DSW 2011 Annual Report Download - page 61

Table of Contents DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the components of net income and total net income in the first statement and that statement must be immediately followed by a financial statement
that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. The
option in current generally accepted accounting principles that permits the presentation of other comprehensive income in the statement of
changes in equity has been eliminated. This update is effective for interim and annual periods beginning after December 15, 2011. In November
2011, the FASB issued a proposed update to indefinitely defer the requirement to present reclassification adjustments in the statement of
operations. Early adoption is permitted because compliance with the amendments is already permitted. The Company expects the adoption of this
update in the first quarter of fiscal 2012 to change the presentation of its statement of operations.
In September 2011, the FASB issued an update to existing guidance related to goodwill impairment testing. The amendments will allow an entity
to first assess qualitative factors to determine whether it is necessary to perform the two-
step quantitative goodwill impairment test. An entity no
longer will be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more
likely than not that its fair value is less than its carrying amount. The guidance also includes examples of the types of factors to consider in
conducting the qualitative assessment. This update is effective for interim and annual periods beginning after December 15, 2011. The Company
does not expect the adoption of this update to materially affect its consolidated financial statements.
Schottenstein Affiliates- As of January 28, 2012
, the Schottenstein Affiliates, entities owned by or controlled by Jay L. Schottenstein, the
executive chairman of the DSW board of directors, and members of his family, owned approximately 29% of DSW’
s outstanding Common Shares
representing approximately 75% of the combined voting power of DSW’
s outstanding Common Shares, and also have the right to exercise
outstanding warrants held by the Schottenstein Affiliates entitling them to acquire additional DSW Common Shares. As of January 28, 2012
, the
Schottenstein Affiliates owned 1.6 million Class A Common Shares and owned 11.1 million Class B Common Shares.
DSW leases certain store, office space and distribution center locations owned by Schottenstein Affiliates. Accounts receivable from and payable
to affiliates principally result from commercial transactions or intercompany transactions and normally settle in the form of cash in 30 to 60 days.
These related party balances as of January 28, 2012 and January 29, 2011 , were related party receivables of $0.1 million and $0.1 million
,
respectively, and as of January 28, 2012 and January 29, 2011 were related party payables of $2.3 million and $1.1 million , respectively.
SEI Loan Agreement - On February 8, 2011, RVI and SEI, Inc. (“SEI”), a Schottenstein Affiliate, entered into a Loan Agreement (the “
Loan
Agreement”)
pursuant to which SEI made available to RVI a revolving credit facility, to fund its operations prior to the Merger, in the principal
amount not to exceed $30.0 million (the “RVI Credit Facility”). Upon execution of the Loan Agreement, RVI also paid an up-
front commitment
fee of 8.75% of the maximum loan amount, $2.625 million , to SEI, which was approved by the RVI board 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 consolidated
statements of operations include interest expense of $0.1 million related to the borrowings under the RVI Credit Facility. In fiscal 2011, DSW
fully amortized the up-front commitment fee of $2.625 million.
Equity Investment- In fiscal 2009, DSW made an equity investment of $1.2 million
in an entity in which the majority interest is held by a
Schottenstein Affiliate and is accounted under cost method accounting. DSW contributed $0.2 million in fiscal 2011
and received a return of
capital of $0.2 million in fiscal 2010 . There was no statement of operations impact in fiscal 2011 , 2010 or 2009 related to this investment.
Other - Purchases from related parties were $1.1 million , $0.4 million and $0.2 million in fiscal 2011 , 2010 and 2009 , respectively.
Historically, both DSW and RVI have issued stock-
based compensation under their respective plans. After the Merger, DSW either cash settled or
converted all outstanding units and options under the RVI 2000 Stock Incentive Plan (“the RVI Plan”)
to be exercisable for DSW Class A
Common Shares. At the date of the Merger, all RVI stock options and Stock Appreciation Rights (“SARs”)
granted to directors immediately
vested resulting in compensation expense of $0.3 million
. At the election of each option holder, options and SARs were either paid in cash at a
value equal to the RVI share price at close of the market
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3.
RELATED PARTY TRANSACTIONS
4. STOCK-
BASED COMPENSATION