DSW 2015 Annual Report Download - page 48

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Table of Contents


On May 26, 2011, Retail Ventures, Inc. (“Retail Ventures” or “RVI”) merged with and into DSW MS LLC
(“Merger Sub”), with Merger Sub surviving the Merger and continuing as a wholly owned subsidiary of DSW Inc. The Merger was accounted for as a reverse
merger with RVI as the accounting acquirer and DSW Inc. (the surviving legal entity) as the accounting acquiree. As this was a transaction between entities
under common control under Accounting Standards Codification ("ASC") Topic 805, Business Combinations, the Merger was accounted for as an equity
transaction in accordance with ASC Topic 810, Consolidation, as the acquisition of a noncontrolling interest, and purchase accounting was not applied. As a
result, there was no adjustment to RVI's historical cost carrying amounts of assets and liabilities. Pre-merger financial information presented in the DSW Inc.
consolidated financial statements represents consolidated RVI financial information. References to Retail Ventures or RVI refer to the pre-merger entity.

On May 12, 2014, DSW Inc. acquired a 49.2% interest in Town Shoes for $75.1 million Canadian dollars ("CAD") ($68.9 million USD) at the purchase date.
As of January 30, 2016, DSW Inc.'s ownership percentage is 46.3%. The dilution of the Company's ownership is due to Town Shoes' employee exercise of
stock options. DSW Inc.'s initial stake provides 50% voting control and board representation equal to the co-investor.
Additionally, the Town Shoe co-investor holds the option to sell the remaining portion of the company in fiscal 2017 to DSW Inc., and for the subsequent
two years. DSW Inc. holds the option to purchase the remaining portion of the company in fiscal 2018, and for the subsequent two years, if the Town Shoe co-
investor has not exercised their put option. DSW Inc. purchased $100 million CAD during the first quarter of fiscal 2015 (approximately $79 million USD at
purchase date) to take advantage of the strength of the dollar and in anticipation of funding the future purchase of the remaining interest in Town Shoes. The
funds are also available to fund other business opportunities or return to U.S. operations, if needed. As this was a cash transaction, the gains or losses related
to the purchase of the CAD were recorded in the consolidated statement of operations. During the first quarter of fiscal 2015, the Company recorded $3.3
million in foreign currency exchange gains related to the purchase of CAD within non-operating income. The Company invested the CAD in available-for-
sale securities in the second quarter of fiscal 2015. The foreign exchange gain or loss is recorded in the consolidated statement of comprehensive income. As
of January 30, 2016, the foreign currency exchange loss of $10.8 million is recorded within other comprehensive income.
Presented below is activity related to DSW Inc.'s portion of Town Shoes included in DSW Inc.'s consolidated balance sheets, consolidated statements of
operations and consolidated statements of comprehensive income for the periods presented:
Fiscal year
2015
2014
(in thousands)
Investment in Town Shoes - beginning of period $ 25,887
$ —
Initial investment —
22,339
Acquisition costs (184)
2,897
DSW Inc.'s portion of Town Shoes (loss) income (5,250)
178
Foreign currency translation adjustments included in "Other comprehensive (loss) income" 934
729
Amortization of purchase price adjustments (199)
(256)
Investment in Town Shoes - end of period $ 21,188
$ 25,887
F- 9
Source: DSW Inc., 10-K, March 24, 2016 Powered by Morningstar® Document Research℠
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