DSW 2012 Annual Report Download - page 29

26
Financing Activities
For fiscal 2012, net cash used in financing activities of $137.1 million was related to our dividend payments, purchase of
our corporate office headquarters and distribution center, warrant exercises and an increase in stock option exercises. For fiscal
2011, net cash used in financing activities of $95.3 million was primarily related to our dividend payments, merger related
activity and an increase in stock option exercises. For fiscal 2010, net cash used in financing activities of $0.1 million was
primarily related to stock option activity and debt issuance costs.
At the effective date of the Merger, our subsidiary assumed RVI’s obligations under the warrants and PIES. The warrants
were exercisable for DSW Common Shares, did not have any cash outflows associated with any exercises and were settled in
fiscal 2012. As we settled the PIES in DSW Class A Common Shares, there were no cash outflows associated with the
settlement. We no longer have quarterly interest payments under the PIES.
$100 Million Credit Facility. On June 30, 2010, we 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, we and our 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 our 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 our personal property assets and our subsidiaries with certain exclusions and may be
used to provide funds for general corporate purposes, to provide for our ongoing working capital requirements and to make
permitted acquisitions. Revolving credit loans bear interest under the Credit Facility at our 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 our 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 our revolving credit availability. Swing loans bear interest under
the base rate option. Our 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 our ability to grant liens on our assets, incur additional indebtedness, enter into
transactions with affiliates and merge or consolidate with another entity. Our Credit Facility allows the payment of dividends
and redemption of our stock by us or our subsidiaries provided that we meet the minimum cash and short-term investments
requirement, as defined in the Credit Facility, of $125 million. Additional covenants limit our payments for capital expenditures
to $125 million in any fiscal year, and if we have direct borrowings greater than $25 million, our Credit Facility also requires
that we maintain a fixed charge coverage ratio of not less than 1.1 to 1.0. We paid $102.0 million for capital expenditures in
fiscal 2012, excluding our purchase of our corporate office headquarters, distribution center and trailer parking lot. As of
February 2, 2013, we were not required to calculate the fixed charge coverage ratio as we did not have direct borrowings
greater than $25 million. We had availability under the Credit Facility of $86.0 million and outstanding letters of credit of $14.0
million as of February 2, 2013.
Our fourth quarter purchase of our corporate office headquarters, distribution center and trailer parking lot for $72 million
was considered a permitted acquisition under our credit facility rather than a capital expenditure, and thus there was no
violation of our credit facility covenant that limits capital expenditures to $125 million in any fiscal year.
Other Liquidity Considerations
Filene's Basement Pension Plan. On December 1, 2011, DSW adopted a plan amendment to terminate the plan with a
proposed termination date of March 22, 2012. DSW is currently awaiting regulatory approval. Prior to the pension plan being
fully funded, certain regulatory approvals and participant settlement elections need to be obtained. DSW has been
communicating with the regulatory authorities and expects resolution of the pension plan within the next twelve months.
To satisfy the liability under the pension plan, we will issue lump-sum payments at participant election and purchase non
participating group annuity contracts to cover any participants that do not elect a lump-sum distribution. The purchase price of
the contracts will be funded from the assets of the plan at the date of termination, and any shortfall will be covered by a
payment from DSW. Currently, our pension plan is recorded as an underfunded plan with liability of $4.5 million. The
transaction should result in the transfer and settlement of the pension benefit obligation, thus relieving us of any responsibility
for the pension plan. Upon the transfer of the plan obligations and assets described above, we expect to reclassify the balance
of accumulated other comprehensive income of $8.8 million to net income when the termination is completed.
$143.75 Million Premium Income Exchangeable SecuritiesSM (“PIES”). The $143.75 million PIES bore a coupon at an
Table of Contents