ... Jubilee Limited Partnership, an affiliate of SSC, and Value City Department Stores, Inc., as modified by Lease Modification Agreement, dated November 2, 2000, re: 3704 W. Dublin-Granville Rd., Columbus, OH DSW/Filene's combo store. Incorporated by reference to Exhibit 10.56 to Retail Ventures' Form...

  • Page 92
    101* XBRL Instance documents _____ * Filed herewith. # Management contract or compensatory plan or arrangement. F-48

  • Page 93
    ... Stock, no par value per share, of the Company (collectively, the " Common Stock ") equal to the Common Stock Exercise Amount (as defined below) at a purchase price equal to the applicable Purchase Price (as defined below), at any time or from time to time but prior to _____ P.M., New York City time...

  • Page 94
    ... Stock, and all other stock of any class or classes (however designated) of the Company the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions...

  • Page 95
    ... the closing bid and asked prices of the security on such date as shown on the OTC Bulletin Board, or (v) if Class A Common Stock is not then listed or admitted for trading on any national exchange or quoted in the over-the-counter market, the fair value thereof (as of a date which is within 20 days...

  • Page 96
    ... to time prior to the Expiration Date, by surrendering to the Company at its principal office this Warrant, with the form of Election to Purchase Shares attached hereto as Exhibit A duly executed by the Holder and accompanied by payment of the Purchase Price for the number of shares of Common Stock...

  • Page 97
    ...Common Stock outstanding immediately prior to such issue or sale and (ii) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such Additional Shares of Common Stock so issued or sold would purchase at the Current Market Price thereof...

  • Page 98
    ... terms provide, with the passage of time or otherwise, for any increase in the consideration payable to the Company, or decrease in the number of Additional Shares of Common Stock issuable upon the exercise, conversion or exchange thereof (by change of rate or otherwise), the Purchase Price computed...

  • Page 99
    ... of property (including securities) other than cash, be computed at the Fair Value thereof at (ii) the time of such issue or sale, and (iii) in case Additional Shares of Common Stock are issued or sold together with other stock or securities or other assets of the Company for a consideration which...

  • Page 100
    ...results in any adjustment of the Purchase Price if the total number of Warrant Shares issuable after the action upon the exercise of all of the Warrants would exceed the total number of shares of Common Stock then authorized by the Company's articles of organization. 7. ACCOUNTANTS' REPORT . In each...

  • Page 101
    ...cause independent certified public accountants of recognized national standing (which may be the regular auditors of the Company) selected by the Company to review and verify or revise such computation (other than any computation of the Fair Value of property) and report. The Company shall also keep...

  • Page 102
    ... Warrant on file with the transfer agent for the Common Stock and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by this Warrant. The Company shall supply such transfer agent with duly executed stock...

  • Page 103
    ...fractional shares. In lieu of fractional shares, the Company shall make payment to the Holder, at the time of exercise of this Warrant as herein provided, in an amount in cash equal to such fraction multiplied by the Current Market Price of a share of Common Stock on the date of Warrant exercise. 13...

  • Page 104
    ... delivery or first class registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Company: DSW Inc. 810 DSW Drive Columbus, OH 43219 Attn: Chief Financial Officer Fax No. (614) 872-1475 with copies to: DSW Inc. 810 DSW Drive Columbus, OH 43219 Attn...

  • Page 105
    ... by and construed in accordance with the law of the State of New York. 20. REGISTRATION RIGHTS AGREEMENT . The shares of Common Stock (and Other Securities of the Company) issuable upon exercise of this Warrant shall constitute Registrable Securities (as such term is defined in the Registration...

  • Page 106
    ... collectively, the " Borrowers "); the Persons named on Schedule I hereto (individually, an " Existing Guarantor ", and collectively, the " Existing Guarantors "); DSW LEASED BUSINESS DIVISION LLC, an Ohio limited liability company (" DSW-LBD ") (the " New Guarantor ", and together with the Existing...

  • Page 107
    ... thereof or the supporting thereof by another letter of credit from an issuing bank and on terms satisfactory to the Issuing Lender and the Administrative Agent), and the payment and performance of all other Obligations of the Loan Parties under the Loan Documents, the New Guarantor shall perform...

  • Page 108
    ... limitation, Section 7.1.3 of the Credit Agreement [Maintenance of Insurance]) in favor of the Administrative Agent required under the Loan Documents have been obtained and are in effect. Execution and delivery by the New Guarantor of the following Loan Documents: (1) All applicable Collateral...

  • Page 109
    ... require in order to carry out the terms and conditions of the Credit Agreement, this Amendment and the other Loan Documents. (d) The Administrative Agent shall have received all documents and instruments, including UCC financing statements, required by applicable Law or reasonably requested...

  • Page 110
    ... Agent or any other Secured Party or their respective counsel in entering into this Amendment. This Amendment shall be deemed to be a contract under the Laws of the State of Ohio without regard to its conflict of laws principles. [SIGNATURE PAGES FOLLOW] (e)

  • Page 111
    ...an Existing Guarantor By: /s/Kurt Gatterdam Name: Kurt Gatterdam Title: Vice President and Treasurer BRAND CARD SERVICES LLC, as an Existing Guarantor By: /s/Kurt Gatterdam Name: Kurt Gatterdam Title: Vice President and Treasurer DSW INFORMATION TECHNOLOGY LLC, as an Existing Guarantor By: /s/Kurt...

  • Page 112
    Title: Vice President and Treasurer

  • Page 113
    List of Omitted Schedules and Exhibits Pursuant to Item 601(b)(2) of Regulation S-K, the following schedules and exhibits to this Joinder, Consent and Second Amendment to Credit Agreement, have not been provided herein: Schedules Schedule I. Existing Guarantors Exhibits Exhibit A. Supplemental ...

  • Page 114
    ... Ohio Ohio Delaware Ohio Ohio Ohio Ohio Ohio Ohio Ohio Ohio Parent Co. No. N/A 1 1 1 2 1 1 1 1 9 9 9 9 Name DSW Inc. DSW Shoe Warehouse, Inc. Brand Card Services LLC DSW Information Technology LLC eTailDirect LLC Mint Studio LLC DSW MS LLC DSW Leased Business Division LLC DSW MS LLC Retail Ventures...

  • Page 115
    ... became effective February 1, 2009, and our report dated March 27, 2012 relating to the effectiveness of DSW's internal control over financial reporting, appearing in the Annual Report on Form 10-K of DSW Inc. for the year ended January 28, 2012 . /s/ DELOITTE & TOUCHE LLP Columbus, Ohio March 27...

  • Page 116
    ...'s name and behalf and in any and all capacities stated below, and to cause to be filed with the Securities and Exchange Commission (the "Commission"), the Corporation's Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended January 28, 2012 , and likewise to sign and file with...

  • Page 117
    ...I, Michael R. MacDonald, certify that: 1. I have reviewed this annual report on Form 10-K of DSW Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances...

  • Page 118
    ...Douglas J. Probst, certify that: 1. I have reviewed this annual report on Form 10-K of DSW Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under...

  • Page 119
    ... with the Annual Report of DSW Inc. (the "Company") on Form 10-K for the fiscal year ended January 28, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael R. MacDonald, President and Chief Executive Officer of the Company, certify, pursuant...

  • Page 120
    ... with the Annual Report of DSW Inc. (the "Company") on Form 10-K for the fiscal year ended January 28, 2012 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Douglas J, Probst, Executive Vice President, and Chief Financial Officer of the Company, certify...