DSW 2013 Annual Report Download - page 52

Table of Contents
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are based on management’s knowledge of current events and actions it may undertake in the future, actual results could differ from these estimates.
Principles of Consolidation- The consolidated financial statements include the accounts of DSW and its wholly owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation.
Two-for-One Stock Split- On October 14, 2013, the shareholders of DSW approved a two-for-one stock split of DSW's Common Shares. The stock split
became effective on November 4, 2013 and provided for the issuance of one Class A Common Share for each Class A and Class B Common Share
outstanding. The stock split resulted in an increase in Class A shareholder voting power from 38% to 57% and a decrease in Class B shareholder voting
power from 62% to 43%. All share and per share data herein have been adjusted retroactively to reflect the stock split.
Other- In the third quarter of fiscal 2013, DSW condensed Class A Common Shares and Class B Common Shares into one line item, Common shares paid
in capital, within the consolidated balance sheets and consolidated statements of shareholders' equity.
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Sales and Revenue Recognition- Revenues from merchandise sales are recognized upon customer receipt of merchandise, are net of returns through period
end, exclude sales tax and are not recognized until collectibility is reasonably assured. DSW defers revenue representing a time lag for shipments to be received
by the customer. Revenue from shipping and handling is in net sales while the related costs are included in cost of sales. Revenue from gift cards is deferred
and recognized upon redemption of the gift card. DSW’s policy is to recognize income from breakage of gift cards when the likelihood of redemption of the gift
card is remote.
As of February 1, 2014, DSW supplies footwear, under supply arrangements, to three other retailers through its Affiliated Business Group. Sales for these
affiliated businesses are net of returns through period end and exclude sales tax, and are included in net sales.
Cost of Sale- In addition to the cost of merchandise, which includes markdowns and shrinkage, DSW includes in cost of sales expenses associated with
distribution and fulfillment (including depreciation) and store occupancy (excluding depreciation and including store impairments). Distribution and
fulfillment expenses are comprised of labor, benefits and other labor-related costs associated with the operations of the distribution and fulfillment centers. The
non-labor costs include rent, depreciation, insurance, utilities, maintenance and other operating costs. Distribution and fulfillment expenses also include the
transportation of merchandise to the distribution and fulfillment centers, from the distribution center to stores and from the fulfillment center and from stores
to the customer. Store occupancy expenses include rent, utilities, repairs, maintenance, insurance, janitorial costs and occupancy-related taxes, which are
primarily real estate taxes passed to DSW by its landlords.
Operating Expenses- Operating expenses include expenses related to store management and store payroll costs, advertising, Affiliated Business Group
operations, store depreciation and amortization, new store advertising and other new store costs (which are expensed as incurred) and corporate expenses.
Corporate expenses include expenses related to buying, information technology, depreciation expense for corporate cost centers, marketing, legal, finance,
outside professional services, customer service center expenses, payroll and benefits for associates and payroll taxes.
Stock-Based Compensation- DSW recognizes compensation expense for stock option awards, time-based restricted stock awards and performance-based
restricted stock awards on a straight-line basis over the requisite service period of the award for the awards that actually vest in accordance with Accounting
Standard Codification ("ASC") 718, Compensation – Stock Compensation . For stock options, the fair value of options granted is estimated on the date of
grant using the Black-Scholes pricing model. This model assumes that the estimated fair value of options is amortized over the options’ vesting periods. The
compensation costs, net of estimated forfeitures, are included in operating expenses in the consolidated statements of operations.
Beginning in fiscal 2013, DSW granted performance-based restricted stock units. These awards cliff vest at the end of a three year period based upon DSW’s
achievement of pre-established goals as of the end of the first year of the term. Also beginning in fiscal 2013, restricted stock units granted will generally cliff
vest at the end of three years from the date of grant. Restricted stock units granted prior to fiscal 2013 generally cliff vest at the end of four years. Both
restricted stock units and performance-based restricted stock units are settled immediately upon vesting. Compensation cost is measured at fair value on the
grant date
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Source: DSW Inc., 10-K, March 27, 2014 Powered by Morningstar® Document Research℠
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