##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K/A
 
 (Amendment No. 3)
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For The Fiscal Year Ended January 29, 2005
OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission file number          1-10767
 RETAIL VENTURES, INC.
  Ohio
    
    20-0090238(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)3241 Westerville Road, Columbus, Ohio
    
    43224(Address of principal executive offices)
    
    (Zip Code)
  
  Securities registered pursuant to Section 12(b) of the Act:Title of each class:
    
    Name of each exchange on which registered:Common Shares, without par value
    
    New York Stock Exchange
  þ o
 þ
 þ o
   DOCUMENTS INCORPORATED BY REFERENCE:
 .




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TABLE OF CONTENTS
 
 Item No.
    
    PagePART I1.
    
    Business
    
    
    32.
    
    Properties
    
    
    153.
    
    Legal Proceedings
    
    
    164.
    
    Submission of Matters to a Vote of Security Holders
    
    
    16PART II5.
    
    Market for the Registrants Common Equity,
Related Shareholder Matters and Issuer Purchases of Equity Securities
    
    
    176.
    
    Selected Financial Data
    
    
    197.
    

Managements
Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    207A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    348.
    
    Financial Statements and Supplementary Data
    
    
    349.
    
    Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    349A.
    
    Controls and Procedures
    
    
    349B.
    
    Other Information
    
    
    38PART III10.
    
    Directors and Executive Officers of the Registrant
    
    
    3911.
    
    Executive Compensation
    
    
    4012.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Shareholders Matters
    
    
    4013.
    
    Certain Relationships and Related Transactions
    
    
    4014.
    
    Principal Accountant Fees and Services
    
    
    40PART IV15.
    
    Exhibits, Financial Statement Schedules
    
    
    41Signatures
    
    
    42TABLE OF CONTENTS TO FINANCIAL STATEMENTS AND SCHEDULESReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets
    
    
    F-2Consolidated Statements of Operations
    
    
    F-3Consolidated Statements of Shareholders Equity
    
    
    F-4Consolidated Statements of Cash Flows
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-6SCHEDULESIIValuation and Qualifying Accounts
    
    
    S-1Index to Exhibits
    
    
    E-1




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PART I
 As used in this Annual Report on Form 10-K and except as the context otherwise may
require, Company, we, us, and our refers to Retail Ventures, Inc.(Retail Ventures) and
its wholly owned subsidiaries, including but not limited to, Value City Department Stores LLC
(Value City), DSW Inc., formerly known as Shonac Corporation, (DSW) and Filenes Basement,
Inc.(Filenes Basement).
 Restatement
 
  
 
  
 
 As
filed with the SEC on April 14, 2005 and May 12, 2005
 
 
  
 
  
 Forward-Looking Information
  
 ITEM 1. BUSINESS.
 History of Our Business
 
  
 3




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General
  Value City.
 DSW.
 Filenes Basement.
 4




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Value City
  Merchandising
 Selection.
  Value Pricing
  Supplier Relationships and Purchasing
  5




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Advertising and Promotion
  Stores
 Store Location, Design and Operations
     6




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Expansion
 Distribution
    License Agreements
  Segment Seasonality
  Service Marks, Trademarks and Tradenames
  7




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DSW
   Merchandising
 Selection.
 Value.
 Convenience
 Supplier Relationships and Purchasing
   Advertising and Promotion
   8




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Stores
 Store Location, Design and Operations.
    Expansion
   Distribution
  9




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Leased Departments and Supply Agreements
    Segment Seasonality
  Service Marks, Trademarks and Tradenames
 ® ® ®
 Filenes Basement
  Merchandising
 Selection
 Value Pricing
 10




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Supplier Relationships and Purchasing
  Advertising and Promotion
   Stores
 Store Location, Design and Operations
    11




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Expansion
  Distribution
  License Agreements and Leased Departments
    Segment Seasonality
  Service Marks, Trademarks and Tradenames
  Management Information and Control Systems
  12




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13




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Associates
   Competition
       Available Information
 www.retailventuresinc.com
 14




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ITEM 2. PROPERTIES.
  Filene'sValue City
    
    
    DSW
    
    
    Basement
    
    
    TotalAlabama
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Arizona
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2California
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    14Colorado
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    6Connecticut
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Delaware
    
    
    3
    
    
    
    1
    
    
    
    
    
    
    
    4Florida
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    9Georgia
    
    
    4
    
    
    
    6
    
    
    
    1
    
    
    
    11Illinois
    
    
    16
    
    
    
    10
    
    
    
    3
    
    
    
    29Indiana
    
    
    7
    
    
    
    4
    
    
    
    
    
    
    
    11Iowa
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Kansas
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Kentucky
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Maine
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Maryland
    
    
    8
    
    
    
    5
    
    
    
    1
    
    
    
    14Massachusetts
    
    
    
    
    
    
    8
    
    
    
    9
    
    
    
    17Michigan
    
    
    9
    
    
    
    10
    
    
    
    
    
    
    
    19Minnesota
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Missouri
    
    
    7
    
    
    
    2
    
    
    
    
    
    
    
    9Nebraska
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Nevada
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2New Hampshire
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1New Jersey
    
    
    7
    
    
    
    6
    
    
    
    1
    
    
    
    14New York
    
    
    
    
    
    
    16
    
    
    
    6
    
    
    
    22North Carolina
    
    
    1
    
    
    
    2
    
    
    
    
    
    
    
    3Ohio
    
    
    23
    
    
    
    11
    
    
    
    1
    
    
    
    35Oklahoma
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Pennsylvania
    
    
    18
    
    
    
    10
    
    
    
    1
    
    
    
    29Rhode Island
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Tennessee
    
    
    1
    
    
    
    3
    
    
    
    
    
    
    
    4Texas
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    16Virginia
    
    
    4
    
    
    
    9
    
    
    
    
    
    
    
    13Washington D.C.
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    3West Virginia
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    4Wisconsin
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3116
    
    
    
    172
    
    
    
    26
    
    
    
    314
    15




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ITEM 3. LEGAL PROCEEDINGS.
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  16




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PART II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
  High
    
    
    LowFiscal 2003:First Quarter
    
    $
    2.26
    
    
    $
    1.48Second Quarter
    
    
    3.25
    
    
    
    1.90Third Quarter
    
    
    5.88
    
    
    
    2.02Fourth Quarter
    
    
    6.30
    
    
    
    4.10Fiscal 2004:First Quarter
    
    $
    8.60
    
    
    $
    5.02Second Quarter
    
    
    9.70
    
    
    
    6.13Third Quarter
    
    
    8.04
    
    
    
    6.32Fourth Quarter
    
    
    7.67
    
    
    
    6.02Fiscal 2005:First Quarter (through March 31, 2005)
    
    $
    10.25
    
    
    $
    6.60
    17




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Total Number ofShares Purchased as
    
    
    Maximum Number ofPart of Publicly
    
    
    Shares that May YetTotal Number of
    
    
    Average Price
    
    
    Announced Plans or
    
    
    be Purchased UnderShares Purchased
    
    
    Paid per Share
    
    
    Programs
    
    
    Plans or ProgramsNovember 1, 2004 - November 30, 2004
    
    None
    
    
    
    
    
    
    
    
    
    NoneDecember 1, 2004 - December 31, 2004
    
    None
    
    
    
    
    
    
    
    
    
    NoneJanuary 1, 2005 - January 29, 2005
    
    None
    
    
    
    
    
    
    
    
    
    NoneTotal
    
    None
    
    
    
    
    
    
    
    
    
    None
 18




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ITEM 6. SELECTED FINANCIAL DATA.
 
  
 
 For the Fiscal Year Ended1/29/2005
    
    
    1/31/2004
    
    
    2/1/2003
    
    
    2/2/2002
    
    
    2/3/2001(1)Restated
    
    
    Restated
    
    
    Restated
    
    
    Restated
    
    
    Restated(dollars in thousands, except per share amounts and net sales per selling square feet)Net sales
    
    $
    2,739,631
    
    
    $
    2,594,206
    
    
    $
    2,450,719
    
    
    $
    2,283,878
    
    
    $
    2,213,017Operating profit (loss)
    
    $
    6,685
    
    
    $
    31,658
    
    
    $
    36,706
    
    
    $
    (15,430
    )
    
    $
    (133,753
    )Loss before cumulative
effect of accounting change
    
    $
    (19,448
    )
    
    $
    (5,219
    )
    
    $
    (2,357
    )
    
    $
    (30,256
    )
    
    $
    (103,006
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    $
    (2,080
    )
    
    
    
    
    
    
    Net loss
    
    $
    (19,448
    )
    
    $
    (5,219
    )
    
    $
    (4,437
    )
    
    $
    (30,256
    )
    
    $
    (103,006
    )Basic loss per share before
cumulative effect of accounting change
    
    $
    (0.57
    )
    
    $
    (0.15
    )
    
    $
    (0.07
    )
    
    $
    (0.90
    )
    
    $
    (3.07
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    $
    (0.06
    )
    
    
    
    
    
    
    Basic loss per share
    
    $
    (0.57
    )
    
    $
    (0.15
    )
    
    $
    (0.13
    )
    
    $
    (0.90
    )
    
    $
    (3.07
    )Diluted loss per share
    
    $
    (0.57
    )
    
    $
    (0.15
    )
    
    $
    (0.13
    )
    
    $
    (0.90
    )
    
    $
    (3.07
    )Total assets
    
    $
    976,426
    
    
    $
    860,592
    
    
    $
    828,126
    
    
    $
    883,045
    
    
    $
    909,511Working capital
    
    $
    233,568
    
    
    $
    227,665
    
    
    $
    174,971
    
    
    $
    225,740
    
    
    $
    209,900Current ratio
    
    
    1.65
    
    
    
    1.84
    
    
    
    1.57
    
    
    
    1.77
    
    
    
    1.65Long-term obligations
    
    $
    343,375
    
    
    $
    326,940
    
    
    $
    264,664
    
    
    $
    337,199
    
    
    $
    326,449Number of:(2)Value City Stores
    
    
    116
    
    
    
    116
    
    
    
    116
    
    
    
    117
    
    
    
    119DSW Stores
    
    
    172
    
    
    
    142
    
    
    
    126
    
    
    
    104
    
    
    
    78Filenes Basement Stores
    
    
    26
    
    
    
    21
    
    
    
    20
    
    
    
    20
    
    
    
    19Net sales per selling sq. ft. (3)
    
    $
    221
    
    
    $
    225
    
    
    $
    224
    
    
    $
    233
    
    
    $
    234Comparable store sales change (4)
    
    
    (1.0
    )%
    
    
    1.2
    %
    
    
    (3.5
    )%
    
    
    (2.4
    )%
    
    
    (1.1
    )%
 
 
 (1)
    
    Fiscal 2000 contains 53 weeks; all other years contain 52 weeks.(2)
    
    Includes all stores operating at the end of the fiscal year.(3)
    
    Presented in whole dollars and excludes leased departments and stores not operated
during the entire fiscal period.(4)
    
    A store or leased department is considered to be comparable if it has been opened
14 months at the beginning of the fiscal year. For fiscal year 2000, comparable store
sales are computed using like 52-week periods. 19




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
 RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
 If we are unable to retain current and attract new customers to our Value City business segment,
our results of operations, financial condition and business could be adversely affected.
  We may be unable to open all the DSW and Filenes Basement stores contemplated by our growth
strategy on a timely basis, and new stores we open may not be profitable or may have an adverse
impact on the profitability of existing stores, any of which could have a material adverse affect
on our business, financial condition and results of operations.
  
    
    identify suitable markets and sites for new store locations;
    
    negotiate favorable lease terms;
    
    build-out or refurbish sites on a timely and effective basis;
    
    obtain sufficient levels of inventory to meet the needs of new stores;
    
    obtain sufficient financing and capital resources or generate sufficient cash flows from operations to fund growth;
    
    successfully open new DSW and Filenes Basement stores in regions of the United
States in which we currently have few or no stores;
    
    open new stores at costs not significantly greater than those anticipated;
    
    control the costs of other capital investments associated with store openings,
including, for example, those related to the expansion of distribution facilities;
    
    hire, train and retain qualified managers and store personnel; and
    
    successfully integrate new stores into our existing infrastructure, operations and
management and distribution systems or adapt such infrastructure, operations and
systems to accommodate our growth.
   20




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We rely on our good relationships with vendors to purchase brand name and designer merchandise at
favorable prices. If these relationships were to be impaired, we may not be able to obtain a
sufficient selection of merchandise at attractive prices, and we may not be able to respond
promptly to changing fashion trends, either of which could have a negative impact on our
competitive position, our business and financial performance.
  We may be unable to anticipate and respond to fashion trends and consumer preferences in the
markets in which we operate, which could adversely affect our business, financial condition and
results of operations.
  
    
    variations in local economic conditions, which could affect our customers discretionary spending;
    
    unanticipated fashion trends;
    
    our success in developing and maintaining vendor relationships that provide us
access to in-season merchandise at attractive prices;
    
    our success in distributing merchandise to our stores in an efficient manner; and
    
    changes in weather patterns, which in turn affect consumer preferences.
  Seasonal variability of operations.
  Our comparable store sales and quarterly financial performance may fluctuate for a variety of
reasons in addition to seasonal factors, which could result in a decline in the price of our common
shares.
  
    
    changes in our merchandising strategy;
    
    timing and concentration of new store openings and related pre-opening and other start-up costs;
    
    levels of pre-opening expenses associated with new stores;
    
    changes in our merchandise mix;
 21




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
    
    changes in and regional variations in demographic and population characteristics;
    
    timing of promotional events;
    
    actions by our competitors; and
    
    general United States economic conditions and, in particular, the retail sales environment.
  Our stock price may fluctuate significantly, which could negatively affect the trading of our
common shares.
  
    
    developments related to the proposed DSW IPO;
    
    quarterly variations in actual or anticipated operating results;
    
    changes by securities analysts in estimates regarding Retail Ventures;
    
    conditions in the retail industry;
    
    the condition of the stock market; and
    
    general economic conditions.
 Our failure to retain our existing senior management team and to continue to attract qualified new
personnel could adversely affect our business
  We may be unable to compete favorably in our highly competitive markets.
  A decline in general economic conditions, or the outbreak or escalation of war or terrorist acts,
could lead to reduced consumer demand for our merchandise
  22




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We rely on foreign sources for our merchandise, and our business is therefore subject to risks
associated with international trade.
  
    
    economic and political instability in countries where these suppliers are located;
    
    international hostilities or acts of war or terrorism affecting the United States
or foreign countries from which our merchandise is sourced;
    
    increases in shipping costs;
    
    transportation delays and interruptions, including as a result of increased
inspections of import shipments by domestic authorities;
    
    work stoppages;
    
    adverse fluctuations in currency exchange rates;
    
    laws of the United States affecting the importation of goods, including duties,
tariffs and quotas and other non-tariff barriers;
    
    expropriation or nationalization;
    
    changes in local government administration and governmental policies;
    
    changes in import duties or quotas;
    
    compliance with trade and foreign tax laws; and
    
    local business practices, including compliance with local laws and with domestic and international labor standards.
  We face significant security risks related to our electronic processing and transmission of
confidential customer information. On March 8, 2005, we announced the theft of credit card and
other purchase information of DSW customers, which could affect our reputation and business and
subject us to liability.
   23




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The proposed IPO of DSW may not be completed. If the IPO is not completed, net proceeds which we
would have received from the IPO will not be available to repay indebtedness, including
indebtedness to related parties. Additionally, we will have incurred expenses to date in
connection with the IPO for which we will not receive any benefits.
  CRITICAL ACCOUNTING POLICIES
    
    
    Revenue Recognition.Revenues from merchandise sales are recognized at the point
of sale and are net of returns and exclude sales tax. Revenue from gift cards is
deferred and is recognized upon redemption of the gift cards. Layaway sales are
recognized when the merchandise has been paid for in full.
    
    Cost of Sales and Merchandise Inventories.We use the retail method of
accounting for substantially all of our merchandise inventories. Merchandise
inventories are stated at the lower of cost, determined using the first-in,
first-out basis, or market, using the retail inventory method. The retail method
is widely used in the retail industry due to its practicality. Under the retail
inventory method, the valuation of inventories at cost and the resulting gross
margins are calculated by applying a calculated cost to retail ratio to the retail
value of inventories. The cost of the inventory reflected on our consolidated
balance sheet is decreased by charges to cost of sales at the time the retail value
of the inventory is lowered through the use of markdowns. Hence, earnings are
negatively impacted as merchandise is marked down prior to sale. Reserves to value
inventory at the lower of cost or market were $42.8 million and $34.2 million at
the end of fiscal 2004 and 2003, respectively.Inherent in the calculation of inventories are certain significant management
judgments and estimates including, setting the original merchandise retail value or
markon, markups of initial prices established, reduction of pricing due to customers
value perception or perceived value, known as markdowns, and estimates of losses
between
 24




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physical inventory counts or shrinkage, which, combined with the averaging process
within the retail method, can significantly impact the ending inventory valuation at
cost and the resulting gross margins.
    
    Asset Impairments and Long-lived Assets.We must periodically evaluate the
carrying amount of our long-lived assets, primarily property and equipment, and
finite life intangible assets when events and circumstances warrant such a review
to ascertain if any assets have been impaired. The carrying amount of a long-lived
asset is considered impaired when the carrying value of the asset exceeds the
expected future cash flows (undiscounted and without interest) from the asset. Our
reviews are conducted down at the lowest identifiable level, which include a store.
The impairment loss recognized is the excess of the carrying value, based on
discounted future cash flows, of the asset over its fair value. Should an
impairment loss be realized, it will be included in operating expenses.During fiscal 2004, fiscal 2003 and fiscal 2002, we recorded $2.9 million (including
the impairment of a capital lease of $1.2 million related to a store closing), $0.3
million and $0.6 million in charges, respectively, related to long-lived assets at
store operating units.During fiscal 2004 we recorded a non-cash charge of $11.7 million, $6.9 million net
of taxes, for the impairment of goodwill related to Filenes Basement. In fiscal
2002, we recorded a charge as a result of the implementation of SFAS 142, which
requires that goodwill no longer be amortized. The initial tests for goodwill
impairment, as of February 3, 2002, resulted in a non-cash charge of $3.4 million,
$2.1 million net of taxes, which is reported in our Consolidated Statement of
Operations as of February 1, 2003 in the caption Cumulative effect of accounting
change. Substantially all of the charge relates to goodwill associated with our
purchase of Mazels interest in VCM and is included in the net loss for the year
ended February 1, 2003.The balance of goodwill subject to goodwill annual testing at the end of the current
fiscal year was $25.9 million on the DSW segment.We believe at this time that the long-lived assets carrying values and useful lives
continue to be appropriate. To the extent these future projections or our strategies
change, the conclusion regarding impairment may differ from our current estimates.
    
    Self-insurance Reserves. We record estimates for certain health and welfare,
workers compensation and casualty insurance costs that are self-insured programs.
These estimates are based on actuarial assumptions and are subject to change based
on actual results. Should costs of certain health and welfare, workers compensation
and casualty insurance increase beyond what was anticipated, reserves recorded may
not be sufficient and to the extent actual results vary from assumptions, earnings
would be impacted.
 
 
    
    Pension. The obligations and related assets of defined benefit retirement plans
are presented in Note 6 of the Notes to Consolidated Financial Statements page F-18
of this Annual Report. Plan assets, which consist primarily of marketable equity
and debt instruments, are valued using market quotations. Plan obligations and the
annual pension expense are determined by independent actuaries and through the use
of a number of assumptions. Key assumptions in measuring the plan obligations
include the discount rate, the rate of salary increases and the estimated future
return on plan assets. In determining the discount rate, we utilize the yield on
fixed-income investments currently available with maturities corresponding to the
anticipated timing of the benefit payments. Salary increase assumptions are based
upon historical experience and anticipated future management actions. Asset returns
are based upon the anticipated average rate of earnings expected on the invested
funds of the plans. At January 29, 2005, the weighted-average actuarial assumption
of our plans was: discount rate 5.75%, assumed salary increases 4.0% and long-term
rate of return on plan assets 8.0%. To the extent actual results vary from
assumptions, earnings would be impacted.
 
 
    
    Customer Loyalty Program. We maintain a customer loyalty program for our DSW
stores in which customers receive a future discount on qualifying purchases. The
Reward Your Style program is designed to promote customer awareness and loyalty
plus provide the Company with the ability to communicate with our customers and
enhance our understanding of their spending trends. While the program develops
customer loyalty, it also provides DSW with valuable market intelligence and
purchasing information regarding its most frequent customers. Upon reaching the
target level, customers may redeem these discounts on a future purchase.
Generally, these future discounts must be redeemed within six months. We accrue
the estimated costs of the anticipated redemptions of the discount earned at the
time of the initial purchase and charge such costs to selling, general and
administrative expense based on historical experience. The estimates of the costs
associated with the loyalty program require us to make assumptions related to
customer purchase levels and redemption rates. The accrued liability as of January
29, 2005 and January 31, 2004 was $4.5 million and $3.0 million, respectively. To
the extent assumptions of purchases and redemption rates vary from actual results,
earnings would be impacted.
 25




---



##### 



During the third quarter of 2004, Filenes Basement implemented a limited-time
customer rewards program that ended in December 2004. The rewards program provided
qualifying customers with Filenes Basement gift cards in various denominations
based on their cumulative spending during the program period. Filenes Basement had
an accrued liability related to the rewards program of $0.8 million at January 29,
2005. Filenes Basement plans to utilize this customer database for direct mail and
e-mail marketing efforts during fiscal 2005.
    
    Income Taxes. We are required to determine the aggregate amount of income tax
expense to accrue and the amount which will be currently payable based upon tax
statutes of each jurisdiction we do business in. In making these estimates, we
adjust income based on a determination of generally accepted accounting principles
for items that are treated differently by the applicable taxing authorities.
Deferred tax assets and liabilities, as a result of these differences, are
reflected on our balance sheet for temporary differences that will reverse in
subsequent years. A valuation allowance is established against deferred tax assets
when it is more likely than not that some or all of the deferred tax assets will
not be realized. If our management had made these determinations on a different
basis, our tax expense, assets and liabilities could be different. During fiscal
2004, we established a valuation reserve for deferred income tax assets of $3.2
million for carry forwards related to state net operating losses. During fiscal
2003, we established a valuation reserve for deferred income tax assets of $1.5
million for charitable contribution carry forwards.
 
 RESTATEMENT OF FINANCIAL STATEMENTS
 
 
  
 
  
 
 As
filed with the SEC on April 14, 2005 and May 12, 2005
 
 
  
 
  
 RESULTS OF OPERATIONS
  26




---



##### 



For the Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/0352 Weeks
    
    
    52 Weeks
    
    
    52 WeeksNet sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    (60.7
    )
    
    
    (61.4
    )
    
    
    (61.8
    )Gross profit
    
    
    39.3
    
    
    
    38.6
    
    
    
    38.2Selling, general and administrative expenses
    
    
    (39.3
    )
    
    
    (37.6
    )
    
    
    (37.0
    )License fees and other income
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.3Operating profit
    
    
    0.2
    
    
    
    1.2
    
    
    
    1.5Interest expense, net
    
    
    (1.4
    )
    
    
    (1.4
    )
    
    
    (1.6
    )Loss before
cumulative effect of accounting change and income taxes
    
    
    (1.2
    )
    
    
    (0.2
    )
    
    
    (0.1
    )Benefit for income taxes
    
    
    0.5
    
    
    
    
    
    
    
    Loss before cumulative effect of accounting change
    
    
    (0.7
    )
    
    
    (0.2
    )
    
    
    (0.1
    )Cumulative effect of accounting change, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Net loss
    
    
    (0.7
    )%
    
    
    (0.2
    )%
    
    
    (0.2
    )%
 Fiscal Year Ended January 29, 2005 (fiscal 2004) Compared To Fiscal Year Ended January 31, 2004 (fiscal 2003)
 Sales.
 2004
    
    
    2003Value City Department Stores
    
    
    (4.9
    )%
    
    
    (0.7
    )%DSW
    
    
    4.8
    %
    
    
    5.6
    %Filenes Basement
    
    
    5.0
    %
    
    
    2.6
    %Total
    
    
    (1.0
    )%
    
    
    1.2
    %
    Gross profit.
   27




---



##### 



2004
    
    
    2003Value City Department Stores
    
    
    38.0
    %
    
    
    38.4
    %DSW
    
    
    43.3
    %
    
    
    41.0
    %Filenes Basement
    
    
    34.2
    %
    
    
    33.4
    %Total
    
    
    39.3
    %
    
    
    38.6
    %
 SG&A.
  2004
    
    
    2003Value City Department Stores
    
    
    40.1
    %
    
    
    38.1
    %DSW
    
    
    37.5
    %
    
    
    37.7
    %Filenes Basement
    
    
    40.8
    %
    
    
    34.9
    %Total
    
    
    39.3
    %
    
    
    37.6
    %
 License fees and other income.
 Operating profit.
 Interest expense.
 Fiscal Year Ended January 31, 2004 (fiscal 2003) Compared To Fiscal Year Ended February 1, 2003 (fiscal 2002)
 Sales.
 2003
    
    
    2002Value City Department Stores
    
    
    (0.7
    )%
    
    
    (5.1
    )%DSW
    
    
    5.6
    %
    
    
    (0.1
    )%Filenes Basement
    
    
    2.6
    %
    
    
    0.3
    %Total
    
    
    1.2
    %
    
    
    (3.5
    )%
  28




---



##### 



Gross profit.
 2003
    
    
    2002Value City Department Stores
    
    
    38.4
    %
    
    
    38.9
    %DSW
    
    
    41.0
    %
    
    
    39.4
    %Filenes Basement
    
    
    33.4
    %
    
    
    32.2
    %Total
    
    
    38.6
    %
    
    
    38.2
    %
 SG&A.
 2003
    
    
    2002Value City Department Stores
    
    
    38.1
    %
    
    
    37.6
    %DSW
    
    
    37.7
    %
    
    
    37.1
    %Filenes Basement
    
    
    34.9
    %
    
    
    33.7
    %Total
    
    
    37.6
    %
    
    
    37.0
    %
 License fees and other income.
 Operating profit.
 Interest expense.
 Seasonality
  Fiscal Year
  29




---



##### 



Income Taxes
   Adoption of Accounting Standards
        Inflation
  30




---



##### 



Liquidity and Capital Resources
  
  
    $350 Million Revolving Credit Facility
   $100 Million Term Loans  Related Parties
  31




---



##### 



$75 Million Senior Subordinated Convertible Loan  Related Parties
    Other Debt Items  Financing and DSW IPO
    32




---



##### 



Contractual Obligations
    Payments due by PeriodNoLess Than
    
    
    1-3
    
    
    3-5
    
    
    More Than
    
    
    ExpirationContractual Obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years
    
    
    DateLong-term debt
    
    $
    315,021
    
    
    $
    21
    
    
    $
    240,000
    
    
    $
    75,000
    
    
    
    
    
    
    
    Capital lease and operating lease
obligations(1)
    
    
    1,402,169
    
    
    
    156,237
    
    
    
    301,937
    
    
    
    268,007
    
    
    $
    675,988
    
    
    
    Pension benefit obligations
    
    
    2,450
    
    
    
    2,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction commitments(2)
    
    
    1,391
    
    
    
    1,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations(3)
    
    
    37,507
    
    
    
    8,444
    
    
    
    17,693
    
    
    
    7,387
    
    
    
    3,388
    
    
    $
    595Total
    
    $
    1,758,538
    
    
    $
    168,543
    
    
    $
    559,630
    
    
    $
    350,394
    
    
    $
    679,376
    
    
    $
    595
 1.
    
    Capital and operating leases require us, as part of the lease, to pay for common area
maintenance and real estate taxes. In fiscal 2004, the common area maintenance and real
estate taxes represented 31.9% of the required lease payment. These costs vary year by
year and based almost entirely on actual costs incurred by the landlord and as such are not
included in the lease obligations presented above.2.
    
    Construction commitments include capital items to be purchased for projects that were
under construction, or for which a lease had been signed, as of January 29, 2005.3.
    
    Many of our purchase commitments are cancelable by us without payment or penalty, and
we have excluded such commitments, along with all associate employment and intercompany
commitments.
 33




---



##### 



Off-Balance Sheet Arrangements
  
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
    
 ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES.
 Evaluation of Disclosure Controls and Procedures
 
   
 
  
 34




---



##### 



Managements
Report on Internal Control over Financial Reporting (as revised)
 
   
 Internal Control  Integrated Framework
    
 35




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 Internal ControlIntegrated
Framework
 
 
  
 
  
 
  
 
  
 
  
 
 Internal ControlIntegrated Framework
 
 36




---



##### 



Internal ControlIntegrated Framework
 
 
 Goodwill and other Intangible Assets
 
 
 /s/ Deloitte & Touche LLP
 
 
 
 
 37




---



##### 



Changes in Internal Control over Financial Reporting
 
  
 
  
 
 ITEM 9B.
    
    OTHER INFORMATION.
  38




---



##### 



PART III
 
 ITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 Executive Officers
  Heywood Wilansky
 James A. McGrady
 Julia A. Davis
 Steven E. Miller
 Audit Committee Financial Expert
   Code of Ethics and Corporate Governance Information
 www.retailventuresinc.com www.retailventuresinc.com
 www.retailventuresinc.com
 39




---



##### 



Other
 ELECTION
OF DIRECTORS, OTHER DIRECTOR INFORMATION, COMMITTEES OF DIRECTORS AND CORPORATE GOVERNANCE
INFORMATION
 
 ITEM 11.
    
    EXECUTIVE COMPENSATION
 COMPENSATION OF MANAGEMENT OTHER DIRECTOR INFORMATION COMMITTEES OF DIRECTORS AND CORPORATE
GOVERNANCE INFORMATION  GENERAL
 
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS
 SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, COMPENSATION OF MANAGEMENT  EQUITY
COMPENSATION PLAN TABLE
 
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
 
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
 AUDIT AND
OTHER SERVICE FEES
 40




---



##### 



PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
 15(a)(1) Financial Statements
 
  
 
 Page inForm 10-KReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets at January 29, 2005 and January 31, 2004
    
    
    F-2Consolidated Statements of Operations for the years ended
January 29, 2005, January 31, 2004 and February 1, 2003
    
    
    F-3Consolidated Statements of Shareholders Equity for the years ended
January 29, 2005, January 31, 2004 and February 1, 2003
    
    
    F-4Consolidated Statements of Cash Flows for the years ended
January 29, 2005, January 31, 2004 and February 1, 2003
    
    
    F-5Notes to Consolidated Financial Statements
    
    
    F-615(a)(2) Consolidated Financial Statement Schedules:The schedule
listed below is filed as part of this Form 10-K/A:Schedule II. Valuation and Qualifying Accounts
    
    
    S-1
 
  15(a)(3) and (b) Exhibits:
  15(c) Additional Financial Statement Schedules:
  41




---



##### 



SIGNATURES
  
 RETAIL VENTURES, INC.April 11, 2006
    By:
    /s/ James A. McGradyJames A. McGrady, Executive Vice
President, Chief Financial Officer, Treasurer and Secretary 
  
 
 42




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
  
 
  
 
  
 
 Internal ControlIntegrated Framework
 
 
 Goodwill and Other Intangible Assets
 
 
  
 
  
 
 
 F-1




---



##### 



RETAIL VENTURES, INC.
CONSOLIDATED BALANCE SHEETS
 (in thousands, except share amounts)  ASSETS
 
 1/29/05
    
    
    1/31/04Restated*
    
    
    Restated*Current assets:Cash and equivalents
    
    $
    29,258
    
    
    $
    14,226Accounts receivable, net
    
    
    7,455
    
    
    
    8,969Receivables from related parties
    
    
    501
    
    
    
    137Inventories
    
    
    473,051
    
    
    
    420,338Prepaid expenses and other assets
    
    
    21,112
    
    
    
    10,651Deferred income taxes
    
    
    62,355
    
    
    
    42,929Total current assets
    
    
    593,732
    
    
    
    497,250Property and equipment, at cost:Furniture, fixtures and equipment
    
    
    321,513
    
    
    
    293,081Leasehold improvements
    
    
    268,423
    
    
    
    234,719Land and building
    
    
    801
    
    
    
    801Capital leases
    
    
    36,265
    
    
    
    37,423627,002
    
    
    
    566,024Accumulated depreciation and amortization
    
    
    (346,548
    )
    
    
    (315,210
    )Property and equipment, net
    
    
    280,454
    
    
    
    250,814Goodwill
    
    
    25,899
    
    
    
    37,619Tradenames and other intangibles, net
    
    
    43,460
    
    
    
    43,638Deferred income taxes and other assets
    
    
    32,881
    
    
    
    31,271Total assets
    
    $
    976,426
    
    
    $
    860,592LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    202,578
    
    
    $
    147,771Accounts payable to related parties
    
    
    5,428
    
    
    
    3,335Accrued expenses:Compensation
    
    
    38,526
    
    
    
    31,777Taxes
    
    
    48,666
    
    
    
    47,254Other
    
    
    64,355
    
    
    
    38,707Current maturities of long-term obligations
    
    
    611
    
    
    
    741Total current liabilities
    
    
    360,164
    
    
    
    269,585Long-term obligations, net of current maturitiesNon-related
    
    
    169,134
    
    
    
    154,724Related parties
    
    
    174,241
    
    
    
    172,216Other noncurrent liabilities
    
    
    87,710
    
    
    
    59,417Commitments and contingenciesShareholders equity:Common shares, without par value; authorized
160,000,000 shares; issued, including treasury shares,
34,110,707 shares and 33,990,707 shares, respectively
    
    
    143,477
    
    
    
    143,077Warrants
    
    
    6,074
    
    
    
    6,074Retained earnings
    
    
    42,756
    
    
    
    62,204Deferred compensation expense, net
    
    
    (3
    )
    
    
    (635
    )Treasury shares at cost, 7,551 shares
    
    
    (59
    )
    
    
    (59
    )Accumulated other comprehensive loss
    
    
    (7,068
    )
    
    
    (6,011
    )Total shareholders equity
    
    
    185,177
    
    
    
    204,650Total liabilities and shareholders equity
    
    $
    976,426
    
    
    $
    860,592
 
 *
    
    See Note 4.The accompanying notes are an integral part of the consolidated financial statements. F-2




---



##### 



RETAIL VENTURES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 For the
    
    
    For the
    
    
    For theYear Ended
    
    
    Year Ended
    
    
    Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/0352 Weeks
    
    
    52 Weeks
    
    
    52 WeeksRestated*
    
    
    Restated*Net sales
    
    $
    2,739,631
    
    
    $
    2,594,206
    
    
    $
    2,450,719Cost of sales
    
    
    (1,663,215
    )
    
    
    (1,593,214
    )
    
    
    (1,514,629
    )Gross profit
    
    
    1,076,416
    
    
    
    1,000,992
    
    
    
    936,090Selling, general and administrative expenses
    
    
    (1,076,445
    )
    
    
    (974,944
    )
    
    
    (906,789
    )License fees and other income
    
    
    6,714
    
    
    
    5,610
    
    
    
    7,405Operating profit
    
    
    6,685
    
    
    
    31,658
    
    
    
    36,706Interest expense, net:Non-related
    
    
    (12,820
    )
    
    
    (12,025
    )
    
    
    (20,040
    )Related parties
    
    
    (25,741
    )
    
    
    (26,570
    )
    
    
    (19,348
    )Loss before cumulative effect of accounting change
and income taxes
    
    
    (31,876
    )
    
    
    (6,937
    )
    
    
    (2,682
    )Benefit for income taxes
    
    
    12,428
    
    
    
    1,718
    
    
    
    325Loss before cumulative effect of accounting change
    
    
    (19,448
    )
    
    
    (5,219
    )
    
    
    (2,357
    )Cumulative effect of accounting change, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (2,080
    )Net loss
    
    $
    (19,448
    )
    
    $
    (5,219
    )
    
    $
    (4,437
    )Basic and diluted loss per share:Loss before cumulative effect of accounting change
    
    $
    (0.57
    )
    
    $
    (0.15
    )
    
    $
    (0.07
    )Cumulative effect of accounting change, net of income taxes
    
    
    
    
    
    
    
    
    
    
    (0.06
    )Net loss
    
    $
    (0.57
    )
    
    $
    (0.15
    )
    
    $
    (0.13
    )Shares used in per share calculations:Basic
    
    
    33,956
    
    
    
    33,753
    
    
    
    33,665Diluted
    
    
    33,956
    
    
    
    33,753
    
    
    
    33,665
 See Note 4.The accompanying notes are an integral part of the consolidated financial statements. F-3




---



##### 



RETAIL VENTURES, INC  CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 
 
 
 Number of SharesAccumulatedCommon
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred
    
    
    
    
    
    
    OtherCommon
    
    
    Shares
    
    
    Common
    
    
    
    
    
    
    Retained
    
    
    Compensation
    
    
    Treasury
    
    
    ComprehensiveShares
    
    
    in Treasury
    
    
    Shares
    
    
    Warrants
    
    
    Earnings
    
    
    Expense
    
    
    Shares
    
    
    Loss
    
    
    TotalBalances
at February 2, 2002
as previously reported
    
    
    34,228
    
    
    
    8
    
    
    $
    145,772
    
    
    
    
    
    
    $
    79,397
    
    
    $
    (4,150
    )
    
    $
    (59
    )
    
    $
    (3,566
    )
    
    $
    217,394Adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,537
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,537
    )Balance, February 2, 2002
(as restated)*
    
    
    34,228
    
    
    
    8
    
    
    $
    145,772
    
    
    
    
    
    
    $
    71,860
    
    
    $
    (4,150
    )
    
    $
    (59
    )
    
    $
    (3,566
    )
    
    $
    209,857Net loss (as restated)*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,437
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,437
    )Net unrealized gain on derivative
financial instruments, net of
income tax provision of $1,316
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,974
    
    
    
    1,974Minimum pension liability, net of
income tax benefit of $2,819
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,228
    )
    
    
    (4,228
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,691
    )Warrants issued
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,074
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,074Net issuance/forfeitures of
restricted shares
    
    
    (315
    )
    
    
    
    
    
    
    (2,589
    )
    
    
    
    
    
    
    
    
    
    
    2,589Amortization of deferred
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    580
    
    
    
    
    
    
    
    
    
    
    
    580Balance, February 1, 2003
(as restated)*
    
    
    33,913
    
    
    
    8
    
    
    $
    143,183
    
    
    $
    6,074
    
    
    $
    67,423
    
    
    $
    (981
    )
    
    $
    (59
    )
    
    $
    (5,820
    )
    
    $
    209,820Net loss (as restated)*
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,219
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,219
    )Net unrealized gain on derivative
financial instruments, net of
income tax provision of $413
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    620
    
    
    
    620Minimum pension liability, net
of income tax benefit of $541
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (811
    )
    
    
    (811
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,410
    )Exercise of stock options
    
    
    20
    
    
    
    
    
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60Net issuance/forfeitures of
restricted shares
    
    
    58
    
    
    
    
    
    
    
    (166
    )
    
    
    
    
    
    
    
    
    
    
    166
    
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    180
    
    
    
    
    
    
    
    
    
    
    
    180Balance, January 31, 2004
(as restated)*
    
    
    33,991
    
    
    
    8
    
    
    $
    143,077
    
    
    $
    6,074
    
    
    $
    62,204
    
    
    $
    (635
    )
    
    $
    (59
    )
    
    $
    (6,011
    )
    
    $
    204,650Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,448
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,448
    )Minimum pension liability, net
of income tax benefit of $753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,057
    )
    
    
    (1,057
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,505
    )Exercise of stock options
    
    
    136
    
    
    
    
    
    
    
    504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    504Net forfeitures of
restricted shares
    
    
    (16
    )
    
    
    
    
    
    
    (104
    )
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    528
    
    
    
    
    
    
    
    
    
    
    
    528Balance,
January 29, 2005 (as restated)*
    
    
    34,111
    
    
    
    8
    
    
    $
    143,477
    
    
    $
    6,074
    
    
    $
    42,756
    
    
    $
    (3
    )
    
    $
    (59
    )
    
    $
    (7,068
    )
    
    $
    185,177
 
 *
    
    See Note 4.The accompanying notes are an integral part of the consolidated financial statements. F-4




---



##### 



RETAIL VENTURES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Year
    
    
    Year
    
    
    YearEnded
    
    
    Ended
    
    
    Ended1/29/05
    
    
    1/31/04
    
    
    2/1/0352 Weeks
    
    
    52 Weeks
    
    
    52 WeeksRestated*
    
    
    Restated*Cash flows from operating activities:Net loss
    
    $
    (19,448
    )
    
    $
    (5,219
    )
    
    $
    (4,437
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    2,080Amortization of debt issuance costs and discount on debt
    
    
    5,380
    
    
    
    6,055
    
    
    
    8,492Amortization of deferred compensation
    
    
    528
    
    
    
    180
    
    
    
    580Depreciation and amortization
    
    
    56,111
    
    
    
    53,432
    
    
    
    53,656Deferred income taxes and other noncurrent liabilities
    
    
    (8,264
    )
    
    
    1,761
    
    
    
    8,587Loss on disposal of assets
    
    
    120
    
    
    
    1,282
    
    
    
    3,021Impairment charges
    
    
    14,596
    
    
    
    312
    
    
    
    582Change in working capital, assets and liabilities:Receivables
    
    
    1,150
    
    
    
    2,493
    
    
    
    (4,044
    )Inventories
    
    
    (52,713
    )
    
    
    (30,513
    )
    
    
    7,005Prepaid expenses and other assets
    
    
    (12,013
    )
    
    
    11,546
    
    
    
    (432
    )Accounts payable
    
    
    56,900
    
    
    
    (13,931
    )
    
    
    6,264Proceeds from lease incentives
    
    
    13,099
    
    
    
    7,094
    
    
    
    9,859Accrued expenses
    
    
    33,042
    
    
    
    (22,885
    )
    
    
    6,319Net cash provided by operating activities
    
    
    88,488
    
    
    
    11,607
    
    
    
    97,532Cash flows from investing activities:Capital expenditures
    
    
    (83,855
    )
    
    
    (68,701
    )
    
    
    (41,784
    )Proceeds from sale of assets
    
    
    119
    
    
    
    43
    
    
    
    184Tradename acquisitions
    
    
    (4,066
    )
    
    
    
    
    
    
    Other assets
    
    
    
    
    
    
    (25
    )
    
    
    Net cash used in investing activities
    
    
    (87,802
    )
    
    
    (68,683
    )
    
    
    (41,600
    )Cash flows from financing activities:Principal payments of long-term obligations:Related party note
    
    
    
    
    
    
    
    
    
    
    (20,000
    )Capital lease obligations and other debt
    
    
    (720
    )
    
    
    (817
    )
    
    
    (583
    )Proceeds from related party note
    
    
    
    
    
    
    
    
    
    
    100,000Net increase (decrease) in revolving credit facility
    
    
    15,000
    
    
    
    61,000
    
    
    
    (147,000
    )Proceeds from issuance of common shares
    
    
    504
    
    
    
    60
    
    
    
    Debt issuance costs
    
    
    (438
    )
    
    
    
    
    
    
    (13,205
    )Net cash provided by (used in) financing activities
    
    
    14,346
    
    
    
    60,243
    
    
    
    (80,788
    )Net increase (decrease) in cash and equivalents
    
    
    15,032
    
    
    
    3,167
    
    
    
    (24,856
    )Cash and equivalents, beginning of year
    
    
    14,226
    
    
    
    11,059
    
    
    
    35,915Cash and equivalents, end of year
    
    $
    29,258
    
    
    $
    14,226
    
    
    $
    11,059
 *
    
    See Note 4.The accompanying notes are an integral part of the consolidated financial statements. F-5




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 1.
    
    BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBusiness OperationsRetail Ventures, Inc. and its wholly-owned subsidiaries are herein referred to collectively
as the Company. The Company operates three segments. Value City Department Stores (Value
City) and Filenes Basement, Inc. (Filenes Basement) segments operate full-line,
off-price department stores. DSW Inc. (DSW) segment sells better-branded off-price shoes
and accessories. As of January 29, 2005, there were a total of 116 Value City stores located
principally in the Midwestern, Eastern and Southern states, 172 DSW stores located throughout
the United States and 26 Filenes Basement stores located primarily in major metropolitan
areas. DSW also operates leased shoe departments pursuant to supply arrangements, for 202
locations for other non-related retailers in the United States.In October 2003, the Company reorganized its corporate structure into a holding company form
whereby Retail Ventures, Inc., an Ohio corporation, became the successor issuer to Value City
Department Stores, Inc. As a result of the reorganization, Value City Department Stores, Inc.
became a wholly-owned subsidiary of Retail Ventures, Inc.In connection with the reorganization, holders of common shares of Value City became holders
of an identical number of common shares of Retail Ventures, Inc. The reorganization was
affected by a merger which was previously approved by the Companys shareholders. Since
October 2003, the Companys common shares have been listed for trading under the ticker
symbol RVI on the New York Stock Exchange.In December 2004, the Company completed another corporate reorganization whereby Value City
Department Stores, Inc. merged with and into Value City, another wholly-owned subsidiary of
Retail Ventures. In turn, Value City transferred all the issued and outstanding shares of DSW
and Filenes Basement to Retail Ventures in exchange for a promissory note.Principles of ConsolidationThe consolidated financial statements include the accounts of Retail Ventures, Inc. and its
wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in
consolidation. To facilitate comparisons with the current year, certain reclassifications have
been made to prior year financial statements and notes to conform to the current year
presentation.Fiscal YearThe Companys fiscal year ends on the Saturday nearest to January 31. Fiscal year 2004, 2003
and 2002 each contain 52 weeks. Unless otherwise stated, references to years in this report
relate to fiscal years rather than calendar years.Use of EstimatesThe preparation of financial statements in conformity with generally accepted accounting
principles 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
date of the financial statements and reported amounts of revenues and expenses during the
reporting period. Significant estimates are required as a part of inventory valuation,
depreciation, amortization, recoverability of long-lived assets, establishing reserves for
insurance and calculating retirement benefits. Although these estimates are based on
managements knowledge of current events and actions it may undertake in the future, actual
results could differ from these estimates.Cash and EquivalentsCash and equivalents represent cash, highly liquid investments with original maturities of
three months or less at the date of purchase and credit card receivables which generally
settle within three days to be cash equivalents.Accounts Receivable, NetAccounts receivable is classified as current assets because the average collection period is
generally less than one year. The carrying amount approximates fair value because of the
relatively short average maturity of the instruments
 F-6




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 and no significant change in interest rates. The allowance for doubtful accounts was $0.8
million for each of the fiscal years 2004 and 2003.InventoriesMerchandise inventories are stated at the lower of cost, determined using the first-in,
first-out basis, or market using the retail inventory method. The retail method is widely
used in the retail industry due to its practicality. Under the retail inventory method, the
valuation of inventories at cost and the resulting gross margins are calculated by applying a
calculated cost to retail ratio to the retail value of inventories. The cost of the inventory
reflected on the consolidated balance sheet is decreased by charges to cost of sales at the
time the retail value of the inventory is lowered through the use of markdowns. Hence,
earnings are negatively impacted as the merchandise is marked down prior to sale. Reserves to
value inventory at the lower of cost or market were $42.8 million and $34.2 million at the end
of fiscal year 2004 and 2003, respectively.Inherent in the calculation of inventories are certain significant management judgments and
estimates, including setting the original merchandise retail value or mark-on, markups of
initial prices established, reductions in prices due to customers perception of value (known
as markdowns), and estimates of losses between physical inventory counts, or shrinkage, which,
combined with the averaging process within the retail inventory method, can significantly
impact the ending inventory valuation at cost and the resulting gross profit.Pre-Opening ExpensesPre-opening costs associated with the opening of new stores are expensed as incurred for
stores opened during the fiscal year and those under construction and to be opened in future
fiscal years. Pre-opening costs expensed were $14.4 million, $5.9 million and $4.5 million for
fiscal 2004, 2003 and 2002, respectively. During these respective periods we opened 31 DSW and
5 Filenes Basement stores in 2004, 16 DSW and one Filenes Basement store in 2003 and 22 DSW
and one Filenes store in 2002.Property and EquipmentDepreciation and amortization are recognized principally on the straight-line method in
amounts adequate to amortize costs over the estimated useful lives of the respective assets.
Leasehold improvements are amortized over the shorter of their useful lives (10 years) or
initial lease term. The estimated useful lives by class of asset are:
 Buildings
    
    31 yearsFurniture, fixtures and equipment
    
    
    3 to 10 years
 Asset Impairment and Long-Lived AssetsThe Company must periodically evaluate the carrying amount of its long-lived assets, primarily
property and equipment, and finite life intangible assets when events and circumstances
warrant such a review to ascertain if any assets have been impaired. The carrying amount of a
long-lived asset is considered impaired when the carrying value of the asset exceeds the
expected future cash flows (undiscounted and without interest) from the asset. The Company
reviews are conducted down at the lowest identifiable level, which include a store. The
impairment loss recognized is the excess of the carrying value, based on discounted future
cash flows, of the asset over its fair value. The impairment loss is included in selling,
general and administrative expense. Based on recent analysis, the Company expensed $2.9
million (including the impairment of a capital lease of $1.2 million related to a store
closing), $0.3 million and $0.6 million in fiscal year 2004, 2003 and 2002, respectively, of
identified stores assets where the recorded value could not be supported by cash flows. The
impairment charges in fiscal 2004 of $2.0 million and $0.9 million were recorded on the Value
City and DSW segments, respectively.GoodwillGoodwill represents the excess cost over the estimated fair values of net assets including
identifiable intangible assets of businesses acquired. The Company, as a result of adoption of
Statement of Financial Accounting Standards (SFAS) No. 142, will no longer record goodwill
amortization.
 F-7




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 The initial result of testing for goodwill for impairment in accordance with SFAS 142, as of
February 3, 2002, was a non-cash charge of $3.4 million, $2.1 million net of taxes, which is
reported in Consolidated Statement of Operations as of February 1, 2003 in the caption
Cumulative effect of accounting change. Substantially all of the charge relates to goodwill
associated with the Companys purchase of Mazels interest in VCM and is included in the net
loss for the year ended February 1, 2003.During fiscal 2004, based on the results of the annual impairment tests in accordance with
SFAS 142, the company recorded a non-cash impairment charge relating to the goodwill on
Filenes Basement of $11.7 million ($6.9 million, net of taxes). At January 29, 2005, the
Company had $25.9 million of goodwill subject to annual testing.Tradenames and Other Intangible AssetsTradenames and other intangibles assets are comprised of values assigned to names the Company
acquired and leases acquired. The accumulated amortization for these assets is $22.0 million
and $17.8 million at January 29, 2005 and January 31, 2004, respectively. During fiscal 2004,
the Company acquired the Leslie Fay tradename for approximately $4.1 million. The
anticipated life of the amortizing asset has been initially assigned 15 years. The asset
value and accumulated amortization of intangible assets is as follows (in thousands):
 FilenesValue City
    
    
    DSW
    
    
    Basement
    
    
    TotalAs of January 29, 2005Tradenames:Gross amount
    
    $
    5,211
    
    
    $
    12,750
    
    
    $
    9,900
    
    
    $
    27,861Accumulated amortization
    
    
    (783
    )
    
    
    (5,738
    )
    
    
    (3,245
    )
    
    
    (9,766
    )Useful life (in years)
    
    
    15
    
    
    
    15
    
    
    
    15Favorable lease values:Gross amount
    
    $
    14,417
    
    
    $
    140
    
    
    $
    23,057
    
    
    $
    37,614Accumulated amortization
    
    
    (5,115
    )
    
    
    (73
    )
    
    
    (7,061
    )
    
    
    (12,249
    )Average useful life (in years)
    
    
    25
    
    
    
    14
    
    
    
    21As of January 31, 2004Tradenames:Gross amount
    
    $
    1,145
    
    
    $
    12,750
    
    
    $
    9,900
    
    
    $
    23,795Accumulated amortization
    
    
    (433
    )
    
    
    (4,887
    )
    
    
    (2,585
    )
    
    
    (7,905
    )Useful life (in years)
    
    
    15
    
    
    
    15
    
    
    
    15Favorable lease values:Gross amount
    
    $
    14,417
    
    
    $
    140
    
    
    $
    23,057
    
    
    $
    37,614Accumulated amortization
    
    
    (4,513
    )
    
    
    (60
    )
    
    
    (5,293
    )
    
    
    (9,866
    )Average useful life (in years)
    
    
    25
    
    
    
    14
    
    
    
    21
 Aggregate amortization expense for the current and each of the five succeeding years is as follows (in thousands):
 FilenesFiscal Year
    
    Value City
    
    
    DSW
    
    
    Basement
    
    
    Total2004
    
    
    952
    
    
    
    864
    
    
    
    2,428
    
    
    
    4,2442005
    
    
    952
    
    
    
    864
    
    
    
    2,428
    
    
    
    4,2442006
    
    
    952
    
    
    
    861
    
    
    
    2,428
    
    
    
    4,2412007
    
    
    952
    
    
    
    854
    
    
    
    2,428
    
    
    
    4,2342008
    
    
    948
    
    
    
    854
    
    
    
    2,428
    
    
    
    4,2302009
    
    
    938
    
    
    
    854
    
    
    
    2,428
    
    
    
    4,220
 F-8




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Vendor AllowancesVendor allowances include allowances, rebates and cooperative advertising funds received from
vendors. These funds are determined for each fiscal year and the majority are based on various
quantitative contract terms. Amounts expected to be received from vendors relating to the
purchase of merchandise inventories are recognized as a reduction of cost of goods sold as the
merchandise is sold. Amounts that represent a reimbursement of costs incurred, such as
advertising, are recorded as a reduction to the related expense in the period that the related
expense is incurred. The Company records an estimate of earned allowances based on the latest
projected purchase volumes and advertising forecasts. On an annual basis, the Company confirms
earned allowances with vendors to determine the amounts are recorded in accordance with the
terms of the contract. At January 29, 2005 and January 31, 2004, the Company had a vendor
allowance balance of less than $100,000.Revenue RecognitionRevenues from merchandise sales are recognized at the point of sale, net of returns and
exclude sales tax. Revenue from gift cards is deferred and the revenue is recognized upon
redemption of the gift cards. Layaway sales are recognized when the merchandise has been paid
for in full.Customer Loyalty ProgramThe Company maintains a customer loyalty program for its DSW stores in which customers receive
a future discount on qualifying purchases. The Reward Your Style (RYS) is designed to
promote customer awareness and loyalty, provide the Company with the ability to communicate
with its customers and enhance the Companys understanding of their spending trends. While
the program develops customer loyalty, it also provides DSW with valuable market intelligence
and purchasing information regarding its most frequent customers. Upon reaching the
target level, customers may redeem these discounts on a future purchase. Generally, these
future discounts must be redeemed within six months. The Company accrues the estimated costs
of the anticipated redemptions of the discount earned at the time of the initial purchase and
charges such costs to selling, general and administrative expense based on historical
experience. The estimates of the costs associated with the loyalty program require the
Company to make assumptions related to customer purchase levels and redemption rates. The
accrued liability as of January 29, 2005 and January 31, 2004 was $4.5 million and $3.0
million, respectively.During the third quarter of 2004, Filenes Basement implemented a limited-time customer
rewards program. The rewards program provided qualifying customers with a Filenes Basement
certificate in various denominations based on their cumulative spending during the program
period. Filenes Basement had an accrued liability related to the rewards program of $0.8
million at January 29, 2005. The Company plans to utilize this customer database for direct
mail and e-mail marketing efforts during fiscal 2005.Advertising ExpenseThe cost of advertising is expensed as incurred. During fiscal year 2004, 2003 and 2002,
advertising expense was $112.5 million, $110.8 million and $94.1 million, respectively.Derivative Financial InstrumentsThe Company utilizes interest rate swap agreements to establish long-term fixed rates
associated with borrowings. The Company does not hold or issue derivative financial
instruments for trading purposes. The Company does not have derivative financial instruments
that are held or issued and accounted for as hedges of anticipated transactions. Amounts due
to or from interest swap counter parties are recorded in interest expense in the period in
which they accrue. At January 29, 2005 and January 31, 2004, the Company had no outstanding
swap agreements.Earnings Per ShareBasic earnings per share is based on a simple weighted average of common shares outstanding.
Diluted earnings per share reflects the potential dilution of common shares, related to both
outstanding stock options, stock appreciation rights and warrants, calculated using the
treasury stock method and convertible debt calculated using the if-converted method. For the
years ended January 29, 2005, January 31, 2004 and February 1, 2003 all potentially dilutive
 F-9




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 instruments were anti-dilutive. The numerator for the calculation of basic and diluted
earnings per share is net loss. The denominator is the weighted average shares outstanding.Stock-Based CompensationThe Company has various stock-based employee compensation plans that are described more fully
in Note 9. The Company accounts for those plans in accordance with APB No. 25. Accounting For
Stock Issued to Employees, and related Interpretations. No stock-based employee compensation
cost is reflected in net loss, as no options granted under those plans had an exercise price
less than the market value of the underlying common stock on the date of the grant. The
following table illustrates the effect on net loss and loss per share if the Company had
applied the fair value recognition of SFAS 123, Accounting For Stock-Based Compensation.
 Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/03Net loss, as reported
    
    $
    (19,448
    )
    
    $
    (5,219
    )
    
    $
    (4,437
    )Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards
    
    
    (2,382
    )
    
    
    (5,341
    )
    
    
    (4,999
    )Pro forma net loss
    
    $
    (21,830
    )
    
    $
    (10,560
    )
    
    $
    (9,436
    )Earnings per share:Basic and diluted as reported
    
    $
    (0.57
    )
    
    $
    (0.15
    )
    
    $
    (0.13
    )Basic and diluted pro forma
    
    $
    (0.64
    )
    
    $
    (0.31
    )
    
    $
    (0.28
    )
 To determine the pro forma amounts, the fair value of each stock option has been estimated on
the date of grant using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in the fiscal year 2004, 2003 and 2002, respectively:
expected volatility of 72.5%, 71.1% and 83.4%; dividend yield of 0.0%; risk-free interest
rates of 4.1%, 4.3% and 2.6%; and, expected lives of 5.4, 8.3 and 7.6 years. The weighted
average fair value of options granted in the fiscal year 2004, 2003 and 2002 was $5.08, $1.49
and $2.54, respectively.Consistent with SFAS No. 123, pro-forma net loss and loss per share have not been calculated
for options granted prior to July 30, 1995. Pro forma disclosures may not be representative of
the actual results to be expected in future years.Comprehensive LossComprehensive loss is defined as the change in equity of a business enterprise during a period
from transactions and other events and circumstances from non-owner sources. It includes all
changes in equity during a period except those resulting from investments by owners and
distributions to owners. The difference between net loss for fiscal year 2003 and 2002
relates to the change in minimum pension liability and the net unrealized gain (loss) on
derivative financial instruments for cash flow hedges. The Company presents other
comprehensive loss in its consolidated statements of shareholders equity.Recent Accounting PronouncementsThe Financial Accounting Standards Board (FASB) periodically issues Statements of Financial
Accounting Standards (SFAS), some of which require implementation by a date falling within
or after the close of the fiscal year.In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest
Entities (FIN 46), which requires the consolidation of certain entities considered to be
variable interest entities (VIEs). An entity is considered to be a VIE when it has equity
investors who lack the characteristics of having a controlling financial interest, or its
capital is insufficient to permit it to finance its activities without additional subordinated
financial support. Consolidation of a VIE by an investor is required when it is determined
that the investor will absorb a majority of the VIEs expected losses or residual returns if
they occur. FIN 46 provides certain exceptions to these rules, relating to qualifying special
purpose entities (QSPEs) subject to the requirements of SFAS No. 140. Upon its
 F-10




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 original issuance, FIN 46 required that VIEs created after January 31, 2003 would be
consolidated immediately, while VIEs created prior to February 1, 2003 were to be consolidated
as of July 1, 2003.In October 2003, the FASB deferred the effective date for consolidation of VIEs created prior
to February 1, 2003 to December 31, 2003 for calendar year-end companies, with earlier
application encouraged.In December 2003, the FASB published a revision to FIN 46 (FIN 46R) to clarify some of the
provisions of the original interpretation and to exempt certain entities from its
requirements. FIN 46R provides special effective date provisions to enterprises that fully or
partially applied to FIN 46 prior to the issuance of the revised interpretation. In
particular, entities that have already adopted FIN 46 are not required to adopt FIN 46R until
the quarterly reporting period ended May 1, 2004. Adoption of the required sections of FIN 46,
as modified and interpreted, including the provisions of FIN 46R, did not have any effect on
the Companys consolidated financial statements or disclosures.In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150 requires that an issuer classify
a financial instrument that is within its scope as a liability (or an asset in some
circumstances), many of which were previously classified as equity. This statement is
effective for financial instruments entered into or modified after May 31, 2003 and for
pre-existing instruments as of the beginning of the first interim period beginning after June
15, 2003. Initial adoption of this accounting pronouncement did not have a material impact on
the Companys consolidated financial statements.The FASBs Emerging Issues Task Force (EITF) Issue No. 02-16, Accounting By A Customer
(Including A Reseller) For Cash Consideration Received From A Vendor addressed the accounting treatment
for vendor allowances. The adoption of EITF Issue No. 02-16 in 2003 did not have a material impact on the
Companys financial position or results of operations.In December 2004, the FASB issued SFAS No. 123 (revised 2004) (SFAS No. 123R), Share-Based
Payment. This statement revised SFAS No. 123, Accounting for Stock-Based Compensation, (SFAS
No. 123) and requires a fair value measurement of all stock-based payments to employees,
including grants of employee stock options and recognition of those expenses in the statements
of operations. This statement establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods and services and focuses on
accounting for transactions in which an entity obtains employee services in share-based
payment transactions. In addition, SFAS No. 123R will require the recognition of compensation
expense over the period during which an employee is required to provide service in exchange
for an award. The effective date of this standard is interim and annual periods beginning
after June 15, 2005. The Company is currently evaluating the impact of this statement and has
not yet determined the method of adoption under SFAS No. 123R and whether the adoption will
result in amounts that are similar to the pro forma disclosures required under SFAS No. 123.2.
    
    RELATED PARTY TRANSACTIONSThe Company purchases merchandise from and sells merchandise to affiliates of Schottenstein
Stores Corporation (SSC), direct owner of approximately 57.0% of the Companys common shares. The related party transactions are as follows (in thousands):
 Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/03Purchases of merchandise from affiliates
    
    $
    4,676
    
    
    $
    12,597
    
    
    $
    13,238
 The Company also leases certain store and warehouse locations owned by SSC as described in
Note 3.Accounts receivable from and payable to affiliates principally result from commercial
transactions with entities owned or controlled by SSC or intercompany transactions with SSC.
Settlement of affiliate receivables and payables are in the form of cash. These transactions
settle normally in 30 to 60 days.The Company shares certain personnel, administrative and service costs with SSC and its
affiliates. The costs of providing these services are allocated among the Company, SSC and its
affiliates without a premium. The allocated amounts are not significant. SSC does not charge
the Company for general corporate management services. In the opinion of the Company and SSC
management, the aforementioned charges are reasonable.
 F-11




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##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 The Company participated in SSCs self-insurance program for general liability, casualty loss
and certain state workers compensation programs, which participation ended in fiscal 2004.
The Company expensed $0.3 million, $1.1 million and $11.9 million in fiscal years 2004, 2003
and 2002, respectively, for such program. Estimates for self-insured programs are determined
by independent actuaries based on actuarial assumptions, which incorporate historical incurred
claims and incurred but not reported (IBNR) claims.The Company also makes contributions to a private charitable foundation controlled by SSC.
During fiscal year 2002 the Company expensed $1.7 million of contributions. During fiscal year
2004 and 2003 no contributions were recorded.Cerberus Partners, L.P. as a beneficial owner of approximately 22.0% of the outstanding
shares, is also a related party.See Notes 3, 5 and 6 to the consolidated financial statements for additional related party
disclosures.3.
    
    LEASESThe Company leases stores and warehouses under various arrangements with related and unrelated
parties. Such leases expire through 2024 and in most cases provide for renewal options.
Generally, the Company is required to pay real estate taxes, maintenance, insurance and
contingent rentals based on sales in excess of specified levels. The Company subleases space
in a number of its facilities to related and unrelated parties. The total amount of income
recorded for these subleases were $1.9 million, $2.0 million and $1.8 million in fiscal 2004,
2003 and 2002, respectively.The Company has several leasing agreements with SSC and affiliates. Under a Master Lease
Agreement, as amended, the Company leases 5 store locations owned by SSC, and also leases or
subleases from SSC or affiliates of SSC 31 store locations, 5 warehouse facilities and a
parcel of land for an annual minimum rent of $24.5 million and additional contingent rents
based on aggregate sales in excess of specified sales trends for the store locations. Leases
and subleases with related parties are for initial periods generally ranging from five to
twenty years, provide for renewal options and require the Company to pay real estate taxes,
maintenance and insurance.SSC operates a chain of furniture stores, five of which operate in separate space subleased
from the Company at five of its store locations. Three of these furniture store subleases
(the Furniture Subleases) are for a term concurrent with the respective lease between the
Company and a third party landlord. These Furniture Subleases provide for the payment by SSC
of base rent and other charges in amounts at least equal to its pro rata share based on square
footage and its pro rata share of any percentage rent based on its gross sales. Two
additional furniture store subleases are for periods shorter than the Companys lease. SSC
paid to the Company pursuant to these subleases the following (in thousands):
 Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/03Minimum rentals:
    
    $
    694
    
    
    $
    1,132
    
    
    $
    1,076Contingent rentals:
    
    
    641
    
    
    
    263
    
    
    
    341Total
    
    $
    1,335
    
    
    $
    1,395
    
    
    $
    1,417
 The total cost of assets held under capital leases at January 29, 2005 and January 31, 2004
was $36.3 million and $37.4 million, respectively. Assets held under capital leases are
amortized over the terms of the related leases. The accumulated amortization for these assets
was $10.3 million and $7.4 million at January 29, 2005 and January 31, 2004, respectively.
 F-12




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Future minimum lease payments required under the aforementioned leases, exclusive of real
estate taxes, insurance and maintenance costs, at January 29, 2005 are as follows (in
thousands):
 Operating LeasesFiscal
    
    
    
    
    
    Unrelated
    
    
    Related
    
    
    CapitalYear
    
    Total
    
    
    Party
    
    
    Party
    
    
    Leases2005
    
    $
    152,799
    
    
    $
    132,045
    
    
    $
    20,754
    
    
    $
    3,4382006
    
    
    150,800
    
    
    
    130,484
    
    
    
    20,316
    
    
    
    3,4382007
    
    
    144,184
    
    
    
    124,711
    
    
    
    19,473
    
    
    
    3,5152008
    
    
    135,624
    
    
    
    117,294
    
    
    
    18,330
    
    
    
    3,5712009
    
    
    125,227
    
    
    
    107,617
    
    
    
    17,610
    
    
    
    3,585Future Years
    
    
    631,253
    
    
    
    534,250
    
    
    
    97,003
    
    
    
    44,735Total minimum lease payments
    
    $
    1,339,887
    
    
    $
    1,146,401
    
    
    $
    193,486
    
    
    $
    62,282Less amount representing interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,558
    )Present value of minimum lease payments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,724Less current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (590
    )Total long-term portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    29,134
 The composition of rental expense (in thousands):
 Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/03Minimum rentals:Unrelated parties
    
    $
    117,770
    
    
    $
    103,925
    
    
    $
    101,221Related parties
    
    
    24,549
    
    
    
    21,837
    
    
    
    19,539Contingent rentals:Unrelated parties
    
    
    17,746
    
    
    
    15,735
    
    
    
    3,975Related parties
    
    
    111
    
    
    
    156
    
    
    
    208Total
    
    $
    160,176
    
    
    $
    141,653
    
    
    $
    124,943
 Many of the Companys leases contain fixed escalations of the minimum annual lease
payments during the original term of the lease. For these leases, the Company recognizes
rental expense on a straight-line basis and records the difference between the average rental
amount charged to expense and the amount payable under the lease as deferred rent. At the end
of fiscal 2004 and 2003, the balance of deferred rent was $25.4 million and $20.3 million,
respectively, and is included in other noncurrent liabilities. Certain store and warehouse
leases provided landlord incentives totaling $37.4 million and $31.1 million in fiscal 2004
and 2003, respectively. These incentives are recorded as long term-liabilities in the
accompanying consolidated balance sheet and are amortized as a reduction of rent expense over
the remaining minimum lease term.4.
    
    RESTATEMENT OF FINANCIAL STATEMENTS
 
 
 
 During February 2005, the Office of the Chief Accountant of the SEC issued a letter to the
AICPA expressing its views regarding certain lease related accounting issues and their
application under GAAP. Following the release of the SEC letter, many retail companies
reviewed their previous interpretations of these lease accounting issues and announced that
they would restate their results for previous periods.After reviewing its accounting for leasing transactions, the Company concluded that it will
correct certain errors in its accounting for two types of leasing transactions. First, the
Companys statements of cash flows reflected construction allowances as a reduction of capital
expenditures (within investing cash flows) rather than as an operating lease activity
(within operating cash flows). Second, the Company had excluded the build-out period of its
stores from its straight line rent expense calculations.
 
 Subsequent to the original issuance of the fiscal 2004 consolidated financial statements, the Company identified errors in its accounting for deferred income taxes. As a result, the Company restated its consolidated financial statements as of January 29, 2005 and January
31, 2004 and for each of the three years ended January 29, 2005, January 31, 2004 and February 1,
2003. The restatement corrects errors identified in the deferred income tax accounts
pertaining to (i) differences between the income tax basis and the financial reporting basis
of certain assets and liabilities and (ii) differences between the income tax basis and the
financial reporting basis of long-lived assets that were not reconciled to the deferred tax
balances.The correction of the above-noted errors, as reflected in the 2002 opening retained earnings,
reduced deferred income tax assets by $6.9 million, increased accrued taxes by $0.6 million
and reduced retained earnings by $7.5 million, respectively. This adjustment had no effect on
the previously reported net loss in each of the three years ended January 29, 2005, January 31, 2004
and February 1, 2003. This adjustment had no effect on net cash or the income tax returns
filed by the Company.
 
 F-13




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 The following is a summary of the effects of these changes on the Companys consolidated
balance sheets as of January 29, 2005 and January 31, 2004, as well as the effect of these
changes on the Companys consolidated statements of operations and statements of cash flow for
fiscal years 2003 and 2002.
 
 
 Year Ended January 29, 2005AdjustmentsAs Originally Reported
    
    

April
14, 2005
    
    

April 5, 2006
    
    
    As RestatedConsolidated Balance Sheets:Deferred income taxes
    
    $
    64,359
    
    
    $
    
    
    
    $
    (2,004
    )
    
    $
    62,355Total current assets
    
    $
    595,736
    
    
    $
    
    
    
    $
    (2,004
    )
    
    $
    593,732Deferred income taxes and other assets
    
    $
    37,806
    
    
    $
    
    
    
    $
    (4,925
    )
    
    $
    32,881Total assets
    
    $
    983,355
    
    
    $
    
    
    
    $
    (6,929
    )
    
    $
    976,426Accrued taxes
    
    $
    48,058
    
    
    $
    
    
    
    $
    608
    
    
    $
    48,666Total current liabilities
    
    $
    359,556
    
    
    $
    
    
    
    $
    608
    
    
    $
    360,164Retained earnings
    
    $
    50,293
    
    
    $
    
    
    
    $
    (7,537
    )
    
    $
    42,756Total shareholders equity
    
    $
    192,714
    
    
    $
    
    
    
    $
    (7,537
    )
    
    $
    185,177Total liabilities and shareholders equity
    
    $
    983,355
    
    
    $
    
    
    
    $
    (6,929
    )
    
    $
    976,426
 Year Ended January 31, 2004AdjustmentsAs Originally Reported
    
    

April
14, 2005
    
    

April 5, 2006
    
    
    As RestatedConsolidated Balance Sheets:Deferred income taxes
    
    $
    44,933
    
    
    $
    
    
    
    $
    (2,004
    )
    
    $
    42,929Total current assets
    
    $
    499,254
    
    
    $
    
    
    
    $
    (2,004
    )
    
    $
    497,250Accumulated depreciation and amortization
    
    $
    (314,206
    )
    
    $
    (1,004
    )
    
    $
    
    
    
    $
    (315,210
    )Property and equipment, net
    
    $
    251,818
    
    
    $
    (1,004
    )
    
    $
    
    
    
    $
    250,814Deferred income taxes and other assets
    
    $
    31,616
    
    
    $
    4,580
    
    
    $
    (4,925
    )
    
    $
    31,271Total assets
    
    $
    863,945
    
    
    $
    3,576
    
    
    $
    (6,929
    )
    
    $
    860,592Accrued taxes
    
    $
    42,066
    
    
    $
    4,580
    
    
    $
    608
    
    
    $
    47,254Total current liabilities
    
    $
    264,397
    
    
    $
    4,580
    
    
    $
    608
    
    
    $
    269,585Other noncurrent liabilities
    
    $
    55,841
    
    
    $
    3,576
    
    
    $
    
    
    
    $
    59,417Retained earnings
    
    $
    74,321
    
    
    $
    (4,580
    )
    
    $
    (7,537
    )
    
    $
    62,204Total shareholders equity
    
    $
    216,767
    
    
    $
    (4,580
    )
    
    $
    (7,537
    )
    
    $
    204,650Total liabilities and shareholders equity
    
    $
    863,945
    
    
    $
    3,576
    
    
    $
    (6,929
    )
    
    $
    860,592
 
 F-14




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 Year Ended January 31, 2004 (continued)AdjustmentsAs Originally Reported
    
    

April
14, 2005
    
    

April 5, 2006
    
    
    As RestatedConsolidated Statements of Operations:Selling, general and administrative expenses
    
    $
    (974,171
    )
    
    $
    (773
    )
    
    $
    
    
    
    $
    (974,944
    )Operating profit
    
    $
    32,431
    
    
    $
    (773
    )
    
    $
    
    
    
    $
    31,658Loss before cumulative effect of accounting
change and income taxes
    
    $
    (6,164
    )
    
    $
    (773
    )
    
    $
    
    
    
    $
    (6,937
    )Loss before cumulative effect of accounting
change
    
    $
    (4,446
    )
    
    $
    (773
    )
    
    $
    
    
    
    $
    (5,219
    )Net Loss
    
    $
    (4,446
    )
    
    $
    (773
    )
    
    $
    
    
    
    $
    (5,219
    )Basic and diluted earnings per share
    
    $
    (0.13
    )
    
    $
    (0.02
    )
    
    $
    
    
    
    $
    (0.15
    )Consolidated Statements of Cash Flows:Net Loss
    
    $
    (4,446
    )
    
    $
    (773
    )
    
    $
    
    
    
    $
    (5,219
    )Depreciation and Amortization
    
    $
    52,979
    
    
    $
    453
    
    
    $
    
    
    
    $
    53,432Deferred income taxes and other noncurrent
liabilities
    
    $
    3,875
    
    
    $
    (2,114
    )
    
    $
    
    
    
    $
    1,761Proceeds from lease incentives
    
    $
    5,433
    
    
    $
    1,661
    
    
    $
    
    
    
    $
    7,094Accrued expenses
    
    $
    (23,658
    )
    
    $
    773
    
    
    $
    
    
    
    $
    (22,885
    )Net cash provided by operating activities
    
    $
    6,174
    
    
    $
    5,433
    
    
    $
    
    
    
    $
    11,607Net cash used in investing activities
    
    $
    (63,250
    )
    
    $
    (5,433
    )
    
    $
    
    
    
    $
    (68,683
    )
 Year Ended February 1, 2003AdjustmentsAs Originally Reported
    
    

April
14, 2005
    
    

April 5, 2006
    
    
    As RestatedConsolidated Statements of Operations:Selling, general and administrative expenses
    
    $
    (906,017
    )
    
    $
    (772
    )
    
    $
    
    
    
    $
    (906,789
    )Operating profit
    
    $
    37,478
    
    
    $
    (772
    )
    
    $
    
    
    
    $
    36,706Loss before cumulative effect of accounting
change and income taxes
    
    $
    (1,910
    )
    
    $
    (772
    )
    
    $
    
    
    
    $
    (2,682
    )Loss before cumulative effect of accounting
change
    
    $
    (1,585
    )
    
    $
    (772
    )
    
    $
    
    
    
    $
    (2,357
    )Net Loss
    
    $
    (3,665
    )
    
    $
    (772
    )
    
    $
    
    
    
    $
    (4,437
    )Basic and diluted earnings per share
    
    $
    (0.11
    )
    
    $
    (0.02
    )
    
    $
    
    
    
    $
    (0.13
    )Consolidated Statements of Cash Flows:Net Loss
    
    $
    (3,665
    )
    
    $
    (772
    )
    
    $
    
    
    
    $
    (4,437
    )Depreciation and Amortization
    
    $
    53,406
    
    
    $
    250
    
    
    $
    
    
    
    $
    53,656Deferred income taxes and other noncurrent
liabilities
    
    $
    11,450
    
    
    $
    (2,863
    )
    
    $
    
    
    
    $
    8,587Proceeds from lease incentives
    
    $
    7,246
    
    
    $
    2,613
    
    
    $
    
    
    
    $
    9,859Accrued expenses
    
    $
    5,547
    
    
    $
    772
    
    
    $
    
    
    
    $
    6,319Net cash provided by operating activities
    
    $
    90,286
    
    
    $
    7,246
    
    
    $
    
    
    
    $
    97,532Net cash used in investing activities
    
    $
    (34,354
    )
    
    $
    (7,246
    )
    
    $
    
    
    
    $
    (41,600
    )
 
 F-15




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 
 5.
    
    LONG-TERM OBLIGATIONS AND NOTES PAYABLELong-term obligations consist of the following (in thousands):
 1/29/05
    
    
    1/31/04Credit facilities:Revolving credit facility
    
    $
    140,000
    
    
    $
    125,000Term loans  related parties
    
    
    100,000
    
    
    
    100,000Discount on term loan  related parties
    
    
    (759
    )
    
    
    (2,784
    )Senior subordinated convertible loan  related parties
    
    
    75,000
    
    
    
    75,000314,241
    
    
    
    297,216Capital lease obligations
    
    
    29,724
    
    
    
    30,265Other
    
    
    21
    
    
    
    200343,986
    
    
    
    327,681Less current maturities
    
    
    (611
    )
    
    
    (741
    )$
    343,375
    
    
    $
    326,940Letters of Credit Outstanding
    
    $
    29,589
    
    
    $
    23,353Availability under revolving credit facility
    
    $
    145,001
    
    
    $
    137,690Accrued interest to related parties
    
    $
    4,128
    
    
    $
    628
 At January 29, 2005, Value City Department Stores, Inc., together with certain other
subsidiaries of the Company, had $525.0 million of financing that consists of three separate
credit facilities (collectively, the Credit Facilities): (i) a three-year $350.0 million
revolving credit facility (the Revolving Loan), (ii) two $50.0 million term loan facilities
provided equally by Cerberus Partners, L.P. and SSC (the Term Loans), and (iii) an amended
and restated $75.0 million senior subordinated convertible loan facility, initially entered
into by the Company on March 15, 2000, which is held equally by Cerberus Partners, L.P. and
SSC (the Convertible Loan). These Credit Facilities are guaranteed by the Company and
substantially all of its subsidiaries.The Company is not subject to any financial covenants; however, the Credit Facilities contain
numerous restrictive covenants relating to the Companys management and operation. These
non-financial covenants include, among other restrictions, limitations on indebtedness,
guarantees, mergers, acquisitions, fundamental corporate changes, financial reporting
requirements, budget approval, disposition of assets, investments, loans and advances, liens,
dividends, stock purchases, transactions with affiliates, issuance of securities and the
payment of and modifications to debt instruments under these agreements. These Credit
Facilities are also subject to an Intercreditor Agreement which provides for an established
order of payment of obligations from the proceeds of collateral upon default (the
Intercreditor Agreement).$350 Million Revolving Credit FacilityUnder the Revolving Credit Facility, the borrowing base formula is structured in a manner that
allows the Company and its subsidiaries availability based on the value of their inventories
and accounts receivable. Primary security for the Revolving Loan is provided by a first
priority lien on all of the inventory and accounts receivable of the Company, as well as
certain intercompany notes and payment intangibles. Subject to the Intercreditor Agreement,
the Revolving Loan also has a second priority-perfected security interest in all of the first
priority collateral securing the Term Loans. Interest on borrowings is calculated at the
banks base rate plus 0.0% to 0.5% or at the Eurodollar offer rate plus 2.00% to 2.75%,
depending upon the level of average excess availability the Company maintains. During fiscal
2004, the Company extended the maturity dates of the Revolving Loan by one year. As a result,
the maturity date of the Revolving Loan, which originally matured on June 11, 2005, was
extended to June 11, 2006, under substantially the same terms and conditions.
 F-16




---



##### 



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 $100 Million Term Loans  Related PartiesThe Term Loans are comprised of a $50.0 million Term Loan B and a $50.0 million Term Loan C.
All obligations under the Term Loans are senior debt and, subject to the Intercreditor
Agreement, have the same rights and privileges as the Revolving Credit Facility and the Senior
Subordinated Convertible Loan. The Company and its principal subsidiaries are obligated on the
facility. During fiscal 2004, the Company extended the maturity dates of the Term Loans by one
year. As a result, the maturity date of the Term Loans, which originally matured on June 11,
2005, was extended to June 11, 2006, under substantially the same terms and conditions.The Term Loans stated rate of interest per annum depends on whether the Company elects to pay
interest in cash or a paid-in-kind (PIK) option. During the first two years of this
facility, the Company could have elected to pay all interest in PIK. During the final two
years of the Term Loans, the stated rate of interest is 15.0% if paid in cash or 15.5% by PIK
and the PIK option is limited to 50% of the interest due. For the years ended January 29, 2005
and January 31, 2004 the Company elected to pay interest in cash.The Company issued 2,954,792 warrants (Warrants) to purchase shares of common stock, at an
initial exercise price of $4.50 per share, to the Term Loan C Lenders. The Warrants are
exercisable at any time prior to June 11, 2012. The Company has granted the Term Loan C
Lenders registration rights with respect to the shares issuable upon exercise of the Warrants.
The $6.1 million value ascribed to the Warrants was estimated as of the date of issuance using
the Black-Scholes pricing model with the following assumptions: risk-free interest rate of
5.6%; expected life of 10 years; expected volatility of 47%; illiquidity discount of 10%; and
an expected dividend yield of 0%. The related debt discount is amortized into interest expense
over the life of the debt.The number of shares issuable varies upon the occurrence of the following: (i) the issuance of
additional shares of common stock without consideration or for a consideration per share less
than the Warrant exercise price; (ii) the declaration of any dividend; (iii) the combination
or consolidation of the outstanding shares of common stock into a lesser number of shares;
(iv) the issuance or sale of additional shares at a price per share less than the current
market price but greater than the Warrant exercise price; (v) the issuance of convertible
securities which are convertible into shares of common stock; and/or
(vi) the exchange of shares in a merger or other business combination.$75 Million Senior Subordinated Convertible Loan  Related PartiesThe Company amended and restated its $75.0 million Senior Subordinated Convertible Loan
Agreement on June 11, 2002 (the Convertible Loan). As amended, borrowings under the
convertible loan will bear interest at 10% per annum. At the Companys option, interest may be
PIK from the closing date to the second anniversary thereof, and thereafter, at the option of
the Company, up to 50% of the interest due may be PIK until maturity. PIK interest accrued
with respect to the convertible loan is added to the outstanding principal balance, on a
quarterly basis and is payable in cash upon the maturity of the debt. The convertible loan is
guaranteed by all principal subsidiaries and is secured by a lien on assets junior to liens
granted in favor of the Lenders on the Revolving Credit Agreement and Term Loans. The
Convertible Loan is not subject to prepayment for five years from the closing date. The agent
has the right to designate two observers to the Board of Directors for so long as the agent is
the beneficial owner of at least 50% of the advances initially made by it and has the right to
designate two individuals to the Board of Directors for so long as the agent is the beneficial
owner of at least 50% of the conversion shares issued or issuable upon conversion of the
advances initially made by it.The Convertible Loan is convertible at the option of the holders into shares of Retail
Ventures, Inc. common stock at a conversion price of $4.50. The maturity date is June 10,
2009.Other Debt ItemsThe Company utilized an interest rate swap agreement to effectively establish long-term fixed
rates on borrowings under the Credit Agreement, thus reducing the impact of interest rate
changes on future income. These swap agreements, which were designated as cash flow hedges,
involved the receipt of variable rate amounts in exchange for fixed rate interest payments
over the life of the agreements. The Companys swap agreement expired April 2003.
 F-17




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 The weighted average interest rate on borrowings under the Companys credit facilities during
fiscal year 2004, 2003 and 2002 was 8.5%, 8.4% and 7.8%, respectively.The book value of notes payable and long-term debt approximates fair value at January 29,
2005. The carrying amount of the revolving line of credit approximates fair value as a result
of the variable rate-based borrowings. The carrying amount of the term loan and subordinated
debt also approximates fair value, as this was the available financing in the marketplace
during the fiscal year.On June 11, 2002, the Company refinanced its previous financing arrangement and recorded $3.3
million loss on the extinguishment of debt resulting from the write-off of deferred financing
costs. This write-off is included in interest expense, net.At January 29, 2005, future annual long-term debt payments are as follows (in thousands):
 Fiscal year
    
    Amount2005
    
    $
    212006
    
    
    240,0002007
    
    
    2008
    
    
    2009
    
    
    75,000Later years
    
    
    Total principal amount
    
    
    315,021Unamortized discount
    
    
    (759
    )Total
    
    $
    314,262
 6.
    
    PENSION BENEFIT PLANSThe Company has three qualified defined benefit pension plans (plans) assumed at the time of
acquisition of three separate companies. The Companys funding policy is to contribute
annually the amount required to meet ERISA funding standards and to provide not only for
benefits attributed to service to date but also for those anticipated to be earned in the
future. The Company uses a January 31 measurement date for its plans.The following provides a reconciliation of projected benefit obligations, plan assets and
funded status of all plans as of January 29, 2005 and January 31, 2004 (in thousands):
 Year Ended1/29/05
    
    
    1/31/04Change in projected benefit obligation:Projected benefit obligation at beginning of year
    
    $
    24,393
    
    
    $
    20,691Service cost
    
    
    43
    
    
    
    35Interest cost
    
    
    1,401
    
    
    
    1,292Benefits paid
    
    
    (1,120
    )
    
    
    (952
    )Actuarial loss
    
    
    1,871
    
    
    
    3,327Projected benefit obligation at end of year
    
    $
    26,588
    
    
    $
    24,393
 F-18




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended1/29/05
    
    
    1/31/04Change in plan assets:Fair market value at beginning of year
    
    $
    18,369
    
    
    $
    15,269Actual (loss) return on plan assets
    
    
    1,272
    
    
    
    2,931Employer contributions
    
    
    1,659
    
    
    
    1,320Benefits paid
    
    
    (1,120
    )
    
    
    (952
    )Other
    
    
    (278
    )
    
    
    (199
    )Fair market value at end of year
    
    $
    19,902
    
    
    $
    18,369Reconciliation of funded status:Funded status
    
    $
    (6,686
    )
    
    $
    (6,023
    )Unrecognized actuarial loss
    
    
    12,111
    
    
    
    10,378Unrecognized transition obligation
    
    
    (222
    )
    
    
    (260
    )Accrued benefit cost
    
    $
    5,203
    
    
    $
    4,095
 Amounts recognized in the consolidated balance sheet consisted of (in thousands):
 Year Ended1/29/05
    
    
    1/31/04Accrued benefit cost
    
    $
    (6,626
    )
    
    $
    (5,923
    )Accumulated other comprehensive income
    
    
    11,829
    
    
    
    10,018Net amount recognized
    
    $
    5,203
    
    
    $
    4,095
 The plans accumulated benefit obligation was $26.5 million at January 29, 2005, and $24.3
million at January 31, 2004.
 Year Ended(in thousands)1/29/05
    
    
    1/31/04Projected benefit obligation
    
    $
    26,588
    
    
    $
    24,393Accumulated benefit obligation
    
    $
    26,528
    
    
    $
    24,293Fair value of plan assets
    
    $
    19,902
    
    
    $
    18,369
 The components of net periodic benefit cost are comprised of the following (in thousands):
 Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/03Service cost
    
    $
    43
    
    
    $
    35
    
    
    $
    29Interest cost
    
    
    1,401
    
    
    
    1,292
    
    
    
    1,280Expected return on plan assets
    
    
    (1,436
    )
    
    
    (1,286
    )
    
    
    (1,453
    )Amortization of transition (asset) obligation
    
    
    (37
    )
    
    
    (75
    )
    
    
    (75
    )Amortization of prior-service cost
    
    
    
    
    
    
    
    
    
    
    (8
    )Amortization of net loss
    
    
    580
    
    
    
    596
    
    
    
    198Net periodic benefit cost
    
    $
    551
    
    
    $
    562
    
    
    $
    (29
    )
 The amount included within accumulated other comprehensive loss arising from a change in the
additional minimum pension liability was $1.8 million at January 29, 2005, $1.4 million at
January 31, 2004 and $3.7 million at February 2, 2003.
 F-19




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Assumptions used in each year of the actuarial computations were:
 Year Ended1/29/05
    
    
    1/31/04Discount rate
    
    
    5.75
    %
    
    
    6.0
    %Rate of increase in compensation levels
    
    
    4.0
    %
    
    
    4.0
    %Expected long-term rate of return
    
    
    8.0
    %
    
    
    8.0
    %
 The expected long-term rate of return was based on historical average annual returns
for S&P 500, Russell 2000 and LB Intermediate Term Government for 10 years and since
inception of the assets.The weighted average allocation of plan assets by category is as follows:
 Year Ended1/29/05
    
    
    1/31/04Equity securities
    
    
    49.1
    %
    
    
    48.4
    %Fixed securities
    
    
    44.7
    
    
    
    45.0Commercial mortgage
    
    
    5.5
    
    
    
    5.8Other
    
    
    0.7
    
    
    
    0.8100.0
    %
    
    
    100.0
    %
 The Companys investment strategy is to meet the liabilities of the plans as they are due and
to maximize the return on invested assets within appropriate risk tolerances.The Companys funding policy is to contribute an amount annually that satisfies the minimum
funding requirements of ERISA and that is tax deductible under the Internal Revenue Code. The
Company anticipates contributing approximately $2.5 million in fiscal 2005 to meet minimum
funding requirements.The following benefit payments, which reflect expected future service, as appropriate, are
expected to be paid (in thousands):
 Fiscal year
    
    Amount2005
    
    $
    1,1112006
    
    
    1,1492007
    
    
    1,1442008
    
    
    1,1512009
    
    
    1,1682010-2014
    
    
    6,799
 7.
    
    OTHER BENEFIT PLANSThe Company maintains a 401(k) Plan (the Plan) for its employees. Employees who attain age
twenty-one are eligible to defer compensation as of the first day of the month following 60
days of employment and may contribute up to thirty percent of their compensation to the Plan
on a pre-tax basis, subject to IRS limitations. As of the first day of the month following an
employees completion of one year of service as defined under the terms of the Plan, the
Company matches employee deferrals into the Plan, 100% on the first 3% of eligible
compensation deferred and 50% on the next 2% of eligible compensation deferred. Additionally,
the Company may contribute a discretionary profit sharing amount to the Plan each year. The
Company incurred costs associated with the 401(k) Plan of $4.7 million, $5.9 million and $5.8
million for fiscal years 2004, 2003 and 2002, respectively.
 
 The Company recently became aware of an issue involving its 401(k) and profit sharing plan.
From September 2001 until July 13, 2004, the Company failed
to register the Companys common shares transferred to participants in its 401(k) plan and the interests of those participants
in that plan, which may also be deemed securities requiring registration. In addition, prior
to November 2004, the Company failed to deliver a prospectus that complied in all respects
with SEC requirements. The Company intends to offer a 30-day right of rescission to those
participants who received its common shares in violation of applicable securities laws during
the one year period preceding the date of
 
 F-20




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 the rescission offer, the statute of limitations period the Company believes may apply to
claims for rescission under applicable laws, or possibly a longer or shorter period.Under the rescission offer, the participants will be entitled to require the Company to
repurchase shares at the price per share of the Companys common shares when the shares were
transferred to the participants account, plus interest at a rate to be determined. Based
upon the Companys preliminary investigation, it currently believes that up to approximately
700,000 common shares transferred to 401(k) plan participants since September 2001 may not
have been properly registered in accordance with the Securities Act of 1933.The Company has undertaken certain curative action under the applicable securities laws and is
also investigating its obligations to undertake any other curative action which may be
required under applicable laws. While the Company cannot predict the possible effect of
federal or state regulatory action, the Company does not believe that these violations will
have a material adverse effect on the Companys financial position or results of operations.The Company provides an Employee Stock Purchase Plan (ESPP). Eligibility requirements are
similar to the 401(k) Plan. Eligible employees can purchase common shares of the Company
through payroll deductions. The Company will match 15% of employee investments up to a maximum
investment level. Plan costs to the Company for all fiscal periods presented are not material
to the consolidated financial statements.While investigating the unregistered sale of shares in connection with the 401(k) Plan, we
also discovered that approximately 640,000 of our common shares sold to our employees through
our ESPP may not have complied with applicable federal or state law. Through the ESPP,
eligible employees can purchase our common shares through payroll deductions and we match 15%
of employee investments up to a maximum investment level. While all of our common shares were
acquired on the open market and in compliance with the provisions of the ESPP, because the
            shares were not registered, participants may have a right to rescind their purchases. The
Company has not yet determined whether or not it will make a rescission offer to participants
in the ESPP and accordingly may be liable for the purchase price of their shares acquired
through the ESPP which were not issued in compliance with the Securities Act or applicable
state securities laws.Certain employees of the Company are covered by union-sponsored, collectively bargained,
multi-employer pension plans, the costs of which are not material to the consolidated
financial statements.8.
    
    SHAREHOLDERS EQUITYThe Company issued common shares to certain key employees pursuant to individual employment
agreements and certain other grants from time to time, which are approved by the Board of
Directors. The market value of the shares at the date of grant is recorded as deferred
compensation expense. The agreements condition the vesting of the shares generally upon
continued employment with the Company with such restrictions expiring over various periods
ranging from three to five years. Deferred compensation is charged to expense on a
straight-line basis during the period that the restrictions lapse.The Company issued 2,954,792 warrants (Warrants) to purchase shares of common stock, at an
initial exercise price of $4.50 per share, to the Term Loan C Lenders and has outstanding at
January 29, 2005 a $75.0 million Senior Subordinated Convertible Loan which is convertible at
the option of the holders into shares of Retail Ventures, Inc. common stock at a conversion
price of $4.50. See Note 5 to the consolidated financial statements for additional long-term
obligations and notes payable disclosure.As of January 29, 2005 and January 31, 2004, the Company had outstanding approximately 198,000
and 251,000 restricted shares, respectively, which are less than 1% of the common shares
outstanding and the diluted shares.9.
    
    STOCK OPTION PLANSThe Company has a 2000 Stock Incentive Plan that provides for the issuance of options to
purchase up to 13,000,000 common shares or the issuance of restricted stock to management, key
employees of the Company and affiliates, consultants as defined, and directors of the Company.
Options generally vest 20% per year on a cumulative basis. Options granted under the 2000
Stock Plan remain exercisable for a period of ten years from the date of grant.
 F-21




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 An option to purchase 2,500 common shares is automatically granted to each non-employee
director on the first New York Stock Exchange trading day in each calendar quarter. The
exercise price for each option is the fair market value of the common shares on the date of
grant. All options become exercisable one year after the grant date and remain exercisable for
a period of ten years from the grant date, subject to continuation of the option-holders
service as directors of the Company.The Company has a 1991 Stock Option Plan that provided for the grant of options to purchase up
to 4,000,000 common shares. Such options are exercisable 20% per year on a cumulative basis
and remain exercisable for a period of ten years from the date of grant.On February 2, 2002, the Company issued 2,720,000 performance-based stock options. The vesting
period of the performance-based stock options was either eight years or earlier if certain
performance criteria were met. In connection with executive employment agreements, however,
all of these outstanding stock options became fully exercisable, and all restrictions imposed
on any outstanding shares of performance-based stock lapsed, on the effective date of
termination of the executives employment.During fiscal 2004 and fiscal 2003 the Company contingently awarded 1,653,000 options and
990,000 options, respectively, subject to an Option Price Protection Provision (OPPP). These
contingent options were awarded at the greater of market value or $4.50 and are subject to a
vesting schedule or a performance vesting formula, as applicable. The OPPP provides that until
the Company receives certain approvals from lenders the issue of these options is contingent.
Further, if any of these contingent options would have vested before they are actually
granted, at or after that time, the grantee may exercise the OPPP on some or all of the
contingent options that would have vested. Pursuant to an OPPP exercise the grantee is
compensated by the Company in the amount of the gain, if any, represented by the difference
between the stock closing price on the New York Stock Exchange on the date of the exercise and
the strike price per share. The OPPP does not apply once contingent options are actually
granted. Compensation expense for these contingent options was $0.4 million in fiscal 2004 and
$0.3 million in fiscal 2003.
 The following table summarizes the Companys stock option plans and related Weighted Average
Exercise Prices (WAEP) (shares in thousands):
 Year Ended1/29/05
    
    

1/31/04
    
    
    2/1/03Shares
    
    
    WAEP
    
    
    Shares
    
    
    WAEP
    
    
    Shares
    
    
    WAEPOutstanding beginning of year
    
    
    9,266
    
    
    $
    4.94
    
    
    
    8,921
    
    
    $
    5.36
    
    
    
    3,693
    
    
    $
    8.07Granted
    
    
    90
    
    
    
    6.95
    
    
    
    833
    
    
    
    2.44
    
    
    
    6,664
    
    
    
    4.30Exercised
    
    
    (143
    )
    
    
    
    
    
    
    (20
    )
    
    
    3.04
    
    
    
    
    
    
    
    Canceled
    
    
    (1,499
    )
    
    
    5.25
    
    
    
    (468
    )
    
    
    8.47
    
    
    
    (1,436
    )
    
    
    7.38Outstanding end of year
    
    
    7,714
    
    
    
    4.85
    
    
    
    9,266
    
    
    
    4.94
    
    
    
    8,921
    
    
    
    5.36Options exercisable end of year
    
    
    6,055
    
    
    $
    5.12
    
    
    
    2,845
    
    
    $
    6.50
    
    
    
    1,651
    
    
    $
    8.98Shares available for additional grants
    
    
    5,498
    
    
    
    
    
    
    
    7,436
    
    
    
    
    
    
    
    7,821
 The following table summarizes information about stock options outstanding as of January 29,
2005 (shares in thousands):
 Options Outstanding
    
    
    Options ExercisableWeightedAverageRemainingRange of Exercise Prices
    
    Shares
    
    
    Contract Life
    
    
    WAEP
    
    
    Shares
    
    
    WAEP$1.68 - $4.49
    
    
    1,104,000
    
    
    8 yrs
    
    $
    2.26
    
    
    
    405,200
    
    
    $
    2.37$4.50 - $10.00
    
    
    6,348,850
    
    
    7 yrs
    
    $
    4.93
    
    
    
    5,392,470
    
    
    $
    4.91$10.01 - $21.44
    
    
    261,500
    
    
    5 yrs
    
    $
    13.78
    
    
    
    257,300
    
    
    $
    13.80
 F-22




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10.
    
    COMMITMENTS AND CONTINGENCIESIn March 2005, the Company announced the theft of credit card and other purchase information
relating to all customers who made purchases at 103 DSW stores between mid-November 2004 and
mid-February 2005. The Company now believes that the theft occurred at 108 DSW stores. The
Company has contacted federal law enforcement authorities, who are involved in the
investigation. The Company is taking steps to address the situation, including a review of the
technology systems in conjunction with a leading computer security firm, and also working with
others to mitigate the situation. The Company cannot yet reasonably estimate what the
potential liability will be in connection with these events.The Company is involved in various legal proceedings that are incidental to the conduct of its
business. The Company estimates the range of liability related to pending litigation where
the amount and range of loss can be estimated. The Company records its best estimate of a
loss when the loss is considered probable. Where a liability is probable and there is a range
of estimated loss, the Company records the minimum estimated liability related to the claim.
In the opinion of management, the amount of any liability with respect to these proceedings
will not be material. As additional information becomes available, the Company assesses the
potential liability related to its pending litigation and revises the estimates. Revisions in
the Companys estimates and potential liability could materially impact its results of
operations.
 11.
    
    INCOME TAXES
 The (benefit) provision for income taxes consists of the following (in thousands):
 Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/03Current:Federal
    
    $
    9,967
    
    
    $
    198
    
    
    $
    2,354State and local
    
    
    3,923
    
    
    
    
    
    
    
    40313,890
    
    
    
    198
    
    
    
    2,757Deferred:Federal
    
    
    (29,245
    )
    
    
    (1,463
    )
    
    
    (2,697
    )State and local
    
    
    2,927
    
    
    
    (453
    )
    
    
    (385
    )(26,318
    )
    
    
    (1,916
    )
    
    
    (3,082
    )Income tax benefit
    
    $
    (12,428
    )
    
    $
    (1,718
    )
    
    $
    (325
    )
 A reconciliation of the expected income taxes based upon the statutory rate is as follows (in thousands):
 Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/03Income tax (benefit) expense at federal statutory rate
    
    $
    (12,760
    )
    
    $
    (667
    )
    
    $
    500Jobs credit
    
    
    (800
    )
    
    
    (1,524
    )
    
    
    (926
    )State and local taxes, net
    
    
    (1,251
    )
    
    
    208
    
    
    
    641Non-deductible interest
    
    
    592
    
    
    
    662
    
    
    
    370Valuation allowance
    
    
    3,214
    
    
    
    1,467
    
    
    
    Write off of net operating loss
    
    
    3,072
    
    
    
    
    
    
    
    Other
    
    
    (4,495
    )
    
    
    (1,864
    )
    
    
    (910
    )$
    (12,428
    )
    
    $
    (1,718
    )
    
    $
    (325
    )
 F-23




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
 The components of the net deferred tax asset as of January 29, 2005 and January 31, 2004
are (in thousands):
 Year Ended1/29/05
    
    
    1/31/04Deferred tax assets:Basis differences in inventory
    
    $
    12,867
    
    
    $
    14,884Basis differences in property and equipment
    
    
    12,248
    
    
    
    9,664Deferred compensation
    
    
    
    
    
    
    1,009Amortization of lease acquisition costs
    
    
    
    
    
    
    1,308Acquired assets
    
    
    
    
    
    
    2,036Net operating loss
    
    
    21,770
    
    
    
    10,318Federal tax credit
    
    
    6,103
    
    
    
    2,963Contribution carry forward
    
    
    330
    
    
    
    1,467Valuation allowance
    
    
    (4,150
    )
    
    
    (1,467
    )Tenant allowance
    
    
    1,315
    
    
    
    1,478Capital leases
    
    
    2,489
    
    
    
    1,362Other comprehensive loss
    
    
    4,760
    
    
    
    4,008Workers Compensation
    
    
    8,353
    
    
    
    Deferred revenue
    
    
    5,007
    
    
    
    Accrued expenses
    
    
    11,137
    
    
    
    17,198Accrued rent
    
    
    10,065
    
    
    
    3,576Other
    
    
    233
    
    
    
    2,14892,527
    
    
    
    71,952Deferred tax liabilities:Prepaid expenses
    
    
    (5,823
    )
    
    
    Gain/loss
    
    
    
    
    
    
    (2,708
    )State and local taxes
    
    
    
    
    
    
    (4,941
    )(5,823
    )
    
    
    (7,649
    )Total net
    
    $
    86,704
    
    
    $
    64,303
 
 The net deferred tax asset is recorded in the Companys consolidated balance sheet as follows
(in thousands):
 
 Year Ended1/29/05
    
    
    1/31/04Current deferred tax asset
    
    $
    62,355
    
    
    $
    42,929Non-current deferred tax asset
    
    
    24,349
    
    
    
    21,374Net deferred tax asset
    
    $
    86,704
    
    
    $
    64,303
 
 The Company has determined that there is a probability that future taxable income may not be
sufficient to fully utilize deferred tax assets (state net operating losses and charitable
contribution carry forwards) which expire in future years at various dates depending on the
state jurisdiction. Therefore, an allowance of $4.2 million was needed at the end of fiscal
2004. Based on available data, the Company believes it is more likely than not that the
remaining deferred tax assets will be realized.The state and city net operating loss carry forward is approximately $351 million and is
available to reduce state and city taxable income from 2006 to 2024. The federal general
business tax credit carry forward is approximately $1.6 million of which $0.2 million will
expire in 2022; $0.1 million will expire in 2023 and $1.3 million will expire in 2024. Also,
the federal AMT credit carry forward amount is $4.5 million.
 F-24




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 12. SEGMENT REPORTING
 The Company is managed in three operating segments: Value City, DSW and Filenes Basement. All
of the operations are located in the United States. The Company has identified such segments
based on management responsibility and measures segment profit as operating profit (loss),
which is defined as income (loss) before interest expense and income taxes.
 
 Year ended January 29, 2005 (in thousands):
 FilenesValue City
    
    
    DSW
    
    
    Basement
    
    
    TotalNet sales
    
    $
    1,430,721
    
    
    $
    937,184
    
    
    $
    371,726
    
    
    $
    2,739,631Operating (loss) profit
    
    
    (25,763
    )
    
    
    55,188
    
    
    
    (22,740
    )
    
    
    6,685Identifiable assets
    
    
    462,959
    
    
    
    357,885
    
    
    
    155,582
    
    
    
    976,426Capital expenditures
    
    
    27,679
    
    
    
    29,536
    
    
    
    26,640
    
    
    
    83,855Depreciation and
Amortization
    
    
    29,928
    
    
    
    18,527
    
    
    
    7,656
    
    
    
    56,111
 
 
 Year ended January 31, 2004 (in thousands):
 Filene'sValue City
    
    
    DSW
    
    
    Basement
    
    
    TotalNet sales
    
    $
    1,504,674
    
    
    $
    772,631
    
    
    $
    316,901
    
    
    $
    2,594,206Operating profit (loss)
    
    
    8,339
    
    
    
    26,170
    
    
    
    (2,851
    )
    
    
    31,658Identifiable assets
    
    
    493,939
    
    
    
    227,790
    
    
    
    138,863
    
    
    
    860,592Capital expenditures
    
    
    38,582
    
    
    
    21,017
    
    
    
    9,102
    
    
    
    68,701Depreciation and
Amortization
    
    
    32,087
    
    
    
    14,825
    
    
    
    6,520
    
    
    
    53,432
 
 Year ended February 1, 2003 (in thousands):
 
 FilenesValue City
    
    
    DSW
    
    
    Basement
    
    
    TotalNet sales
    
    $
    1,518,595
    
    
    $
    628,964
    
    
    $
    303,160
    
    
    $
    2,450,719Operating profit (loss)
    
    
    24,341
    
    
    
    14,639
    
    
    
    (2,274
    )
    
    
    36,706Capital expenditures
    
    
    26,136
    
    
    
    12,260
    
    
    
    3,388
    
    
    
    41,784Depreciation and
Amortization
    
    
    41,761
    
    
    
    5,424
    
    
    
    6,471
    
    
    
    53,656
 The following sets forth sales by each major merchandise category (in thousands):
 
 Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/03Apparel and ready to wear
    
    $
    1,083,195
    
    
    $
    1,112,789
    
    
    $
    1,144,024Hard goods and home furnishings
    
    
    512,169
    
    
    
    493,511
    
    
    
    466,759Shoes and other footwear
    
    
    1,144,267
    
    
    
    987,906
    
    
    
    839,936Total
    
    $
    2,739,631
    
    
    $
    2,594,206
    
    
    $
    2,450,719
 F-25




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 13.
    
    QUARTERLY FINANCIAL DATA (UNAUDITED)
 QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended January 29, 2005
 1st Qtr.
    
    
    2nd Qtr.
    
    
    3rd Qtr.
    
    
    4th Qtr.05/01/04
    
    
    07/31/04
    
    
    10/30/04
    
    
    01/29/0513 Weeks
    
    
    13 Weeks
    
    
    13 Weeks
    
    
    13 WeeksRestated*
    
    Restated*
    
    Restated*Net sales
    
    $
    646,300
    
    
    $
    631,654
    
    
    $
    699,738
    
    
    $
    761,939Cost of sales
    
    
    (386,867
    )
    
    
    (372,088
    )
    
    
    (419,776
    )
    
    
    (484,484
    )Gross profit
    
    
    259,433
    
    
    
    259,566
    
    
    
    279,962
    
    
    
    277,455Selling, general and administrative expenses
    
    
    (254,606
    )
    
    
    (249,664
    )
    
    
    (273,962
    )
    
    
    (298,213
    )License fees and other income
    
    
    1,557
    
    
    
    1,566
    
    
    
    1,950
    
    
    
    1,641Operating profit (loss)
    
    
    6,384
    
    
    
    11,468
    
    
    
    7,950
    
    
    
    (19,117
    )Interest expense, netNon-related
    
    
    (2,780
    )
    
    
    (3,078
    )
    
    
    (3,123
    )
    
    
    (3,839
    )Related parties
    
    
    (6,615
    )
    
    
    (6,836
    )
    
    
    (6,815
    )
    
    
    (5,475
    )(Loss) income before income taxes
    
    
    (3,011
    )
    
    
    1,554
    
    
    
    (1,988
    )
    
    
    (28,431
    )Benefit (provision) for income taxes
    
    
    1,062
    
    
    
    (797
    )
    
    
    646
    
    
    
    11,517Net (loss) income
    
    $
    (1,949
    )
    
    $
    757
    
    
    $
    (1,342
    )
    
    $
    (16,914
    )Basic (loss) earnings per share (1)
    
    $
    (0.06
    )
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    (0.50
    )Diluted (loss) earnings per share (1)
    
    $
    (0.06
    )
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    (0.50
    )
 Year Ended January 31, 2004
 1st Qtr.
    
    
    2nd Qtr.
    
    
    3rd Qtr.
    
    
    4th Qtr.05/03/03
    
    
    08/02/03
    
    
    11/01/03
    
    
    01/31/0413 Weeks
    
    
    13 Weeks
    
    
    13 Weeks
    
    
    13 WeeksRestated*
    
    Restated*
    
    Restated*
    
    Restated*Net sales
    
    $
    588,532
    
    
    $
    604,594
    
    
    $
    680,639
    
    
    $
    720,441Cost of sales
    
    
    (371,812
    )
    
    
    (368,228
    )
    
    
    (419,251
    )
    
    
    (433,923
    )Gross profit
    
    
    216,720
    
    
    
    236,366
    
    
    
    261,388
    
    
    
    286,518Selling, general and administrative expenses
    
    
    (230,227
    )
    
    
    (235,078
    )
    
    
    (249,790
    )
    
    
    (259,849
    )License fees and other income
    
    
    1,501
    
    
    
    1,291
    
    
    
    1,454
    
    
    
    1,364Operating (loss) profit
    
    
    (12,006
    )
    
    
    2,579
    
    
    
    13,052
    
    
    
    28,033Interest expense, netNon-related
    
    
    (4,207
    )
    
    
    (2,102
    )
    
    
    (2,959
    )
    
    
    (2,757
    )Related parties
    
    
    (6,383
    )
    
    
    (6,957
    )
    
    
    (6,615
    )
    
    
    (6,615
    )(Loss) income before income taxes
    
    
    (22,596
    )
    
    
    (6,480
    )
    
    
    3,478
    
    
    
    18,661Benefit (provision) for income taxes
    
    
    9,230
    
    
    
    2,639
    
    
    
    (2,770
    )
    
    
    (7,381
    )Net (loss) income
    
    $
    (13,366
    )
    
    $
    (3,841
    )
    
    $
    708
    
    
    $
    11,280Basic (loss) earnings per share (1)
    
    $
    (0.40
    )
    
    $
    (0.11
    )
    
    $
    0.02
    
    
    $
    0.33Diluted (loss) earnings per share (1)
    
    $
    (0.40
    )
    
    $
    (0.11
    )
    
    $
    0.02
    
    
    $
    0.24
 F-26




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 Year Ended January 29, 2005  As previously reported
 1st Qtr.
    
    
    2nd Qtr.
    
    
    3rd Qtr.05/01/04
    
    
    07/31/04
    
    
    10/30/0413 Weeks
    
    
    13 Weeks
    
    
    13 WeeksNet sales
    
    $
    646,300
    
    
    $
    631,654
    
    
    $
    699,738Cost of sales
    
    
    (386,867
    )
    
    
    (372,088
    )
    
    
    (419,776
    )Gross profit
    
    
    259,433
    
    
    
    259,566
    
    
    
    279,962Selling, general and administrative expenses
    
    
    (254,204
    )
    
    
    (249,261
    )
    
    
    (273,560
    )License fees and other income
    
    
    1,557
    
    
    
    1,566
    
    
    
    1,950Operating profit
    
    
    6,786
    
    
    
    11,871
    
    
    
    8,352Interest expense, netNon-related
    
    
    (2,780
    )
    
    
    (3,078
    )
    
    
    (3,123
    )Related parties
    
    
    (6,615
    )
    
    
    (6,836
    )
    
    
    (6,815
    )(Loss) income before income taxes
    
    
    (2,609
    )
    
    
    1,957
    
    
    
    (1,586
    )Benefit (provision) for income taxes
    
    
    1,062
    
    
    
    (797
    )
    
    
    646Net (loss) income
    
    $
    (1,547
    )
    
    $
    1,160
    
    
    $
    (940
    )Basic (loss) earnings per share (1)
    
    $
    (0.05
    )
    
    $
    0.03
    
    
    $
    (0.03
    )Diluted (loss) earnings per share (1)
    
    $
    (0.05
    )
    
    $
    0.03
    
    
    $
    (0.03
    )
 Year Ended January 31, 2004  As previously reported
 1st Qtr.
    
    
    2nd Qtr.
    
    
    3rd Qtr.
    
    
    4th Qtr.05/03/03
    
    
    08/02/03
    
    
    11/01/03
    
    
    01/31/0413 Weeks
    
    
    13 Weeks
    
    
    13 Weeks
    
    
    13 WeeksNet sales
    
    $
    588,532
    
    
    $
    604,594
    
    
    $
    680,639
    
    
    $
    720,441Cost of sales
    
    
    (371,812
    )
    
    
    (368,228
    )
    
    
    (419,251
    )
    
    
    (433,923
    )Gross profit
    
    
    216,720
    
    
    
    236,366
    
    
    
    261,388
    
    
    
    286,518Selling, general and administrative expenses
    
    
    (230,034
    )
    
    
    (234,885
    )
    
    
    (249,597
    )
    
    
    (259,655
    )License fees and other income
    
    
    1,501
    
    
    
    1,291
    
    
    
    1,454
    
    
    
    1,364Operating (loss) profit
    
    
    (11,813
    )
    
    
    2,772
    
    
    
    13,245
    
    
    
    28,227Interest expense, netNon-related
    
    
    (4,207
    )
    
    
    (2,102
    )
    
    
    (2,959
    )
    
    
    (2,757
    )Related parties
    
    
    (6,383
    )
    
    
    (6,957
    )
    
    
    (6,615
    )
    
    
    (6,615
    )(Loss) income before income taxes
    
    
    (22,403
    )
    
    
    (6,287
    )
    
    
    3,671
    
    
    
    18,855Benefit (provision) for income taxes
    
    
    9,230
    
    
    
    2,639
    
    
    
    (2,770
    )
    
    
    (7,381
    )Net (loss) income
    
    $
    (13,173
    )
    
    $
    (3,648
    )
    
    $
    901
    
    
    $
    11,474Basic (loss) earnings per share (1)
    
    $
    (0.39
    )
    
    $
    (0.11
    )
    
    $
    0.03
    
    
    $
    0.34Diluted (loss) earnings per share (1)
    
    $
    (0.39
    )
    
    $
    (0.11
    )
    
    $
    0.03
    
    
    $
    0.25
 *
    
    See Note 4.(1)
    
    (Loss) earnings per share calculations for each quarter are based on the applicable
weighted average shares outstanding for each period and may not necessarily be equal to
the full year per share amount.
 F-27




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 14.
    
    SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (in thousands):A supplemental schedule of non-cash investing and financing activities is presented below:
 Year Ended1/29/05
    
    
    1/31/04
    
    
    2/1/03Cash paid during the year for:Interest
    
    $
    28,864
    
    
    $
    34,070
    
    
    $
    30,319Income taxes
    
    $
    12,540
    
    
    $
    2,298
    
    
    $
    7,324Issuance of warrants
    
    
    
    
    
    
    
    
    
    $
    6,074
 In June 2002, the Company issued warrants with a fair market value of $6,074,000, using the
Black Scholes model, to the holders of to the Term Loan C Lenders to purchase 2,954,792 shares
of common stock at the initial exercise price of $4.50 per share, subject to adjustment. The
Warrants are exercisable at any time prior to June 11, 2012. The Company has granted the Term
Loan C Lenders registration rights with respect to the shares issuable upon exercise of the
Warrants.15.
    
    SUBSEQUENT EVENTS:In March 2005, the Company increased the ceiling under its revolving credit facility to $425
million. The increase of $75 million to the revolving credit facility was accomplished by
amendment under substantially the same terms to the existing revolving credit agreement which
expires in June 2006.In March 2005, the Company announced that DSW had filed a registration statement with the
SEC and plans to pursue an initial public offering (IPO). The Company expects that DSW
will complete the IPO in 2005, subject to market conditions. After the IPO, the Company
expects to own a majority of the outstanding common shares of DSW.In March 2005, the Company closed two underperforming Value City stores. The Company recorded a
charge of approximately $1.7 million relating to the operating lease for one of these store
locations.
 F-28




---



##### 



RETAIL VENTURES, INC.
SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands)
 Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EBalance at
    
    
    Charges to
    
    
    Charges to
    
    
    
    
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    Other
    
    
    
    
    
    
    EndDescription
    
    of Period
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions(1)
    
    
    of PeriodAllowance deducted from asset to which it applies:Allowance for doubtful accounts:Year Ended:02/01/03
    
    
    1,793
    
    
    
    10
    
    
    
    
    
    
    
    907
    
    
    
    89601/31/04
    
    
    896
    
    
    
    33
    
    
    
    
    
    
    
    103
    
    
    
    82601/29/05
    
    
    826
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    766Inventory Reserve:Year Ended:02/01/03
    
    
    33,540
    
    
    
    8,594
    
    
    
    
    
    
    
    9,659
    
    
    
    32,47501/31/04
    
    
    32,475
    
    
    
    6,569
    
    
    
    
    
    
    
    4,859
    
    
    
    34,18501/29/05
    
    
    34,185
    
    
    
    14,142
    
    
    
    
    
    
    
    5,545
    
    
    
    42,782Allowance for Sales Returns:Year Ended:02/01/03
    
    
    2,348
    
    
    
    528
    
    
    
    
    
    
    
    614
    
    
    
    2,26201/31/04
    
    
    2,262
    
    
    
    963
    
    
    
    
    
    
    
    15
    
    
    
    3,21001/29/05
    
    
    3,210
    
    
    
    1,861
    
    
    
    
    
    
    
    1,495
    
    
    
    3,576Store Closing Reserve:Year ended:02/01/03
    
    
    615
    
    
    
    1,099
    
    
    
    
    
    
    
    1,190
    
    
    
    52401/31/04
    
    
    524
    
    
    
    598
    
    
    
    
    
    
    
    
    
    
    
    1,12201/29/05
    
    
    1,122
    
    
    
    1,926
    
    
    
    
    
    
    
    1,736
    
    
    
    1,312
 
 (1)
    
    The deductions in Column D are amounts written off against the respective reserve. S-1




---



##### 



INDEX TO EXHIBITS
 ExhibitNo.
    
    Description2.1
    
    Agreement and Plan of Merger among Value City Department Stores,
Inc., Retail Ventures, Inc. (the Company) and Value City Merger
Sub, Inc., effective as of October 8, 2003. Incorporated by
reference to Exhibit 2 to Form 8-K (file no. 1-10767) filed on
October 8, 2003.3.1
    
    Amended and Restated Articles of Incorporation of the Company.
Incorporated by reference to Exhibit 3(a) to Form 8-K (file No.
1-10767) filed on October 8, 2003.3.2
    
    Amended and Restated Code of Regulations of the Company. Incorporated
by reference to Exhibit 3(b) to Form 8-K (file No. 1-10767) filed on
October 8, 2003.10.1
    
    Corporate Services Agreement, dated June 12, 2002, between the
Company and SSC. Incorporated by reference to Exhibit 10.6 to Form
10-Q (file no. 1-10767) filed June 18, 2002.10.2
    
    License Agreement, dated June 5, 1991, between the Company and SSC
re: Service Marks. Incorporated by reference to Exhibit 10.2 to
Amendment No. 1 to Form S-1 Registration Statement (file no.
33-40214) filed June 6, 1991.10.3#
    
    Form of Indemnification Agreement, dated 1991, between the Company
and its directors and executive officers. Incorporated by reference
to Exhibit 10.7 to Amendment No. 1 to Form S-1 Registration Statement
(file no. 33-40214) filed June 6, 1991.10.4#
    
    Amended and Restated Retail Ventures, Inc. 1991 Stock Option Plan.
Incorporated by reference to Exhibit 4(a) to Amendment No. 1 to Form
S-8 Registration Statement (file no. 333-45852) filed October 16,
2003.10.5#
    
    Retail Ventures, Inc. Employee Stock Purchase Plan. Incorporated by
reference to Exhibit 4(a) to Amendment No. 1 to Form S-8 Registration
Statement (file no. 33-46221) filed October 16, 2003.10.6#
    
    Retail Ventures, Inc. Amended and Restated 2000 Stock Incentive Plan
(the 2000 Stock Incentive Plan). Incorporated by reference to
Exhibit 4(a) to Amendment No. 1 to Form S-8 Registration Statement
(file no. 333-100398) filed on October 16, 2003.10.7#
    
    Amended and Restated Retail Ventures, Inc. Non-Employee Director
Stock Option Plan. Incorporated by reference to Exhibit 4(a) to Form
S-8 Registration Statement (file no. 333-45856) filed October 16,
2003.10.8
    
    Sublease, dated April 25, 1991, between the Company, as sublessor,
and SSC, as sublessee, re: Baltimore, MD (Eastpoint) furniture store
location. Incorporated by reference to Exhibit 10.15.1 to
Registration Statement on Form S-1 (file no. 33-40214) filed April
29, 1991.10.9
    
    Sublease, dated April 25, 1991, between the Company, as sublessor,
and SSC, as sublessee, re: Baltimore, MD (Westview) furniture store
location. Incorporated by reference to Exhibit 10.15.2 to
Registration Statement on Form S-1 (file no. 33-40214) filed April
29, 1991.10.10
    
    Sublease, dated April 25, 1991, between the Company, as sublessor,
and SSC, as sublessee, re: Lansing, MI furniture store location.
Incorporated by reference to Exhibit 10.15.3 to Registration
Statement on Form S-1 (file no. 33-40214) filed April 29, 1991.10.11
    
    Sublease, dated April 25, 1991, between the Company, as sublessor,
and SSC, as sublessee, re: Louisville, KY (Preston Highway) furniture
store location. Incorporated by reference to Exhibit 10.15.4 to
Registration Statement on Form S-1 (file no. 33-40214) filed April
29, 1991.
 E-1




---



##### 



ExhibitNo.
    
    Description10.12
    
    Form of Assignment and Assumption Agreement between the Company, as
assignee, and SSC, as assignor, re: separate assignments of leases
for 31 stores. Incorporated by reference to Exhibit 10.16 to
Registration Statement on Form S-1 (file no. 33-40214) filed April
29, 1991.10.13
    
    Lease Agreement, dated July 1, 1988, between the Company, by
assignment from SSC, dated April 25, 1991, as sublessee, and SSC, as
sublessor, re: Benwood, WV store location. Incorporated by reference
to Exhibit 10.19 to Form 10-K (file no.1-10767) filed October 24,
1991.10.14#
    
    Form of Restricted Stock Agreement between the Company and certain
employees. Incorporated by reference to Exhibit 10.27 to Amendment
No. 1 to Form S-1 Registration Statement (file no. 33-47252) filed
April 27, 1992.10.15
    
    Lease, dated September 1, 1992, between the Company, as lessee, and
SSC, as lessor, re: South Bend/Mishawaka, IN store. Incorporated by
reference to Exhibit 10.29 to Form 10-K (file no.1-10767) filed
October 22, 1992.10.16
    
    Lease, dated January 27, 1992, between the Company, as lessee, and
J.A.L. Realty Company, an affiliate of SSC, as lessor, re: 3080 Alum
Creek Drive, Columbus, OH warehouse. Incorporated by reference to
Exhibit 10.30 to Form 10-K (file no.1-10767) filed October 22, 1992.10.16.1
    
    Exercise of the first five-year renewal option commencing February 1,
1997 under lease, dated January 27, 1992, as amended, between the
Company, as lessee, and J.A.L. Realty Company, an affiliate of SSC,
as lessor, re: 3080 Alum Creek Drive, Columbus, OH warehouse.
Incorporated by reference to Exhibit 10.30.1 to Form 10-Q (file no.
1-10767) filed March 19, 1996.10.17
    
    Lease, dated July 29, 1992, between the Company, as lessee, and
J.A.L. Realty Company, an affiliate of SSC, as lessor, re: 3232 Alum
Creek Drive, Columbus, OH warehouse. Incorporated by reference to
Exhibit 10.31 to Form 10-K (file no.1-10767) filed October 22, 1992.10.18
    
    Ground lease, dated April 15, 1994, between the Company, as lessee,
and J.A.L. Realty Company, an affiliate of SSC, as lessor, re: 19
acres (Westerville Rd., Columbus, OH). Incorporated by reference to
Exhibit 10.35 to Form 10-K (file no. 1-10767) filed October 26, 1994.10.19
    
    Agreement of Lease, dated March 1, 1994, between the Company, as
tenant, and Jubilee Limited Partnership, an affiliate of SSC, as
landlord, re: Hobart, IN store. Incorporated by reference to Exhibit
10.37 to Form 10-Q (file no. 1-10767) filed December 12, 1994.10.20
    
    Agreement of Lease, dated January 13, 1995, between the Company, as
tenant, and Westland Partners, an affiliate of SSC, as landlord, re:Westland, MI store. Incorporated by reference to Exhibit 10.39 to
Form 10-Q, (file no. 1-10767) filed March 14, 1995.10.21
    
    Agreement of Lease, dated January 13, 1995, between the Company, as
tenant, and Taylor Partners, an affiliate of SSC, as landlord, re:Taylor, MI store. Incorporated by reference to Exhibit 10.40 to Form
10-Q, (file no. 1-10767) filed March 14, 1995.10.22
    
    Lease, dated September 2, 1997, between the Company, as lessee, and
SSC-Fort Wayne L.L.C., an affiliate of SSC, as lessor. Incorporated
by reference to Exhibit 10.33.1 to Form 10-K (file no. 1-10767) filed
April 29, 2002.10.23
    
    Agreement of Lease, dated April 10, 1995, between the Company, as
tenant, and Independence Limited Liability Company, an affiliate of
SSC, as landlord, re: Charlotte, NC store. Incorporated by reference
to Exhibit 10.45 to Form 10-Q (file no. 1-10767) filed December 12,
1995.10.24
    
    Sublease and Occupancy Agreement, dated December 15, 1995, between
the Company, SSC and SSC, dba Value City Furniture, re: Louisville,
KY (Preston Highway) store. Incorporated by reference to Exhibit
10.46 to Form 10-Q (file no. 1-10767) filed March 19, 1996.
 E-2




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##### 



ExhibitNo.
    
    Description10.25
    
    Agreement of Lease, dated October 4, 1996, between the Company, as
tenant, and Hickory Ridge Pavilion, Ltd., an affiliate of SSC, as
landlord, re: Memphis, TN store. Incorporated by reference to
Exhibit 10.50 to Form 10-K (file no. 1-10767) filed November 1, 1996.10.26
    
    Agreement of Lease, dated October 30, 1998, between the Company, as
lessee, and Jubilee Limited Partnership, an affiliate of SSC, as
lessor, re: Calumet City, IL store. Incorporated by reference to
Exhibit 10.56 to Form 10-K (file no. 1-10767) filed April 30, 1999.10.27
    
    Agreement of Lease, dated September 29, 1998, between the Company, as
tenant, and Valley Fair Irvington, LLC, an affiliate of SSC, as
landlord, re: Irvington, NJ. Incorporated by reference to Exhibit
10.57 to Form 10-K (file no. 1-10767) filed April 30, 1999.10.28
    
    Industrial Space Lease  Net, dated March 22, 2000, between 4300 East
Fifth Avenue, LLC, an affiliate of SSC, as landlord, and Shonac
Corporation, as tenant, re: Building 6, Columbus International
Aircenter, Columbus, OH. Incorporated by reference to Exhibit 10.60
to Form 10-K (file no. 1-10767) filed April 28, 2000.10.29
    
    Lease, dated August 30, 2002, by and between Jubilee Limited
Partnership, an affiliate of SSC, and Shonac Corporation, re: Troy,
MI DSW store. Incorporated by reference to Exhibit 10.44 to Form
10-K (file no. 1-10767) filed April 29, 2004.10.29.1
    
    Assignment and Assumption Agreement, dated October 23, 2002, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Troy, MI DSW store. Incorporated by reference to
Exhibit 10.29.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.30
    
    Lease, dated October 8, 2003, by and between Jubilee Limited
Partnership, an affiliate of SSC, and Shonac Corporation, re: Denton,
TX DSW store. Incorporated by reference to Exhibit 10.46 to Form
10-K (file no. 1-10767) filed April 29, 2004.10.30.1
    
    Assignment and Assumption Agreement, dated December 18, 2003 between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Denton, TX DSW store. Incorporated by reference to
Exhibit 10.30.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.31
    
    Lease, dated October 28, 2003, by and between JLP-RICHMOND LLC, an
affiliate of SSC, and Shonac Corporation, re: Richmond, VA DSW store.
Incorporated by reference to Exhibit 10.47 to Form 10-K (file no.
1-10767) filed April 29, 2004.10.31.1
    
    Assignment and Assumption Agreement, dated December 18, 2003, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Richmond, VA DSW store. Incorporated by reference to
Exhibit 10.31.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.32#
    
    Employment Agreement, dated June 21, 2000, between James A. McGrady
and the Company. Incorporated by reference to Exhibit 10.46 (also
listed as Exhibit 10.61) to Form 10-K (file no. 1-10767) filed May 4,
2001.10.33#
    
    Employment Agreement dated February 3, 2002 between John C. Rossler
and the Company. Incorporated by reference to Exhibit 10 to Form
10-Q (file no. 1-10767) filed September 12, 2002.10.34#
    
    Employment Agreement, dated February 3, 2002, between Edwin J.
Kozlowski and the Company. Incorporated by reference to Exhibit 10.43
to Form 10-K (file no. 1-10767) filed May 1, 2003.10.35#
    
    Employment Agreement, dated as of April 29, 2004, between Julia A.
Davis and the Company. Incorporated by reference to Exhibit 10.51 to
Form 10-K (file no. 1-10767) filed April 29, 2004.10.36
    
    Loan and Security Agreement, dated as of June 11, 2002, by and among
National City Commercial Finance, Inc., as Administrative Agent for
the ratable benefit of the Revolving Credit Lenders, National City
Commercial Finance, Inc. and Fleet Retail Finance Inc., as Collateral
Agents for the ratable benefit of the Revolving Credit Lenders, the
Revolving Credit Lenders, National City Bank, as L/C Issuer, and
Value City Department Stores, Inc., as agent for the Borrowers named
therein. Incorporated by reference to Exhibit 10.1 to Form 10-Q
(file no. 1-10767) filed June 18, 2002.
 
 E-3




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##### 



ExhibitNo.
    
    Description10.36.1
    
    First Amendment to Loan and Security Agreement, dated as of October
7, 2003, by and among National City Commercial Finance, Inc., as
Administrative Agent for the ratable benefit of the Revolving Credit
Lenders, National City Commercial Finance, Inc. and Fleet Retail
Finance Inc., as Collateral Agents for the ratable benefit of the
Revolving Credit Lenders, the Revolving Credit Lenders, National City
Bank, as L/C Issuer, and Value City Department Stores, Inc., as agent
for the Borrowers named therein. Incorporated by reference to Exhibit
10(a) to Form 8-K (file No. 1-10767) filed October 8, 2003.10.36.2
    
    Second Amendment to Loan and Security Agreement, dated as of July 29,
2004, by and among National City Business Credit, Inc., as
Administrative Agent for the ratable benefit of the Revolving Credit
Lenders, National City Business Credit, Inc. and Fleet Retail Group,
Inc., as Collateral Agents for the ratable benefit of the Revolving
Credit Lenders, National City Bank, as L/C Issuer, the Revolving
Credit Lenders, and Value City Department Stores, Inc., as agent for
the Borrowers named therein. Incorporated by reference to Exhibit
10.1 to Form 10-Q (file no. 1-10767) filed September 8, 2004.10.36.3
    
    Joinder and Third Amendment to Loan and Security Agreement, dated as
of December 29, 2004, by and among National City Business Credit,
Inc., as Administrative Agent for the ratable benefit of the
Revolving Credit Lenders, National City Business Credit, Inc. and
Fleet Retail Group, Inc., as Collateral Agents for the ratable
benefit of the Revolving Credit Lenders, National City Bank, as L/C
Issuer, the Revolving Credit Lenders, and Value City Department
Stores LLC, as agent for the Borrowers named therein. Incorporated
by reference to Exhibit 10.1 to Form 8-K (file no. 1-10767) filed
January 4, 2005.10.37
    
    Financing Agreement, dated as of June 11, 2002, by and among Value
City Department Stores, Inc., Shonac Corporation, DSW Shoe Warehouse,
Inc., Gramex Retail Stores, Inc., VCM Ltd., Filenes Basement, Inc.,
GB Retailers, Inc., Value City Limited Partnership, and Value City of
Michigan, Inc., as Borrowers, the Lenders named therein, and Cerberus
Partners, L.P., as Agent for the Lenders. Incorporated by reference
to Exhibit 10.2 to Form 10-Q (file no. 1-10767) filed June 18, 2002.10.37.1
    
    First Amendment to the Financing Agreement, dated as of October 7,
2003, by and among Value City Department Stores, Inc., Shonac
Corporation, DSW Shoe Warehouse, Inc., Gramex Retail Stores, Inc.,
Filenes Basement, Inc., GB Retailers, Inc., Value City Limited
Partnership, and Value City of Michigan, Inc., as Borrowers, J.S.
Overland Delivery, Inc., Value City Department Stores Services, Inc.,
Westerville Road GP, Inc. and Westerville Road LP, Inc., as Initial
Guarantors, Retail Ventures, Inc., Retail Ventures Jewelry, Inc.,
Retail Ventures Services, Inc., and Retail Ventures Imports, Inc., as
Additional Guarantors, the Lenders named therein, and Cerberus
Partners, L.P., as Agent for the Lenders. Incorporated by reference
to Exhibit 10(b) to Form 8-K (file No. 1-10767) filed October 8,
2003.10.37.2
    
    Second Amendment to Financing Agreement, dated as of July 29, 2004,
by and among the Borrowers named therein, the Guarantors named
therein, the Lenders named therein, and Cerberus Partners, L.P., as
Agent for the Lenders. Incorporated by reference to Exhibit 10.2 to
Form 10-Q (file no. 1-10767) filed September 8, 2004.10.37.3
    
    Third Amendment to Financing Agreement, dated as of December 29,
2004, by and among the Borrowers named therein, the Guarantors named
therein, the Lenders named therein, and Cerberus Partners, L.P., as
Agent for the Lenders. Incorporated by reference to Exhibit 10.2 to
Form 8-K (file no. 1-10767) filed January 4, 2005.10.38
    
    Amended and Restated Senior Convertible Loan Agreement, dated as of
June 11, 2002, by and among Value City Department Stores, Inc., as
Borrower, Shonac Corporation, DSW Shoe Warehouse, Inc., Gramex Retail
Stores, Inc., VCM, Ltd., Filenes Basement, Inc., GB Retailers, Inc.,
J.S. Overland Delivery, Inc., Value City Department Stores Services,
Inc., Value City Limited Partnership, Value City of Michigan, Inc.,
Westerville Road GP, Inc. and Westerville Road LP, Inc., as
Guarantors, the Lenders named therein, and Schottenstein Stores
Corporation, as Agent for itself and the other Lenders. Incorporated
by reference to Exhibit 10.3 to Form 10-Q (file no. 1-10767) filed
June 18, 2002.
 E-4




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##### 



ExhibitNo.
    
    Description10.38.1
    
    Amendment No. 1 to Amended and Restated Senior Convertible Loan
Agreement, dated as of June 11, 2002, by and among Value City
Department Stores, Inc., as Borrower, Shonac Corporation, DSW Shoe
Warehouse, Inc., Gramex Retail Stores, Inc., VCM, Ltd., Filenes
Basement, Inc., GB Retailers, Inc., J.S. Overland Delivery, Inc.,
Value City Department Stores Services, Inc., Value City Limited
Partnership, Value City of Michigan, Inc., Westerville Road GP, Inc.
and Westerville Road LP, Inc., as Initial Guarantors, the Lenders
named therein, and Schottenstein Stores Corporation, as Agent and as
a Lender. Incorporated by reference to Exhibit 10.3.1 to Form 10-Q
(file no. 1-10767) filed June 18, 2002.10.38.2
    
    Amendment No. 2 to Amended and Restated Senior Convertible Loan
Agreement, dated as of October 7, 2003, by and among Value City
Department Stores, Inc., as Borrower, Shonac Corporation, DSW Shoe
Warehouse, Inc., Gramex Retail Stores, Inc., Filenes Basement, Inc.,
GB Retailers, Inc., Value City Limited Partnership, Value City of
Michigan, Inc., J.S. Overland Delivery, Inc., Value City Department
Stores Services, Inc., Westerville Road GP, Inc. and Westerville Road
LP, Inc., as Initial Guarantors, Retail Ventures, Inc., Retail
Ventures Jewelry, Inc., Retail Ventures Services, Inc., and Retail
Ventures Imports, Inc., as Additional Guarantors, the Lenders named
therein, and Cerberus Partners, L.P., as Agent for the Lenders.
Incorporated by reference to Exhibit 10(c) to Form 8-K (file No.
1-10767) filed October 8, 2003.10.38.3
    
    Amendment No. 3 to Amended and Restated Senior Convertible Loan
Agreement, dated as of December 29, 2004, by and among Value City
Department Stores LLC, as Borrower, the Guarantors named therein, the
Lenders named therein, and Cerberus Partners, L.P., as Agent for the
Lenders. Incorporated by reference to Exhibit 10.3 to Form 8-K (file
no. 1-10767) filed January 4, 2005.10.39
    
    Amended and Restated Registration Rights Agreement, dated as of June
11, 2002 by and among Value City Department Stores, Inc. and Cerberus
Partners, L.P. and SSC, as Initial Holders. Incorporated by
reference to Exhibit 10.4 to Form 10-Q (file no. 1-10767) filed June
18, 2002.10.40
    
    Form of Common Stock Purchase Warrants issued by the Company to
Cerberus Partners, L.P. and SSC. Incorporated by reference to
Exhibit 10.5 to Form 10-Q (file no. 1-10767) filed June 18, 2002.10.41#
    
    Value City Department Stores, Inc. 2003 Incentive Compensation Plan.
Incorporated by reference to Exhibit 10.41 to Form 10-K (file no.
1-10767) filed April 14, 2005.10.42#
    
    Employment Agreement, effective November 1, 2004, between Retail
Ventures, Inc. and Heywood Wilansky. Incorporated by reference to
Exhibit 10.1 to Form 8-K/A (file no. 1-10767) filed November 24,
2004.10.43#
    
    Employment Agreement, effective October 10, 2003, between Value City
Department Stores, Inc. and Steven E. Miller. Incorporated by
reference to Exhibit 10.43 to Form 10-K (file no. 1-10767) filed
April 14, 2005.10.44
    
    Agreement of Lease, dated March 1, 1994, between Jubilee Limited
Partnership, an affiliate of SSC, and Value City Department Stores,
Inc., as modified by First Lease Modification, dated November 1,
1994, re: Merrilville, IN Value City store. Incorporated by
reference to Exhibit 10.44 to Form 10-K (file no. 1-10767) filed
April 14, 2005.10.45
    
    Lease Agreement, dated July 7, 1987, by and between Schottenstein
Trustees, an affiliate of SSC, and Schottenstein Stores Corp. dba
Schottensteins Department Store, as modified by Lease Extension and
Modification Agreement, dated March 12, 1998, by and between
Schottenstein Trustees and Value City Department Stores, Inc. dba
Schottensteins East Department Store, re: 6055 E. Main Street,
Columbus, OH Value City store. Incorporated by reference to Exhibit
10.45 to Form 10-K (file no. 1-10767) filed April 14, 2005.
 E-5




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##### 



ExhibitNo.
    
    Description10.46
    
    Industrial Space Lease  Net, dated May 18, 2000, by and between
4300 East Fifth Avenue LLC, an affiliate of SSC, and Value City
Department Stores, Inc., re: 4200 East Fifth Avenue, Columbus, OH
warehouse. Incorporated by reference to Exhibit 10.46 to Form 10-K
(file no. 1-10767) filed April 14, 2005.10.47
    
    Industrial Space Lease  Net, dated May 18, 2000, by and between
4300 East Fifth Avenue LLC, an affiliate of SSC, and Value City
Department Stores, Inc., re: 4320-30 East Fifth Avenue, Columbus, OH
warehouse. Incorporated by reference to Exhibit 10.47 to Form 10-K
(file no. 1-10767) filed April 14, 2005.10.48
    
    Sublease, dated May 2000, by and between SSC, as sublessor, and
Shonac Corporation dba DSW Shoe Warehouse, as sublessee, re: Pittsburgh, PA DSW store. Incorporated by reference to Exhibit 10.48
to Form 10-K (file no. 1-10767) filed April 14, 2005.10.48.1
    
    Assignment and Assumption Agreement, dated January 8, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: 451 Clariton Boulevard, Pittsburgh, PA DSW store.
Incorporated by reference to Exhibit 10.48.1 to Form 10-K/A (file no.
1-10767) filed May 12, 2005.10.49
    
    Lease, dated May 2000, by and between Jubilee-Richmond LLC, an
affiliate of SSC, and DSW Shoe Warehouse, Inc. (as assignee of Shonac
Corporation), re: Glen Allen, VA DSW store. Incorporated by reference
to Exhibit 10.49 to Form 10-K (file no. 1-10767) filed April 14,
2005.10.50
    
    Lease, dated February 28, 2001, by and between Jubilee-Springdale,
LLC, an affiliate of SSC, and Shonac Corporation dba DSW Shoe
Warehouse, re: Springdale, OH DSW store. Incorporated by reference to
Exhibit 10.50 to Form 10-K (file no. 1-10767) filed April 14, 2005.10.50.1
    
    Assignment and Assumption Agreement, dated May 11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Springdale, OH DSW store. Incorporated by reference to
Exhibit 10.50.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.51
    
    Agreement of Lease, dated 1997, between Shoppes of Beavercreek Ltd.,
an affiliate of SSC, and Shonac Corporation (assignee of SSC d/b/a
Value City Furniture through Assignment of Tenanyt Leashold Interst
and Amendment No. 1 to Agreement of Lease, dated February 28, 2001),
re: Beavercreek, OH DSW store. Incorporated by reference to Exhibit
10.51 to Form 10-K (file no. 1-10767) filed April 14, 2005.10.51.1
    
    Assignment and Assumption Agreement, dated May 11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Beavercreek, OH DSW store. Incorporated by reference to
Exhibit 10.51.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.52
    
    Lease, dated February 28, 2001, by and between JLP-Chesapeake, LLC,
an affiliate of SSC, and Shonac Corporation, re: Chesapeake, VA DSW
store. Incorporated by reference to Exhibit 10.52 to Form 10-K (file
no. 1-10767) filed April 14, 2005.10.52.1
    
    Assignment and Assumption Agreement, dated May 11, 2001, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Chesapeake, VA DSW store. Incorporated by reference to
Exhibit 10.52.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.53
    
    Ground Lease Agreement, dated April 30, 2002, by and between Polaris
Mall, LLC, a Delaware limited liability company, and SSC-Polaris LLC,
an affiliate of SSC, as modified by Sublease agreement, dated April
30, 2002, by and between SSC-Polaris LLC, as sublessor, and DSW Shoe
Warehouse, Inc. as sublease (assignee of Shonac Corporation), re: Columbus, OH (Polaris) DSW store. Incorporated by reference to
Exhibit 10.53 to Form 10-K (file no. 1-10767) filed April 14, 2005.10.53.1
    
    Assignment and Assumption Agreement, dated August 6, 2002, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Columbus, OH (Polaris) DSW store. Incorporated by
reference to Exhibit 10.53.1 to Form 10-K/A (file no. 1-10767) filed
May 12, 2005.
 
 E-6




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##### 



ExhibitNo.
    
    Description10.54
    
    Lease, dated August 30, 2002, by and between JLP-Cary LLC, an
affiliate of SSC, and Shonac Corporation, re: Cary, NC DSW store.
Incorporated by reference to Exhibit 10.54 to Form 10-K (file no.
1-10767) filed April 14, 2005.10.54.1
    
    Assignment and Assumption Agreement, dated October 23, 2002, between
Shonac Corporation, as assignor and DSW Shoe Warehouse, Inc., as
assignee, re: Cary, NC DSW store. Incorporated by reference to
Exhibit 10.54.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.55
    
    Lease, dated August 30, 2002, by and between JLP-Madison LLC, an
affiliate of SSC, and Shonac Corporation, re: Madison, TN DSW store.
Incorporated by reference to Exhibit 10.55 to Form 10-K (file no.
1-10767) filed April 14, 2005.10.55.1
    
    Assignment and Assumption Agreement, dated October 23, 2002, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Madison, TN DSW store. Incorporated by reference to
Exhibit 10.55.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.56
    
    Lease, dated July 19, 2000, by and between Jubilee Limited
Partnership, an affiliate of SSC, and Value City Department Stores,
Inc., as modified by Lease Modification Agreement, dated November 2,
2000, re: 3704 W. Dublin-Granville Rd., Columbus, OH DSW/Filenes
combo store. Incorporated by reference to Exhibit 10.56 to Form 10-K
(file no. 1-10767) filed April 14, 2005.10.57
    
    Master Store Lease, dated April 25, 1991, by and between SSC and
Value City Department Stores, Inc., as modified by First Amendment to
Master Store Lease, dated February 3, 1992, and Second Amendment to
Master Store Lease, Dated March 18, 2005, by and between SSC and
Value City Department Stores LLC and Value City of Michigan, Inc.,
re: 4 store locations (Clarksville, IN, Springdale, OH, Louisville,
KY (Dixie Highway), and Beckley, WV). Incorporated by reference to
Exhibit 10.57 to Form 10-K (file no. 1-10767) filed April 14, 2005.10.58
    
    Lease, dated September 24, 2004, by and between K&S Maple Hill Mall,
L.P., an affiliate of SSC, and Shonac Corporation, re: Kalamazoo, MI
DSW store. Incorporated by reference to Exhibit 10.58 to Form 10-K
(file no. 1-10767) filed April 14, 2005.10.58.1
    
    Assignment and Assumption Agreement, dated February 28, 2005, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: Kalamazoo, MI DSW store. Incorporated by reference to
Exhibit 10.58.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.59
    
    Lease, dated November 2004, by and between KSK Scottsdale Mall, L.P.,
an affiliate of SSC, and Shonac Corporation, re: South Bend, IN DSW
store. Incorporated by reference to Exhibit 10.59 to Form 10-K
(file no. 1-10767) filed April 14, 2005.10.59.1
    
    Assignment and Assumption Agreement, dated March 18, 2005, between
Shonac Corporation, as assignor, and DSW Shoe Warehouse, Inc., as
assignee, re: South Bend, IN DSW store. Incorporated by reference to
Exhibit 10.59.1 to Form 10-K/A (file no. 1-10767) filed May 12, 2005.10.60
    
    Lease Agreement, dated March 18, 2005, by and between SSC and Value
City of Michigan, Inc., re: Flint, MI DSW store. Incorporated by
reference to Exhibit 10.60 to Form 10-K (file no. 1-10767) filed
April 14, 2005.10.61
    
    Lease Agreement, dated September 2, 1997, by and between
SSC-Barboursville, L.L.C., an affiliate of SSC, and Value City Department
Stores, Inc. Incorporated by reference to Exhibit 10.61 to Form 10-K
(file no. 1-10767) filed April 14, 2005.10.62#
    
    Sample Nonqualified Stock Option Award Agreement issued by the
Company pursuant to the 2000 Stock Incentive Plan. Incorporated by
reference to Exhibit 10.62 to Form 10-K (file no. 1-10767) filed
April 14, 2005.
 
 E-7




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##### 



ExhibitNo.
    
    Description10.63#
    
    Sample Price Protected Stock Option Award Agreement issued by the
Company pursuant to the 2000 Stock Incentive Plan. Incorporated by
reference to Exhibit 10.63 to Form 10-K (file no. 1-10767) filed
April 14, 2005.10.64#
    
    Sample Equity Compensation Approval Notice and Agreement issued by
the Company to certain employees. Incorporated by reference to
Exhibit 10.64 to Form 10-K (file no. 1-10767) filed April 14, 2005.10.65
    
    Master Sublease, dated April 25, 1991, between the Company, as
sublessee, and SSC, as sublessor, re: two stores (Covington, KY and
Greenwood, IN). Incorporated by reference to Exhibit 10.11 to
Registration Statement on Form S-1 (file no. 33-402144) filed April
29, 1991.10.66#
    
    Form of Indemnification Agreement between the Company and its
directors and officers. Incorporated by reference to Exhibit 10(b)
to Registration Statement on Form S-8 (file no. 333-117341) filed
July 13, 2004.10.67
    
    Lease Agreement, dated November 5, 1992, by and between Value City
Department Stores, Inc. (successor to SSC d/b/a Elyria Value City
Shopping Center), as sublessor, and SSC d/b/a Value City Furniture
#17, as sublessee, as modified by Sublease Extension and Modification
Agreement, dated October 11, 2001, re: Elyria, OH store. Incorporated
by reference to Exhibit 10.67 to Form 10-K/A (file no. 1-10767) filed
May 12, 2005.10.68
    
    Agreement of Lease, dated March 6, 1996, between Value City of
Michigan, Inc. (assignee of MRSLV Saginaw, L.L.C.), as sublessor, and
SSC d/b/a Value City Furniture, as sublessee, re: Saginaw Michigan
store. Incorporated by reference to Exhibit 10.68 to Form 10-K/A
(file no. 1-10767) filed May 12, 2005.21
    
    List of Subsidiaries. Incorporated by reference to Exhibit 21 to Form
10-K (file no. 1-10767) filed April 14, 2005.23*
    
    Consent of Independent Registered Public Accounting Firm.24
    
    Power of Attorney. Incorporated by
reference to Exhibit 24 to Form
10-K (file no. 1-10767) filed April 14, 2005.31.1*
    
    Rule 13a-14(a)/15d-14(a) Certification  Principal Executive Officer.31.2*
    
    Rule 13a-14(a)/15d-14(a) Certification  Principal Financial Officer.32.1*
    
    Section 1350 Certification  Principal Executive Officer.32.2*
    
    Section 1350 Certification  Principal Financial Officer.
 
 
 *
    
    Filed herewith.#
    
    Management contract or compensatory plan or arrangement. E-8