DSW 2013 Annual Report Download - page 32

Table of Contents
In addition to our investments in new stores and remodeling stores, we invested in the reconfiguration of the Columbus distribution center and the expansion of
the dsw.com fulfillment center in fiscal 2012 to support business growth. With the purchase of our corporate office headquarters for $72 million in fiscal
2012, we have the ability to gradually expand our campus as needed. Currently, portions of the properties are leased to related and unrelated parties for annual
rental income. As a transaction between entities under common control, the net book value of assets transferred to DSW was considered an investing cash flow
while the difference between the cash paid and the net book value of assets transferred to DSW was considered a financing cash flow.
We expect to spend approximately $115 million for capital expenditures in fiscal 2014. Our future investments will depend primarily on the number of stores
we open and remodel, infrastructure and information technology programs that we undertake and the timing of these expenditures. We plan to open
approximately 35 stores in fiscal 2014, including six small format stores. In fiscal 2013, we opened 30 new DSW stores, including two small format stores.
The small format stores are smaller than the typical DSW store and, if successful, they could pave the way for more small format stores. During fiscal 2013,
the average investment required to open a typical new DSW store was approximately $1.7 million, prior to construction and tenant allowances. Of this
amount, gross inventory typically accounted for $0.6 million, fixtures and leasehold improvements typically accounted for $0.8 million and new store
advertising and other new store expenses typically accounted for $0.3 million.
Financing Activities
For fiscal 2013, net cash used in financing activities of $26.4 million was primarily related to the payment of dividends partially offset by proceeds from the
exercise of stock options. For fiscal 2012, net cash used in financing activities of $137.1 million was primarily related to the payment of dividends and
purchase of our corporate office headquarters and distribution center, partially offset by proceeds from warrant and stock option exercises. For fiscal 2011,
net cash used in financing activities of $95.3 million was primarily related to the payment of dividends and merger related activity, partially offset by
proceeds from stock option exercises.
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.
On May 29, 2013, we announced that our Board of Directors authorized the extension of the share repurchase program to repurchase up to $100 million of
DSW Common Shares. The repurchase program will be funded using our available cash, and we have no obligation to repurchase any amount of our
common shares under the program. In December 2013, DSW repurchased 38,333 Class A Common Shares at a cost of $1.6 million.
Our Credit Facility, Letter of Credit Agreement and other liquidity considerations are described more fully below:
$50 Million Secured Credit Facility. On August 2, 2013, we entered into a secured revolving credit agreement (the "Credit Facility"). The Credit Facility,
together with the Letter of Credit Agreement (defined below), amended and restated our prior credit facility, dated June 30, 2010. The Credit Facility reduced the
amount of revolving credit commitments from $100 million to $50 million, allowed us to transfer our outstanding letters of credit and has a term of five years
that will expire on July 31, 2018. The Credit Facility may be increased by up to $100 million upon our request and the increase would be subject to lender
availability, our financial condition and compliance with covenants. 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 Lender'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 a rate equal to the LIBOR Rate (as defined in the Credit Agreement), plus an applicable margin, which is between 1.00
and 1.25, based upon our revolving credit availability. In addition, the Credit Facility contains restrictive covenants relating to our management and the
operation of our business. These covenants, among other things, limit or restrict our ability to grant liens on our assets, limit our ability to incur additional
indebtedness, limit our ability to enter into transactions with affiliates and limit our ability to merge or consolidate with another entity. The Credit Facility also
requires that we meet the minimum cash and short-term investments requirement of $125 million, as defined in the Credit Facility. An additional covenant
limits payments for capital expenditures to $200 million in any fiscal year. We paid $86.4 million for capital expenditures in fiscal 2013. We had availability
under the Credit Facility of $49.4 million and outstanding letters of credit of $0.6 million as of February 1, 2014.
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Source: DSW Inc., 10-K, March 27, 2014 Powered by Morningstar® Document Research℠
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