DSW 2015 Annual Report Download - page 30

Table of Contents
compliance with conditions precedent that must be satisfied prior to issuing any letter of credit or extension. In addition, the Letter of Credit Agreement
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. An event of default may cause the applicable interest rate and fees to increase by 2.0% per annum. As of January 30,
2016, we had $7.1 million in outstanding letters of credit and $7.7 million in restricted cash on deposit as collateral under the Letter of Credit Agreement.
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For fiscal 2015, there was no income from discontinued operations. For fiscal 2014, cash flows used in discontinued operations related to the final
distribution from the Filene's Basement debtor's estates.
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Acquisition of Ebuys, Inc.- On February, 15, 2016, DSW Shoe Warehouse, Inc., a wholly owned subsidiary of DSW Inc., entered into a Stock Purchase
Agreement to acquire Ebuys, Inc. (“Ebuys”), an online close-out footwear and accessories retailer for $62.5 million, less adjustments for working capital.
Ebuys sells product to customers located in North America, Europe, Australia and Asia. The transaction supports our efforts to grow market share within
footwear and accessories domestically and internationally.
The seller, Ebuys, Inc. may also receive future payments contingent on its performance. The provisional fair value of this contingent consideration is
estimated to be $55 million, subject to final closing adjustments. We estimated the fair value of the contingent consideration using a risk-weighted
discounted cash flow model. At each future reporting date, we will remeasure the contingent consideration liabilities at fair value until the contingencies are
resolved in 2020. Ebuys, Inc. will be a wholly owned subsidiary of DSW Shoe Warehouse, Inc. and will maintain its team and facilities. The transaction
closed on March 4, 2016 (see Note 20 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on the
acquisition).
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We have the following minimum commitments under contractual obligations. A “purchase obligation”, as defined by the SEC, is an agreement to purchase
goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be
purchased, fixed, minimum or variable price provisions; and the approximate timing of the transaction. Other long-term liabilities are defined as long-term
liabilities that are reflected on our balance sheet in accordance with generally accepted accounting principles ("GAAP"). Based on this definition, the table
below includes only those contracts which include fixed or minimum obligations. It does not include normal purchases, which are made in the ordinary
course of business.
The following table provides aggregated information about contractual obligations and other non-current liabilities as of January 30, 2016:
Payments due by Period
Total
Less Than
1 Year
1 - 3
Years
3 -5
Years
More Than
5 Years
Contractual obligations:
(in thousands)
Operating lease obligations (1)
$ 1,207,125
$ 188,578
$ 346,287
$ 280,119
$ 392,141
Construction commitments (2)
5,231
5,231
—
—
—
Purchase obligations (3)
28,580
4,978
17,382
6,220
—
Total
$ 1,240,936
$ 198,787
$ 363,669
$ 286,339
$ 392,141
(1) Many of our operating leases require us to pay contingent rent based on sales, common area maintenance costs and real estate taxes. Contingent rent,
costs and taxes vary year by year and are based almost entirely on actual amounts incurred. As such, they are not included in the lease obligations
presented above. Other non-current liabilities of $140.8 million are primarily comprised of deferred rent liabilities and construction and tenant
allowances. Deferred rent, which is included in non-current liabilities, is excluded from this table as our payment obligations are included in the
operating lease obligations. Construction and tenant allowances, which are included in non-current liabilities, are not contractual
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Source: DSW Inc., 10-K, March 24, 2016 Powered by Morningstar® Document Research℠
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