DSW 2011 Annual Report Download - page 54

Table of Contents DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On May 26, 2011, Retail Ventures, Inc. (“Retail Ventures” or “RVI”) merged with and into DSW MS LLC (“Merger Sub”),
with Merger Sub
surviving the Merger and continuing as a wholly owned subsidiary of DSW. Upon the closing of the Merger, each outstanding RVI common share
was converted into 0.435 DSW Class A Common Shares, unless the holder of each outstanding RVI common share properly and timely elected to
receive a like amount of DSW Class B Common Shares. In connection with the Merger, RVI shareholders received 10.6 million DSW Class A
Common Shares and 11.5 million
DSW Class B Common Shares. Prior to the Merger, RVI held 27.4 million DSW Class B Common Shares,
which were retired in the third quarter of fiscal 2011. RVI common shares, without par value, which traded under the symbol “RVI,”
ceased
trading on, and were delisted from, the New York Stock Exchange on May 26, 2011.
The Merger was accounted for as a reverse merger with RVI as the accounting acquirer and DSW (the surviving legal entity) as the accounting
acquiree. As this was a common control transaction under Accounting Standard Codification (“ASC”) 805, Business Combinations
, the Merger
was accounted for as an equity transaction in accordance with ASC 810, Consolidation
as the acquisition of a noncontrolling interest, and
purchase accounting was not applied. As a result, there was no adjustment to RVI's historical cost carrying amounts of assets and liabilities
reflected in the accompanying balance sheet. For financial reporting purposes, the Merger was accounted for as if the following transactions took
place:
Pre-
merger financial information presented in the DSW consolidated financial statements represents consolidated RVI financial information.
References to Retail Ventures or RVI refer to the pre-merger entity. The pre-
merger financial information has been and will be in future periods
retrospectively recast for the following matters:
F-10
1.
BACKGROUND
• RVI acquired all of the outstanding noncontrolling interests in DSW in exchange for 17.1 million newly issued Class A Common Shares,
thus eliminating the noncontrolling interests. Legally, these DSW Class A Common Shares are the shares 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
Shares are entitled to one vote for each share. DSW Class B Common Shares are entitled to eight votes for each share; and
• RVI offered to all common shareholders as of the date immediately prior to the closing of the Merger, the opportunity to tender Class A
Common Shares in exchange for newly issued Class B Common Shares, resulting in the issuance of 11.5 million Class B Common
Shares and the retirement of the same number of Class A Common Shares.
• Share and per share information -
DSW recast all RVI historical share and per share information, including earnings per share, to reflect
the exchange ratio of 0.435 for all periods presented.
• Segment presentation -
DSW maintained its historical segment presentation, which is consistent with how the chief operating decision
maker, as defined in ASC 280, Segment Reporting
, reviews the business. DSW sells products through three channels: DSW stores,
dsw.com and the leased business division.
The reportable segments are the DSW segment, which includes the DSW stores and dsw.com
sales channels, and the leased business division segment.
In order to reconcile to the consolidated financial statements, DSW includes
other, which consists of assets, liabilities and expenses that are not attributable to the two reportable segments. The pre-
merger or prior
period consolidated financial statements and notes have been recast to reflect the two reportable segments and other.
• Cost of sales- DSW conformed RVI's accounting policies and recast RVI's pre-
merger or prior period financial statements and notes for
warehousing and store occupancy costs historically reported by RVI within operating expenses to be consistent with DSW's historical
classification of these costs within cost of sales. For fiscal 2010 and 2009 , store occupancy and warehousing expenses of
$246.6 million
and $244.6 million , respectively, which were included in operating expenses for RVI, are included in cost of sales for DSW.