DSW 2011 Annual Report Download - page 69

Table of Contents DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair values and balance sheet locations of DSW’s, and prior to the Merger, RVI’
s, derivative liabilities are as follows for the periods
presented:
The effect of derivative instruments on DSW’s, and prior to the Merger, RVI’
s, consolidated statements of operations is as follows for the periods
presented:
DSW $100 Million Secured Credit Facility - On June 30, 2010, DSW entered into a $100 million secured revolving credit facility (the “
Credit
Facility ”) with a term of four years that will expire on June 30, 2014. Under the Credit Facility
, DSW and its subsidiary, DSW Shoe Warehouse,
Inc., are co-borrowers, with all other subsidiaries listed as guarantors. The Credit Facility may be increased by up to $75 million upon DSW’
s
request and approval by increasing lenders and subject to customary conditions. The Credit Facility provides for swing loans of up to $10 million
and the issuance of letters of credit up to $50 million. The Credit Facility is secured by a lien on substantially all of DSW’
s personal property
assets and its subsidiaries with certain exclusions and may be used to provide funds for general corporate purposes, to provide for DSW’
s ongoing
working capital requirements, and to make permitted acquisitions. Revolving credit loans bear interest under the Credit Facility at DSW’
s option
under: (A) a base rate option at a rate per annum equal to the highest of (i) the Federal Funds Open Rate (as defined in the Credit Facility), plus
0.5%, (ii) the Agent’s prime rate, and (iii) the Daily LIBOR Rate (as defined in the Credit Facility
) plus 1.0%, plus in each instance an applicable
margin based upon DSW’
s revolving credit availability; or (B) a LIBOR option at rates equal to the one, two, three, or six month LIBOR rates,
plus an applicable margin based upon DSW’s revolving credit availability. Swing loans bear interest under the base rate option. DSW’
s right to
obtain advances under the Credit Facility is limited by a borrowing base. In addition, the Credit Facility
contains restrictive covenants relating to
DSW’s management and the operation of DSW’s business. These covenants, among other things, limit or restrict DSW’
s ability to grant liens on
its assets, incur additional indebtedness, enter into transactions with affiliates and merge or consolidate with another entity. The Credit Facility
allows the payment of dividends or redemption of stock provided that DSW meets the minimum cash and short-
term investments requirement, as
defined in the Credit Facility, of $125.0 million. Additional covenants limit payments for capital expenditures to $125 million in any fiscal year,
and if DSW has direct borrowings greater than $25 million, the Credit Facility
also requires that DSW maintain a fixed charge coverage ratio of
not less than 1.1 to 1.0. DSW paid $ 74.7 million
for capital expenditures in fiscal 2011. DSW was not required to calculate a fixed charge
coverage ratio in fiscal 2011 or 2010.
F-25
Assumptions: January 28, 2012
January 29, 2011
Risk-free interest rate
0.1
%
0.5
%
Expected volatility of common stock
43.5
%
49.4
%
Expected term
0.4 years
1.4 years
Expected dividend yield
1.3
%
0.0
%
January 28, 2012 January 29, 2011
Balance Sheet Location
(in thousands)
Warrants – related party Warrant liability
$
29,303
$
18,290
Warrants – non-related party Warrant liability
2,334
Conversion feature of short-term debt Conversion feature of short-term debt
6,375
Total
$
29,303
$
26,999
Fiscal years ended
January 28, 2012
January 29, 2011 January 30, 2010
(in thousands)
Warrants – related party
$
11,071
$
12,956
$
6,910
Warrants – non-related party
1,192
1,653
9,858
Conversion feature of debt
41,651
34,405
49,731
Expense related to the change in fair value of derivative instruments
$
53,914
$
49,014
$
66,499