DSW 2014 Annual Report Download - page 17

Table of Contents
Merger Sub assumed the obligations of RVI for a guaranteed lease obligation. On November 2, 2011, Syms and Filene’s Basement filed for bankruptcy
protection. RVI guaranteed the obligations of Filene’s Basement in connection with a lease for the Union Square location. Merger Sub may be responsible for
any obligations of RVI under this guaranty.
The landlord at the Union Square location filed a claim against the Filene's/Syms estate for losses incurred in connection with the lease rejection in
bankruptcy. The landlord also filed a lawsuit against Merger Sub seeking payment under the guaranty. On February 27, 2015, the parties jointly entered into
a Stipulation and Settlement Agreement that provides for the settlement of the litigation and certain claims arising from the Filene's/Syms bankruptcy. The
guaranty remains in effect through lease expiration.
In addition, if our assumptions or estimates regarding the amount of any actual or contingent liabilities were incorrect or become incorrect due to changes in
economic conditions, among other reasons, this could cause the amount of any actual liability to exceed the amounts estimated, which could have a material
adverse effect on our financial condition.

We will be exposed to investment risk with the acquisition of an equity interest in Town Shoes.
In May 2014, DSW acquired a 49% equity interest in Town Shoes. DSW is exposed to risk of the success of the Town Shoes business. DSW is also exposed to
risk of adverse reactions to the transaction or changes to business relationships; competitive responses; inability to maintain key personnel and changes in
general economic conditions in Canada. If Town Shoes fails to perform to our expectations, it could have a material adverse effect on our results of operations
or financial condition.
We will be exposed to foreign currency risk with the acquisition of an equity interest in Town Shoes.
We are exposed to foreign currency exchange risk through our equity in Town Shoes' earnings and the shareholder note that we hold. We currently do not
utilize hedging instruments to mitigate foreign currency exchange risks.
 
None.
 
We own our corporate office headquarters and distribution center. As of January 31, 2015, all 431 DSW stores and our fulfillment center are leased or
subleased, and we leased or subleased 19 DSW stores and our dsw.com fulfillment center from Schottenstein Affiliates. The remaining DSW stores are leased
from unrelated entities. Most of the DSW store leases provide for a minimum annual rent plus a percentage of gross sales over specified breakpoints and are
for a fixed term with options for two to five extension periods, each of which is for a period of four or five years, exercisable at our option. The lease for our
fulfillment center expires in September 2017 and has two renewal options with terms of five years each. Our primary distribution facility, our corporate office
headquarters and our dsw.com fulfillment center are located in Columbus, Ohio.
 
Guarantee of Union Square lease. Filene's Basement was a party to a lease for space located in Union Square, New York. RVI guaranteed Filene’s Basement’s
obligations for the Union Square location when RVI owned Filene’s Basement. The Union Square lease was rejected in connection with the Filene's/Syms
bankruptcy filing in November 2011. The landlord filed a claim against the Filene's/Syms estate for losses incurred in connection with the lease rejection.
The landlord also filed a lawsuit against Merger Sub seeking payment under the guaranty. On February 27, 2015, the parties jointly entered into a Stipulation
and Settlement Agreement that provides for the settlement and release of the guaranty litigation and certain claims arising from the Filene's/Syms bankruptcy.
Visa/Mastercard Settlement. In Q4 2014, we received a $2.6 million settlement from Visa/Mastercard related to litigation regarding swipe fees. We recorded
the proceeds in other operating income.
Other legal proceedings. Other than the proceedings noted above, we are involved in various legal proceedings that are incidental to the conduct of our
business. We estimate the range of liability related to pending litigation where the amount of the range of loss can be estimated. We record our best estimate
of a loss when the loss is considered probable. When a liability is probable and there is a range of estimated loss, we record the most likely estimated liability
related to the claim. Although it is
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Source: DSW Inc., 10-K, March 26, 2015 Powered by Morningstar® Document Research℠
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