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Table of Contents DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
sheet date. In fiscal 2010 and 2009, the Company recognized realized gains of $1.5 million for the sale of a fully impaired auction rate
security and $0.5 million related to the sale of preferred shares, respectively, as non-
operating income. In fiscal 2009, the Company
recognized other-than-
temporary impairments related to auction rate securities of $2.9 million, excluding realized gains of $0.5 million, as
non-
operating expense. The Company did not recognize any impairment on investments during fiscal 2011 or fiscal 2010 or gains in fiscal
2011. Please see Note 6 for additional discussion of the Company’s investments.
Accounts Receivable -
Accounts receivable are classified as current assets because the average collection period is generally shorter than one
year. The carrying amount approximates fair value because of the relatively short average maturity of the instruments and no significant
change in interest rates.
Derivative Financial Instruments- In accordance with ASC 815, Derivatives and Hedging
, DSW, and prior to the Merger, RVI, recognizes
all derivatives on the balance sheet at fair value. For derivatives that are not designated as hedges under ASC 815, changes in the fair values
are recognized in earnings in the period of change. There were no derivatives designated as hedges outstanding 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 a detailed
discussion of the Company’s derivative financial instruments.
Concentration of Credit Risk-
Financial instruments, which principally subject the Company to concentration of credit risk, consist of cash and
equivalents and investments. The Company invests excess cash when available through financial institutions in money market accounts and short-
term and long-
term investments. At times, such amounts invested through banks may be in excess of Federal Deposit Insurance Corporation
(“FDIC”) insurance limits, and the Company mitigates the risk by utilizing multiple banks.
Concentration of Vendor Risk- During fiscal 2011 , 2010 and 2009
, merchandise supplied to the Company by three key vendors accounted for
approximately 19% , 20% and 21% of net sales, respectively.
Allowance for Doubtful Accounts-
The Company monitors its exposure for credit losses and records related allowances for doubtful accounts.
Allowances are estimated based upon specific accounts receivable balances, where a risk of default has been identified. As of
January 28, 2012
and January 29, 2011 , the Company’s allowance for doubtful accounts was $0.6 million and $0.7 million, respectively. The reduction in
fiscal
2010 is related to the release of the Company’
s claim related to the Value City bankruptcy estate in December 2010. The following table
summarizes the activity related to the Company’s allowance for doubtful accounts:
In addition, during the first quarter of fiscal 2009, RVI recorded an allowance for $52.6 million
to fully reserve for the notes receivable from
Filene’s Basement's bankruptcy in fiscal 2009. Effective November 3, 2009, RVI’s claims against Filene’
s Basement in respect of these notes
receivable were released in connection with a settlement agreement approved by the Bankruptcy Court for the District of Delaware. The following
table summarizes the activity related to the Company’s allowance for notes receivable from Filene’s Basement:
F-12
Fiscal years ended
Balance at
Beginning of the
Period
Charged to
Expense
Deductions
Balance at End of
the Period
(in thousands)
January 28, 2012
$
714
532
(691
)
$
555
January 29, 2011
$
5,343
183
(4,812
)
$
714
January 30, 2010
$
1,192
5,652
(1,501
)
$
5,343
Fiscal year ended
Balance at
Beginning of the
Period
Charged to
Expense
Deductions
Balance at End of
the Period
(in thousands)
January 30, 2010
$
—
52,559
(52,559
)
$
—