Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November ~~10, 2017,~~16, 2018, the registrant had ~~48,686,513~~49,478,819 shares of common stock, $0.01 par value per share, outstanding.

	October 28, 2017			January 28, 2017			November 3, 2018			February 3, 2018
	(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2018)			(Fiscal 2017)

ASSETS
Current assets:
Cash and cash equivalents	$	5,791		$	5,572		$	6,376		$	5,362
Accounts receivable		4,232			7,114			1,438			3,046
Inventories		119,878			117,446			116,371			103,332
Prepaid expenses and other current assets		11,747			8,817			11,275			9,927
Total current assets		141,648			138,949			135,460			121,667

Property and equipment, net of accumulated depreciation and amortization		116,126			124,347			98,286			111,032

Other assets:
Intangible assets		1,923			2,228			1,573			1,821
Other assets		3,955			3,804			5,716			5,885
Total assets	$	263,652		$	269,328		$	241,035		$	240,405

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	2,296		$	6,941		$	-		$	1,392
Current portion of deferred gain on sale-leaseback		1,465			1,465			1,465			1,465
Accounts payable		32,750			31,258			29,717			33,987
Accrued expenses and other current liabilities		24,616			31,938			26,854			25,585
Borrowings under credit facility		68,198			44,097			57,290			47,385
Total current liabilities		129,325			115,699			115,326			109,814

Long-term liabilities:
Long-term debt, net of current portion		10,892			12,061			14,743			10,669
Deferred rent and lease incentives		36,075			35,421			32,938			35,718
Deferred gain on sale-leaseback, net of current portion		10,624			11,723			9,159			10,258
Deferred tax liability		222			222
Other long-term liabilities		4,735			5,682			3,238			3,960
Total long-term liabilities		62,548			65,109			60,078			60,605

Commitments and contingencies

Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued		—			—			—			—
Common stock, $0.01 par value, 100,000,000 shares authorized, 61,426,351 and 61,637,164 shares issued at October 28, 2017 and January 28, 2017, respectively		614			616
Common stock, $0.01 par value, 100,000,000 shares authorized, 62,209,305 and 61,485,882 shares issued at November 3, 2018 and February 3, 2018, respectively								622			615
Additional paid-in capital		307,115			304,466			309,338			307,557
Treasury stock at cost, 12,755,873 and 10,877,439 shares at October 28, 2017 and January 28, 2017, respectively		(92,658	)		(87,977	)
Treasury stock at cost, 12,755,873 shares at November 3, 2018 and February 3, 2018								(92,658	)		(92,658	)
Accumulated deficit		(138,069	)		(122,567	)		(145,585	)		(139,285	)
Accumulated other comprehensive loss		(5,223	)		(6,018	)		(6,086	)		(6,243	)
Total stockholders' equity		71,779			88,520			65,631			69,986
Total liabilities and stockholders' equity	$	263,652		$	269,328		$	241,035		$	240,405

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

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Nine Months Ended
	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016			November 3, 2018			October 28, 2017			November 3, 2018			October 28, 2017
	(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2018)			(Fiscal 2017)			(Fiscal 2018)			(Fiscal 2017)

Sales	$	103,700		$	101,871		$	332,454		$	327,637		$	107,069		$	103,700		$	342,606		$	332,454
Cost of goods sold including occupancy costs		58,887			56,633			183,136			177,790			60,009			58,887			188,333			183,136
Gross profit		44,813			45,238			149,318			149,847			47,060			44,813			154,273			149,318

Expenses:
Selling, general and administrative		41,968			41,383			137,204			129,051			40,436			41,968			133,631			137,204
Corporate restructuring and CEO transition costs														692			—			2,452			—
Impairment of assets														—			—			—			1,718
Depreciation and amortization		7,680			7,494			25,055			22,363			7,161			7,680			21,867			23,337
Total expenses		49,648			48,877			162,259			151,414			48,289			49,648			157,950			162,259

Operating loss		(4,835	)		(3,639	)		(12,941	)		(1,567	)		(1,229	)		(4,835	)		(3,677	)		(12,941	)

Interest expense, net		(871	)		(779	)		(2,497	)		(2,346	)		(798	)		(871	)		(2,642	)		(2,497	)

Loss before provision for income taxes		(5,706	)		(4,418	)		(15,438	)		(3,913	)
Provision for income taxes		-			34			64			126
Loss before provision (benefit) for income taxes														(2,027	)		(5,706	)		(6,319	)		(15,438	)
Provision (benefit) for income taxes														(22	)		-			(19	)		64


Net loss	$	(5,706	)	$	(4,452	)	$	(15,502	)	$	(4,039	)	$	(2,005	)	$	(5,706	)	$	(6,300	)	$	(15,502	)


Net loss per share - basic and diluted	$	(0.12	)	$	(0.09	)	$	(0.32	)	$	(0.08	)	$	(0.04	)	$	(0.12	)	$	(0.13	)	$	(0.32	)

Weighted-average number of common shares outstanding:
Basic		48,607			49,552			48,966			49,532			49,352			48,607			49,068			48,966
Diluted		48,607			49,552			48,966			49,532			49,352			48,607			49,068			48,966

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

	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Nine Months Ended
	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016			November 3, 2018			October 28, 2017			November 3, 2018			October 28, 2017
	(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2018)			(Fiscal 2017)			(Fiscal 2018)			(Fiscal 2017)
Net loss	$	(5,706	)	$	(4,452	)	$	(15,502	)	$	(4,039	)	$	(2,005	)	$	(5,706	)	$	(6,300	)	$	(15,502	)

Other comprehensive income before taxes:
Foreign currency translation		(52	)		(176	)		164			(319	)		(7	)		(52	)		(246	)		164
Pension plans		210			237			631			711			165			210			495			631
Other comprehensive income before taxes		158			61			795			392			158			158			249			795
Tax provision related to items of other comprehensive income		—			—			—			—			(45	)		—			(92	)		—
Other comprehensive income, net of tax		158			61			795			392			113			158			157			795
Comprehensive loss	$	(5,548	)	$	(4,391	)	$	(14,707	)	$	(3,647	)	$	(1,892	)	$	(5,548	)	$	(6,143	)	$	(14,707	)

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

Accumulated

Additional

Other

Common Stock

Paid-in

Treasury Stock

Accumulated

Comprehensive

Shares

Amounts

Capital

Shares

Amounts

Deficit

Income (Loss)

Total

Balance at January 28, 2017

61,637

$
616

$
304,466

(10,877
)

$
(87,977
)

$
(122,567
)

$
(6,018
)

$
88,520

Board of Directors compensation

96

1

420

421

Stock compensation expense

1,306

1,306

Restricted Stock issued, reclass from liability to equity (Note 3)

425

4

916

920

Cancellations of restricted stock, net of issuances

(777
)

(8
)

8

—

Deferred stock vested

45

1

(1
)

—

Repurchase of common stock

(1,878
)

(4,681
)

(4,681
)
Accumulated other comprehensive income (loss):

Pension plan

631

631

Foreign currency

164

164

Net loss

(15,502
)

(15,502
)
Balance at October 28, 2017

61,426

$
614

$
307,115

(12,755
)

$
(92,658
)

$
(138,069
)

$
(5,223
)

$
71,779

																		Accumulated
						Additional												Other
	Common Stock					Paid-in			Treasury Stock						Accumulated			Comprehensive
	Shares			Amounts		Capital			Shares			Amounts			Deficit			Income (Loss)			Total
Balance at February 3, 2018		61,486		$	615	$	307,557			(12,755	)	$	(92,658	)	$	(139,285	)	$	(6,243	)	$	69,986
Board of Directors compensation		146			1		448															449
Stock compensation expense							1,094															1,094
Restricted stock units (RSUs) granted for achievement of performance-based compensation, reclassified from liability to equity (Note 4)							381															381
Issuance of common stock upon RSUs release		627			6		(6	)														—
Shares withheld for taxes related to net share settlement of RSUs		(54	)		—		(136	)														(136	)
Cancellation of restricted stock, net of issuances		(3	)		—		—															—
Deferred stock vested		7			—		—															—
Accumulated other comprehensive income (loss):
Pension plan, net of taxes																			367			367
Foreign currency, net of taxes																			(210	)		(210	)
Net loss																(6,300	)					(6,300	)
Balance at November 3, 2018		62,209		$	622	$	309,338			(12,755	)	$	(92,658	)	$	(145,585	)	$	(6,086	)	$	65,631

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

	For the Nine Months Ended						For the Nine Months Ended
	October 28, 2017			October 29, 2016			November 3, 2018			October 28, 2017
	(Fiscal 2017)			(Fiscal 2016)			(Fiscal 2018)			(Fiscal 2017)
Cash flows from operating activities:
Net loss	$	(15,502	)	$	(4,039	)	$	(6,300	)	$	(15,502	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net loss to net cash (used for) provided by operating activities:
Amortization of deferred gain on sale-leaseback		(1,099	)		(1,099	)		(1,099	)		(1,099	)
Amortization of deferred debt issuance costs		206			208			136			206
Write-off of deferred debt issuance costs								186			—
Depreciation and amortization		25,055			22,363			21,867			23,337
Deferred taxes, net of valuation allowance		—			26
Impairment of assets								—			1,718
Stock compensation expense		1,306			1,076			1,094			1,306
Board of Directors stock compensation		421			362			449			421

Changes in operating assets and liabilities:
Accounts receivable		2,882			(3,642	)		1,608			2,882
Inventories		(2,432	)		(3,167	)		(13,039	)		(2,432	)
Prepaid expenses and other current assets		(2,930	)		(705	)		(1,348	)		(2,930	)
Other assets		(151	)		(376	)		169			(151	)
Accounts payable		1,492			(972	)		(4,270	)		1,492
Deferred rent and lease incentives		654			3,976			(2,780	)		654
Accrued expenses and other liabilities		(4,654	)		(5,959	)		2,054			(4,654	)
Net cash provided by operating activities		5,248			8,052
Net cash (used for) provided by operating activities								(1,273	)		5,248

Cash flows from investing activities:
Additions to property and equipment, net		(18,429	)		(21,799	)		(9,842	)		(18,429	)
Net cash used for investing activities		(18,429	)		(21,799	)		(9,842	)		(18,429	)

Cash flows from financing activities:
Repurchase of common stock		(4,681	)		—			—			(4,681	)
Costs associated with new credit facility								(553	)		—
Proceeds from the issuance of long-term debt								15,000			—
Principal payments on long-term debt		(5,930	)		(5,363	)		(12,251	)		(5,930	)
Net borrowings under credit facility		24,011			20,284			10,069			24,011
Tax withholdings paid related to net share settlements of RSUs								(136	)		-
Net cash provided by financing activities		13,400			14,921			12,129			13,400
Net increase in cash and cash equivalents		219			1,174			1,014			219
Cash and cash equivalents:
Beginning of period		5,572			5,170			5,362			5,572
End of period	$	5,791		$	6,344		$	6,376		$	5,791

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

In the opinion of management of Destination XL Group, Inc., a Delaware corporation (formerly known as Casual Male Retail Group, Inc. and, collectively with its subsidiaries, referred to as the “Company”), the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair presentation of the interim financial statements. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the notes to the Company’s audited consolidated financial statements for the fiscal year ended ~~January 28, 2017~~February 3, 2018 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March ~~20, 2017.~~23, 2018.

The information set forth in these statements may be subject to normal year-end adjustments. The information reflects all adjustments that, in the opinion of management, are necessary to present fairly the Company’s results of operations, financial position and cash flows for the periods indicated. The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 the reported amounts of revenues and expenses during the reporting period. The Company’s business historically has been seasonal in nature, and the results of the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The Company’s fiscal year is a 52- or 53- week period ending on the Saturday closest to January 31. Fiscal ~~2017~~2018 is ~~a 53-week period ending on February 3, 2018 and fiscal 2016 was~~ a 52-week period ending on ~~January 28, 2017.~~February 2, 2019 and fiscal 2017 was a 53-week period ended on February 3, 2018.

The Company reports its operations as one reportable segment, Big & Tall Men’s Apparel, which consists of two principal operating segments: its retail business and its direct business. The Company considers its operating segments to be similar in terms of economic characteristics, production processes and operations, and has therefore aggregated them into a single reporting segment, consistent with its omni-channel business approach.

In the second quarter of fiscal 2017, the Company incurred an impairment charge of $1.7 million for the write-off of certain store assets. This amount was previously included in “Depreciation and Amortization” in the Consolidated Statements of Operations for the first nine months of fiscal 2017 but was reclassified to “Impairment of Assets” in the Consolidated Statement of Operations for the fiscal year ended February 3, 2018. The ~~direct operating segment includes~~prior year comparison in the ~~operating results~~Consolidated Statements of Operations for the first nine months of fiscal 2018 reflect this reclassification.

For the first nine months of fiscal 2018, the Company has reclassified $190,228 in costs, incurred in the first quarter of fiscal 2018, to “Corporate Restructuring and ~~assets~~CEO Transition Costs.” These costs were initially reported in “Selling, General and Administrative” expenses for ~~LivingXL~~^®the first quarter and ~~ShoesXL~~^®.

At ~~October 28, 2017,~~November 3, 2018, the “Casual Male” trademark had a carrying value of ~~$0.4~~$0.1 million and is considered a definite-lived asset. The Company is amortizing the remaining carrying value on an accelerated basis, consistent with projected cash flows through fiscal 2018, its estimated remaining useful life.

The Company’s “Rochester” trademark is considered an indefinite-lived intangible asset and has a carrying value of $1.5 million. During the nine months ended ~~October 28, 2017,~~November 3, 2018, no event or circumstance occurred which would cause a reduction in the fair value of the Company’s reporting units, requiring interim testing of the Company’s “Rochester” trademark.

ASC Topic 825, Financial Instruments, requires disclosure of the fair value of certain financial instruments. ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements.

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities.

The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible.

The fair value of long-term debt is classified within Level 2 of the valuation hierarchy. At ~~October 28, 2017,~~November 3, 2018, the fair value approximated the carrying amount based upon terms available to the Company for borrowings with similar arrangements and remaining maturities.

The fair value of indefinite-lived assets, which consists of the Company’s “Rochester” trademark, is measured on a non-recurring basis in connection with the Company’s annual impairment test. The fair value of the trademark is determined using a projected discounted cash flow analysis based on unobservable inputs and is classified within Level 3 of the valuation hierarchy. See Intangibles above.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and short-term borrowings approximate fair value because of the short maturity of these instruments.

Other comprehensive income (loss) includes amounts related to foreign currency and pension plans and is reported in the Consolidated Statements of Comprehensive Income (Loss). Other comprehensive income (loss) and reclassifications from AOCI for the three and nine months ended November 3, 2018 and October 28, 2017, ~~and October 29, 2016,~~ respectively, were as follows:

	October 28, 2017									October 29, 2016									November 3, 2018									October 28, 2017
For the three months ended:	(in thousands)																		(in thousands)
	Pension Plans			Foreign Currency			Total			Pension Plans			Foreign Currency			Total			Pension Plans			Foreign Currency			Total			Pension Plans			Foreign Currency			Total
Balance at beginning of the quarter	$	(4,816	)	$	(565	)	$	(5,381	)	$	(5,639	)	$	(682	)	$	(6,321	)	$	(5,595	)	$	(604	)	$	(6,199	)	$	(4,816	)	$	(565	)	$	(5,381	)

Other comprehensive income (loss) before reclassifications, net of taxes		43			(52	)		(9	)		61			(176	)		(115	)		58			(9	)		49			43			(52	)		(9	)

Amounts reclassified from accumulated other comprehensive income, net of taxes ⁽¹⁾		167			—			167			176			—			176			64			—			64			167			—			167

Other comprehensive income (loss) for the period		210			(52	)		158			237			(176	)		61			122			(9	)		113			210			(52	)		158

Balance at end of quarter	$	(4,606	)	$	(617	)	$	(5,223	)	$	(5,402	)	$	(858	)	$	(6,260	)	$	(5,473	)	$	(613	)	$	(6,086	)	$	(4,606	)	$	(617	)	$	(5,223	)

	October 28, 2017									October 29, 2016									November 3, 2018									October 28, 2017
For the nine months ended:	(in thousands)																		(in thousands)
	Pension Plans			Foreign Currency			Total			Pension Plans			Foreign Currency			Total			Pension Plans			Foreign Currency			Total			Pension Plans			Foreign Currency			Total
Balance at beginning of fiscal year	$	(5,237	)	$	(781	)	$	(6,018	)	$	(6,113	)	$	(539	)	$	(6,652	)	$	(5,840	)	$	(403	)	$	(6,243	)	$	(5,237	)	$	(781	)	$	(6,018	)

Other comprehensive income (loss) before reclassifications, net of taxes		128			164			292			183			(319	)		(136	)		173			(210	)		(37	)		128			164			292

Amounts reclassified from accumulated other comprehensive income, net of taxes ⁽¹⁾		503			—			503			528			—			528			194			—			194			503			—			503

Other comprehensive income (loss) for the period		631			164			795			711			(319	)		392			367			(210	)		157			631			164			795

Balance at end of quarter	$	(4,606	)	$	(617	)	$	(5,223	)	$	(5,402	)	$	(858	)	$	(6,260	)	$	(5,473	)	$	(613	)	$	(6,086	)	$	(4,606	)	$	(617	)	$	(5,223	)

Revenue from the Company’s retail business is recorded upon purchase of merchandise by customers, net of an allowance for sales returns. Revenue from the Company’s direct business is recognized at the time a customer order is delivered, net of an allowance for sales returns. Store sales are defined as sales that originate and are fulfilled directly at the store level. E-commerce sales are defined as sales that originate online, including those initiated online at the store level.

All share-based payments, including grants of employee stock options and restricted stock, are recognized as an expense in the Consolidated Statements of Operations based on their fair values and vesting periods. The fair value of stock options is determined using the Black-Scholes valuation model and requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them (the “expected term”), the estimated volatility of the Company’s common stock price over the expected term and the number of options that will ultimately not complete their vesting requirements (“forfeitures”). The Company reviews its valuation assumptions at each grant date and, as a result, is likely to change its valuation assumptions used to value employee stock-based awards granted in future periods. The values derived from using the Black-Scholes model are recognized as an expense over the vesting period, net of estimated forfeitures. The estimation of stock-based awards that will ultimately vest requires significant judgment. Actual results and future changes in estimates may differ from the Company’s current estimates.

The Company reviews its long-lived assets for events or changes in circumstances that might indicate the carrying amount of the assets may not be recoverable. The Company assesses the recoverability of the assets by determining whether the carrying value of such assets over their respective remaining lives can be recovered through projected undiscounted future cash flows. The amount of impairment, if any, is measured based on projected discounted future cash flows using a discount rate reflecting the Company’s average cost of funds.

There was no material impairment of long-lived assets in the third quarter and first nine months of fiscal 2018. In the second quarter of fiscal 2017, the Company recorded an impairment charge of $1.7 million ~~for~~related to the write-down of property and equipment. The impairment charge related to a store where the carrying value exceeded fair value. The fair value of these assets, based on Level 3 inputs, was determined using estimated discounted cash flows. The impairment charge wasequipment, which is included in ~~Depreciation and Amortization on~~ the ~~Consolidated Statement of Operations~~results for ~~the nine months ended October 28, 2017. There was no material impairment of assets in the third quarter of fiscal 2017 or in~~ the first nine months of fiscal ~~2016.~~2017.

~~In July 2015, the FASB issued ASU 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory,~~" which applies to inventory that is measured using first-in, first-out ("FIFO") or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This ASU is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. The Company ~~adopted this pronouncement as of January 29, 2017. The adoption of this standard did not have a material impact on the Company’s~~ ~~Consolidated Financial Statements~~.

~~In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting~~,” which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards, and classification on the statement of cash flows. The standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company adopted this standard during the first quarter of fiscal 2017. The adoption of this standard did not have a material impact on the Company’s provision for income taxes or diluted earnings per share. The Company has elected to adopt the guidance related to the presentation of excess tax benefits in its Consolidated Statements of Cash Flows on a prospective transition method. ~~Since there were~~ ~~no excess tax benefits~~ ~~for the nine months ended October 28, 2017 or October 29, 2016, this election did not result in a change in presentation on the Consolidated Statement of Cash Flows.~~ ~~In addition, the Company has elected to continue to estimate forfeitures at each grant.~~

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which ~~supersedes~~amends the accounting guidance on revenue recognition. The amendments in this ASU are intended to provide a framework for addressing revenue issues, improve comparability of revenue recognition ~~requirements in ASC 605, “Revenue Recognition,” as well as various other sections of~~practices, and improve disclosure requirements. This ASU sets forth a five-step model for determining when and how revenue is recognized. Under the ~~ASC, such as, but not limited to, ASC 340-20, “Other Assets and Deferred Costs - Capitalized Advertising Costs”. The core principle of ASU 2014-09 is that~~model, an entity ~~should~~is required to recognize revenue ~~in a way that depicts~~to depict the transfer of ~~promised~~ goods or services to ~~customers in~~a customer at an amount ~~that reflects~~reflecting the consideration ~~to which the entity~~it expects to ~~be entitled~~receive in exchange for those goods or services. To assess the impact of ASU 2014-09, ~~will be effective for fiscal years,~~the Company reviewed its current accounting policies and ~~interim periods within those years, beginning after December 15, 2017,~~practices, identified all material revenue streams, assessed the impact of the ASU on its material revenue streams and ~~is to be applied either retrospectively to each prior reporting period presented or~~identified potential differences with ~~the cumulative effect recognized at the date of initial adoption as an adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets~~current policies and practices. The Company adopted this standard on February 4, 2018, with no material impact on the ~~balance sheet). Early adoption is~~

~~permitted after December 15, 2016. The Company expects to adopt ASU 2014-09 in the first quarter of fiscal 2018,~~Company’s Consolidated Financial Statements, using the modified retrospective ~~approach as a transition method. The Company is continuing to evaluate the impact that ASU 2014-09 will have on its Consolidated Financial Statements and its~~approach. Further disclosures ~~particularly as it relates~~related to the Company’s revenue recognition policies and internal controls for gift card breakage, loyalty award program and estimates for sales returns. Based on these efforts, the Company currently anticipates that the performance obligations underlying its core revenue stream and the timingadoption of recognition therefore, will remain substantially unchanged. The Company expects that ASU 2014-09 will require additional disclosure, but does not expect the adoption to have a material impact on its Consolidated Financial Statements.

~~In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)~~,” which will require an entity to recognize lease assets and lease liabilities on its balance sheet and will increase disclosure requirements on its leasing arrangements. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. ~~In the financial statements~~this standard are provided below in ~~which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. While the Company is still~~Note 2, ~~evaluating the impact this pronouncement will have on its~~ ~~Consolidated Financial Statements, the~~ Revenue Recognition~~Company expects a~~ ~~gross-up of its Consolidated Balance Sheets as a result of recognizing lease liabilities and right of use assets. The extent of such gross-up is under evaluation.~~ .

In March 2016, the FASB issued ASU 2016-04, “Liabilities—Extinguishments of Liabilities: Recognition of Breakage for Certain Prepaid Stored-Value Products,” which amends exempting gift cards and other prepaid stored-value products from the guidance on extinguishing financial liabilities. Rather, they will be subject to breakage accounting consistent with the new revenue guidance in Topic 606. However, the exemption only applies to breakage liabilities that are not subject to unclaimed property laws or that are attached to segregated bank accounts (e.g., consumer debit cards). ~~The ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted.~~ The Company ~~does not expect the~~adopted this pronouncement as of February 4, 2018. The adoption of this ~~pronouncement to~~standard did not have a material impact on ~~its~~the Company’s Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which reduces the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230. The ~~ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.~~Company adopted this pronouncement as of February 4, 2018. The ~~Company does not expect the~~ adoption of this ~~pronouncement to~~standard did not have a material impact on ~~its~~the Company’s Consolidated Financial Statements.

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory,” which reduces the existing diversity in practice in how income tax consequences of an intra-entity transfer of an asset other than inventory should be recognized. The amendments in ASU 2016-16 require an entity to recognize such income tax consequences when the intra-entity transfer occurs rather than waiting until such time as the asset has been sold to an outside party. The ~~ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years.~~Company adopted

this pronouncement as of February 4, 2018. The ~~Company does not expect the~~ adoption of this ~~pronouncement to~~standard did not have a material impact on ~~its~~the Company’s Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718)”which provides clarity in order to reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. The Company adopted this pronouncement as of February 4, 2018. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This ASU is a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require lessees to recognize lease assets and lease liabilities for most leases, including those leases previously classified as operating leases under current GAAP. The ASU retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. In July 2018, the FASB issued ASU2018-11 “Leases (Topic 842): Targeted Improvements.” Prior to ASU2018-11, a modified retrospective transition was required for financing or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements. ASU2018-11 allows entities an additional transition method to the existing requirements whereby an entity could adopt the provisions of ASU 2016-02 by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted.

The Company will adopt the standard in the first quarter of fiscal 2019 by not restating comparative periods and recognizing a cumulative-effect adjustment to the opening balance sheet of retained earnings in accordance with ASU 2018-11. The Company has implemented its leasing software solution to enable compliance with accounting and disclosure requirements. The Company is continuing to identify necessary changes to its business processes and controls to support adoption of the new standard. While we are still in the process of quantifying the impact, we expect the adoption of the new standard to result in a material gross-up of our Consolidated Balance Sheets as a result of recognizing lease liabilities and right of use assets, which will be subject to long-lived asset impairment testing under ASC 360. The Company does not expect the adoption of the new standard to have a material impact on its results of operations or liquidity. The Company plans to elect the lessee non-lease component separation practical expedient, which permits the Company to not separate non-lease components from the lease components to which they relate. The Company expects to make an accounting policy election that will keep certain leases with a term of 12 months or less off the balance sheet and result in recognizing those lease payments on a straight-line basis over the lease term. As the Company’s leases do not provide an implicit rate, it plans to use its incremental borrowing rate based on information available at commencement date to determine the present value of future payments.

In February 2018, the FASB issued ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The amendments in this update allow a reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The amendments in this update are effective for fiscal years beginning after December 15, ~~2017,~~2018 and interim periods within those fiscal years. Early adoption is permitted. The Company ~~does not expect~~is currently evaluating the ~~adoption of~~impact this pronouncement towill have ~~a material impact~~ on its Consolidated Financial ~~Statements~~Statements.

In August 2018, the FASB issued ASU 2018-.13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” This guidance modifies the disclosure requirements on fair value measurements in Topic 820 by removing disclosures regarding transfers between Level 1 and Level 2 of the fair value hierarchy, by modifying the measurement uncertainty disclosure, and by requiring additional disclosures for Level 3 fair value measurements, among others. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact this pronouncement will have on its Consolidated Financial Statements.

No other new accounting pronouncements, issued or effective during the first nine months of fiscal ~~2017,~~2018, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

On February 4, 2018, the Company adopted Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective approach for all contracts not completed as of the date of adoption. Results for the reporting periods beginning on February 4, 2018 are presented under ASC 606, while prior period amounts continue to be reported in accordance with accounting under ASC 605, Revenue Recognition. There was no material impact to the Company’s Consolidated Financial Statements as a result of adopting ASC 606.

The Company operates as a retailer of big & tall men’s apparel, which includes both retail stores and a direct business. Revenue is recognized by the operating segment that initiates a customer’s order. Store sales are defined as sales that originate and are fulfilled directly at the store level. Direct sales are defined as sales that originate online, including those initiated online at the store level. Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included as part of accrued expenses on the Consolidated Balance Sheets.

Unredeemed Loyalty Coupons. The Company offers a free loyalty program to its customers for which points accumulate based on the purchase of merchandise. Over 90% of the Company’s customers participate in the loyalty program. Under ASC 606, these loyalty points provide the customer with a material right and a distinct performance obligation with revenue deferred and recognized when the points are expected to redeem or expire. The cycle of earning and redeeming loyalty points is generally under one year in duration. The loyalty accrual, net of breakage, was $1.2 million and $0.6 million at November 3, 2018 and February 3, 2018, respectively.

Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers. Upon issuance of a gift card, gift certificate, or credit voucher, a liability is established for its cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Based on historical redemption patterns, the Company can reasonably estimate the amount of gift cards, gift certificates, and credit vouchers for which redemption is remote, which is referred to as "breakage". Breakage is recognized over two years in proportion to historical redemption trends and is recorded as sales in the Consolidated Statements of Operations. The gift card liability, net of breakage, was $1.2 million and $2.2 million at November 3, 2018 and February 3, 2018, respectively.

Shipping. Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented. Amounts related to shipping and handling that are billed to customers are recorded in sales, and the related costs are recorded in cost of goods sold, including occupancy costs, in the Consolidated Statements of Operations.

As noted above under Segment Information in Note 1, the Company’s business consists of one reportable segment. Substantially all of the Company’s revenue is generated from its retail store operations and its direct business. Accordingly, we have determined that the following sales channels depict the nature, amount, timing, and uncertainty of how revenue and cash flows are affected by economic factors:

On ~~October 30, 2014,~~May 24, 2018, the Company ~~amended its~~entered into the Seventh Amended and Restated Credit Agreement with Bank of America, N.A., as agent, providing for a secured $140.0 million credit facility (the “New Credit Facility”). The New Credit Facility replaced the Company’s existing credit facility with Bank of ~~America, N.A, effective October 29, 2014, by executing the Second Amendment to the Sixth Amended and Restated Loan and Security Agreement (as amended, the “Credit Facility”).~~America.

The New Credit Facility ~~provides for~~continues to provide maximum committed borrowings of ~~$125 million. The Credit Facility includes,~~$125.0 million in revolver loans, with the ability, pursuant to an accordion feature, ~~the ability~~ to increase the New Credit Facility by an additional ~~$50~~$50.0 million upon the request of the Company

and the agreement of the lender(s) participating in the ~~increase. The Credit Facility includes a~~increase (the “Revolving Facility”). There were no changes to the sublimit of ~~$20~~$20.0 million for commercial and standby ~~letters~~letter of ~~credit and a~~credits or the sublimit of up to ~~$15~~$15.0 million for swingline loans. The Company’s ability to borrow under the New Credit Facility (the “Loan Cap”) is determined using an availability formula based on eligible assets. The ~~maturity date of the~~New Credit Facility is October 29, 2019. The Company’s obligations under the Credit Facility are secured by a lien on substantially all of its assets, excluding (i) a first priority lien held by the lenders of the Term Loan Facility on certain equipment ofrequires the Company ~~described below and (ii) intellectual property.~~

~~At October 28, 2017, the Company had outstanding borrowings under the Credit Facility~~to maintain a minimum consolidated fixed charge coverage ratio of $68.4 million, before unamortized debt issuance costs of $0.2 million. Outstanding standby letters of credit were $3.3 million and outstanding documentary letters of credit were $0.1 million. Unused excess availability at October 28, 2017 was $38.2 million. Average monthly borrowings outstanding under the Credit Facility during the first nine months of fiscal 2017 were $60.4 million, resulting in an average unused excess availability of approximately $43.3 million. The Company’s ability to borrow under the Credit Facility is determined using an availability formula based on eligible assets, with increased advance rates based on seasonality. Pursuant to the terms of the Credit Facility,1.0:1.0 if ~~the Company’s~~its excess availability under the New Credit Facility fails to be equal to or greater than the greater of ~~(i)~~ 10% of the Loan Cap ~~(defined in~~and $7.5 million. The maturity date of the New Credit Facility aswas extended from October 29, 2019 to May 24, 2023. The Company’s obligations under the ~~lesser~~New Credit Facility are secured by a lien on substantially all of ~~the revolving credit commitments at such time or the borrowing base at the relevant measurement time) and (ii) $7.5~~its assets.

The New Credit Facility includes a new $15.0 million ~~the Company will be required~~ ~~to maintain a minimum consolidated fixed charge coverage ratio of 1.0:1.0~~“first in, ~~order to pursue certain transactions, including but not limited to, stock repurchases, payment of dividends and business acquisitions.~~last out” (FILO) term facility (the “FILO Facility”), which is discussed below under long-term debt.

Borrowings made pursuant to the ~~Credit~~Revolving Facility will bear interest, calculated under either the Federal Funds rate or the LIBOR rate, at a rate equal to the ~~base rate (determined as the highest of~~following: (a) ~~Bank of America N.A.’s prime rate, (b)~~ the Federal Funds rate ~~plus 0.50% or (c) the annual ICE-LIBOR rate (“LIBOR”) for the respective interest period)~~ plus a varying percentage based on the Company’s ~~borrowing base,~~excess availability, of either 0.25% or 0.50%~~-0.75% for prime-based~~, or (b) the LIBOR rate (the Company being able to select interest periods of 1 week, 1 month, 2 months, 3 months or 6 months) plus a varying percentage based on the Company’s excess availability, of either 1.25% or 1.50%.

At November 3, 2018, the Company had outstanding borrowings under the Revolving Facility of $57.7 million, before unamortized debt issuance costs of $0.4 million. Outstanding standby letters of credit were $2.9 million and ~~1.50%-1.75% for LIBOR-based borrowings.~~ outstanding documentary letters of credit were $2.3 million. Unused excess availability at November 3, 2018 was $45.4 million. Average monthly borrowings outstanding under the previous credit facility and new Revolving Facility during the first nine months of fiscal 2018 were $56.3 million, resulting in an average unused excess availability of approximately $33.6 million.

The Company is also subject to an unused line fee of 0.25%. In connection with the New Credit Facility, the Company wrote-off $0.1 million of unamortized debt issuance costs. At ~~October 28, 2017,~~November 3, 2018, the Company’s prime-based interest rate was ~~4.75%~~5.50%. At ~~October 28, 2017,~~November 3, 2018, the Company had approximately ~~$64.0~~$52.0 million of its outstanding borrowings in LIBOR-based contracts with an interest rate of ~~2.70%~~3.50%. The LIBOR-based contracts expired on ~~October 31, 2017.~~November 7, 2018. When a LIBOR-based borrowing expires, the borrowings revert back to prime-based borrowings unless the Company enters into a new LIBOR-based borrowing arrangement.

The fair value of the amount outstanding under the ~~Credit~~Revolving Facility at ~~October 28, 2017~~November 3, 2018 approximated the carrying value.

The total borrowing capacity under the FILO Facility is based on a borrowing base, generally defined as a specified percentage of the value of eligible accounts, including certain trade names, that step down over time, plus a specified percentage of the value of eligible inventory that steps down over time. There can be no voluntary prepayments on the FILO Facility during the first year. After its one-year anniversary, the FILO Facility can be repaid, in whole or in part, subject to certain payment conditions.

Borrowings made under the FILO Facility will bear interest, calculated under either the Federal Funds rate or the LIBOR rate, at a rate equal to the following: (a) the Federal Funds rate plus a varying percentage based on the Company’s excess availability, of either 1.75% or 2.00% or (b) the LIBOR rate (the Company being able to select interest periods of 1 week, 1 month, 2 months, 3 months or 6 months) plus a varying percentage based on the Company’s excess availability, of either 2.75% or 3.00%. At November 3, 2018, the outstanding balance of $15.0 million was in a 2-month LIBOR-based contract with an interest rate of 5.07%. The LIBOR-based contract will expire on December 9, 2018. When a LIBOR-based borrowing expires, the Company can enter into a new LIBOR-based borrowing arrangement.

Pursuant to a Master Loan and Security Agreement with Banc of America Leasing & Capital, LLC, dated July 20, 2007 and amended on September 30, 2013 (the “Master Agreement”), the Company entered into twelve equipment security notes between September 2013 and June 2014 (in aggregate, the “Notes”), whereby the Company borrowed an aggregate of $26.4 million. The Notes ~~are~~were for a term of 48 months and ~~accrue~~accrued interest at fixed rates ranging from 3.07% to 3.50%. ~~Principal and interest are paid monthly, in arrears.~~

~~The Notes are secured by a security interest in all of the Company’s rights, title and interest in and to certain equipment.~~ The Company ~~was subject to prepayment penalties through~~repaid, in full, without penalty, the remaining outstanding balance on the Notes during the second ~~anniversary~~quarter of ~~each note. The Company is no longer subject to any~~

prepayment penalties. The Master Agreement includes default provisions that are customary for financings of this type and are similar and no more restrictive than the Company’s existing Credit Facility.fiscal 2018.

On October 30, 2014, the Company entered into a term loan agreement with respect to a new ~~$15~~$15.0 million senior secured term loan facility with Wells Fargo Bank, National Association as administrative and collateral agent (the “Term Loan Facility”). The effective date of the Term Loan Facility iswas October 29, 2014 (the “Effective Date”). ~~The proceeds from~~In connection with the New Credit Facility, discussed above, on May 24, 2018 this Term Loan Facility was repaid in full, without penalty. In connection with the repayment, the Company wrote-off approximately $0.1 million in unamortized debt issuance costs associated with this Term Loan Facility.

Interest on the Term Loan Facility ~~were used to repay borrowings under the Credit Facility.~~

~~The Term Loan Facility bears interest~~was at a rate per annum equal to the greater of (a) 1.00% and (b) the one month LIBOR rate, plus 6.50%. Interest payments are payable on the first business day of each calendar month, and increase by 2% following the occurrence and during the continuance of an “event of default,” as defined in the Term Loan Facility. The Term Loan Facility provides for quarterly principal payments on the first business day of each calendar quarter, which commenced the first business day of January 2015, in an aggregate principal amount equal to $250,000, subject to adjustment, with the balance payable on the termination date.

The Term Loan Facility includes usual and customary mandatory prepayment provisions for transactions of this type that are triggered by the occurrence of certain events. In addition, the amounts advanced under the Term Loan Facility can be optionally prepaid in whole or part without penalty.

The Term Loan Facility matures on October 29, 2019. It is secured by a first priority lien on certain equipment of the Company, and a second priority lien on substantially all of the remaining assets of the Company, excluding intellectual property.

The following is a summary of the Company’s ~~long-term incentive plans. Beginning on August 4, 2016, all~~Long-Term Incentive Plans. All equity awards granted under long-term incentive plans are issued from the Company’s stockholder-approved 2016 Incentive Compensation Plan. ~~All prior awards were issued from~~See Note 5, Stock-Based Compensation.

Under the Company’s ~~2006~~First Amended and Restated Long Term Incentive ~~Compensation~~ Plan ~~which expired on July 31, 2016. See Note 4, Stock-Based Compensation.~~

~~The 2016 Long-Term Incentive Wrap-Around Plan (the “Wrap-Around Plan”~~(“LTIP”), which was approved in the fourth quarter of fiscal 2014, was a supplemental performance-based incentive plan that was only effective if there was no vesting of the performance-based awards under the 2013-2016 LTIP and, as a result, all performance-based awards under that plan are forfeited. The performance targets under the 2013-2016 LTIP were not achieved at the end of fiscal 2016 and accordingly, the Wrap-Around Plan became effective.

The performance target under the Wrap-Around Plan consisted of two metrics, Sales and EBITDA, with threshold (50%), target (80%) and maximum (100%) payout levels. Each metric was weighted as 50% of the total performance target. However, in order for there to be any payout under either metric, EBITDA for fiscal 2016 ~~had to be equal to or greater than the minimum threshold.~~

~~The Wrap-Around Plan also provided for an opportunity to receive additional shares of restricted stock if the performance targets were achieved~~ and the Company’s closing stock price was $6.75 or higher on the day earnings for fiscal 2016 were publicly released, which was March 20, 2017. The stock did not achieve a minimum of $6.75, therefore, no additional award was earned.

Based on the operating results for fiscal 2016, the Company achieved a 50.6% payout of its EBITDA target. The minimum threshold for the Sales target was not achieved. Accordingly, subsequent to year-end, in the first quarter of fiscal 2017 the Compensation Committee of the Board of Directors approved awards totaling $2.3 million, with a grant date of March 20, 2017. On that date, the Company granted shares of restricted stock, with a fair value of approximately $1.0 million and cash awards totaling approximately $1.3 million. All awards vested on July 28, 2017.

~~On March 20, 2017, in conjunction with the grant of restricted stock awards, the Company reclassified $0.9 million of the liability accrual from “Accrued Expenses and Other Current Liabilities” to “Additional Paid-In Capital.” See the Consolidated Statement of Changes in Stockholders’ Equity.~~

With the 2013-2016 LTIP and Wrap-Around Plan expiring at the end of fiscal 2016, on March 15, 2016, the Compensation Committee approved the Destination XL Group, Inc. Long-Term Incentive Plan, as amended February 1, 2017 (the “new LTIP”).

~~Under the terms of the new LTIP, each year the Compensation Committee will establish~~established performance targets which ~~will~~ cover a two-year performance period (each a “Performance Period”), thereby creating overlapping Performance Periods. Each participant in the plan ~~will be~~is entitled to receive an award based on that participant’s “Target Cash Value” which is defined as the participant’s annual base salary (on the participant’s effective date) multiplied by his or her ~~long-term incentive program~~LTIP percentage, which iswas 100% for the Company’s Chief Executive Officer, 70% for ~~its~~ senior executives and 25% for other participants in the plan. Effective October 22, 2018, the LTIP percentage for its vice president managing director level was increased from 25% to 50%. Because of the overlapping two-year Performance Periods, the Target Cash Value for any award is based on one year of annual ~~salary, as opposed to two years, to avoid doubling an award payout~~salary. All awards granted under both the 2016-2017 LTIP and 2017-2018 LTIP were in ~~any given fiscal year.~~restricted stock units (RSUs).

For each participant, 50% of the Target Cash Value is subject to time-based vesting and 50% is subject to performance-based vesting. The time-vested portion of the award ~~will vest~~vests in two installments with 50% of the time-vested portion vesting on April 1 following the fiscal year end which marks the end of the applicable Performance Period and 50% vesting on April 1 the succeeding year. The performance-based vesting is subject to the achievement of the performance target(s) for the applicable Performance Period. ~~Performance awards~~Awards for any achievement of performance targets would not be granted ~~will vest on~~until the performance targets are achieved and would then be subject to additional vesting through August 31 following the end of the applicable Performance Period.

For the 2016-2017 Performance Period, the Compensation Committee established two performance targets under the LTIP (the “2016-2017 LTIP”), each weighted 50%. The first target is EBITDA for fiscal 2017, defined as earnings before interest, taxes, depreciation and amortization, and the second target isCompany achieved 54.4% of its “DXL Comparable Store Marginal Cash-Over-Cash Return”, target, defined as the aggregate of each comparable DXL store’s four-wall cash flow for fiscal 2017 divided by the aggregate capital investment, net of any tenant allowance, for each comparable DXL store. The minimum threshold for the EBITDA target was not achieved. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Accordingly, subsequent to the end of fiscal 2017, in the first quarter of fiscal 2018, the Compensation Committee of the Board of Directors approved a 27.2% payout resulting in awards totaling $0.5 million, with a grant date of April 2, 2018. On that date, the Company granted 265,749 RSUs, which vested on August 31, 2018.

On April 2, 2018, in conjunction with the grant of the RSUs, the Company reclassified $0.4 million of the liability accrual from “Accrued expenses and other current liabilities” to “Additional paid-in capital.” See the Consolidated Statement of Changes in Stockholders’ Equity.

For the 2017-2018 Performance Period, the Compensation Committee established two performance targets under the LTIP (the “2017-2018 LTIP”), ~~each weighted 50%. The first target is~~ as follows:

~~All awards granted under both the 2016-2017 LTIP and 2017-2018 LTIP were in restricted stock units (RSUs).~~ Assuming that the Company achieves the performance target at target levels and all time-vested awards vest, the compensation expense associated with the ~~2016-2017 LTIP and~~ 2017-2018 LTIP is estimated to be approximately $4.0 ~~million and $4.2 million, respectively.~~million. Approximately half of the compensation expense ~~for each plan~~ relates to the time-vested RSUs, which ~~are~~is being expensed over thirty-six months, based on the respective vesting dates. ~~With respect to the performance-based component, RSUs will be granted at the end of the performance period if the performance targets are achieved.~~ Through the end of the ~~third quarter~~first nine months of fiscal ~~2017, the Company had accrued approximately $0.3 million in compensation expense related to the potential payout of performance awards under the 2016-2017 LTIP. No~~2018, no accrual has been made for performance awards under the 2017-2018 LTIP.

In June 2018, the Company amended its LTIP by executing the Second Amended and Restated LTIP, as further amended in October 2018 (the “Amended LTIP”), which among other things, extends the performance period for awards to three years, beginning with grants in fiscal 2018. For each participant, 50% of the Target Cash Value is subject to time-based vesting and 50% is subject to performance-based vesting. The time-vested portion of the award vests in four installments with the first 25% vesting on the later of April 1 following the grant date or one-year from the date of grant. Each of the remaining three tranches will vest on April 1, 2020, April 1, 2021 and April 1, 2022. The performance-based vesting is subject to the achievement of the performance target(s) for the applicable Performance Period. Awards for any achievement of performance targets would not be granted until the performance targets are achieved and would then be subject to additional vesting through August 31 following the end of the applicable Performance Period.

On October 24, 2018, the Compensation Committee established two performance targets for the 2018-2020 Performance Period under the Amended LTIP (the “2018-2020 LTIP”) as follows:

Assuming that the Company achieves the performance target at target levels and all time-vested awards vest, the compensation expense associated with the 2018-2020 LTIP is estimated to be approximately $4.1 million. Approximately half of the compensation expense relates to the time-vested RSUs, which is being expensed straight-line over forty-one months. Through the end of the ~~second quarter~~first nine months of fiscal ~~2016,~~2018, no accrual has been made for performance awards under the ~~Company’s 2006 Incentive~~2018-2020 LTIP.

5. Stock-Based Compensation ~~Plan (as amended and restated effective as of August 1, 2013, the “2006 Plan”) was the only stockholder-approved plan.~~

The 2006 Plan expired on July 31, 2016. In the third quarter of fiscal 2016, at the Company’s 2016 Annual Meeting of Stockholders held August 4, 2016, the Company’s stockholders approved the adoption ofCompany has one active stock-based compensation plan: the 2016 Incentive Compensation Plan (the “2016 Plan”).

The initial share reserve under the 2016 ~~Plan, including the rollover of 525,538 available shares under our 2006~~ Plan was 5,725,538 shares of our common stock. A grant of a stock option award or stock appreciation right will reduce the outstanding reserve on a one-for-one basis, meaning one share for every share granted. A grant of a full-value award, including, but not limited to, restricted stock, restricted stock units and deferred stock, will reduce the outstanding reserve by a fixed ratio of 1.9 shares for every share granted. At November 3, 2018, the Company had 4,576,630 shares available under the 2016 Plan.

In accordance with the terms of the 2016 Plan, any shares outstanding under the previous 2006 Incentive Compensation Plan (the “2006 Plan”) at August 4, 2016 that subsequently terminate, expire or are canceled for any reason without having been exercised or paid are added back and become available for issuance under the 2016 Plan, with ~~options and~~ stock ~~appreciation rights~~options being added back on a one-for-one basis and full-value awards being added back on a 1 to 1.9 basis. At ~~October 28, 2017, the Company had 6,437,283 shares available~~November 3, 2018, there are 804,782 stock options and 128,408 full-value awards that remain outstanding under the ~~2016~~2006 Plan.

The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant. Except with respect to 5% of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the Company’s 2006 Plan and 2016 Plan, on a combined basis, for the first nine months of fiscal ~~2017:~~2018:

For the first nine months of fiscal 2018, the Company granted 153,888 stock options, 30,000 shares of restricted stock, 1,050,650 RSUs and 82,289 shares of deferred stock. For the first nine months of fiscal 2017, the Company granted 30,000 stock options, 484,558 shares of restricted stock, 804,701 RSUs and 74,968 ~~shares of deferred stock. For the first nine months of fiscal 2016, the Company granted 8,522 stock options, 3,834 shares of restricted stock, 431,270 RSUs and 23,570~~ shares of deferred stock.

Unless otherwise specified by the Compensation Committee, RSUs, restricted stock and deferred stock are valued using the closing price of the Company’s common stock on the day immediately preceding the date of grant.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were used for grants for the first nine months of fiscal ~~2017~~2018 and fiscal ~~2016:~~2017, respectively:

The Company granted ~~29,425~~40,309 shares of common stock, with a fair value of approximately ~~$71,454,~~$81,081, to certain of its non-employee directors as compensation in lieu of cash in the first nine months of fiscal ~~2017.~~2018.

The Company recognized total stock-based compensation expense of ~~$1.3~~$1.1 million and ~~$1.1~~$1.3 million for the first nine months of fiscal ~~2017~~2018 and fiscal ~~2016,~~2017, respectively. The total compensation cost related to time-vested stock options, restricted stock and RSU awards not yet recognized as of ~~October 28, 2017~~November 3, 2018 was approximately ~~$2.4~~$2.9 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 2234 months.

The following table provides a reconciliation of the number of shares outstanding for basic and diluted earnings per share:

The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each period because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or because of the unearned compensation associated with either stock options, restricted stock units, restricted or deferred stock had an anti-dilutive effect.

For the three months ended

For the nine months ended

October 28, 2017

October 29, 2016

October 28, 2017

October 29, 2016

(in thousands, except exercise prices)

Stock Options (time-vested)

1,295

1,232

1,295

1,232

Restricted Stock Units (time-vested)

1,106

3

1,109

409

Restricted and Deferred Stock

54

2

78

10

Range of exercise prices of such options

$1.85 - $7.02

$4.49 - $7.52

$1.85- $7.02

$4.49 - $7.52

	For the three months ended				For the nine months ended
	November 3, 2018		October 28, 2017		November 3, 2018		October 28, 2017
(in thousands, except exercise prices)
Stock options		963		1,295		963		1,295
Restricted stock units		754		1,106		786		1,109
Restricted and deferred stock		24		54		57		78
Range of exercise prices of such options	$2.25 - $7.02		$1.85 - $7.02		$2.25- $7.02		$1.85 - $7.02

The above options, which were outstanding at ~~October 28, 2017,~~November 3, 2018, expire from March 19, 2020 to June ~~8, 2018 to August 31, 2027 .~~29, 2028.

There were no performance-based awards outstanding at October 28, 2017. For the third quarter and first nine months of fiscal 2016, 893,621 shares of unvested performance-based restricted stock and 1,125,317 performance-based stock options were excluded from the Company’s computation of basic and diluted earnings per share. All outstanding performance-based awards expired unvested in March 2017 as a result of the Company’s not achieving performance targets in fiscal 2016. 16

Shares of unvested time-based restricted stock of 30,000 at November 3, 2018 and 53,333 shares at October 28, 2017 ~~and 356,227 shares at October 29, 2016~~ were excluded from the computation of basic earnings per share and will continue to be excluded until such shares vest. ~~See Note 3, Long-Term Incentive Plans, for a discussion of the Company’s LTIP plans and equity awards.~~

~~All 53,333~~The 30,000 shares of restricted stock outstanding at ~~October 28, 2017~~November 3, 2018 are considered issued and outstanding. Each share of restricted stock has all of the rights of a holder of the Company’s common stock, including, but not limited to, the right to vote and the right to receive dividends, which rights are forfeited if the restricted stock is forfeited.

On March 17, 2017, the Company’s Board of Directors approved a stock repurchase plan. Under the stock repurchase plan, the Company may purchase up to $12.0 million of its common stock through open market and privately negotiated transactions during fiscal 2017. The timing and the amount of any repurchases of common stock will be determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program commenced in the first quarter of fiscal 2017 and will expire on February 3, 2018, but may be suspended, terminated or modified at any time for any reason. The Company expects to finance the repurchases from operating funds and/or periodic borrowings on its Credit Facility. Any repurchased common stock will be held as treasury stock and will be recorded on a trade-date basis.

Through October 28, 2017, the Company purchased 1,878,434 shares of common stock at an average price of $2.49 per share. Approximately $7.3 million remains available under the stock repurchase plan. There were no stock repurchases during the third quarter of fiscal 2017.

At ~~October 28, 2017,~~November 3, 2018, the Company had total deferred tax assets of approximately ~~$84.4~~$52.5 million, total deferred tax liabilities of ~~$12.6~~$4.0 million and a corresponding valuation allowance of ~~$72.0~~$48.5 million.

In the fourth quarter of fiscal 2013, the Company entered into a three-year cumulative loss position and based on forecasts at that time, the Company expected the cumulative three-year loss to increase as ofSince the end of fiscal ~~2014. Management determined that this represented significant negative evidence at February 1, 2014.~~2014, the Company has had a full valuation allowance against its net deferred tax assets. While the Company has projected it will return to profitability, generate taxable income and ultimately emerge from a three-year cumulative loss, based on ~~a consideration of all positive and negative evidence as of February 1, 2014, the Company established a full allowance against its net deferred tax assets. Based on~~ the Company’s forecast for fiscal ~~2017,~~2018, the Company believes that a full valuation allowance remains appropriate at this time.

As of ~~October 28, 2017,~~November 3, 2018, for federal income tax purposes, the Company ~~had~~has net operating loss carryforwards of ~~$155.9~~$141.4 million, ~~for federal~~which will expire from 2022 through 2036 and net operating loss carryforwards of $16.9 million that are not subject to expiration. For state income tax purposes, ~~and $88.8~~the Company has $89.3 million ~~for state income tax purposes~~of net operating losses that are available to offset future taxable ~~income through fiscal year 2037.~~income. Additionally, the Company has ~~alternative minimum tax credit carryforwards of $2.3 million, which are available to further reduce income taxes over an indefinite period. Additionally, the Company has $2.6~~$2.8 million of net operating loss ~~for tax purposes~~carryforwards related to the Company’s operations in Canada.

The utilization of net operating loss carryforwards and the realization of tax benefits in future years depends predominantly upon having taxable income. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of net operating loss carryforwards and tax credit carryforwards which may be used in future years.

~~The Company’s~~As of February 4, 2018, the Company is calculating its tax provision based on the newly enacted U.S. statutory rate of 21%. The tax benefit for the third quarter and first nine months of fiscal ~~2017 represented current state~~2018 included a tax expense of $45,000 and $92,000 in other comprehensive income (loss), which resulted in a tax benefit on the Consolidated Statement of Operations related to the corresponding decrease in valuation allowance, partially offset by a tax expense for certain states’ margin tax. ~~For~~The tax provision for the ~~first~~ nine months of fiscal ~~2016 the tax provision~~2017 primarily ~~represents current state~~represented certain states’ margin ~~tax and foreign income~~ tax.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The charge for taxation is based on the results for the year as adjusted for items that are non-assessable or disallowed. The charge is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Pursuant to Topic 740, “Income Taxes”, the Company will recognize the benefit from a tax position only if it is more likely than not that the position would be sustained upon audit based solely on the technical merits of the tax position. The unrecognized tax benefit at ~~October 28, 2017~~November 3, 2018 was ~~$3.0~~$2.0 million. This amount is directly associated with a prior year tax position related to exiting the Company’s direct business in Europe. The amount of unrecognized tax benefit has been presented as a reduction in the reported amounts of its federal and state net operating loss carryforwards. It is the Company’s policy to record interest and penalties on unrecognized tax benefits as income taxes; however, no penalties or interest have been accrued on this liability because the carryforwards have not yet been utilized.

The Company is subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters for years through fiscal 2001, with remaining fiscal years subject to income tax examination by federal tax authorities.

~~Oliver Walsh was elected as~~ 2018, the Company committed to a ~~director at~~corporate restructuring plan (“Restructuring”) to accelerate the ~~Company’s Annual Meeting~~Company's path to profitability by better aligning its expense structure with its revenues. The Company eliminated 56 positions, which represented approximately 15% of ~~Stockholders on August 3, 2017. On August 17, 2017, Mr. Walsh entered into a temporary consulting agreement~~its corporate work force, or 2% of its total work force, in connection with the Restructuring. On May 16, 2018, 36 employees were notified of their termination, with the remaining 20 positions representing open positions that will not be filled. The Company offered cash severance benefits to ~~serve~~the eligible affected employees. Each affected employee’s eligibility for these severance benefits is contingent upon such employee’s execution (and no revocation) of a separation agreement, which includes a general release of claims against the Company.

The Company incurred an aggregate charge of approximately $1.9 million, of which $0.3 million was incurred in the third quarter of fiscal 2018, for employee severance and one-time termination benefits, as well as other employee-related costs associated with the

Restructuring. Approximately $1.5 million of the ~~Company’s Interim Chief Marketing Officer through the Fall and Holiday selling seasons, while~~$1.9 million will be cash expenditures. At November 3, 2018, the Company ~~searches for a new Chief Marketing Officer.~~ has an accrued liability related to the restructuring of $0.3 million.

Pursuant to the terms of the ~~temporary consulting agreement,~~Transition Agreement between the Company and Mr. ~~Walsh~~Levin dated March 20, 2018, as amended (the “Transition Agreement”), Mr. Levin is expected to resign as an officer and director of the Company on January 1, 2019, at which time he will be entitled to receive his base salary, AIP bonus and LTIP compensation ~~at a rate of $7,000 per week plus reimbursement for all business and travel expenses. Because of~~over the ~~related party relationship, the temporary consulting agreement was approved by the Company’s Audit Committee. Through~~following twelve months.

On November 27, 2018, subsequent to the end of the third quarter of fiscal ~~2017,~~2018, the Company entered into a letter agreement with Mr. ~~Walsh received total compensation~~Levin (the “Letter Agreement”). The Letter Agreement is a supplement to the Transition Agreement between the Company and Mr. Levin, and sets forth Mr. Levin’s initial transition duties and consulting activities that he will be required to perform under the terms of the Transition Agreement in the event that the Company does not appoint a successor CEO by December 31, 2018 and, pursuant to the ~~temporary consulting agreement, excluding reimbursement~~terms of ~~expenses,~~the Transition Agreement, Mr. Levin resigns as President and Chief Executive Officer and as a Director of ~~$70,000.~~the Company on January 1, 2019.

In accordance with the terms of the Letter Agreement, effective January 1, 2019, if no successor CEO has been appointed by December 31, 2018, Mr. Levin will begin serving as the Company’s acting CEO and, as such, its principal executive officer (collectively, “Acting CEO”) through the earliest of: (i) April 30, 2019 (subject to an extension by the Company on the same terms through no later than June 30, 2019); (ii) the date that a successor CEO commences employment or (iii) termination of his employment by the Company. As compensation, Mr. Levin will receive $200,000 per month but in no event less than $800,000.

During the third quarter and first nine months of fiscal 2018, the Company incurred costs of approximately $0.4 million and $0.6 million, respectively, primarily related to the CEO search.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect” or “anticipate” or the negatives thereof, variations thereon or similar terminology. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but may be found in other locations as well, and include statements regarding our expectations with respect to CEO transition costs, CEO search process, cash flows, gross profit margins, merchandise margins, marketing costs, restructuring charges, selling, general and administrative expenses, store counts, inventory levels, capital expenditures, borrowings, interest costs, sales and earnings ~~expectations~~ for fiscal ~~2017 and beyond, the expected impact of inventory management improvements on inventory levels and working capital in fiscal 2017,~~2018, the expected impact of investments in marketing on ~~2017~~2018 sales and longer term impact on customer acquisition and brand awareness, anticipated savings from our corporate restructuring, and the anticipated ~~pace and~~ number of store openings and closings in fiscal ~~2017 and anticipated impact of expanding into Canada or future growth.~~2018. These forward-looking statements generally relate to plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends. The forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and notes to those statements included elsewhere in this Quarterly Report and our audited consolidated financial statements for the year ended ~~January 28, 2017,~~February 3, 2018, included in our Annual Report on Form 10-K for the year ended ~~January 28, 2017,~~February 3, 2018, as filed with the Securities and Exchange Commission on March ~~20, 2017~~23, 2018 (our “Fiscal ~~2016~~2017 Annual Report”).

Numerous factors could cause our actual results to differ materially from such forward-looking statements. We encourage readers to refer to the “Risk Factors” section in Part I, Item 1A of our Fiscal ~~2016~~2017 Annual Report, that sets forth certain risks and uncertainties that may have an impact on future results and direction of our Company, including, without limitations, risks relating to the execution of our corporate strategy, and our ability to grow our market share, predict customer tastes and fashion trends, forecast sales growth trends, maintain and build our brand awareness and compete successfully in our market.

All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. These forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances in which the forward-looking statement is based.

Destination XL Group, Inc., together with our consolidated subsidiaries (the “Company”), is the largest specialty retailer of big & tall men’s apparel with retail and direct operations in the United States, Canada and London, England. We operate under the trade names of Destination XL^®, DXL^®, DXL Outlets, Casual Male XL^®, Casual Male XL Outlets and Rochester ~~Clothing, ShoesXL~~^® ~~and LivingXL~~^®.Clothing. At ~~October 28, 2017,~~November 3, 2018, we operated ~~211~~216 Destination XL stores, 1415 DXL outlet stores, 8167 Casual Male XL retail stores, 3330 Casual Male XL outlet stores and 5 Rochester Clothing stores. Our e-commerce site, DestinationXL.com, supports our stores, brands and product extensions.

Unless the context indicates otherwise, all references to “we,” “our,” “us” and “the Company” refer to Destination XL Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years which end on February 2, 2019 and February 3, 2018 ~~and January 28, 2017~~ as “fiscal ~~2017”~~2018” and “fiscal ~~2016,~~2017,” respectively. Fiscal ~~2017~~2018 is a ~~53-week~~52-week period and fiscal ~~2016~~2017 was a ~~52-week~~53-week period.

We report our operations as one reportable segment, Big & Tall Men’s Apparel. We consider our retail and direct (e-commerce) businesses, especially in our growing omni-channel environment, to be similar in terms of economic characteristics, production processes and operations, and have, therefore, aggregated them into a single reporting segment.

Total comparable sales include our retail stores that have been open for at least 13 months and our direct business. Stores that have been remodeled or re-located during the period are also included in our determination of comparable sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months. If a store becomes a clearance center, it is also removed from the calculation of comparable sales. The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers.

As we disclosed at the end of fiscal 2016, with over 200 DXL stores open, we have transitioned to one comparable sales figure for the Company which includes stores and our e-commerce business. We no longer provide comparable store sales on a discrete basis for our DXL format stores.

In addition, our customer’s shopping experience continues to evolve across multiple channels and we are continually changing to meet his needs. As part of our omni-channel initiatives, the majority of our retail stores have the capability of fulfilling online orders if merchandise is not available in the warehouse. As a result, we continue to see more transactions that begin online but are ultimately ~~completed~~satisfied at the store level. Similarly, if a customer visits a store and the item is out of stock, the associate can order the item through our website. A customer also has the ability to order online and pick-up in store. Because this omni-channel approach to retailing is changing the boundaries of where a sale originates and where a sale is ultimately settled, we do not report comparable sales separately for our retail and e-commerce businesses. However, as we invest in building our e-commerce platform, bringing a heightened digital focus to our Company, additional disclosure on our e-commerce growth as it relates to our current initiatives is important. ~~Beginning in the second quarter of fiscal 2017, we~~We define store sales as sales that originate and are fulfilled directly at the store level. E-commerce sales are defined as sales that originate online, including those initiated online at the store level. ~~This reclassification on how we define a store sale from an e-commerce sale had no effect on our previous disclosure or how we report total Company comparable sales.~~

The following is a summary of results for the third quarter and first nine months of fiscal ~~2017~~2018 as compared to the prior year’s third quarter and first nine months, including adjusted EBITDA and adjusted net loss, which ~~is a~~are non-GAAP ~~measure.~~measures. Please see “Non-GAAP Financial Measures” below for ~~a reconciliation~~reconciliations of ~~Net Loss to EBITDA.~~these non-GAAP measures.

Our sales for the third quarter were below expectations and were negatively impacted by the delayed arrival of cold weather in the Northeast and Hurricanes Irma and Harvey. We believe that our customer is a need-based shopper and the onset of cold weather is typically when he comes to shop. Comparable sales for our DXL stores in the Northeast region trailed our stores in the rest of the country by approximately 400 basis points. We estimate that the negative impact of the comp sales of our Northeast stores on our total comparable sales of (0.1%) for the third quarter was approximately 90 basis points. Additionally, from a merchandising category perspective, our cold weather categories trended behind the remainder of our merchandise assortment by over 10% for the third quarter and over 20% for the month of October. With the cold weather arriving in the first few weeks of the fourth quarter, we are beginning to see an improvement in comparable sales performance. In addition to the unseasonably warm weather during the quarter, we also had 34 stores that were closed for at least one day, with the majority closed three to four days, as a result of Hurricanes Irma and Harvey. We estimate that the combined impact from both storms on our comparable sales for the third quarter was approximately 50 basis points.

Despite, the warm weather and hurricanes, which contributed to a decrease in store traffic, we are pleased with our sales productivity in our stores, with average dollars per transactions, units per transaction and conversion all increasing over the prior year. We remain committed to driving traffic to our stores and website and building brand awareness as we head into the fourth quarter of fiscal 2017. We are pleased to have launched our new Holiday advertising campaign and believe our integrated social, digital and media marketing plan, which we discuss below, will drive traffic to our stores and website.

During the third quarter of fiscal ~~2017, as part of~~2018, we continued to see solid growth in our ~~ongoing inventory initiatives, we took an aggressive approach to moving some of~~comparable sales base, while maintaining a healthy gross margin, and cost savings in our ~~traditional slower-moving categories, which resulted in increased markdowns for the quarter~~SG&A(selling, general and ~~decreased merchandise margins from~~administrative) expenses. As a year ago of approximately 120 basis points. On a comparative basis with the end of the third quarter of the prior year, we have reduced inventories by approximately $8.3 million, or 6.5% at October 28, 2017, with minimal impact toresult, our merchandise margin which, on a year-to-date basis, has decreased by only 40 basis points compared to the prior year. We expect our merchandise margins to return to a more normalized level in the fourth quarter due to fewer merchandise markdowns. This initiative has enabled us to reduce our inventory thereby improving our working capital and free cash flow.

~~Our~~ net loss for the third quarter of fiscal ~~2017~~2018 was ~~$(5.7) million, or $(0.12)~~$(0.04) per diluted share, ~~as compared to a~~an $(0.08) improvement from the net loss of ~~$(4.5) million, or $(0.09) per diluted share,~~$(0.12) for the third quarter of fiscal ~~2016.~~2017. For the first nine months of fiscal ~~2017, the net loss was $(15.5)~~2018, our adjusted EBITDA more than doubled to $6.6 million, ~~or $(0.32) per diluted share, as compared to a net loss of $(4.0)~~from $2.8 million ~~or $(0.08) per diluted share~~ for the same period of the prior year. As a result of our performance year to date, we are updating our guidance for 2018, which we discuss in detail below.

~~period. Included~~We have seen a consistent improvement in ~~net loss for~~sales since the ~~first nine months~~fourth quarter of fiscal 2017, ~~was an impairment charge of approximately $1.7 million, or $0.03 per diluted share, for the write-down of certain store assets and an~~with a comparable sales increase ~~of approximately $4.2 million, or $0.09 per diluted share,~~ in ~~advertising costs.~~

In the first nine months of fiscal 2017, we opened a total of 20 stores, which includes two DXL retail stores in Ontario, Canada. These two stores mark our first Company-operated DXL stores located outside of the United States. We believe that Canada provides a strategic growth opportunity for our DXL brand. In addition, for fiscal 2017 we expect to close approximately 19 Casual Male XL stores and 3 Casual Male XL outlet stores, the majority of which are in connection with the opening of the DXL retail and outlet stores in the same geographic market. Of the 114 Casual Male XL stores in operation, 112 are generating positive free cash flow.

As we discussed last quarter, we are committed to improving brand awareness, driving traffic to our stores and growing our e-commerce business through a robust investment in both our traditional and digital marketing programs. Our new marketing campaign, “Time to XL,” launched on social media and on our website on November 7, 2017. Our new creative ad will begin to air on television starting November 25, 2017 and will run through the Christmas holiday. In addition to our digital and media advertising, we will also be sponsoring the Frisco Bowl college football game on December 20, 2017. Our new campaign is centered on changing the conversation around Men’s XL apparel and celebrating the style of our customer base. The campaign features prominent brand ambassadors, including 10-time MLB All-Star David Ortiz, producer and artist DJ Khaled, singer and songwriter Sundance, NHL Stanley Cup winner Hal Gill and fashion blogger Kelvin Davis; five celebrities with larger-than-life personalities, each with his own sense of #XLstyle. We want the XL community to know who we are and that we “XL” at service, selection, comfort and fit. We are confident that this campaign will signal a new chapter in the DXL store and we are hopeful that the campaign will drive brand awareness and new customers to our DXL brand.

~~As discussed more fully below under “Liquidity and Capital Resources~~,” in March 2017 our Board of Directors approved a stock repurchase plan, pursuant to which we may purchase up to $12.0 million of our outstanding common stock during fiscal 2017. During the first nine months of fiscal 2017, we repurchased approximately 1.9 million shares at a total cost of approximately $4.7 million. There were no stock repurchases during the third quarter of fiscal ~~2017.~~

~~In fiscal 2016,~~2018 of 3.4%, or $3.4 million. We saw positive sales growth across all regions, with particularly strong comparable sales in the Northeast and Southeast regions. Our results were driven by productivity in stores, with improved store traffic and strong conversion rates, and growth in our direct business. During the third quarter, we ~~began~~launched our ~~inventory optimization project in an effort to improve inventory receipt flow~~new website, which offers a cleaner look and ~~procurement, tightening controls over~~feel, with easier navigation, updated site functionality and streamlined checkout. Visually, the ~~number~~updated website provides a stronger showcase for our brands and product offerings, which we believe will resonate better with our customers. On a trailing 12-month basis, our direct business represented 21.2% of ~~weeks of supply and refining~~ our ~~in-stock positions by sku level. We expect these changes to result in a more optimized inventory structure and expect our inventory~~total sales at the end of the third quarter of fiscal ~~2017~~2018, as compared to ~~be $12.0~~20.8% at the end of the third quarter of fiscal 2017.

Our reduced SG&A costs, primarily related to payroll cost savings, also contributed to the improvement in earnings. As discussed in more detail below, in the second quarter we initiated a corporate restructuring to accelerate our path to profitability, including a corporate workforce reduction of approximately 15%. Given that our transformation to the DXL concept is essentially complete, we are intently focused on improving our adjusted EBITDA margin, as a percentage of total sales. Our current strategy includes growing our brand and better expense management. The corporate restructuring aligns us with those objectives.

We also remain focused on improving our liquidity and reducing our debt levels. Last quarter, we amended our credit facility with Bank of America, N.A., which extended the maturity date of the facility from October 2019 to May 2023. We also reduced our borrowing rates under the revolving facility by 25 basis points and added a $15.0 million ~~less~~“first in last out” (FILO) facility at a substantially lower borrowing rate than ~~fiscal 2016. This reduction in inventory is expected to improve~~ our ~~working capital position and partially reduce our debt in fiscal 2017.~~previous term loan facility. At the end of the third quarter of fiscal ~~2017,~~2018, we ~~were ahead of plan having~~have reduced ~~inventory levels~~our total debt outstanding by ~~$8.3~~$9.4 million ~~or a decrease of 6.5%, as compared~~ to $72.0 million from $81.4 million at the end of the third quarter ~~last year.~~of fiscal 2017.

As mentioned above, in May 2018, we executed a restructuring plan (“Restructuring”) to accelerate the Company's path to profitability by better aligning its expense structure with its revenues. We doeliminated 56 positions, which represented approximately 15% of our corporate work force, or 2% of our total work force. On May 16, 2018, 36 employees were notified of their termination with the remaining 20 positions representing open positions that will not ~~believe these changes have jeopardized sales from out-of-stock positions~~be filled. In connection with the Restructuring, we incurred an aggregate charge of $1.9 million for employee severance and one-time termination benefits, as well as other employee-related costs associated with the Restructuring. Of the total charge of $1.9 million, $0.3 million was recorded in ~~either our retail stores or in our direct business.~~ the third quarter of fiscal 2018. Approximately $1.5 million of the $1.9 million was cash expenditures.

As a result of this Restructuring, we expect to realize savings of approximately $5.6 million in SG&A expenses in fiscal 2018, which is reflected in our ~~sales falling below expectations due~~fiscal 2018 earnings expectations. The $5.6 million in ~~part~~savings primarily related to corporate payroll, travel, benefits and non-essential project expenses, with expected annualized savings of approximately $10.3 million. Of the $10.3 million, we expect $6.6 million to come from corporate staffing changes, $2.0 million from changes to defined contribution plans and $1.7 million from other non-essential general and administrative costs.

Our “Built XL” advertising campaign emphasizes fit, expertise, clothing brands, in-store experience, and one-stop shopping. We are highlighting our key differentiators and working to make an emotional connection with our core consumer. In our Spring campaign, we reduced the number of weeks as compared to fiscal 2017, but we saw a strong increase in store and web traffic once our Spring campaign launched. We were pleased with the reaction to this campaign and its effect on our overall brand awareness.

Our Fall/Holiday campaign, which launched in late November, is a continuation of the Spring “Built XL” advertising campaign. Radio advertising began the week of Thanksgiving with a television ad starting after the Thanksgiving holiday, consistent with last year’s marketing campaign.

In addition to the ~~delay~~media campaign, we will also be increasing the circulation of ~~cold weather,~~our direct mail campaign and strengthening offers under our loyalty program. This holiday season, we ~~are revising~~will also be testing a holiday catalog to our ~~guidance. In~~top customers which will highlight current fashion and product offerings.

On March 23, 2018, the ~~second~~Company announced Mr. Levin’s plan to retire on December 31, 2018, and the engagement of Heidrick & Struggles International Inc. to lead a search process to identify a successor for Mr. Levin. That search process was terminated on October 1, 2018. On November 26, 2018, the Company engaged Russell Reynolds Associates to lead a new CEO search process, which we expect to be completed by the end of the first quarter of fiscal ~~2017,~~2019.

Pursuant to the terms of the Transition Agreement between the Company and Mr. Levin dated March 20, 2018, as amended (the “Transition Agreement”), Mr. Levin is expected to resign as an officer and director of the Company on January 1, 2019, at which time he will be entitled to receive his base salary, AIP bonus and LTIP compensation over the following twelve months.

On November 27, 2018, the Company entered into a letter agreement with Mr. Levin, whereby, if no successor CEO has been appointed by December 31, 2018, Mr. Levin will assume the role of Acting CEO from January 1, 2019 through April 30, 2019, unless such agreement is extended by the Board of Directors through June 30, 2019. In connection with assuming this role, Mr. Levin will receive additional compensation of $200,000 per month, but in no event less than $800,000.

The Company expects to incur an aggregate charge of approximately $2.1 million for CEO transition costs in fiscal 2018, related primarily to expenses incurred pursuant to the Transition Agreement and the CEO search. During the third quarter and first nine months of fiscal 2018, the Company incurred costs of approximately $0.4 million and $0.6 million, respectively, related primarily to the CEO search.

The Company expects to incur additional charges in fiscal 2019 of approximately $0.4 million for CEO search costs and approximately $1.2 million, assuming target, of future cash payments that Mr. Levin may be entitled to under existing performance plans, if and when such targets are achieved.

Based on the positive sales trend that we ~~increased~~have experienced for the first nine months of fiscal 2018, we are updating our ~~marketing expense~~earnings guidance for fiscal 2018. As discussed above, the Company expects to incur an aggregate charge of $2.1 million of CEO transition costs in fiscal 2018, a decrease from our previous disclosure of $4.2 million.

Our strategy for fiscal 2018 remains focused on customer acquisition, customer retention, and customer re-activation. Our marketing spend for the year is expected to be approximately $24.0 million, which is less than the fiscal 2017 ~~to $29.0 million to help drive brand awareness, store traffic and our digital presence. This is an increase~~spend of approximately ~~$10.8~~$29.5 million, ~~from~~but greater than the fiscal ~~2016. While we expect this will benefit sales in the fourth quarter~~2016 spend of $18.0 million. Compared to fiscal 2017, we ~~strongly believe~~are projecting that ~~this investment in marketing and customer acquisition was important for~~ our long-term growth. We currently expect to open 20 DXL retail stores and 1 DXL outlet store in fiscal 2017, while closing 19 Casual Male XL retail stores and 3 Casual Male XL outlet stores, the majority of which are in connection with the opening of the DXL retail and outlet stores in the same geographic markets. All DXL store growthtotal sales for the year will be ~~funded~~negatively impacted by ~~cash from operations.~~ one less week of sales and a net decrease in store count of ten stores, worth approximately $5.3 million in sales. Fiscal 2017 included a 53rd week, with sales of $6.9 million and operating income of $1.6 million.

~~For~~Our revised guidance for fiscal ~~2017, our revised outlook, based on a 53-week year,~~2018 is as follows:

Total sales for the third quarter of fiscal ~~2017~~2018 increased ~~1.8%~~3.2% to ~~$103.7~~$107.1 million from ~~$101.9~~$103.7 million from the third quarter of fiscal ~~2016.~~2017. The increase of ~~$1.8~~$3.4 million in total sales was due to a comparable sales increase of 3.4%, or $3.4 million, an increase of $0.7 million in non-comparable sales ~~of $6.4~~from DXL stores open less than 13 months, a $0.7 million shift in calendar weeks due to the 53^rd week in fiscal 2017 and other revenue of ~~$0.4 million,~~$0.3 million. These increases were partially offset by ~~a decrease in sales from~~ closed stores of $4.9 million and a comparable sales decrease of $0.1 million, or (0.1)%. As discussed above, sales for the third quarter were impacted by the unseasonably warm weather and the hurricanes which impacted our Florida and Texas stores. While store traffic was down 5% for the third quarter, we did see increases in sales productivity with increases in average dollars per transactions, units per transaction and conversion.$1.7 million.

For the first nine months of fiscal ~~2017,~~2018, total sales increased ~~$4.8~~3.1% to $342.6 million ~~or 1.5%, as compared to~~from $332.5 million for the first nine months of fiscal ~~2016.~~2017. The increase ~~in sales~~of $10.2 million was primarily due to a comparable sales increase of 3.0%, or $9.5 million, non-comparable sales of ~~$23.0~~$5.8 million ~~partially~~and $2.0 million as a result of the shift in calendar weeks. These increases were offset by ~~sales from~~the closed stores of ~~$17.5~~$6.5 million and a decrease in other revenues of ~~0.5%,~~$0.7 million.

Our focus in fiscal 2018 is on achieving topline growth through customer acquisition, customer retention, and customer re-activation, and capturing a greater share of wallet by providing a great guest experience wherever our target customer decides to shop, whether in our stores or ~~$1.6 million, in comparable sales.~~

~~With~~online. During the third quarter of fiscal 2018, we launched our transformation of our store base complete, we are focused on growing our e-commerce business and improving store productivity through an integrated strategy. We are implementing several initiatives to enhanceupdated website, which enhances our digital presence and ~~provide~~provides our customers with improved ~~functionality and increased~~functionality. Our goal is to increase touchpoints across all of our e-commerce platforms with the objective of growing and retaining our customer base. On a trailing twelve-month basis, ~~e-commerce~~direct sales as a percentage of ~~net~~total sales were ~~20.8%~~21.2% at the end of the third quarter of fiscal ~~2017~~2018 as compared to ~~19.5%~~20.8% at the end of the third quarter of the prior year. For the first nine months of fiscal 2018, our direct sales were 20.4%, up from 20.1% for the first nine months of the prior year.

Our stores also performed strongly during the quarter, with comparable sales increases across all regions, especially in the Northeast and Southeast, which outperformed the chain. Store traffic has been improving each quarter, but this quarter we saw store traffic move positive. This improvement, coupled with our continued increases in conversions and dollars per transactions, contributed to the sales growth this quarter.

Our end-of-rack customer ~~grew to 45.3%~~represented 45.7% of our bottoms business, up slightly from ~~44.8%~~45.3% in the ~~third quarter~~first nine months of fiscal ~~2016. Our end-of-rack customer, with a waist size of 46 inches or less, shops 52% more often than our customer with a waist size of 48 inches or more and, on an annual basis, spends twice as much.~~2017.

For the third quarter of fiscal ~~2017,~~2018, our gross margin rate, inclusive of occupancy costs, was ~~43.2%~~44.0% as compared to a gross margin rate of ~~44.4%~~43.2% for the third quarter of fiscal ~~2016.~~2017. The ~~decrease~~80 basis point improvement was the result of ~~120~~a 90 basis ~~points was due to a~~point decrease in merchandise margins of 120 basis points. The decrease in merchandise margin was related to an increase in promotional markdowns related to our inventory productivity initiatives as compared to the prior year’s third quarter. In addition, during the third quarter we took an aggressive approach to move slow-moving and clearance inventory, which also contributed to an increase in markdowns. As a result, our

~~clearance inventory at October 28, 2017 was 7%, a decrease from 9% at October 29, 2016. Occupancy~~occupancy costs as a ~~percentage~~percent of sales ~~remained flat.~~partially offset by a decrease of 10 basis points in merchandise margins.

For the first nine months of fiscal ~~2017,~~2018, our gross margin rate, inclusive of occupancy costs, was ~~44.9%~~45.0% as compared to ~~a gross margin rate of 45.7%~~44.9% for the first nine months of fiscal ~~2016.~~2017. The ~~decrease~~increase of 8010 basis points was due to a 4060 basis point decrease in occupancy costs as a percent of sales partially offset by a decrease in merchandise margins ~~and a 40~~of 50 basis ~~point increase~~points.

The decrease in ~~occupancy costs. The increase in occupancy costs~~merchandise margins for the third quarter of fiscal 2018 was ~~primarily~~ due to ~~an increase~~a slight shift in ~~DXL total square footage and the comparable sales decline. On a dollar basis, occupancy costs for~~product mix from our private label brands to our designer brands. For the first nine months of fiscal ~~2017 increased approximately 4.2% over the prior year’s first nine months, primarily~~2018, increases in shipping costs were also a factor. Occupancy costs, as a percentage of sales, improved as a result of ~~an increase~~the leveraging of ~~1.5% in total square footage~~the sales base. For the third quarter and ~~the increased percentage of DXL stores.~~

~~The decrease of 40 basis points in merchandise margins for the~~ first nine months of fiscal ~~2017 as compared~~2018, occupancy costs decreased $0.3 million and $0.4 million, respectively, related to the prior year was due primarily to our inventory initiatives and increased efforts to reduce slow-moving merchandise categories which resulted in higher promotional markdowns than the prior year. Our inventory initiatives have resulted in a 6.5% decrease in inventory levels from a year ago, improved inventory turn and days on hand, while at the same time managing a strong merchandise margin. closed stores.

As a percentage of sales, SG&A expenses for the third quarter of fiscal ~~2017~~2018 were ~~40.5%~~37.8% as compared to ~~40.6%~~40.5% for the third quarter of fiscal ~~2016. For the first nine months of fiscal 2017 SG&A expenses as a percentage of sales were 41.3% as compared to 39.4% for the first nine months of fiscal 2016.~~2017. On a dollar basis, SG&A ~~increased~~decreased by ~~$0.6 million and $8.2~~$1.5 million for the third quarter ~~and first nine months~~ of fiscal ~~2017, respectively.~~2018. The ~~increase in the third quarter of fiscal 2017~~decrease was ~~primarily~~ due to ~~increases~~a reduction in ~~store~~ payroll and ~~other supporting costs associated with our DXL store base and e-commerce initiatives.~~ payroll related cost.

For the first nine months of fiscal ~~2017,~~2018, SG&A expenses were 39.0% as compared to 41.3% for the ~~increase was principally~~first nine months of fiscal 2017. On a dollar basis, SG&A expenses decreased $3.6 million, primarily due to ~~an increase~~a decrease in marketing costs of ~~$4.2~~approximately $2.2 million, in advertising expense. As discussed above, we are increasing our investment in our marketing initiatives to help drive brand awareness, store traffic and our digital presence. The remainder of the increase was due to ~~increases~~a reduction in ~~store~~the number of weeks in the Spring campaign, a reduction in payroll and payroll related costs of approximately $2.5 million and other supporting costs ~~associated with a greater DXL~~of approximately $0.9 million. These savings were partially offset by an increase of approximately $2.1 million in costs related to e-commerce and technology initiatives.

SG&A expenses are managed through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store ~~base~~payroll, marketing, and ~~e-commerce initiatives.~~other store operating costs, represented 23.0% of sales in the first nine months of fiscal 2018 as compared to 23.9% of sales in the first nine months of last year. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 16.0% of sales in the first nine months of fiscal 2018 compared to 17.4% of sales in the first nine months of last year. The Company will continue to address its SG&A cost structure to improve its EBITDA margins and overall profitability.

In the second quarter of fiscal 2017, we incurred an asset impairment charge of $1.7 million for the write-off of certain store assets. This amount was previously included in depreciation and amortization in the Consolidated Financial Statements for the first nine months of fiscal 2017 but was reclassified to impairment of assets in the Consolidated Financial Statements for fiscal year 2017. For consistency, the prior year results included in the Consolidated Financial Statements for the first nine months of fiscal 2018 reflect this year-end reclassification to impairment of assets.

Depreciation and amortization for the third quarter of fiscal ~~2017 increased $0.2~~2018 decreased $0.5 million to ~~$7.7~~$7.2 million as compared to ~~$7.5~~$7.7 million for the third quarter of fiscal ~~2016.~~

2017. For the first nine months of fiscal ~~2017,~~2018, depreciation and amortization ~~was $25.1~~decreased $1.4 million ~~as compared~~ to ~~$22.4~~$21.9 million from $23.3 million for the first nine months of fiscal ~~2016. The increase of $2.7 million includes a $1.7 million impairment charge taken in~~2017. With the ~~second quarter of fiscal 2017 to write-down certain store assets. The remainder of the increase was due to the continued~~DXL store growth ~~associated with~~substantially complete, our ~~DXL retail and outlet stores.~~depreciation costs have started to decrease.

Net interest expense for the third quarter ~~and~~of fiscal 2018 of $0.8 million decreased slightly from $0.9 for the third quarter of fiscal 2017 million. The decrease in interest costs is due to a reduction in total debt outstanding at the end of the third quarter of fiscal 2018 as compared to the prior year, partially offset by an increase in interest rates.

For the first nine months of fiscal ~~2017~~2018, interest expense of ~~$0.9~~$2.6 million ~~and $2.5 million, respectively,~~ increased slightly from ~~$0.8~~$2.5 million ~~and $2.3 million, respectively,~~ for the ~~third quarter and~~ first nine months of fiscal ~~2016.~~2017. Net interest expense for the first nine months of fiscal 2018 include the write-off of approximately $0.2 million of unamortized debt issuance costs associated with entering into a New Credit Facility and the repayment of the Term Loan Facility, as discussed below. As a result of ~~our inventory initiatives undertaken to improve liquidity,~~the New Credit Facility and the repayment of the Term Loan Facility, we expect to realize, on an annualized basis, savings of approximately $0.7 million due to more favorable interest ~~costs for fiscal 2017 will be similar to fiscal 2016 levels.~~rates.

At ~~October 28, 2017,~~November 3, 2018, we had total deferred tax assets of ~~$84.4~~$52.5 million, total deferred tax liabilities of ~~$12.6~~$4.0 million and a corresponding valuation allowance of ~~$72.0~~$48.5 million. The deferred tax assets included approximately ~~$59.4~~$39.0 million of net operating loss carryforwards and approximately ~~$4.7~~$2.8 million of deferred gain on our sale-leaseback and, to a lesser extent, other book/tax timing differences.

At the end of fiscal ~~2013,~~2014, we established a full valuation allowance against our deferred tax assets. Based on our earnings guidance for fiscal ~~2017,~~2018, we believe that a full valuation allowance continues to remain appropriate at this time.

Beginning with the first quarter of fiscal 2018, we are calculating our tax provision based on the newly enacted U.S. statutory rate of 21%. Our tax provision for the third quarter and first nine months of fiscal 2018 and fiscal 2017 ~~represented~~was primarily due to current state margin tax. ~~For the~~The third quarter and first nine months of fiscal ~~2016,~~2018 included a tax expense of $45,000 and $92,000, respectively, in other comprehensive income (loss), which resulted in a tax benefit on the ~~tax provision represented current state margin tax and foreign income tax.~~Consolidated Statement of Operations related to the corresponding decrease in valuation allowance.

For the third quarter of fiscal ~~2017,~~2018, we had a net loss of $(2.0) million, or $(0.04) per diluted share, compared with a net loss of $(5.7) million, or $(0.12) per diluted share, ~~compared with a net loss of $(4.5) million, or $(0.09) per diluted share,~~ for the third quarter of fiscal ~~2016.~~

2017. For the first nine months of fiscal ~~2017,~~2018, we had a net loss of $(6.3) million, or $(0.13) per diluted share, as compared with a net loss of $(15.5) million, or $(0.32) per diluted share ~~compared~~for the first nine months of fiscal 2017.

Results for the third quarter and first nine months of fiscal 2018 includes charges of $0.7 million and $2.5 million, respectively, associated with ~~a net loss of $(4.0) million, or $(0.08) per diluted share.~~the Company’s restructuring and CEO transition costs discussed above. Results for the first nine months of fiscal 2017 included an impairment charge of $1.7 million ~~or $0.03 per diluted share, associated with~~for the write-down of certain store ~~assets, and increased advertising costs of $4.2 million, or $0.09 per diluted share.~~assets.

On a non-GAAP basis, ~~assuming a normalized tax rate for both periods,~~the adjusted net loss for the third quarter and first nine months of fiscal 2018 was ($0.02) and ($0.06) per diluted share, respectively, as compared to the adjusted net loss of ($0.09) per diluted share and ($0.21) per diluted share for the third quarter and first nine months of fiscal 2017, ~~was $(0.07) per diluted share and $(0.19) per diluted share, respectively, as compared to adjusted net loss of $(0.05) per diluted share and $(0.05) per diluted share, respectively,~~respectively. Results for the third quarter and first nine months of fiscal ~~2016.~~ 2018 were adjusted for the restructuring charge and CEO transition costs of $0.7 million and $2.5 million, respectively. Results for the first nine months of fiscal 2017 were adjusted for the impairment charge of $1.7 million. Further, all periods were adjusted to assume a normalized tax rate of 26%.

At ~~October 28, 2017,~~November 3, 2018, total inventory was ~~$119.9~~$116.4 million compared to ~~$117.4~~$103.3 million at ~~January 28, 2017~~February 3, 2018 and ~~$128.2~~$119.9 million at October ~~29, 2016.~~28, 2017. The ~~6.5%~~2.9% decrease of ~~$8.3~~$3.5 million from October ~~29, 2016~~28, 2017 was due to inventory initiatives that began in fiscal 2016 to improve timing of receipts and reduce weeks of supply on hand. At ~~October 28, 2017,~~November 3, 2018, our clearance inventory, which includes inventory in our “dots” program as well as certain merchandise that has been permanently marked down, represented ~~7.0%~~11.7% of our total inventory, as compared to ~~9.0%~~9.7% at October ~~29, 2016.~~28, 2017. We believe that this slight increase is due to more customers gravitating toward our new, full-price fashion merchandise in the Fall assortment, as opposed to last year where we were seeing higher sell-throughs on clearance product.

Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income and net income. Traditionally, a significant portion of our operating income and net income is generated in the fourth quarter, as a result of the “Holiday” season.

Our primary sources of liquidity are cash generated from operations and availability under our credit facility with Bank of America, N.A., which was ~~most recently~~ amended and restated in ~~October 2014 (“Credit Facility”).~~May 2018. Our current cash needs are primarily for working capital (essentially inventory requirements), capital expenditures and growth initiatives. We plan to manage our working capital and it is expected that excess cash from operations will be directed toward our growth initiatives and ~~as discussed further below, our stock repurchase program, which was announced in March 2017.~~debt reductions.

~~As discussed below, our~~Our capital expenditures ~~for~~in fiscal ~~2017~~2018 are expected to be approximately ~~$22.0~~$12.5 million, ~~primarily related~~and while capital expenditures may have to be funded periodically during the ~~planned opening~~year from our credit facility, by the end of ~~approximately 20 new DXL retail and 1 outlet stores and information technology projects. However, we expect~~fiscal 2018 all capital expenditures are expected to ~~receive approximately $5.0 million in tenant allowances to offset these capital expenditures. We expect to fund this store growth and stock repurchase program in fiscal 2017 primarily through~~be funded from cash flow from ~~operations, with periodic borrowings from our Credit Facility.~~operations. We currently believe that our existing cash generated by operations together with our ~~Credit Facility~~credit facility will be sufficient within current forecasts for us to meet our foreseeable liquidity requirements.

For fiscal ~~2017,~~2018, we expect cash flow from operating activities of ~~$31.0~~$22.5 million to ~~$35.0~~$26.5 million (including tenant allowances), and positive free cash flow of ~~$9.0~~$10.0 million to ~~$13.0~~$14.0 million that ~~will be used~~we expect to use to reduce outstanding ~~debt and purchase shares of the Company’s common stock as part of its stock repurchase program.~~debt.

~~For~~Cash flow from operations for the first nine months of fiscal ~~2017, free cash flow improved by $0.5~~2018 was $(1.3) million, compared to ~~$(13.2) million from $(13.7)~~$5.2 million for the first nine months of fiscal ~~2016.~~2017. The ~~improvement~~decrease in ~~free~~ cash flow from operations was primarily due to the ~~lower~~prior year benefiting from inventory reduction initiatives, which have now annualized, resulting in a $10.6 million swing as well as a decrease in tenant allowances from the prior year of approximately $5.4 million, which corresponds to our decrease in capital ~~expenditures and positive working capital changes,~~expenditures. These decreases in cash flow from operations were partially offset by ~~reduced earnings.~~our improved earnings of $9.2 million. Capital expenditures for the first nine months of fiscal

2018 decreased to $9.8 million as compared to $18.4 million for the first nine months of fiscal 2017, due to opening fewer stores. For the first nine months of fiscal 2018, we opened two DXL stores, one DXL outlet store and rebranded three Casual Male XL stores to DXL stores, as compared to 20 store openings for the first nine months of fiscal 2017. Partially offsetting this decrease in store capital was an increase in capital expenditures related to our IT and website initiatives. The majority of the planned capital for these IT and website initiatives was incurred in the first half of fiscal 2018. Free cash flow, a non-GAAP measure, was $(11.1) million for the first nine months of fiscal 2018 as compared to $(13.2) million for the first nine months of fiscal 2017.

The following is a summary of our total debt outstanding at ~~October 28, 2017~~November 3, 2018 with the associated unamortized debt issuance costs:

~~Our~~In the second quarter of fiscal 2018, we amended and restated our credit facility with Bank of America, ~~N.A., effective October 29, 2014~~N.A (our ~~“Credit~~“New Credit Facility”) ~~provides~~which extended the maturity date to May 24, 2023. The New Credit Facility continues to provide for a maximum committed borrowing of $125.0 million, which, pursuant to an accordion feature, ~~may~~could be increased to $175.0 million upon our request and the agreement of the lender(s) participating in the ~~increase.~~increase (the “Revolving Facility”). The New Credit Facility includes a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans. The maturity date of the Credit Facility is October 29, 2019. Our Credit Facility is described in more detail in Note 2 of the Notes to the Consolidated Financial Statements included in this Quarterly Report.

Borrowings made pursuant to the Revolving Facility under the New Credit Facility will bear interest, calculated under either the Federal Funds rate or the LIBOR rate, at a rate equal to the ~~base rate (determined as the highest of~~following: (a) ~~Bank of America N.A.’s prime rate, (b)~~ the Federal Funds rate ~~plus 0.50% and (c) the annual ICE-LIBOR (“LIBOR”) rate for the respective interest period)~~ plus a varying percentage based on ~~our borrowing base,~~the Company’s excess availability, of either 0.25% or 0.50%~~-0.75% for prime-based borrowings and~~, or (b) the LIBOR rate (the Company being able to select interest periods of 1 week, 1 month, 2 months, 3 months or 6 months) plus a varying percentage based on the Company’s excess availability, of either 1.25% or 1.50%~~-1.75% for LIBOR-based borrowings.~~.

We had outstanding borrowings of ~~$68.4~~$57.7 million under the New Credit Facility at ~~October 28, 2017.~~November 3, 2018. At ~~October 28, 2017,~~November 3, 2018, outstanding standby letters of credit were ~~$3.3~~$2.9 million and outstanding documentary letters of credit were ~~$0.1~~$2.3 million. The average monthly borrowing outstanding under the ~~Credit Facility~~our credit facility during the first nine months ended ~~October 28, 2017~~November 3, 2018 was approximately ~~$60.4~~$56.3 million, resulting in an average unused excess availability of approximately ~~$43.3~~$33.6 million. Unused excess availability at ~~October 28, 2017~~November 3, 2018 was ~~$38.2~~$45.4 million. ~~Our obligations~~

The New Credit Facility also included a FILO facility for $15.0 million, the proceeds of which were used to repay our previous Term Loan Facility. The total borrowing capacity under the ~~Credit~~FILO Facility ~~are secured by~~is based on a ~~lien on substantially all of our assets, excluding (i)~~borrowing base, generally defined as a ~~first priority lien held by the lenders~~specified percentage of the ~~Term Loan~~value of eligible accounts, including certain trade names, that step down over time, plus a specified percentage of the value of eligible inventory that steps down over time. There can be no voluntary prepayments on the FILO Facility during the first year. After its one-year anniversary, the FILO Facility can be repaid, in whole or in part, subject to certain payment conditions.

Borrowings made under the FILO Facility will bear interest, calculated under either the Federal Funds rate or the LIBOR rate, at a rate equal to the following: (a) the Federal Funds rate plus a varying percentage based on ~~certain~~the Company’s excess availability, of ~~our equipment described below and (ii) intellectual property.~~either 1.75% or 2.00% or (b) the LIBOR rate (the Company being able to select interest periods of 1 week, 1 month, 2 months, 3 months or 6 months) plus a varying percentage based on the Company’s excess availability, of either 2.75% or 3.00%. At November 3, 2018, the outstanding balance of $15.0 million was in a 2-month LIBOR-based contract with an interest rate of 5.07%.

We ~~have~~previously entered into twelve Equipment Security Notes (the “Notes”), whereby we borrowed an aggregate of $26.4 million. The Notes, which were issued between September 2013 and June 2014, were issued pursuant to a Master Loan and Security Agreement with Banc of America Leasing & Capital, LLC, dated July 20, 2007 and most recently amended on September 30, 2013. The Notes ~~are~~were secured by a security interest in all of our rights, title and interest in and to certain equipment. The Notes ~~are for 48 months and accrue~~accrued interest at fixed rates ranging from 3.07% to 3.50%. ~~Principal and interest, are payable monthly, in arrears. The Company was subject to prepayment penalties through~~During the second ~~anniversary~~quarter of ~~each note. The~~fiscal 2018, the Company ~~is no longer subject to any prepayment penalties.~~repaid in full the remaining balance on these Notes, without penalty.

We ~~have~~previously had a ~~$15.0 million~~ senior secured term loan facility with Wells Fargo Bank, National Association as administrative and collateral agent (the “Term Loan Facility”). The interest rate on the Term Loan Facility ~~bears interest at a rate per annum~~was equal to the greater of (a) 1.00% and (b) the ~~one month~~one-month LIBOR rate, plus 6.50%. Interest payments are payable on the first business day of each calendar month, and increase by 2% following the occurrence and during the continuance of an “event of default,” as defined in the Term Loan Facility. The Term Loan Facility, ~~which matures on~~with a maturity date of October 29, 2019 ~~provides for quarterly principal payments on~~and an outstanding balance of $11.5 million, was repaid in full, without penalty, during the ~~first business day~~second quarter of ~~each calendar quarter, which commenced the first business day of January 2015,~~fiscal 2018 in ~~an aggregate principal amount equal to $250,000, subject to adjustment,~~connection with the ~~balance payable on the termination date.~~New Credit Facility.

~~The Term Loan Facility is secured by a first priority lien on certain of our equipment, and a second priority lien on substantially all of our remaining assets, excluding intellectual property.~~

The following table sets forth the open stores and related square footage at November 3, 2018 and October 28, 2017, ~~and October 29, 2016,~~ respectively:

	October 28, 2017				October 29, 2016				November 3, 2018				October 28, 2017
Store Concept	Number of Stores		Square Footage		Number of Stores		Square Footage		Number of Stores		Square Footage		Number of Stores		Square Footage
(square footage in thousands)
DXL Retail		211		1,659		188		1,513		216		1,683		211		1,659
DXL Outlets		14		72		12		60		15		78		14		72
Casual Male XL Retail		81		280		108		385		67		225		81		280
Casual Male Outlets		33		103		39		123		30		91		33		103
Rochester Clothing		5		51		5		51		5		51		5		51
Total Stores		344		2,165		352		2,132		333		2,128		344		2,165

Below is a summary of store openings and closings from ~~January 28, 2017~~February 3, 2018 to ~~October 28, 2017:~~November 3, 2018:

Number of Stores:

DXL

DXL Outlets

Casual Male
XL Retail

Casual Male
XL Outlets

Rochester
Clothing

Total Stores

At January 28, 2017

192

13

97

36

5

343

New stores⁽¹⁾

8

—

—

—

—

8

Replaced stores⁽²⁾

11

1

(13
)

(3
)

—

(4
)
Closed retail stores⁽³⁾

—

—

(3
)

—

—

(3
)
At October 28, 2017

211

14

81

33

5

344

Number of Stores:	DXL			DXL Outlets		Casual Male XL Retail			Casual Male XL Outlets			Rochester Clothing		Total Stores
At February 3, 2018		212			14		78			33			5		342
New stores⁽¹⁾		1			—		—			—			—		1
Rebranded stores ⁽²⁾		3			—		(3	)		—			—		—
Replaced stores⁽³⁾		1			1		(1	)		(1	)		—		—
Closed retail stores⁽⁴⁾		(1	)		—		(7	)		(2	)		—		(10	)
At November 3, 2018		216			15		67			30			5		333

Our capital expenditures for the first nine months of fiscal ~~2017~~2018 were ~~$18.4~~$9.8 million as compared to ~~$21.8~~$18.4 million for the first nine months of fiscal ~~2016.~~2017. We have opened 2 DXL retail stores, 1 DXL outlet and rebranded 3 Casual Male XL stores to a DXL during the first nine months of fiscal 2018 as compared to 19 DXL retail stores and 1 DXL outlet ~~during the first nine months of fiscal 2017 as compared to 22 DXL retail stores and 3 DXL outlets~~ for the first nine months of fiscal ~~2016.~~2017.

For fiscal ~~2017,~~2018, our capital expenditures are expected to be approximately ~~$22.0~~$12.5 million and we expect to receive approximately ~~$5.0~~$1.1 million in tenant allowances to offset these expenditures. ~~Our budget~~This includes approximately ~~$13.7~~$1.8 million, excluding any allowance, related to the opening of 202 new DXL retail stores, the remodeling of 3 Casual Male XL to DXL retail stores and 1 DXL outlet ~~stores,~~store, and approximately ~~$8.3~~$10.7 million for continued information technology projects, website initiatives and general overhead projects. In addition, for fiscal 2018, we expect to close approximately 199 Casual Male XL stores, ~~and~~ 3 Casual Male XL outlet stores ~~the majority of which are in connection with the opening of the~~and 1 DXL ~~retail and outlet stores in the same geographic market.~~ store.

There have been no material changes to the critical accounting policies and estimates disclosed in our ~~Fiscal 2016 Annual Report.~~Form 10-K for the year ended February 3, 2018. See Note 1 to the Consolidated Financial Statements included in this report for information on recent accounting pronouncements and changes in accounting principles.

Adjusted net loss, adjusted net loss per diluted share, free cash flow, ~~free cash flow before DXL capital expenditures~~EBITDA and adjusted EBITDA are non-GAAP measures. These non-GAAP measures are not presented in accordance with GAAP and should not be considered superior to or as a substitute for net loss or cash flows from operating activities or any other measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the non-GAAP measures presented in this Quarterly Report may not be comparable to similar measures used by other companies. We believe that inclusion of these non-GAAP measures helps investors gain a better understanding of our performance, especially when comparing such results to previous periods and that they are useful as an additional means for investors to evaluate our operating results, when reviewed in conjunction with our GAAP financial statements. Reconciliations of these non-GAAP measures are presented in the following tables (certain columns may not foot due to rounding):

Adjusted net loss and adjusted net loss per diluted share. The above discussion includes an adjusted net loss for the third quarter and first nine months of fiscal ~~2017~~2018 and fiscal ~~2016~~2017 on a non-GAAP basis, which reflected ~~an adjustment assuming~~results before corporate restructuring, CEO transition costs, impairment charges and assumes a normal tax rate of ~~40%~~26%. We have fully reserved against our deferred tax assets and, therefore, net loss is not reflective of earnings assuming a “normal” tax position. Adjusted net ~~income (loss)~~loss provides investors with a useful indication of the financial performance of the business, on a comparative basis, assuming a normalized effective tax rate of ~~40%~~26%.

The following is a reconciliation of the net loss to adjusted net loss, ~~assuming~~adjusted for corporate restructuring charge, CEO transition costs and impairment charges and assumes a normal tax rate of ~~40%~~26% for the third quarter and first nine months of fiscal ~~2017~~2018 and fiscal ~~2016:~~2017:

For the three months ended

For the nine months ended

October 28, 2017

October 29, 2016

October 28, 2017

October 29, 2016

$

Per diluted
share

$

Per diluted
share

$

Per diluted
share

$

Per diluted
share

(in thousands, except per share data)

Net loss (GAAP basis)

$
(5,706
)

$
(0.12
)

$
(4,452
)

$
(0.09
)

$
(15,502
)

$
(0.32
)

$
(4,039
)

$
(0.08
)

Add back: Actual income tax provision

—

34

64

126

Income tax benefit, assuming

a normal tax rate of 40%

2,282

1,767

6,175

1,565

Adjusted net loss (non-GAAP basis)

$
(3,424
)

$
(0.07
)

$
(2,651
)

$
(0.05
)

$
(9,263
)

$
(0.19
)

$
(2,348
)

$
(0.05
)

Weighted average number of common shares

outstanding on a diluted basis

48,607

49,552

48,966

49,532

	For the three months ended												For the nine months ended
	November 3, 2018						October 28, 2017						November 3, 2018						October 28, 2017
	$			Per diluted share			$			Per diluted share			$			Per diluted share			$			Per diluted share
(in thousands, except per share data)
Net loss (GAAP basis)	$	(2,005	)	$	(0.04	)	$	(5,706	)	$	(0.12	)	$	(6,300	)	$	(0.13	)	$	(15,502	)	$	(0.32	)
Adjust:
Corporate restructuring		262		$	0.01			-			-			1,922		$	0.04			-			-
CEO transition costs		430		$	0.01			-			-			530		$	0.01			-			-
Impairment of assets		-			-			-			-			-			-			1,718		$	0.04
Add back actual income tax provision (benefit)		(22	)		-			-			-			(19	)		-			64			-
Add income tax benefit, assuming a normal tax rate of 26%		347		$	0.01			1,484		$	0.03			1,005		$	0.02			3,567		$	0.07

Adjusted net loss (non-GAAP basis)	$	(988	)	$	(0.02	)	$	(4,222	)	$	(0.09	)	$	(2,862	)	$	(0.06	)	$	(10,153	)	$	(0.21	)

Weighted average number of common shares outstanding:
diluted basis for a net loss position					49,352						48,607						49,068						48,966

Free Cash ~~Flow and Free Cash Flow Before DXL Capital Expenditures.~~Flow. We define free cash flow as cash flow from operating activities less capital expenditures. Free cash flow ~~before DXL capital expenditures is free cash flow with DXL capital expenditures added back. Free cash flow~~ excludes the mandatory and discretionary repayment of debt. Free cash flow ~~and free cash flow before DXL capital expenditures are metrics~~is a metric that management uses to monitor liquidity. We expect to fund our ongoing ~~DXL~~ capital expenditures with cash flow from operations. ~~We believe this metric is important to investors because it demonstrates our ability to strengthen liquidity while also contributing to the funding of the DXL store growth.~~

The following table reconciles free cash ~~flow and free cash flow before DXL capital expenditures:~~flow:

EBITDA and Adjusted EBITDA. EBITDA is calculated as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before restructuring charges, impairment charges and CEO transition costs. We believe that EBITDA isand adjusted EBITDA are useful to investors in evaluating our performance. With the significant capital investment ~~associated~~we have made over the past several years in connection with ~~the~~ DXL ~~transformation and, therefore, increasing~~store openings, we have increased levels of depreciation and interest, and therefore, management uses EBITDA as a key metric to measure profitability and economic productivity.

The following table is a reconciliation of net ~~income (loss)~~loss to adjusted EBITDA:

	For the three months ended						For the nine months ended						For the three months ended						For the nine months ended
	October 28, 2017			October 29, 2016			October 28, 2017			October 29, 2016			November 3, 2018			October 28, 2017			November 3, 2018			October 28, 2017
(in millions)
Net loss (GAAP basis)	$	(5.7	)	$	(4.5	)	$	(15.5	)	$	(4.0	)	$	(2.0	)	$	(5.7	)	$	(6.3	)	$	(15.5	)
Add back:
Corporate restructuring														0.3			-			1.9			-
CEO transition costs														0.4			-			0.6			-
Impairment of assets														-			-			-			1.7
Provision for income taxes		-			-			0.1			0.1			-			-			-			0.1
Interest expense		0.9			0.8			2.5			2.3			0.8			0.9			2.6			2.5
Depreciation and amortization		7.7			7.5			25.1			22.4			7.2			7.7			21.9			23.3
EBITDA (non-GAAP basis)	$	2.8		$	3.9		$	12.1		$	20.8
Adjusted EBITDA (non-GAAP basis)													$	6.6		$	2.8		$	20.7		$	12.1

The following table is a reconciliation of non-GAAP measures used in our Fiscal ~~2017~~2018 Outlook:

	~~Projected~~
	~~Fiscal 2017~~
~~(in millions, except per share data)~~				~~per diluted share~~
~~Net loss (GAAP basis)~~	~~$(17.0)-$(21.0)~~
~~Add back:~~
~~Provision for income taxes~~		~~0.1~~
~~Interest expense~~		~~3.3~~
~~Depreciation and amortization~~		~~33.6~~
~~EBITDA (non-GAAP basis)~~	~~$16.0-$20.0~~

~~Net loss (GAAP basis)~~	~~$(17.0)-$(21.0)~~			~~$(0.35)-$(0.42)~~
~~Income tax benefit, assuming 40% rate~~	~~$6.8-$8.4~~			~~$0.14-$0.17~~
~~Adjusted net loss (non-GAAP basis)~~	~~$(10.2)-$(12.6)~~			~~$(0.21)-$(0.25)~~
~~Weighted average common shares outstanding - diluted~~		~~48.5~~

~~Cash flow from operating activities (GAAP basis)~~	~~$31.0-$35.0~~
~~Capital expenditures, infrastructure projects~~		~~(8.3~~	)
~~Free Cash Flow, before DXL capital expenditures (non-GAAP basis)~~	~~$22.7-$26.7~~
~~Capital expenditures for DXL stores~~		~~(13.7~~	)
~~Free Cash Flow (non-GAAP basis)~~	~~$9.0-$13.0~~

	Projected
	Fiscal 2018
(in millions, except per share data)				per diluted share
Net loss (GAAP basis)	$(9.8)-$(12.8)
Add back:
Restructuring charge		1.9
CEO transition costs		2.1
Provision for income taxes		0.1
Interest expense		3.4
Depreciation and amortization		29.3
Adjusted EBITDA (non-GAAP basis)	$24.0-$27.0

Net loss (GAAP basis)	$(9.8)-$(12.8)			$(0.20)-$(0.26)
Add back:
Restructuring charge		1.9		$0.04
CEO transition costs		2.1		$0.04
Add back tax provision and record benefit assuming 26%	1.8 -2.7			$0.04-$0.05
Adjusted net loss (non-GAAP basis)	$(4.0) -$(6.1)			$(0.08)-$(0.13)
Weighted average common shares outstanding - diluted		49.1

Cash flow from operating activities (GAAP basis)	$22.5 -$26.5
Capital expenditures, infrastructure projects		(10.7	)
Capital expenditures for DXL stores		(1.8	)
Free Cash Flow (non-GAAP basis)	$10.0-$14.0

In the normal course of business, our financial position and results of operations are routinely subject to a variety of risks, including market risk associated with interest rate movements on borrowings and foreign currency fluctuations. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of these and other potential exposures.

We utilize cash from operations and from the Revolving Facility of our Credit Facility to fund our working capital needs. Our Credit Facility is not used for trading or speculative purposes. As part of our Credit Facility, we also have an outstanding $15.0 million FILO loan. In addition, we have available letters of credit as sources of financing for our working capital requirements. Borrowings under the Credit Facility, which expires ~~October 29, 2019,~~May 24, 2023, bear interest at variable rates based on Bank of America’s prime rate or LIBOR. At ~~October 28, 2017,~~November 3, 2018, the interest rate on our prime based borrowings was ~~4.75%~~5.50%. At ~~October 28, 2017,~~November 3, 2018, the $15.0 million outstanding under our FILO loan were in a LIBOR contract with an interest rate of 5.07% and approximately ~~$64.0~~$52.0 million of our outstanding borrowings under our Revolving Facility were in LIBOR contracts with an interest rate of ~~2.70%. At October 28, 2017, we also had $12.0 million outstanding under a term loan, which bears interest at a variable rate based on one-month LIBOR rates plus 6.5%~~3.50%.

Based upon a sensitivity analysis as of ~~October 28, 2017,~~November 3, 2018, assuming average outstanding borrowing during the first nine months of fiscal ~~2017~~2018 of ~~$60.4~~$56.3 million under our ~~Credit~~Revolving Facility and ~~$12.0~~$15.0 million outstanding under our ~~term~~FILO loan, a 50 basis point increase in interest rates would have resulted in a potential increase in interest expense of approximately ~~$362,000~~$356,500 on an annualized basis.

Our Rochester Clothing store located in London, England conducts business in British pounds and our two DXL stores located in Ontario, Canada conduct business in Canadian dollars. As of ~~October 28, 2017,~~November 3, 2018, sales from these stores were immaterial to consolidated sales. As such, we believe that movement in foreign currency exchange rates will not have a material adverse effect on our financial position or results of operations.

As required by Rule 13a-15 under the Exchange Act, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~October 28, 2017.~~November 3, 2018. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~October 28, 2017,~~November 3, 2018, our disclosure controls and procedures were effective.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended ~~October 28, 2017~~November 3, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We are subject to various legal proceedings and claims that arise in the ordinary course of business. Management currently believes that the resolution of these matters will not have a material adverse impact on our future results of operations or financial position.

There have been no material changes to the risk factors as previously disclosed in Part I, Item 1A of our ~~Fiscal 2016 Annual Report.~~Form 10-K for the year ended February 3, 2018.

~~None.~~On October 22, 2018, the Compensation Committee of the Board of Directors approved the First Amendment to the Second Amended and Restated Long-Term Incentive Plan ( the “Amended LTIP”), as filed as Exhibit 10.1 to this Form 10-Q for the quarter ending November 3, 2018. The Amended LTIP amended Section 7(e) to clarify the payment of performance-based awards in connection with a Change in Control as it relates to a performance period that has not yet ended or has not previously been vested or paid. In addition, Section 16 of the Amended LTIP was amended to update the 409(a) language to be consistent with the Company’s 2016 Incentive Compensation Plan.

On October 24, 2018, the Compensation Committee established two performance targets for the 2018-2020 Performance Period under the Amended LTIP (the “2018-2020 LTIP”) as follows:

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware	04-2623104
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
555 Turnpike Street Canton, MA	02021
(Address of principal executive offices)	(Zip Code)

	Restricted shares			Restricted Stock Units ⁽¹⁾			Deferred shares ⁽²⁾			Fully-vested shares ⁽³⁾			Total number of shares			Weighted-average grant-date fair value ⁽⁴⁾
Shares
Outstanding non-vested shares at beginning of year		856,332			369,828			64,876			—			1,291,036		$	5.09
Shares granted		484,558			804,701			74,968			66,325			1,430,552		$	2.68
Shares vested/issued		(430,336	)		(27,697	)		(44,599	)		(66,325	)		(568,957	)	$	2.66
Shares canceled		(857,221	)		(37,649	)		—			—			(894,870	)	$	4.94
Outstanding non-vested shares at end of quarter		53,333			1,109,183			95,245			—			1,257,761		$	3.52

	Restricted shares			Restricted stock units ⁽¹⁾			Deferred shares ⁽²⁾			Fully-vested shares ⁽³⁾			Total number of shares			Weighted-average grant-date fair value ⁽⁴⁾
Shares
Outstanding non-vested shares at beginning of year		36,666			1,048,552			115,457			—			1,200,675		$	3.43
Shares granted		30,000			1,050,650			82,289			105,645			1,268,584		$	2.48
Shares vested/issued		(3,333	)		(627,220	)		(7,708	)		(105,645	)		(743,906	)	$	2.98
Shares canceled		(33,333	)		(91,747	)		—			—			(125,080	)	$	2.84
Outstanding non-vested shares at end of quarter		30,000			1,380,235			190,038			—			1,600,273		$	2.93

	Number of shares			Weighted-average exercise price per option		Weighted-average remaining contractual term	Aggregate intrinsic value		Number of shares			Weighted-average exercise price per option		Weighted-average remaining contractual term	Aggregate intrinsic value
Stock Options
Outstanding options at beginning of year		2,524,546		$	4.98		$	11,286		1,195,910		$	4.80		$	21,750
Options granted		30,000		$	1.85					153,888		$	2.48			—
Options canceled		(1,259,579	)	$	5.05
Options expired and canceled										(366,626	)	$	4.73			2,000
Options exercised		—			—					—			—			—
Outstanding options at end of quarter		1,294,967		$	4.82	4.8 years	$	3,000		983,172		$	4.49	5.1 years	$	144,396
Options exercisable at end of quarter		1,294,967		$	4.82	4.8 years				829,284		$	4.87	4.3 years	$	26,308

	October 28, 2017			October 29, 2016
Expected volatility		49.9	%		39.3	%
Risk-free interest rate		1.44	%	0.78%
Expected life	3.0 yrs			2.0 yrs
Dividend rate		—			—

	Third Quarter			First Nine Months			Third Quarter			First Nine Months
	(in millions)						(in millions)
Sales for fiscal 2016	$	101.9		$	327.6
Less 2016 sales for stores that have closed /converted		(4.9	)		(17.5	)
Sales for fiscal 2017							$	103.7		$	332.5
Less 2017 sales for stores that have closed /converted								(1.7	)		(6.5	)
Adjustment to sales for the shift in calendar weeks								0.7			2.0
	$	97.0		$	310.1		$	102.7		$	328.0

Decrease in comparable sales		(0.1	)		(1.6	)
Increase in comparable sales								3.4			9.5
Non-comparable sales, primarily DXL stores open less than 13 months		6.4			23.0			0.7			5.8
Other, net		0.4			1.0			0.3			(0.7	)
Sales for fiscal 2017	$	103.7		$	332.5
Sales for fiscal 2018							$	107.1		$	342.6

(in thousands)	Gross Debt Outstanding		Less Debt Issuance Costs			Net Debt Outstanding		Gross Debt Outstanding		Less Debt Issuance Costs			Net Debt Outstanding
Credit facility	$	68,444	$	(246	)	$	68,198	$	57,671	$	(381	)	$	57,290
Equipment financing notes		1,409		(5	)		1,404
Term loan, due 2019		12,000		(216	)		11,784
FILO loan									15,000		(257	)		14,743
Total debt	$	81,853	$	(467	)	$	81,386	$	72,671	$	(638	)	$	72,033


10.1		~~Letter~~First Amendment to the Second Amended and Restated Long-Term Incentive Plan. †


10.2		Second Amendment to Employment and Chairman Compensation Agreement ~~dated January 29, 2014, by and~~ between the Company and ~~Red Mountain Capital Partners LLC.~~Seymour Holtzman (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 7, 2018, and incorporated herein by reference). *†

10.3		Second Amended and Restated Employment Agreement dated as of October 8, 2018 between the Company and Brian S. Reaves (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 9, 2018, and incorporated herein by reference). *†

31.1		Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of ~~1934.~~1934.

31.2		Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of ~~1934.~~1934.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002.~~2002.

101		The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~October 28, 2017,~~November 3, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements.

	DESTINATION XL GROUP, INC.

Date: November ~~17, 2017~~30, 2018	By:	/S/ John F. Cooney
		John F. Cooney
		Vice President, Managing Director, Chief Accounting Officer and Corporate Controller (Duly Authorized Officer and Chief Accounting Officer)

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