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Item 8. Financial Statements and Supplementary Data

2023-03-16 compared with 2022-03-21 · 343 added, 249 removed, 654 unchanged (48% of the section changed)

59 unchanged sentences

Operating expenses ( 896,382 ) ( 870,682 ) ( 753,278 )

Income from equity investment 8,986 9,329 10,149

Income from equity investments 8,864 8,986 9,329

Impairment charges ( 4,317 ) ( 1,720 ) ( 153,606 )

1 unchanged sentence

Interest expense, net ( 14,874 ) ( 32,129 ) ( 23,694 )

Loss on extinguishment of debt and write-off of debt issuance costs ( 12,862 ) — —

Non-operating income (expenses), net ( 130 ) ( 67 ) 1,361

2 unchanged sentences

Net income (loss) 162,666 154,481 ( 488,719 )

Basic and diluted earnings (loss) per share:

Net loss attributable to redeemable noncontrolling interest 10 — —

Net income (loss) attributable to Designer Brands Inc.

$ 162,676 $ 154,481 $ ( 488,719 )

Earnings (loss) per share attributable to Designer Brands Inc.:

Basic earnings (loss) per share $ 2.41 $ 2.12 $ ( 6.77 )

11 unchanged sentences

Reclassification adjustment for net gains realized in net income (loss) — — ( 368 )

Total other comprehensive income (loss), net of income taxes ( 331 ) ( 791 ) 211

Total comprehensive income (loss) $ 154,150 $ ( 489,510 ) $ 94,708

Total other comprehensive loss, net of income taxes ( 1,733 ) ( 331 ) ( 791 )

Comprehensive income (loss) 160,933 154,150 ( 489,510 )

Comprehensive loss attributable to redeemable noncontrolling interest 10 — —

Comprehensive income (loss) attributable to Designer Brands Inc.

$ 160,943 $ 154,150 $ ( 489,510 )

The accompanying notes are an integral part of the consolidated financial statements.

11 unchanged sentences

Intangible assets, net 31,866 15,527

Equity investment 55,578 58,598

Deferred tax assets 48,285 356

Equity investments 63,820 55,578

Other assets 42,798 31,295

Total assets $ 2,009,618 $ 2,014,634

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND SHAREHOLDERS' EQUITY

Current liabilities:

1 unchanged sentence

Accrued expenses 190,676 215,812

Current maturities of long-term debt — 62,500

Current operating lease liabilities 190,086 202,228

5 unchanged sentences

Commitments and contingencies

Redeemable noncontrolling interest 3,155 —

Shareholders' equity:

1 unchanged sentence

Treasury shares, at cost ( 662,614 ) ( 515,065 )

Retained deficit ( 74,304 ) ( 228,785 )

Retained earnings (deficit) 81,993 ( 74,304 )

Accumulated other comprehensive loss ( 5,350 ) ( 3,617 )

Total shareholders' equity 432,901 412,396

Total liabilities and shareholders' equity $ 2,014,634 $ 1,976,595

Total liabilities, redeemable noncontrolling interest, and shareholders' equity $ 2,009,618 $ 2,014,634

The accompanying notes are an integral part of the consolidated financial statements.

5 unchanged sentences

Balance, February 1, 2020 64,033 7,733 22,169 $ 971,380 $ ( 515,065 ) $ 267,094 $ ( 2,495 ) $ 720,914

Cumulative effect of accounting change — — — — — ( 9,556 ) — ( 9,556 )

Net income — — — — — 94,497 — 94,497

Stock-based compensation activity 439 — — 17,579 — — — 17,579

Repurchase of Class A common shares ( 7,078 ) — 7,078 — ( 141,629 ) — — ( 141,629 )

Dividends paid ($ 1.00 per share)

Net loss attributable to Designer Brands Inc.

— — — — — ( 488,719 ) — ( 488,719 )

Other comprehensive income — — — — — — 211 211

Balance, February 1, 2020 64,033 7,733 22,169 971,380 ( 515,065 ) 267,094 ( 2,495 ) 720,914

Net loss — — — — — ( 488,719 ) — ( 488,719 )

Stock-based compensation activity 633 — — 18,773 — — — 18,773

3 unchanged sentences

Balance, January 30, 2021 64,666 7,733 22,169 990,153 ( 515,065 ) ( 228,785 ) ( 3,286 ) 243,017

Net income — — — — — 154,481 — 154,481

Net income attributable to Designer Brands Inc.

— — — — — 154,481 — 154,481

Stock-based compensation activity 958 — — 15,229 — — — 15,229

1 unchanged sentence

Balance, January 29, 2022 65,624 7,733 22,169 1,005,382 ( 515,065 ) ( 74,304 ) ( 3,617 ) 412,396

Net income attributable to Designer Brands Inc.

— — — — — 162,676 — 162,676

Stock-based compensation activity 1,010 — — 20,587 — — — 20,587

Repurchase of Class A common shares ( 10,713 ) — 10,713 — ( 147,549 ) — — ( 147,549 )

Dividends paid ($ 0.20 per share)

— — — ( 7,097 ) — ( 6,379 ) — ( 13,476 )

Foreign currency translation adjustment — — — — — — ( 1,733 ) ( 1,733 )

Balance, January 28, 2023 55,921 7,733 32,882 $ 1,018,872 $ ( 662,614 ) $ 81,993 $ ( 5,350 ) $ 432,901

The accompanying notes are an integral part of the consolidated financial statements.

7 unchanged sentences

Deferred income taxes ( 51,891 ) ( 1,001 ) 34,485

Income from equity investment ( 8,986 ) ( 9,329 ) ( 10,149 )

Distributions received from equity investment 12,006 8,491 10,514

Income from equity investments ( 8,864 ) ( 8,986 ) ( 9,329 )

Distributions received from equity investments 8,850 12,006 8,491

Impairment charges 4,317 1,720 153,606

Loss on extinguishment of debt and write-off of debt issuance costs 12,862 — —

Gain on settlement — — ( 8,990 )

Other 2,017 2,775 695

Change in operating assets and liabilities:

Change in operating assets and liabilities, net of acquired amounts:

Accounts receivables 7,962 8,703 23,179

8 unchanged sentences

Cash paid for property and equipment ( 54,974 ) ( 33,030 ) ( 31,114 )

Purchases of available-for-sale investments — — ( 20,973 )

Equity investment in Le Tigre ( 8,228 ) — —

Sales of available-for-sale investments — — 24,755

Proceeds from settlements — 8,990 4,965

Proceeds from settlement — — 8,990

Cash paid for business acquisition ( 19,062 ) — —

Other ( 5,853 ) ( 1,998 ) —

1 unchanged sentence

Cash flows from financing activities:

Borrowing on revolving line of credit — 276,000 463,300

Payments on revolving line of credit — ( 466,000 ) ( 433,300 )

Borrowing under ABL Revolver 349,653 150,000 —

Payments on borrowings under ABL Revolver ( 449,653 ) ( 50,000 ) —

Borrowing on revolving lines of credit 1,705,235 349,653 426,000

Payments on revolving lines of credit ( 1,424,200 ) ( 449,653 ) ( 516,000 )

Proceeds from issuance of Term Loan — — 250,000

Payments on borrowings under Term Loan ( 12,500 ) ( 6,263 ) —

Payments for borrowings and prepayment premium under Term Loan ( 238,196 ) ( 12,500 ) ( 6,263 )

Payments of debt issuance costs ( 2,316 ) — ( 21,422 )

28 unchanged sentences

Segment Reporting

Subsequent Event

Subsequent Events

DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Business Operations- Designer Brands Inc.

("we," "us," "our," and the "Company") is one of North America's largest designers, producers, and retailers of footwear and accessories.

("we," "us," "our," and the "Company") is one of the world's largest designers, producers, and retailers of footwear and accessories.

We operate in three reportable segments:

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The Canada Retail segment operates The Shoe Company and DSW banners through its direct-to-consumer Canada stores and e-commerce sites.

The Brand Portfolio segment earns revenue from the sale of wholesale products to retailers, commissions for serving retailers as the design and buying agent for products under private labels (which we refer to as "First Cost"), and the sale of branded products through the direct-to-consumer e-commerce site at www.vincecamuto.com.

An integral part of the Brand Portfolio segment is our equity investment in ABG-Camuto LLC ("ABG-Camuto"), which is a partnership between Camuto LLC, a wholly-owned subsidiary doing business as "Camuto Group," and Authentic Brands Group LLC, a global brand management and marketing company.

Camuto Group has a 40 % interest in ABG-Camuto, a joint venture that owns several intellectual property rights, including, among others, Vince Camuto and Louise et Cie, and focuses on licensing and developing new category extensions to support the global growth of these brands.

Camuto Group has a licensing agreement with ABG-Camuto whereby we pay royalties on our net sales from the brands owned by ABG-Camuto, subject to guaranteed minimums.

Camuto Group also owns footwear and certain handbag licensing rights of Jessica Simpson, Lucky Brand and, through a joint venture, JLO Jennifer Lopez.

The Brand Portfolio segment earns revenue from the wholesale of products to retailers and international distributors, commissions for serving retailers as the design and buying agent for products under private labels (referred to as "First Cost"), and the sale of our branded products through direct-to-consumer e-commerce sites at www.vincecamuto.com and www.topoathletic.com.

Our equity investments in ABG-Camuto, LLC ("ABG-Camuto") and Le Tigre 360 Global LLC ("Le Tigre") are an integral part of the Brand Portfolio segment.

In partnership with Authentic Brands Group LLC, a global brand management and marketing company, we have a 40 % ownership interest in ABG-Camuto, a joint venture that owns the intellectual property rights of Vince Camuto and others.

ABG-Camuto is responsible for the growth and marketing of the brands held by the joint venture.

We have entered into a licensing agreement with ABG-Camuto, whereby we pay royalties to ABG-Camuto based on the sales of licensed products, subject to guaranteed minimums.

ABG-Camuto also earns royalties on sales from third parties that license the brand names to produce non-footwear product categories.

In July 2022, we acquired a 33.3 % ownership interest in Le Tigre, which manages the Le Tigre brand.

We entered into a license agreement with Le Tigre, whereby we pay royalties to Le Tigre based on the sales of the Le Tigre brand, subject to guaranteed minimums.

The license agreement provides us the exclusive right to design, source, and sell Le Tigre branded footwear .

W e recognize equity investments and earnings under the equity method within the Brand Portfolio segment.

In addition, we own the licensing rights for footwear of the Jessica Simpson brand and for footwear and handbags of the Lucky Brand.

Our other operating segment, which we exited during 2020, is below the quantitative and qualitative thresholds for a reportable segment and is aggregated into Other for segment reporting purposes.

On December 13, 2022, we acquired a 79.4 % ownership interest in Topo Athletic LLC ("Topo"), a designer of specialty athletic footwear that sells its Topo branded products at wholesale to retailers and international distributors and through its direct-to-consumer e-commerce site at www.topoathletic.com.

The Topo acquisition provides us with expanded capabilities within the athletic footwear market.

Topo is included within our Brand Portfolio segment.

Fiscal Year- Our fiscal year ends on the Saturday nearest to January 31.

References to a fiscal year (e.g., "2022") refer to the calendar year in which the fiscal year begins.

This reporting schedule is followed by many national retail companies and typically results in a 52-week fiscal year, but occasionally will contain an additional week resulting in a 53-week fiscal year.

The periods presented in these consolidated financial statements each consisted of 52 weeks.

IMPACTS OF THE COVID-19 PANDEMIC

In March 2020, the World Health Organization declared the coronavirus ("COVID-19") outbreak a pandemic.

On March 18, 2020, to help control the spread of the virus and protect the health and safety of our customers, associates, and the communities we serve, we temporarily closed all of our stores in the U.S.

In addition, we took several actions in late March 2020 to reduce costs and operations to levels that were more commensurate with then-current sales, including furloughs and pay reductions.

During the second quarter and into the third quarter of 2020, we re-opened all of our stores, discontinued the furlough program, and restored pay for our associates that had taken pay reductions.

Beginning in July 2020, we initiated an internal reorganization and reduction of our workforce with additional actions taken throughout 2020 and into the first quarter of 2021, resulting in the elimination of approximately 1,000 associate positions.

The charges recorded as a result of this reorganization are included in our integration and restructuring costs discussed below.

As a result of the material reduction in net sales and cash flows during 2020, we updated our impairment analyses for our U.S.

Retail and Canada Retail segments at the store-level, which represents the lowest level for which identifiable cash flows are independent of the cash flows of other assets.

The carrying amount of the store asset group, primarily made up of operating lease assets, leasehold improvements and fixtures, is considered impaired when the carrying value of the asset group exceeds the expected future cash flows from the asset group.

The impairment loss recognized is the excess of the carrying value of the asset or asset group over its fair value (categorized as Level 3 under the fair value hierarchy).

Fair value at the store level is typically based on projected discounted cash flows over the remaining lease term.

In addition, we evaluated other long-lived assets based on our intent to use such assets going forward.

During 2020, we recorded impairment charges of $ 127.1 million ($ 104.2 million and $ 22.9 million for the U.S.

Retail segment and Canada Retail segment, respectively).

Also, during 2020, we recorded an impairment charge of $ 6.5 million for the Brand Portfolio segment customer relationship intangible asset resulting in a full impairment due to the lack of projected cash flows over the remaining useful life (categorized as Level 3 under the fair value hierarchy).

As a result of the material reduction in net sales and cash flows due to the temporary closure of all of our stores, the decrease in net sales from our retailer customers and the decrease in the Company's market capitalization due to the impact of the COVID-19 pandemic on macroeconomic conditions, we performed an impairment analysis for goodwill and other indefinite-lived intangible assets during the first quarter of 2020.

We calculated the fair value of the reporting units with goodwill primarily based on a discounted cash flow analysis (categorized as Level 3 under the fair value hierarchy).

Our analysis concluded that the fair value of the First Cost reporting unit within the Brand Portfolio segment did not exceed its carrying

Accordingly, during 2020, we recorded an impairment charge of $ 20.0 million for the First Cost reporting unit in the Brand Portfolio segment, resulting in a full impairment.

On March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which, among other things, provided employer payroll tax credits for wages paid to associates who were unable to work over a defined period and options to defer payroll tax payments.

Based on our evaluation of the CARES Act, we qualified for certain employer payroll tax credits, which were treated as government subsidies to offset related operating expenses, as well as the deferral of payroll and other tax payments in the future.

Similar credits were also available in Canada.

During 2021 and 2020, the qualified government credits reduced our operating expenses by $ 4.0 million and $ 11.4 million, respectively, on our consolidated statements of operations.

As of January 29, 2022, we had $ 5.3 million of deferred qualified payroll and other tax obligations, which is included in accrued expenses on the consolidated balance sheets that we expect to pay at the end of 2022.

We recorded our income tax expense, income tax receivable, and deferred tax assets and related liabilities based on management's best estimates.

Additionally, we assessed the likelihood of realizing the benefits of our deferred tax assets.

Our ability to recover these deferred tax assets depends on several factors, including our ability to project future taxable income.

One of the provisions of the CARES Act allows net operating losses generated within tax years 2018 through 2020 to be carried back up to five years, including years in which the U.S.

federal statutory tax rate was 35%, as opposed to the current rate of 21%.

In evaluating future taxable income, significant weight is given to positive and negative evidence that is objectively verifiable.

As a result of the losses incurred in 2020 due to the impacts of the COVID-19 pandemic, we were in a three-year cumulative loss position as of January 29, 2022 and January 30, 2021, which was significant objective negative evidence in considering whether deferred tax assets are realizable.

Such objective evidence limits the ability to consider other subjective evidence, such as the projection of future taxable income.

A valuation allowance has been recognized as a reserve on the total deferred tax asset balance due to the uncertainty of realization of our loss carry forwards and other deferred tax assets.

For 2021, 2020 and 2019, our effective tax rate was 10.7 %, 19.7 % and 21.1 %, respectively.

The rate for 2021 was the result of maintaining a full valuation allowance on deferred tax assets while also recording net discrete tax benefits, primarily as a result of adjustments to our estimated 2020 return reflecting implemented tax strategies.

The decrease in the rate for 2020 compared to 2019 was the result of recording an additional valuation allowance of $ 87.6 million partially offset by the ability to carry back current year losses to a tax year where the U.S.

federal statutory tax rate was 35%.

While trends improved during 2021 as compared to 2020, we cannot reasonably estimate the extent to which our business will continue to be affected by the COVID-19 pandemic and to what extent the recent improved trends will continue.

For instance, we have continued to experience reduced customer in-store traffic and net sales when compared to pre-COVID-19 periods, and it is unclear when customer behavior will return to pre-COVID-19 patterns, if at all.

The ongoing and prolonged nature of the COVID-19 pandemic may lead to further adjustments to our operations.

As such, the ultimate impacts of the COVID-19 pandemic on our businesses will depend on future developments, including the availability of labor, global supply chain disruptions, new variants of COVID-19 and the severity thereof, and the global availability and use of vaccines or palliatives, all of which are highly uncertain and cannot be predicted.

As a result, we may have future write-downs or adjustments to inventories, receivables, long-lived assets, intangibles, goodwill, and the valuation allowance on deferred tax assets.

SIGNIFICANT ACCOUNTING POLICIES

Variable Interest Entity- In 2019, we formed a joint venture with an entity affiliated with performing artist and celebrity Jennifer Lopez.

This partnership was formed in order to design, source and sell the JLO Jennifer Lopez collection, a line of footwear and handbags.

Our Camuto Group business is responsible for design and sourcing, and DSW is the exclusive retailer of the brand.

Jennifer Lopez and her team lead the creative directive for marketing and product design, with our technical expertise and guidance.

Jennifer Lopez earns fixed licensing fees and also has the opportunity to earn the Company's Class A common shares based on the expansion of our VIP rewards programs from her fan base, which no common shares have been earned yet under this arrangement.

Based on certain terms within the joint venture operating agreement, we have determined that we have overall control of the joint venture.

In addition, we provide a revolving line of credit to the joint venture and a guarantee for funding in excess of the joint venture's equity.

As a result, we are considered the primary beneficiary of the joint venture and it is consolidated within our financial statements.

Assets and liabilities of the joint venture are immaterial.

We recognize all of the losses of the joint venture up to the amounts guaranteed and share any profits between the partners under the terms of the joint venture operating agreement.

Principles of Consolidation- The consolidated financial statements include the accounts of Designer Brands Inc.

and its subsidiaries, including the variable interest entity.

and its subsidiaries, including any variable interest entities.

All intercompany accounts and transactions have been eliminated in consolidation.

All amounts are in U.S.

All amounts are in United States ("U.S.") dollars.

Use of Estimates- The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and reported amounts of net sales and expenses during the repor ting periods.

Certain estimates and assumptions use forecasted financial information based on information reasonably available to us, along with the estimated, but uncertain, future impacts of the COVID-19 pandemic .

Significant estimates and assumptions are required as a part of accounting for sales returns allowances, customer allowances and discounts, allowance for doubtful accounts, gift card breakage income, deferred revenue associated with loyalty programs, valuation of inventories, depreciation and amortization, impairments of long-lived assets, intangibles and goodwill, lease accounting, income taxes, and self-insurance reserves.

Certain estimates and assumptions use forecasted financial information based on information reasonably available to us.

Significant estimates and assumptions are required as a part of accounting for sales returns allowances, customer allowances and discounts reserve, gift card breakage income, deferred revenue associated with loyalty programs, valuation of inventories, depreciation and amortization, impairments of long-lived assets, intangibles and goodwill, lease accounting, redeemable noncontrolling interest, income taxes and valuation allowances on deferred tax assets, self-insurance reserves, and valuations used to account for an acquisition.

Although we believe these estimates and assumptions are reasonable, they are based on management's knowledge of current events and actions we may undertake in the future.

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For products shipped directly to our customers, we recognize the sale upon the estimated customer receipt date based on historical delivery transit times.

Revenue from shipping and handling is recorded in net sales while the related costs are included in cost of sales in the consolidated statements of operations.

For products shipped directly to our customers from our suppliers (referred to as "drop ship"), we record gross sales upon customer receipt based on the price paid by the customers as we have determined that we are the principal party responsible for the sale transaction.

Revenue from shipping and handling is recorded in net sales while the related costs are included in cost of sales on the consolidated statements of operations.

For products shipped directly to our customers from our vendors (referred to as "drop ship"), we record gross sales upon customer receipt based on the price paid by the customers as we have determined that we are the principal party responsible for the sale transaction.

Sales from the Brand Portfolio segment are recognized upon transfer of control.

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Operating Expenses- Operating expenses include expenses related to store management and store payroll costs, advertising, store depreciation, new store costs, design, sourcing and distribution costs associated with the Brand Portfolio segment, and corporate expenses.

Corporate expenses include expenses related to buying, information technology, depreciation and amortization expense for corporate assets, marketing, legal, finance, outside professional services, customer service center expenses, and payroll-related costs for associates.

Corporate expenses include expenses related to buying, information technology, rent (net of sublease income), depreciation and amortization expense for corporate assets, marketing, legal, finance, outside professional services, customer service center expenses, and payroll-related costs for associates.

In March 2020, the U.S.

We qualified for certain employer payroll tax credits, which were treated as government subsidies to offset related operating expenses.

Similar credits were also available in Canada.

During 2021 and 2020, the qualified government credits reduced our operating expenses by $ 4.0 million and $ 11.4 million, respectively, on the consolidated statements of operations.

Interest Expense, net- Interest expense, net, is summarized in the following table:

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Stock-Based Compensation- We recognize compensation expense for awards of stock options, restricted stock units ("RSUs"), and director stock units, based on the fair value on the grant date and on a straight-line basis over the requisite service period for the awards that are expected to vest, with forfeitures estimated based on our historical experience and future expectations.

Stock-based compensation is included in operating expenses in the consolidated statements of operations.

Integration and Restructuring Costs- During 2021, we incurred severance costs of $ 3.3 million ( $ 1.5 million and $ 1.8 million for the U.S.

Retail segment and Brand Portfolio segment, respectively).

During 2020, we incurred restructuring costs, which consisted primarily of severance of $ 15.2 million ($ 5.5 million, $ 0.8 million and $ 8.9 million for the U.S.

Retail segment, Canada Retail segment and Brand Portfolio segment, respectively), and professional fees of $ 2.4 million.

During 2019, we incurred integration and restructuring costs related to our prior year acquisition activity, which consisted primarily of severance of $ 3.9 million, fees for terminating joint ventures of $ 7.2 million, and professional fees and other integration costs of $ 6.6 million.

Integration and restructuring costs are recorded as operating expenses on the consolidated statements of operations.

Stock-based compensation is included in operating expenses on the consolidated statements of operations.

Chief Executive Officer Transition- In January 2023, we announced our planned succession process relating to the Company's Chief Executive Officer ("CEO") role, whereby our current CEO, Roger Rawlins, will step down from his role as CEO and as a member of the Board of Directors effective April 1, 2023, or such earlier date as determined by the Board of Directors, at which time Doug Howe, who currently serves as Executive Vice President of the Company and President of DSW, will assume the CEO role and join the Board of Directors as a Class II director.

To assist in facilitating a smooth transition, Mr.

Rawlins will remain employed under the terms of a transition and consulting agreement through April 1, 2023, and for the 12-month period thereafter will serve as a strategic advisor to the Company and the Board of Directors.

Rawlins remains employed through April 1, 2023, we will provide Mr.

Rawlins benefits that are consistent with those that Mr.

Rawlins would be entitled to in the event of a termination by the Company without cause under his Amended and Restated Standard Executive Severance Agreement.

In conjunction with the CEO transition, we estimate CEO transition costs will total $ 9.4 million consisting of $ 3.5 million in severance costs, $ 2.8 million in accelerated stock-based compensation (net of stock awards forfeited), and $ 3.1 million in retention stock awards to certain members of our leadership team and other related professional fees.

During the fourth quarter of 2022, we recognized $ 3.7 million in operating expenses on the consolidated statements of operations, with the remaining estimated $ 5.7 million to be recorded in 2023.

Severance- During 2022, we incurred severance costs, excluding the severance related to the CEO transition, of $ 2.8 million ($ 1.8 million, $ 0.2 million and $ 0.8 million for the U.S.

Retail, Canada Retail, and Brand Portfolio segments, respe ctively).

During 2021, we incurred severance costs of $ 3.3 million ($ 1.5 million and $ 1.8 million for the U.S.

Retail and Brand Portfolio segments, respectively).

On March 18, 2020, to help control the spread of the coronavirus ("COVID-19") and protect the health and safety of our customers, associates, and the communities we serve, we temporarily closed all of our stores in the U.S.

In addition, we took several actions in late March 2020 to reduce costs and operations to levels that were more commensurate with then-current sales, including furloughs and pay reductions.

During the second quarter and into the third quarter of 2020, we re-opened all of our stores, discontinued the furlough program, and restored pay for our associates that had taken pay reductions.

During 2020, we incurred restructuring costs, which consisted primarily of severance costs of $ 15.2 million ($ 5.5 million, $ 0.8 million and $ 8.9 million for the U.S.

Retail, Canada Retail, and Brand Portfolio segments, respectively).

As of January 28, 2023 and January 29, 2022, we had $ 5.7 million and $ 1.9 million, respectively, of severance liability included in accrued expenses on the consolidated balance sheets.

Gain on Settlement- During 2020, we collected $ 9.0 million, net of legal costs incurred, and recorded a gain to operating expenses in the consolidated statements of operations that was due to a settlement with a vendor related to costs incurred on an internal-use software project that was capitalized and then impaired in a previous year.

New Store Opening Costs- Costs associated with the opening of new stores are expensed as incurred.

During 2021, 2020 and 2019, new store opening costs, primarily pre-opening rent and marketing expenses, were $ 1.6 million, $ 2.7 million and $ 2.6 million, respectively.

Gain on Settlement- During 2020, we collected $ 9.0 million, net of legal costs incurred, and recorded a gain to operating expenses on the consolidated statements of operations that was due to a settlement with a vendor related to costs incurred on an internal-use software project that was capitalized and then impaired in a previous year.

Marketing Expense- The cost of advertising is generally expensed when the advertising first takes place or when mailed.

During 2022, 2021 and 2020, marketing costs were $ 167.1 million, $ 163.0 million and $ 131.7 million, respectively.

Non-Operating Income (Expenses), Net- Non-operating income (expenses), net, includes gains and losses from foreign currency revaluation and realized gains and losses related to our investment portfolio.

Non-Operating Income (Expenses), net- Non-operating income (expenses), net, includes gains and losses from foreign currency revaluation and realized gains and losses related to investments.

Income Taxes- We account for income taxes under the asset and liability method.

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable.

We recorded our income tax expense, income tax receivable, and deferred tax assets and related liabilities based on management's best estimates.

Additionally, we assessed the likelihood of realizing the benefits of our deferred tax assets by evaluating historical and projected future operating results, the reversal of existing temporary differences, taxable income in permitted carry back years, and the availability of tax planning strategies.

One of the provisions of the CARES Act allows net operating losses generated within tax years 2018 through 2020 to be carried back up to five years, including years in which the U.S.

federal statutory tax rate was 35%, as opposed to the current rate of 21%.

In evaluating future taxable income, significant weight is given to positive and negative evidence that is objectively verifiable.

During 2020, a valuation allowance was recognized as a reserve on the total deferred tax asset balance and was maintained until the fourth quarter of 2022.

This valuation allowance was the result of losses incurred in 2020 due to the impacts of the COVID-19 pandemic that resulted in a three-year cumulative loss position, which was significant objective negative evidence in considering whether deferred tax assets were realizable.

During the fourth quarter of 2022, we released the valuation allowance on the majority of the U.S.

and Canada deferred tax assets given the continued realization of income since 2020, being in a three-year cumulative adjusted earnings position, and having projected future income.

These factors provided sufficient evidence to conclude that it is more likely than not that the majority of the U.S.

and Canada deferred tax assets are realizable.

Our effective tax rate for 2022 was negative 2.0 %, whereas for 2021 and 2020 it was positive 10.7 % and 19.7 %, respectively.

The rate for 2022 was the result of releasing $ 55.7 million of the valuation allowance, partially offset by the permanent tax adjustments, primarily non-deductible compensation.

The rate for 2021 was the result of maintaining a full valuation allowance on deferred tax assets, while also recording net discrete tax benefits, primarily as a result of adjustments to our estimated 2020 return reflecting implemented tax strategies.

The rate for 2020 was the result of recording a valuation allowance of $ 87.6 million, partially offset by the ability to carry back current year losses to a tax year where the U.S.

federal statutory tax rate was 35%.

We review and update our tax positions as necessary to add any new uncertain tax positions taken, or to remove previously

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these estimates.

On August 16, 2022, the U.S.

enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations and a 1% excise tax on net stock repurchases.

Based on our current analysis of the provisions, we do not believe this legislation will have a material impact on our consolidated financial statements.

Cash, Cash Equivalents, and Restricted Cash - Cash and cash equivalents represent cash, money market funds, and credit card receivables that generally settle within three days.

Restricted cash represents cash that is restricted as to withdrawal or usage and consists of a mandatory cash deposit maintained for certain insurance policies and letters of credit.

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows:

(in thousands) January 29, 2022 January 30, 2021 February 1, 2020

Restricted cash represented cash that was restricted as to withdrawal or usage and consists of a mandatory cash deposit maintained for certain insurance policies and letters of credit.

(in thousands) January 28, 2023 January 29, 2022 January 30, 2021

Cash and cash equivalents $ 58,766 $ 72,691 $ 59,581

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We evaluate our investments for impairment and whether impairment is other-than-temporary at each balance sheet date.

The following table presents activity related to our equity investment in ABG-Camuto:

The following table presents activity related to our equity investments:

(in thousands) 2022 2021 2020

Balance at beginning of period $ 55,578 $ 58,598 $ 57,760

Investment in Le Tigre 8,228 — —

Share of net earnings 8,864 8,986 9,329

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Balance at end of period $ 63,820 $ 55,578 $ 58,598

On July 1, 2022, we acquired a 33.3 % ownership interest in Le Tigre for $ 8.2 million.

We account for our investment in Le Tigre, where we exercise significant influence but do not have control, using the equity method.

The difference between the purchase price of Le Tigre and our interest in Le Tigre's underlying net equity is comprised of a definite lived tradename intangible asset and equity method goodwill.

Our share of net loss o f Le Tigre and amortization of the intangible asset is included in the share of net earnings, net, shown in the table above and income from equity investments on the consolidated statements of operations.

Receivables, net - Receivables are classified as current assets because the average collection period is generally shorter than one year.

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The carrying value of cash and cash equivalents, restricted cash, receivables, and accounts payables approximated their fair values due to their short-term nature.

The fair value of borrowings under our senior secured asset-based credit facility ("ABL Revolver") approximated the carrying value.

As of January 29, 2022, the fair value of borrowings under our senior secured term loan ("Term Loan") was $ 237.6 million compared to the carrying value of $ 231.3 million .

The fair value of debt borrowings was estimated based on current interest rates offered for similar instruments (categorized as Level 2 under the fair value hierarchy).

The carrying value of borrowings under our revolving lines of credit approximated fair value based on its term and variable interest rate.

Property and Equipment, net- Property and equipment, net, are stated at cost less accumulated depreciation determined by the straight-line method over the expected useful life of assets.

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Once the application development stage has been reached, certain qualifying costs are capitalized until the software is ready for its intended use.

If a cloud computing arrangement includes a software license, the software license element of the arrangement is accounted for in a manner consistent with the acquisition of other software licenses.

If the arrangement does not include a software license, the arrangement is accounted for as a service contract.

Leases- A lease liability for new leases is recorded based on the present value of future fixed lease commitments with a corresponding lease asset.

Capitalized software costs and the related accumulated amortization are included in property and equipment, net, on the consolidated balance sheets.

Capitalized implementation costs for cloud computing arrangements accounted for as service contracts are included in other assets on the consolidated balance sheets and amortized over the life of the service contract to operating expenses on the consolidated statements of operations.

Leases- A lease liability for new and modified leases is recorded based on the present value of future fixed lease commitments with a corresponding lease asset.

For leases classified as operating leases, we recognize a single lease cost on a straight-line basis based on the combined amortization of the lease liability and the lease asset.

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We monitor for events or changes in circumstances that may require a reassessment of our leases and determine if a remeasurement is required.

In response to the COVID-19 pandemic, we negotiated deferrals of lease payments to be repaid over various periods, with no substantive changes to the total consideration without a change in the terms.

We have elected to treat these changes as modifications to our leases, resulting in remeasuring the related lease assets and liabilities and including non-lease components per our policy.

Impairment of Long-Lived Assets- We periodically evaluate the carrying amount of our long-lived assets, primarily operating lease assets, property and equipment and definite-lived intangible assets, when events and circumstances warrant such a review to ascertain if any assets have been impaired.

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Fair value at the store level is typically based on projected discounted cash flows over the remaining lease term.

During 2022, we recorded impairment charges of $ 4.3 million, primarily in the Brand Portfolio segment resulting from subleases of abandoned leased spaces.

During 2021, we recorded impairment charges of $ 1.7 million , including $ 1.2 million in the U.S.

Retail segment for abandoned equipment we are replacing and $ 0.5 million in the Brand Portfolio segment for the sublease of an abandoned leased space.

Refer to section above, Impacts of the COVID-19 Pandemic , regarding impairment charges of long-lived assets during 2020.

During 2019, we recorded impairment charges of $ 7.8 million, including $ 4.8 million for operating lease assets and other property and equipment in the Brand Portfolio segment related to the planned consolidation of certain locations as part of our integration efforts and $ 3.0 million primarily for operating lease assets related to under-performing stores ($ 2.3 million and $ 0.7 million for the U.S.

Retail segment and Canada Retail segment, respectively).

Retail segment for abandoned equipment we replaced and $ 0.5 million in the Brand Portfolio segment for the sublease of an abandoned leased space.

As a result of the material reduction in net sales and cash flows during 2020 due to the COVID-19 pandemic, we updated our impairment analyses for our U.S.

Retail and Canada Retail segments at the store-level, which represents the lowest level for which identifiable cash flows are independent of the cash flows of other assets.

Fair value at the store level is typically based on projected discounted cash flows over the remaining lease term.

In addition, we evaluated other long-lived assets based on our intent to use such assets going forwa rd.

During 2020, we recorded impairment charges of $ 127.1 million ($ 104.2 million and $ 22.9 million for the U.S.

Retail and Canada Retail segments, respectively).

Goodwill and Other Indefinite Lived Intangible Assets- We evaluate goodwill and other indefinite lived intangible assets for impairment annually during our fourth quarter, or more frequently if an event occurs or circumstances change that would indicate that impairment may exist.

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Impairment charges are calculated as the amount by which the carrying amount exceeds its fair value, but not to exceed the carrying value for goodwill.

Refer to section above, Impacts of the COVID-19 Pandemic , regarding impairment charges of goodwill during 2020.

As a result of the material reduction in net sales and cash flows due to the temporary closure of all of our stores, the decrease in net sales from our retailer customers, and the decrease in the Company's market capitalization due to the impact of the COVID-19 pandemic on macroeconomic conditions, we performed an impairment analysis for goodwill and other indefinite-lived intangible assets during the first quarter of 2020.

We calculated the fair value of the reporting units with goodwill primarily based on a discounted cash flow analysis (categorized as Level 3 under the fair value hierarchy).

Our analysis concluded that the fair value of the First Cost reporting unit within the Brand Portfolio segment did not exceed its carrying value.

Accordingly, during 2020, we recorded an impairment charge of $ 20.0 million for the First Cost reporting unit in the Brand Portfolio segment, resulting in a full impairment.

Self-Insurance Reserves- We record estimates for certain health and welfare, workers' compensation and casualty insurance costs that are self-insured programs.

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We have purchased stop loss insurance to limit our exposure on a per person basis for health and welfare and on a per claim basis for workers' compensation and general liability, as well as on an aggregate annual basis.

Redeemable noncontrolling interest- As discussed in more detail in Note 2, Acquisition , we have an exclusive call option to purchase and the noncontrolling interest holders have a put option with respect to the remaining 20.6 % ownership interest in Topo upon the occurrence of certain events or after a defined period of time following the transaction close.

The redemption price is based on the future performance of Topo.

As a result of the redemption feature, we record the remaining interest in Topo as a redeemable noncontrolling interest in temporary equity on the consolidated balance sheets.

The noncontrolling interest is adjusted each reporting period for the net income (loss) attributable to the noncontrolling interest.

Each reporting period, a measurement period adjustment, if any, is then recorded to adjust the noncontrolling interest to the higher of either the redemption value, assuming it was redeemable at the reporting date, or its carrying value.

Any adjustments are also recorded as net income (loss) attributable to the noncontrolling interest.

The following table presents activity related to our redeemable noncontrolling interest:

(in thousands) 2022

Balance at beginning of period $ —

Acquisition fair value of redeemable noncontrolling interest 3,165

Net loss attributable to redeemable noncontrolling interest ( 10 )

Balance at end of period $ 3,155

Foreign Currency Translation and Transactions- Our wholly-owned Canadian subsidiary has Canadian dollars as its functional currency.

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dollars at exchange rates in effect at the balance sheet date or historical rates as appropriate.

Each quarter, amounts included in our consolidated statements of operations from this business are translated at the average exchange rate for the period.

The cumulative translation adjustments resulting from changes in exchange rates are included in the consolidated balance sheets as a component of accumulated other comprehensive loss.

Transaction gains and losses are included in the consolidated statements of operations.

Each quarter, amounts included in the consolidated statements of operations from this business are translated at the average exchange rate for the period.

The cumulative translation adjustments resulting from changes in exchange rates are included as a component of accumulated other comprehensive loss on the consolidated balance sheets.

Transaction gains and losses are included in non-operating income (expenses), net, on the consolidated statements of operations.

Deferred Compensation Plans - We provide deferred compensation plans, including defined contribution plans to eligible associates and a non-qualified deferred compensation plan for certain executives and members of the Board of Directors.

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During 2022, 2021 and 2020, we recognized costs associated with matching contributions of $ 6.2 million , $ 5.9 million and $ 5.3 million, respectively.

Variable Interest Entity- W e had a joint ventur e with an entity affiliated with performing artist and celebrity Jennifer Lopez, which was formed in order to design, source and sell the JLO Jennifer Lopez collection, a line of footwear and handbags.

Our Brand Portfolio segment was responsible for design and sourcing, and DSW was the primary retailer of the brand.

Jennifer Lopez earned fixed licensing fees, which we guaranteed for the term of license.

Based on certain terms within the joint venture operating agreement, we determined that we had overall control of the joint venture.

As a result, we were considered the primary beneficiary, and we consolidated the joint venture within our financial statements.

Assets and liabilities of the joint venture are immaterial.

During 2022, we agreed to dissolve the joint venture along with related licensing and design and sourcing arrangements, which resulted in recording a termination fee of $ 5.2 million to operating expenses on the consolidated statements of operations.

On December 13, 2022, we acquired a 79.4 % ownership interest in Topo for $ 19.1 million in cash.

We have an exclusive call option to purchase the remaining 20.6 % ownership interest in Topo upon the occurrence of certain events or after a period of two years following the close of the transaction.

The noncontrolling interest holders also have a put option with respect to the remaining 20.6 % ownership interest in Topo upon the occurrence of certain events or after a period of three years following the close of the transaction.

The redemption price is defined in the operating agreement and is based primarily on a fixed multiple of Topo's trailing 12 months of adjusted earnings before interest, taxes, depreciation, amortization, and other agreed upon adjustments.

The preliminary purchase price and the allocation of the total consideration to the fair values of the assets, liabilities, and redeemable noncontrolling interest consisted of the following:

(in thousands) Preliminary Purchase Price and Allocation as of December 13, 2022

Purchase price cash consideration $ 19,062

Fair value of assets and liabilities acquired:

Accounts receivables $ 3,195

Inventories 5,612

Goodwill 3,460

Intangible assets 12,500

Other assets 1,898

Accounts payable and other liabilities ( 4,438 )

Redeemable noncontrolling interest ( 3,165 )

We recorded an allocation of the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed and the redeemable noncontrolling interest based on their fair value at the acquisition date.

The purchase price is subject to adjustments primarily based upon a working capital provision as provided by the purchase agreement.

The allocation of the purchase price is based on certain preliminary valuations and analysis that have not been completed as of the date of this filing.

Any subsequent changes in the estimated fair values assumed upon the finalization of more detailed analysis within the

measurement period will change the allocation of the purchase price and will be adjusted during the period in which the amounts are determined.

We expect to finalize the valuations as soon as practicable, but not later than one year from the acquisition date.

The fair value of the intangible assets relates to customer relationships and a tradename, which are amortized over a useful life of eight and 15 years, respectively, and are based on the excess earnings method under the income approach.

The fair value measurements are based on significant unobservable inputs, including discounted future cash flows and customer attrition rates.

The fair value measurement of the redeemable noncontrolling interest was calculated by considering the implied fair value of Topo using the purchase price and an estimated amount to redeem the noncontrolling interest.

The goodwill represents the excess of the purchase price over the fair value of the net assets acquired and was primarily attributable to acquiring an established design and sourcing process for athletic footwear.

Goodwill is expected to be deductible for income tax purposes.

The results of operations for Topo from the date of acquisition through the end of 2022, were not material and are included in the consolidated statements of operations within the Brand Portfolio segment.

Pro forma results of operations reflecting the acquisition of Topo are not presented as the impact of Topo on our consolidated financial results would not have been material.

We incurred $ 1.3 million of acquisition-related costs in connection with the acquisition of Topo, which were included in operating expenses on the consolidated statements of operations.

DISAGGREGATION OF NET SALES

The following table presents net sales disaggregated by product and service category for each segment:

Net Sales by Brand Categories- The following table presents net sales disaggregated by brand categories for each segment:

(in thousands) U.S.

Retail Canada Retail Brand Portfolio Eliminations / Other Consolidated

Owned Brands:

Direct-to-consumer $ 569,741 $ — $ 37,840 $ — $ 607,581

External customer wholesale and commission income — — 202,834 — 202,834

Intersegment wholesale and commission income — — 87,041 ( 87,041 ) —

Total Owned Brands 569,741 — 327,715 ( 87,041 ) 810,415

National brands 2,221,772 — — — 2,221,772

Canada Retail (2)

— 283,241 — — 283,241

Total net sales $ 2,791,513 $ 283,241 $ 327,715 $ ( 87,041 ) $ 3,315,428

Owned Brands:

Direct-to-consumer $ 421,398 $ — $ 27,876 $ — $ 449,274

External customer wholesale and commission income — — 164,192 — 164,192

Intersegment wholesale and commission income — — 93,956 ( 93,956 ) —

Total Owned Brands 421,398 — 286,024 ( 93,956 ) 613,466

National brands 2,348,308 — — — 2,348,308

Canada Retail (2)

— 234,809 — — 234,809

Total net sales $ 2,769,706 $ 234,809 $ 286,024 $ ( 93,956 ) $ 3,196,583

(in thousands) U.S.

Retail Canada Retail Brand Portfolio Eliminations / Other Consolidated

Owned Brands:

Direct-to-consumer $ 260,618 $ — $ 21,299 $ — $ 281,917

External customer wholesale and commission income — — 156,631 — 156,631

Intersegment wholesale and commission income — — 59,818 ( 59,818 ) —

Total Owned Brands 260,618 — 237,748 ( 59,818 ) 438,548

National brands 1,539,705 — — — 1,539,705

Canada Retail (2)

— 182,659 — — 182,659

— — 10,898 62,909 73,807

Total net sales $ 1,800,323 $ 182,659 $ 248,646 $ 3,091 $ 2,234,719

(1) "Owned Brands" refers to those brands we have rights to sell through ownership or license arrangements.

(2) We currently do not report the Canada Retail segment net sales and Other by brand categories.

Other represents discontinued revenue channels.

Net Sales by Product and Service Categories - The following table presents net sales disaggregated by product and service

categories for each segment:

(in thousands) 2022 2021 2020

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DEFERRED REVENUE LIABILITIES

We record deferred revenue liabilities for remaining obligations we have to our customers.

We record deferred revenue liabilities, included in accrued expenses on the consolidated balance sheets, for remaining obligations we have to our customers.

The following table presents the changes and total balances for gift cards and loyalty programs:

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CUSTOMER ALLOWANCES

We reduce sales by the amount of actual and remaining expected customer allowances, discounts and returns, and cost of sales by the amount of merchandise we expect to recover.

Customer allowances are provided to our wholesale customers for margin assistance, co-op advertising support, and various other deductions.

We estimate the reserves needed for margin assistance by reviewing inventory levels held by retailers, expected markdowns, gross margins realized, and other performance indicators.

Product returns and other customer deductions are estimated based on anticipated future returns using historical experience and trends.

Co-op advertising allowances are estimated based on arrangements with customers.

The following table presents the changes and total balances for sales reserves:

We reduce sales by the amount of actual and remaining expected sales returns and customer allowances and discounts, and cost of sales by the amount of merchandise we expect to recover.

S ales returns allowances and customer allowances and discounts are included in accrued expenses on the consolidated balance sheets.

Customer allowances and discounts are provided to our wholesale customers for margin assistance, advertising support, and various other deductions.

We estimate the allowances needed for margin assistance by reviewing inventory levels held by retailers, expected markdowns, gross margins realized, and other performance indicators.

Sales returns and other customer deductions are estimated based on anticipated future returns using historical experience and trends.

Advertising allowances are estimated based on arrangements with customers.

The following table presents the changes and total balances for customer allowances:

(in thousands) 2022 2021 2020

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End of period $ 18,107 $ 18,574 $ 17,333

Customer allowances and discounts reserve:

Customer allowances and discounts:

Beginning of period $ 2,097 $ 4,579 $ 11,528

Acquisition adjustments during measurement period — — ( 3,267 )

Net sales reduced for estimated allowances and discounts 9,947 8,709 14,363

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The following summarizes the related party transactions with the Schottenstein Affiliates for the relevant periods:

Leases- We lease our fulfillment center and certain store locations owned by the Schottenstein Affiliates.

Leases- We lease certain store and office locations that are owned by the Schottenstein Affiliates.

We also leased a fulfillment center from a Schottenstein Affiliate through September 2022 that was not renewed.

See Note 13 , Leases , for rent expense and future minimum lease payment requirements associated with the Schottenstein Affiliates.

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Due to Related Parties- Amounts due to the Schottenstein Affiliates, other than operating lease liabilities, were immaterial for all periods presented.

We have a 40 % interest in our equity investment in ABG-Camuto.

EQUITY METHOD INVESTMENTS

ABG-Camuto- We have a 40 % ownership interest in ABG-Camuto.

We have a licensing agreement with ABG-Camuto, pursuant to which we pay royalties on the net sales of the brands owned by ABG-Camuto, subject to guaranteed minimums.

For each fiscal year 2021, 2020 and 2019, we recorded royalty expense for amounts paid to ABG-Camuto of $ 18.2 million.

See Note 13, Commitments and Contingencies - Contractual Obligations , for f uture guaranteed minimum royalty payment requirements to ABG-Camuto.

For 2022, 2021 and 2020, we recorded royalty expense for amounts paid to ABG-Camuto of $ 18.3 million, $ 18.2 million, and $ 18.2 million, respectively.

See Note 14, Commitments and Contingencies - Contractual Obligations , for future guaranteed minimum royalty payment requirements to ABG-Camuto.

Amounts due to ABG-Camuto were immaterial for all periods presented.

Le Tigre - We have a 33.3 % ownership interest in Le Tigre.

During 2022, we entered into a license agreement with Le Tigre, whereby we pay royalties on our net sales of the Le Tigre brand, subject to guaranteed minimums.

The license agreement provides for the exclusive right to design and source Le Tigre branded footwear.

Activity with Le Tigre during 2022 was immaterial.

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is based on net income (loss) and the weighted average of Class A and Class B common shares outstanding.

Basic earnings (loss) per share is based on net income (loss) attributable to Designer Brands Inc.

and the weighted average of Class A and Class B common shares outstanding.

Diluted earnings per share reflects the potential dilution of common shares adjusted for outstanding stock options and RSUs calculated using the treasury stock method.

The following is a reconciliation between basic and diluted weighted average shares outstanding, as used in the calculation of earnings (loss) per share:

The following is a reconciliation between basic and diluted weighted average shares outstanding, as used in the calculation of earnings (loss) per share attributable to Designer Brands Inc.:

(in thousands) 2022 2021 2020

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Eligible recipients include associates, including executive officers, and non-employee directors.

The maximum number of shares of Class A common shares underlying awards which may be issued over the term of the Plan cannot exceed 11.0 million shares.

As of January 29, 2022, 8.6 million shares of Class A common shares remain available for future stock-based compensation grants under the Plan.

The maximum number of shares of Class A common shares underlying awards that may be issued over the term of the Plan cannot exceed 11.0 million shares.

As of January 28, 2023, 6.5 million Class A common shares remain available for future stock-based compensation grants under the Plan.

Stock-based compensation expense consisted of the following:

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$ 28,502 $ 23,923 $ 20,236

STOCK OPTIONS

Stock options were granted with an exercise price per share equal to the fair market value of our Class A common shares on the grant date.

Stock Options- Stock options were granted with an exercise price per share equal to the fair market value of our Class A common shares on the grant date.

Stock options generally vest 20 % per year on a cumulative basis and remain exercisable for a period of 10 years from the date of grant.

Stock option activity for the periods presented and unvested options as of January 29, 2022 were immaterial.

RESTRICTED STOCK UNITS

Grants of time-based RSUs generally cliff vest after three years and performance-based RSUs generally cliff vest after three years based upon the achievement of pre-established goals as of the end of the first year of the term.

As of January 28, 2023, there were no unvested stock options, and stock option activity for the periods presented was immaterial.

Restricted Stock Units- Grants of time-based RSUs generally cliff vest after three years , and performance-based RSUs generally cliff vest after three years based upon the achievement of pre-established goals as of the end of the first year of the term.

RSUs receive dividend equivalents in the form of additional RSUs, which are subject to the same restrictions and forfeiture provisions as the original award.

The grant date fair value of RSUs is based on the closing market price of the Class A common shares on the date of the grant.

The following table summarizes the activity for unvested RSUs for 2021:

The following table summarizes the RSU activity for 2022:

Time-Based RSUs Performance-Based RSUs

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As of January 28, 2023, the total compensation cost related to unvested performance-based RSUs not yet recognized was approximately $ 5.3 million, with a weighted average expense recognition period remaining of 1.7 years.

DIRECTOR STOCK UNITS

We issue stock units to non-employee directors.

Stock units are automatically granted to each director on the date of each annual meeting of shareholders based on the closing market price of the Class A common shares.

Director Stock Units- We issue stock units to non-employee directors.

Stock units are granted to each director on the date of each annual meeting of shareholders based on the closing market price of the Class A common shares.

In addition, each director that is eligible to receive compensation for board service may elect to have the cash portion of such compensation paid in the form of stock units.

Stock units granted to directors vest immediately and directors are given the option to settle their units 30 days after the grant date, at a specified date more than 30 days following the grant date, or defer receipt until completion of service.

Stock units granted to directors not yet settled, which are not subject to forfeiture, are considered to be outstanding for the purposes of computing basic earnings (loss) per share.

Director stock units vest immediately, and directors are given the option to settle their units 30 days after the grant date, at a specified date more than 30 days following the grant date, or defer receipt until completion of board service.

Director stock units not yet settled, which are not subject to forfeiture, are considered to be outstanding for the purposes of computing basic earnings (loss) per share.

As of January 28, 2023, we had 0.5 million director stock units not yet settled.

SHAREHOLDERS' EQUITY

Our Class A common shares are listed for trading under the ticker symbol "DBI" on the New York Stock Exchange.

There is currently no public market for the Company's Class B common shares, but the Class B common shares can be exchanged for the Company's Class A common shares at the election of the holder on a share for share basis.

S hares- Our Class A common shares are listed for trading under the ticker symbol "DBI" on the New York Stock Exchange.

There is currently no public market for the Company's Class B common shares, but the Class B common shares can be converted into the Company's Class A common shares at the election of the holder on a share for share basis.

Holders of Class A common shares are entitled to one vote per share and holders of Class B common shares are entitled to eight votes per share on matters submitted to shareholders for approval.

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We have authorized 100 million shares of no par value preferred shares, with no shares issued for any of the periods presented.

SHARE REPURCHASES

On August 17, 2017, the Board of Directors authorized the repurchase of an additional $ 500 million of Class A common shares under our share repurchase program, which was added to the $ 33.5 million remaining from the previous authorization, with $ 334.9 million of Class A common shares that remain authorized for repurchase under the program as of January 29, 2022.

The share repurchase program is subject to the ABL Revolver and Term Loan restrictions and may be suspended, modified, or discontinued at any time, and we have no obligation to repurchase any amount of our common shares under the program.

Any share repurchases will be completed in the open market at times and in amounts considered appropriate based on price and market conditions.

Share Repurchases- On August 17, 2017, the Board of Directors authorized the repurchase of an additional $ 500 million of Class A common shares under our share repurchase program, which was added to the $ 33.5 million remaining from the previous authorization.

A s of January 28, 2023, $ 187.4 million of Class A common shares remained available for repurchase under the program.

The share repurchase program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our Class A common shares under the program.

Shares will be repurchased in the open market at times and in amounts considered appropriate based on price and market conditions.

ACCUMULATED OTHER COMPREHENSIVE LOSS

For 2021, the change in accumulated other comprehensive loss was due to foreign currency translation adjustments as shown in the consolidated statements of shareholders' equity.

For 2020 and 2019, changes for the balances of each component of accumulated other comprehensive loss, net of tax, were as follows:

For 2022 and 2021, the change in accumulated other comprehensive loss was due to foreign currency translation adjustments as shown in the consolidated statements of shareholders' equity.

For 2020, changes for the balances of each component of accumulated other comprehensive loss, net of tax, were as follows:

(in thousands)

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Other comprehensive income (loss) before reclassifications ( 618 ) 195 ( 423 )

Amounts reclassified to non-operating expenses, net — ( 58 ) ( 58 )

Other comprehensive income (loss) ( 340 ) 551 211

Balance, February 1, 2020 ( 2,668 ) 173 ( 2,495 )

Other comprehensive income (loss) before reclassifications ( 618 ) 195 ( 423 )

Amounts reclassified to non-operating income, net — ( 368 ) ( 368 )

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Provision for bad debts — ( 40 ) ( 1,041 )

Recoveries and other adjustments 102 1,066 1,166

Recoveries, write-offs, and other adjustments 820 102 1,066

Allowance for doubtful accounts - end of period $ ( 312 ) $ ( 1,132 ) $ ( 1,194 )

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Accumulated depreciation and amortization ( 889,582 ) ( 894,190 )

$ 256,786 $ 296,469

Property and equipment, net $ 235,430 $ 256,786

GOODWILL AND INTANGIBLE ASSETS

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Brand Portfolio-

Impairment charges — — — — ( 19,989 ) ( 19,989 )

Acquired Topo goodwill 3,460 — 3,460 — — —

1,703 1,757 3,460 28 ( 28 ) —

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Definite-lived customer relationships $ 7,852 $ ( 1,454 ) $ 6,398 $ 1,409 $ ( 1,409 ) $ —

Definite-lived tradename 10,853 ( 292 ) 10,561 — — —

Indefinite-lived trademarks and tradenames 14,907 — 14,907 15,527 — 15,527

$ 33,612 $ ( 1,746 ) $ 31,866 $ 16,936 $ ( 1,409 ) $ 15,527

During 2022, we acquired the rights to the shoes.com tradename for $ 4.9 million, which was recorded as a definite lived tradename intangible asset with a useful life of 15 years.

In addition, we recognized preliminary estimates of the fair value of the definite-lived customer relationships and tradename intangible assets from the Topo acquisition, which are amortized over a useful life of eight and 15 years, respectively.

ACCRUED EXPENSES

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Less unamortized Term Loan debt issuance costs — ( 5,714 )

Less current maturities of long-term debt — ( 62,500 )

Long-term debt $ 281,035 $ 225,536

As of January 29, 2022, the total borrowings under the Term Loan were classified as long-term debt since we had the ability and intent to refinance the Term Loan using borrowings from our ABL Revolver, which we classify as long-term debt.

See Note 16 , Subsequent Event, for additional information.

On August 7, 2020, we replaced our previous senior unsecured revolving credit agreement with the ABL Revolver, which provides a revolving line of credit of up to $ 400.0 million, including a Canadian sub-limit of up to $ 20.0 million, a $ 50.0 million sub-limit for the issuance of letters of credit, a $ 40.0 million sub-limit for swing loan advances for U.S.

ABL Revolver- On March 30, 2022, we replaced our previous senior secured asset-based revolving credit facility with our current senior secured asset-based revolving credit facility ("ABL Revolver"), which provides a revolving line of credit of up to $ 550.0 million, including a Canadian sub-limit of up to $ 55.0 million, a $ 75.0 million sub-limit for the issuance of letters of credit, a $ 55.0 million sub-limit for swing-loan advances for U.S.

borrowings, and a $ 5.5 million sub-limit for swing-loan advances for Canadian borrowings.

Our ABL Revolver matures in August 2025 and, as of January 29, 2022, was secured by substantially all of our personal property assets, including a first priority lien on credit card receivables and inventory and a second priority lien on personal property assets that constituted first priority collateral for the Term Loan.

The amount of credit available is limited to a borrowing base based on, among other things, a percentage of the book value of eligible inventory and credit card receivables, as reduced by certain reserves.

As of January 29, 2022, the ABL

Revolver had a borrowing base of $ 400.0 million, with no outstanding borrowings and $ 4.9 million in letters of credit issued, resulting in $ 395.1 million available for borrowings.

Our ABL Revolver matures in March 2027 and is secured by a first-priority lien on substantially all of our personal property assets, including credit card receivables and inventory.

The ABL Revolver may be used to provide funds for working capital, capital expenditures, share repurchases, other expenditures, and permitted acquisitions as defined by the credit facility agreement.

The amount of credit available is limited to a borrowing base formulated on, among other things, a percentage of the book value of eligible inventory and credit card receivables, as reduced by certain reserves.

As of January 28, 2023, the ABL Revolver had a borrowing base of $ 529.9 million, with $ 281.0 million in outstanding borrowings a nd $ 5.0 million in letters of credit issued, resulting in $ 243.9 million av ailable for borrowings.

Borrowings and letters of credit issued under the ABL Revolver accrue interest, at our option, at a rate equal to:

(A) a base rate per annum equal to the greatest of (i) the prime rate, (ii) the overnight bank funding rate plus 0.5 %, and (iii) the adjusted one-month London Interbank Offered Rate ("LIBOR") (as defined) plus 1.0 %;

or (B) an adjusted LIBOR per annum (subject to a floor of 0.75 %), plus, in each instance, an applicable rate to be determined based on average availability, with an interest rate of 3.00 % as of January 29, 2022.

(A) a base rate per annum equal to the greatest of (i) the prime rate, (ii) the Fed Funds Rate (as defined in the credit facility agreement and subject to a floor of 0%) plus 0.5 %, and (iii) the one-month Adjusted Term SOFR (as defined in the credit facility agreement) plus 1.0 %;

or (B) a one-month, three-month or six-month Adjusted Term SOFR per annum (subject to a floor of 0 %), plus, in each instance, an applicable rate to be determined based on average availability, with an interest rate of 6.6 % as of January 28, 2023.

Commitment fees are based on the unused portion of the ABL Revolver.

Interest expense related to the ABL Revolver includes interest on borrowings and letters of credit, commitment fees, and the amortization of debt issuance costs.

On August 7, 2020, we also entered into a $ 250.0 million Term Loan.

The Term Loan required minimum quarterly principal payments with the remaining outstanding balance due in August 2025.

The Term Loan had limited prepayment requirements under certain conditions.

The Term Loan was collateralized by a first priority lien on substantially all of our personal and real property (subject to certain exceptions), including investment property and intellectual property, and by a second priority lien on certain other personal property, primarily credit card receivables, and inventory, that constitute first priority collateral for the ABL Revolver.

Borrowings under the Term Loan accrued interest, at our option, at a rate equal to:

(A) a base rate per annum equal to the greater of (i) 3.25 %, (ii) the prime rate, (iii) the overnight bank funding rate plus 0.5 %, and (iv) the adjusted one-month LIBOR plus 1.0 %, plus, in each instance, 7.5 %;

or (B) an adjusted LIBOR per annum (subject to a floor of 1.25 %), plus 8.5 %, with an interest rate of 9.75 % (effective interest rate of 11.77 % when including the amortization of debt issuance costs) as of January 29, 2022.

DEBT COVENANTS

The ABL Revolver contains a minimum availability covenant where an event of default shall occur if availability is less than the greater of $ 30.0 million or 10.0 % of the maximum credit amount.

The Term Loan included a springing covenant imposing a minimum earnings before interest, taxes, depreciation, and amortization covenant, which arises when liquidity is less than $ 150.0 million.

In addition, the ABL Revolver and the Term Loan each contain customary covenants restricting our activities, including limitations on the ability to sell assets, engage in acquisitions, enter into transactions involving related parties, incur additional debt, grant liens on assets, pay dividends or repurchase stock, and make certain other changes.

There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions.

As of January 29, 2022, we were limited in our ability to pay dividends, repurchase stock, and make certain restricted payments above a maximum of $ 10.0 million over the term of the Term Loan.

Both the ABL Revolver and the Term Loan contain customary events of default with cross-default provisions.

Upon an event of default that is not cured or waived within the cure periods, in addition to other remedies that may be available to the lenders, the obligations may be accelerated, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against the collateral.

As of January 29, 2022, we were in compliance with all financial covenants.

We lease our stores, fulfillment center, and other facilities under operating lease arrangements with unrelated parties and related parties owned by the Schottenstein Affiliates.

We pay variable amounts for certain lease and non-lease components as well as for contingent rent based on sales for certain leases where the sales are in excess of specified levels and for leases that have certain contingent triggering events that are in effect.

Debt Covenants- As of January 28, 2023, the ABL Revolver required us to maintain a fixed charge coverage ratio covenant of not less than 1 :1 when availability is less than the greater of $ 41.3 million or 10.0 % of the maximum borrowing amount.

The ABL Revolver also contains customary covenants restricting certain activities, including limitations on our ability to sell assets, engage in acquisitions, enter into transactions involving related parties, incur additional debt, grant liens on assets, pay dividends or repurchase stock, and make certain other changes.

There are specific exceptions to these covenants including, in some cases, upon satisfying specified payment conditions based on availability.

The ABL Revolver contains customary events of default, including failure to comply with certain financial and other covenants.

Upon an event of default that is not cured or waived within the cure periods, in addition to other remedies that may be available to the lenders, our obligations under the ABL Revolver may be accelerated, outstanding letters of credit may be required to be cash collateralized, and remedies may be exercised against the collateral.

As of January 28, 2023, we were in compliance with all financial covenants contained in the ABL Revolver.

Termination of Term Loan - On February 8, 2022, we settled in full the $ 231.3 million principal amount outstanding on that date under our senior secured term loan agreement ("Term Loan").

In connection with this settlement, we incurred a $ 12.7 million loss on extinguishment of debt, composed of a $ 6.9 million prepayment premium and a $ 5.7 million write-off of unamortized debt issuance costs.

We lease our stores, our distribution center located in New Jersey, and other facilities under operating lease arrangements with unrelated parties and related parties owned by the Schottenstein Affiliates.

We pay variable amounts for certain lease and non-lease components, contingent rent based on sales for certain leases where the sales are in excess of specified levels, and leases that have certain contingent triggering events that are in effect.

We also lease equipment under operating leases.

We receive operating sublease income from unrelated third parties for leasing portions or all of certain properties.

Operating sublease income and operating expenses for these properties are included in operating expenses in our consolidated statements of operations.

Lease income and lease expense consisted of the following:

Operating sublease income and lease expense consisted of the following:

(in thousands) 2022 2021 2020

9 unchanged sentences

Other operating lease information:

Weighted-average remaining lease term 5.1 years 5.3 years

Weighted-average remaining lease term (years) 5.7 5.1

Weighted-average discount rate 4.2 % 4.0 %

As of January 29, 2022, our future fixed minimum lease payments are as follows:

As of January 28, 2023, our future f ixed minimum lease payments are as follows:

(in thousands) Unrelated Parties Related Parties Total

10 unchanged sentences

Non-current operating lease liabilities $ 617,374 $ 14,038 $ 631,412

As of January 29, 2022, we have entered into lease commitments for one new store location and three store relocations where the leases have not yet commenced, and therefore the lease liabilities have not yet been recorded.

As of January 28, 2023, we had entered into lease commitments for one new store location and three store relocations where the leases have not yet commenced, and therefore the lease liabilities have not yet been recorded.

We expect the lease commencement to begin over the next three fiscal quarters for these locations, and we will record additional operating lease liabilities of approximately $ 5.4 million.

COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

We are involved in various legal proceedings that are incidental to the conduct of our business.

Legal Proceedings- We are involved in various legal proceedings that are incidental to the conduct of our business.

Although it is not possible to predict with certainty the eventual outcome of any litigation, we believe the amount of any potential liability with respect to current legal proceedings will not be material to the results of operations or financial condition.

As additional information becomes available, we will assess any potential liability related to pending litigation and revise the estimates as needed.

INSURANCE RECOVERIES

During 2020, a third-party vendor experienced a shutdown of services to us that impacted our ability to fulfill orders from customers for a limited period of time.

This incident is covered under an insurance policy that provides for reimbursement of lost profits and recognized losses as a result of the outage.

During 2020, we recognized an insurance recovery receivable of $ 3.0 million, recorded as an offset to cost of sales, for recognized losses that we believe are probable of being reimbursed through the insurance policy.

Reimbursement for lost profits and any additional recoveries in excess of recognized losses are treated as gain contingencies and will be recognized when realized or realizable.

We continue to work with the insurance carrier to reach an agreement on the total amount to be recovered.

We provide guarantees for lease obligations that are scheduled to expire in 2023 for locations that have been leased to third parties.

Guarantees- We provide guarantees for lease obligations that are scheduled to expire in 2025 for locations that have been leased to third parties.

If a third party does not pay the rent or vacates the premise, we may be required to make full rent payments to the landlord.

As of January 29, 2022, the total future minimum lease payment requirements for these guarantees were approximately $ 13.7 million.

CONTRACTUAL OBLIGATIONS

As of January 29, 2022, we have entered into various noncancelable purchase and service agreements, including construction commitments for capital items to be purchased for projects that were under construction or for which a lease has been signed.

In addition, we have license agreements that allow us to use third-party owned brands, including a license agreement with ABG-Camuto (a related party), that have guaranteed minimum royalty payments.

As of January 29, 2022, our noncancelable purchase obligations and future guaranteed minimum royalty payments are as follows:

As of January 28, 2023, the total future payment requirements for these guarantees were approximately $ 8.7 million.

Contractual Obligations- As of January 28, 2023, we had entered into various noncancelable purchase and service agreements, including agreements with remaining terms in excess of one year and construction commitments for capital items to be purchased for projects that were under construction or for which a lease has been signed.

In addition, we have license agreements that allow us to use brands owned by third parties, including a license agreement with our equity investments (related parties), that have guaranteed minimum royalty payments.

As of January 28, 2023, our noncancelable purchase obligations and future guaranteed minimum royalty payments were as follows:

(in thousands) Noncancelable Purchase Obligations Guaranteed Minimum Royalties

Unrelated Parties Related Party Total

Unrelated Parties Related Parties Total

2023 $ 13,831 $ 12,609 $ 18,550 $ 31,159

28 unchanged sentences

State and local taxes, net of federal benefit (provision) 7,955 7,870 ( 23,678 )

Foreign tax rate differential 1,111 ( 3,000 ) 546

Change in valuation allowance ( 55,654 ) ( 29,950 ) 87,579

1 unchanged sentence

CARES Act rate differential — ( 1,697 ) ( 57,894 )

Federal interest income

( 3,029 ) ( 502 ) —

Uncertain tax positions 5,940 1,275 ( 290 )

Other 3,461 ( 318 ) 1,331

$ ( 3,142 ) $ 18,544 $ ( 119,928 )

See Note 1 , Description of Business and Significant Accounting Policies - Impacts of the COVID-19 Pandemic , for discussion of the CARES Act rate differential and the change in valuation allowance.

See Note 1 , Description of Business and Significant Accounting Policies - Income Taxes , for discussion of the CARES Act rate differential and the change in valuation allowance.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:

9 unchanged sentences

Intangible assets 1,601 2,994

Gift cards 2,756 393

Other 2,055 2,345

6 unchanged sentences

Other ( 6,430 ) ( 3,210 )

( 200,158 ) ( 215,769 )

Net deferred tax liabilities $ ( 3,606 ) $ ( 4,607 )

Net deferred income taxes are reported within the consolidated balance sheets as follows:

Total deferred tax liabilities ( 208,451 ) ( 200,158 )

Net deferred tax assets (liabilities) $ 48,285 $ ( 3,606 )

Net deferred income taxes are reported on the consolidated balance sheets as follows:

(in thousands) January 28, 2023 January 29, 2022

Deferred tax assets included in other assets $ 356 $ —

Deferred tax assets $ 48,285 $ 356

Deferred tax liabilities included in other non-current liabilities — ( 3,962 )

$ 48,285 $ ( 3,606 )

As of January 29, 2022, the valuation allowance is primarily related to federal, state and foreign deferred tax assets.

Additionally, there are $ 9.1 million state and $ 14.4 million foreign net operating losses, which, if not utilized, a portion of the carryovers will begin to expire in 2025 and 2038, respectively.

As of January 28, 2023, the remaining valuation allowance was primarily related to state deferred tax assets.

Additionally , there were $ 11.4 million state, $ 8.1 million foreign, and $ 2.2 million federal net operating losses, which, if not utilized, a portion of the carryovers will begin to expire in 2025, 2036, and 2038, respectively.

The following table presents the changes in valuation allowance:

1 unchanged sentence

Valuation allowance - beginning of period $ 70,762 $ 101,185 $ 9,472

Additions charged to income tax provision (benefit) — 87,579 —

Additions charged to income tax benefit — — 87,579

Allowances taken or written off ( 55,654 ) ( 29,950 ) —

7 unchanged sentences

Additions for tax positions taken in the current year 5,342 1,021 603

Reductions for tax positions taken in prior years:

Changes in estimates — — ( 340 )

Settlements — ( 1,280 ) ( 2,196 )

Settlements of tax positions taken in prior years ( 665 ) — ( 1,280 )

Unrecognized tax benefits - end of period $ 15,785 $ 11,108 $ 10,087

Of the total unrecognized tax benefits at January 29, 2022, January 30, 2021 and February 1, 2020, approximate ly $ 9.5 million, $ 8.7 million and $ 9.2 million, respectively, represent the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate in future periods.

Of the total unrecognized tax benefits at January 28, 2023, January 29, 2022 and January 30, 2021, $ 14.0 million, $ 9.5 million and $ 8.7 million, respectively, represented the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate in future periods.

While it is expected that the amount of unrecognized tax benefits will change in the next 12 months, any changes are not expected to have a material impact on our financial position, results of operations, or cash flows.

We recognize interest and penalties related to unrecognized tax benefits as a component of the income tax provision (benefit).

As of January 29, 2022, January 30, 2021 and February 1, 2020, interest and penalties were $ 3.1 million, $ 2.6 million and $ 2.3 million, respectively.

We are no longer subject to U.S.

federal or state income tax examinations for years prior to 2015.

We have a federal and three state income tax returns in the process of examination at this time.

We estimate the range of possible changes that may result from any future tax examinations to be insignificant at this time.

As of January 28, 2023, January 29, 2022 and January 30, 2021, interest and penalties were $ 4.7 million, $ 3.1 million and $ 2.6 million, respectively.

SEGMENT REPORTING

Our three reportable segments, which are also operating segments, are the U.S.

Retail segment, the Canada Retail segment, and the Brand Portfolio segment.

We have determined that the Chief Operating Decision Maker ("CODM") is our Chief Executive Officer and we have identified such segments based on internal management reporting and responsibilities.

The performance of each segment is based primarily on net sales and gross profit.

As a result, we do not allocate operating expenses to the segments.

Total assets by segment are not presented in the table below as the CODM does not evaluate, manage, or measure performance of segments using total assets.

The following table provides certain financial da ta by segment reconciled to the consolidated financial statements:

(in thousands) U.S.

Retail Canada Retail Brand Portfolio Other Corporate / Eliminations Total

Retail Canada Retail Brand Portfolio Other Corporate / Eliminations Consolidated

External customer sales $ 2,791,513 $ 283,241 $ 240,674 $ — $ — $ 3,315,428

2 unchanged sentences

Gross profit $ 904,583 $ 99,121 $ 72,006 $ — $ 3,515 $ 1,079,225

Income from equity investment $ — $ — $ 8,986 $ — $ — $ 8,986

Income from equity investments $ — $ — $ 8,864 $ — $ — $ 8,864

Cash paid for property and equipment $ 27,567 $ 3,169 $ 1,501 $ — $ 22,737 $ 54,974

8 unchanged sentences

(in thousands) U.S.

Retail Canada Retail Brand Portfolio Other Corporate / Eliminations Total

Retail Canada Retail Brand Portfolio Other Corporate / Eliminations Consolidated

External customer sales $ 1,800,323 $ 182,659 $ 188,828 $ 62,909 $ — $ 2,234,719

5 unchanged sentences

Depreciation and amortization $ 47,083 $ 7,817 $ 5,433 $ 42 $ 27,651 $ 88,026

Retail and Brand Portfolio segments and Other net sales recognized are primarily based on sales to customers in the U.S., and Canada Retail segment net sales recognized are based on sales to customers in Canada.

Retail and Brand Portfolio segments and Other net sales recognized were primarily based on sales to customers in the U.S., and the Canada Retail segment net sales recognized were based on sales to customers in Canada.

Net sales realized from geographic markets outside of the U.S.

and Canada have collectively been immaterial.

and Canada were collectively immaterial.

As of January 28, 2023 and January 29, 2022, long-lived assets, consisting of property and equipment and operating lease assets, included $ 875.7 million and $ 835.9 million, respectively, in the U.S.

and $ 58.6 million and $ 66.1 million, respectively, in Canada, with only an immaterial amount in other countries.

No single customer accounts for 10% or more of consolidated total net sales.

However, the Brand Portfolio segment has four customers that make up approximately 57 % of its total net sales, excluding intersegment net sales, and the loss of any or all of these customers could have a material adverse effect on the Brand Portfolio segment.

SUBSEQUENT EVENT

On February 8, 2022, we settled in full the $ 231.3 million principal amount outstanding under our Term Loan.

In connection with this settlement, we incurred a $ 12.7 million loss on extinguishment of debt, comprised of a $ 6.9 million prepayment premium and a $ 5.7 million write-off of unamortized debt issuance costs, which will be recorded in the first quarter of 2022.

The settlement of the Term Loan was made using proceeds from borrowings under the ABL Revolver.

No single customer accounted for 10% or more of consolidated total net sales.

However, the Brand Portfolio segment has four customers that make up approximately 53 % of its segment net sales, excluding intersegment net sales, and the loss of any or all of these customers could have a material adverse effect on the Brand Portfolio segment.

SUBSEQUENT EVENTS

Acquisition of Keds- On February 4, 2023, we acquired the Keds business, including the Keds brand, inventory, and inventory related accounts payable, from Wolverine World Wide, Inc.

for $ 123.3 million.

The Keds business designs, sources, and sells branded footwear and earns revenue from the wholesale of products to retailers in the U.S.

and Canada, the wholesale of products to international distributors, and the sale of branded products through direct-to-consumer e-commerce sites in the U.S.

The purchase price of the acquisition was funded with available cash and borrowings on the ABL Revolver.

We will account for the acquisition and include the results of the Keds business in our Brand Portfolio segment beginning with our first quarter of 2023.

Given the acquisition date, we are in the process of developing our fair value assumptions for the assets and liabilities acquired.

ABL Revolver Amendment- On February 28, 2023, the ABL Revolver was amended to increase the available capacity under the revolving line of credit from $ 550.0 million to $ 600.0 million and to add a first-in last-out term loan (the "FILO Term Loan") of up to $ 30.0 million, which was drawn in full on the date of the amendment, subject to a borrowing base.

The FILO Term Loan may be repaid in full, but not in part, so long as certain payment conditions are satisfied.

Once repaid, no portion of the FILO Term Loan may be reborrowed.

The maturity date of the ABL Revolver did not change and is applicable to the FILO Term Loan.

The interest rate on the revolving line of credit remains unchanged, and the FILO Term Loan will accrue interest, at our option, at a rate equal to (A) a fluctuating interest rate per annum equal to the greatest of (i) the prime rate, (ii) the Fed Funds Rate plus 0.5 %, or (iii) Adjusted Term SOFR plus 1.0 %, plus 2.25 %;

or (B) Adjusted Term SOFR for the interest period in effect for such borrowing plus 3.25 %.

The ABL Revolver was also amended to change the period during which we are required to maintain a fixed charge coverage ratio of not less than 1 :1 when availability is less than the greater of $ 47.3 million or 10 % of the maximum borrowing amount .

Dividends- On March 15, 2023, the Board of Directors declared a quarterly cash dividend payment of $ 0.05 per share for both Class A and Class B common shares.

The dividend will be paid on April 14, 2023 to shareholders of record as of the close of business on March 31, 2023.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data