Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Feb. 01, 2014 |
Nature of Business | ' |
Nature of Business |
Destination XL Group, Inc. (formerly known as Casual Male Retail Group, Inc. and collectively referred to as the “Company”) is the largest specialty retailer of big & tall men’s apparel. The Company operates under the trade names of Destination XL® (DXL®), Casual Male XL®, Casual Male XL Outlets, Rochester Clothing, B&T Factory Direct™, ShoesXL® and LivingXL®. At February 1, 2014, the Company operated 99 DXL® stores, 250 Casual Male XL retail and outlet stores and 10 Rochester Clothing stores located throughout the United States, including one store in London, England. The Company also operates a direct business throughout the United States and Canada, which includes brand mailers and an aggregated e-commerce site to support its brands and product extensions. |
Basis of Presentation | ' |
Basis of Presentation |
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts, transactions and profits are eliminated. |
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from estimates. |
Reclassifications | ' |
Reclassifications |
The Company has reclassified the long-term portion of its deferred rent and lease incentives from “Accrued Expenses and Other Current Liabilities” into “Deferred Rent and Lease Incentives” on the consolidated balance sheets. |
Subsequent Events | ' |
Subsequent Events |
All appropriate subsequent event disclosures, if any, have been made in these Notes to the Consolidated Financial Statements. |
Segment Reporting | ' |
Segment Reporting |
Through the end of fiscal 2011, the Company managed its business as one reportable segment comprised of three operating segments – Casual Male XL, Rochester Clothing and B&T Factory Direct. However, with the continued expansion of the Destination XL (“DXL”) store format and the merger of all of the Company’s websites into one consolidated site, www.destinationxl.com, which carries merchandise from all three of these business formats, the businesses are now managed using retail and direct, as opposed to the previous store formats. |
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 businesses. The Company considers its operating segments to be similar in terms of economic characteristics, production processes and operations, and have therefore aggregated them into a single reporting segment. The direct operating segment includes the operating results and assets for LivingXL and ShoesXL. |
Fiscal Year | ' |
Fiscal Year |
The Company’s fiscal year is a 52-week or 53-week period ending on the Saturday closest to January 31. Fiscal years 2013 and 2011, which were 52-week periods, ended on February 1, 2014 and January 28, 2012, respectively. Fiscal 2012 was a 53-week period that ended on February 2, 2013. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
Cash and cash equivalents consist of cash in banks and short-term investments, which have a maturity of ninety days or less when acquired. Included in cash equivalents are credit card and debit card receivables from banks, which generally settle within two to four business days. |
Accounts Receivable | ' |
Accounts Receivable |
Accounts receivable primarily includes amounts due for tenant allowances and from the Company’s business partners. For fiscal 2013, fiscal 2012 and fiscal 2011, the Company has not incurred any losses on its accounts receivable. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
ASC Topic 825, Financial Instruments, requires disclosure of the fair value of certain financial instruments. 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. |
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 asset 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 February 1, 2014 the fair value approximates the carrying amount based upon terms available to the Company for borrowings with similar arrangements and remaining maturities. See Note C, Debt Obligations, for more discussion. |
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 are classified within Level 3 of the valuation hierarchy. See Intangibles below. |
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Retail stores that have indicators of impairment and fail the recoverability test are measured for impairment by comparing the fair value of the assets against their carrying value. Fair value of the assets is estimated using a projected discounted cash flow analysis and is classified within Level 3 of the valuation hierarchy. See Impairment of Long-Lived Assets below. |
Inventories | ' |
Inventories |
All inventories are valued at the lower of cost or market, using a weighted-average cost method. |
Property and Equipment | ' |
Property and Equipment |
Property and equipment are stated at cost. Major additions and improvements are capitalized while repairs and maintenance are charged to expense as incurred. Upon retirement or other disposition, the cost and related depreciation of the assets are removed from the accounts and the resulting gain or loss, if any, is reflected in income. Depreciation is computed on the straight-line method over the assets’ estimated useful lives as follows: |
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Furniture and fixtures | | Five to ten years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Equipment | | Five to ten years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Leasehold improvements | | Lesser of useful lives or related lease term | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Hardware and software | | Three to seven years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Intangibles | ' |
Intangibles |
ASC Topic 805, Business Combinations, requires that all business combinations be accounted for under the purchase method. The statement further requires separate recognition of intangible assets that meet one of two criteria set forth in the statement. Under ASC Topic 350, Intangibles Goodwill and Other, goodwill and intangible assets with indefinite lives are tested at least annually for impairment. At each reporting period, management analyzes current events and circumstances to determine whether the indefinite life classification for its “Rochester” trademark continues to be valid. If circumstances warrant a change to a finite life, the carrying value of the intangible asset would then be amortized prospectively over the estimated remaining useful life. The Company’s “Casual Male” trademark is considered a finite life asset. Other intangible assets with defined lives are amortized over their useful lives. |
At least annually, as of the Company’s December month-end, the Company evaluates its “Rochester” trademark. The Company performs an impairment analysis and records an impairment charge for any intangible assets with a carrying value in excess of its fair value. |
In the fourth quarter of fiscal 2013, the “Rochester” trademark was tested for potential impairment, utilizing an income approach with applicable royalty rates applied. The Company concluded that the “Rochester” trademark, with a carrying value of $1.5 million at February 1, 2014, was not impaired. Although the Company expects that some of the Rochester locations will close as part of the DXL expansion, the Rochester Clothing stores that will remain open are currently expected to generate more than sufficient cash flows to support the carrying value of $1.5 million for the “Rochester” trademark. |
In fiscal 2011, the Company determined that its “Casual Male” trademark could no longer be considered an indefinite-lived asset. As the Company opens DXL stores, it is closing the majority of its Casual Male XL stores in those respective markets. By fiscal 2017, the Company expects to have only 75 to 100 Casual Male XL retail and outlets stores open. As a result, in the fourth quarter of fiscal 2011, the Company recorded a non-cash impairment charge of $23.1 million against its “Casual Male” trademark. This charge was reflected in “Provision for Trademark Impairment” for the year ended January 28, 2012. The remaining carrying value of the trademark is being amortized on an accelerated basis against projected cash flows through fiscal 2018, its estimated remaining useful life. |
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Below is a table showing the changes in the carrying value of the Company’s intangible assets from February 2, 2013 to February 1, 2014: |
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(in thousands) | | February 2, 2013 | | | Additions | | | Impairment | | | Amortization | | | February 1, 2014 | | | | | | | | | | | | | | | | | |
“Rochester” trademark | | $ | 1,500 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1,500 | | | | | | | | | | | | | | | | | |
“Casual Male” trademark (1) | | | 4,110 | | | | — | | | | — | | | | (1,646 | ) | | | 2,464 | | | | | | | | | | | | | | | | | |
Other intangibles(2) | | | 646 | | | | — | | | | — | | | | (217 | ) | | | 429 | | | | | | | | | | | | | | | | | |
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Total intangible assets | | $ | 6,256 | | | | — | | | $ | — | | | $ | (1,863 | ) | | $ | 4,393 | | | | | | | | | | | | | | | | | |
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-1 | Beginning in fiscal 2012, the “Casual Male” trademark is being accounted for as a finite-lived asset. The gross carrying amount and accumulated amortization of the “Casual Male” trademark subject to amortization, was $6.1 million and $3.6 million, respectively, at February 1, 2014 and $6.1 million and $2.0 million, respectively, at February 2, 2013. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
-2 | Approximately $33,000 of the $217,000 of amortization, which relates to the amortization of favorable lease commitments, was included in cost of goods sold (as part of occupancy costs) on the Consolidated Statement of Operations for fiscal 2013. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other intangibles included customer lists and favorable lease commitments, with finite lives which ranged from 3 to 16 years based on each asset’s estimated economic useful life. At February 1, 2014, customer lists, with a remaining life of 4.3 years, is the only other intangible remaining. |
The gross carrying amount and accumulated amortization of these other intangibles, subject to amortization, were $4.3 million and $3.9 million, respectively, at February 1, 2014 and $4.3 million and $3.7 million, respectively, at February 2, 2013. Amortization expense for fiscal 2013, 2012 and 2011 was $0.2 million, $0.4 million and $0.5 million, respectively. |
Expected amortization expense for intangible assets, including our “Casual Male” trademark, for the next five fiscal years is as follows: |
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FISCAL YEAR | | (in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2014 | | $ | 1,085 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2015 | | $ | 639 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2016 | | $ | 441 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2017 | | $ | 407 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2018 | | $ | 321 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Pre-opening Costs | ' |
Pre-opening Costs |
The Company expenses all pre-opening costs for its stores as incurred. |
Advertising Costs | ' |
Advertising Costs |
The Company expenses in-store advertising costs as incurred. Television advertising costs are expensed in the period in which the advertising is first aired. Direct response advertising costs, which consist of catalog production and postage costs, are deferred and amortized over the period of expected direct marketing revenues, which is less than one year. There were no deferred direct response costs at February 1, 2014. Direct response costs which were deferred at February 2, 2013 were $0.5 million. Advertising expense, which is included in selling, general and administrative expenses, was $27.8 million, $18.5 million and $19.6 million for fiscal 2013, 2012 and 2011, respectively. |
Revenue Recognition | ' |
Revenue Recognition |
Revenue from the Company’s retail store operation is recorded upon purchase of merchandise by customers, net of an allowance for sales returns. Revenue from the Company’s catalog and e-commerce operations is recognized at the time a customer order is delivered, net of an allowance for sales returns. |
Accumulated Other Comprehensive Income (Loss)-("AOCI") | ' |
Accumulated Other Comprehensive Income (Loss)—(“AOCI”) |
Other comprehensive income (loss) includes amounts related to foreign currency and pension plans and is reported in the Consolidated Statements of Comprehensive Income. Other comprehensive income and reclassifications from AOCI for fiscal 2013, fiscal 2012 and fiscal 2011 are as follows: |
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(in thousands) | | Fiscal 2013 | | | Fiscal 2012 | | | Fiscal 2011 | |
| | Pension Plans | | | Foreign | | | Total | | | Pension | | | Foreign | | | Total | | | Pension | | | Foreign | | | Total | |
Currency | Plans | Currency | Plans | Currency |
Balance at beginning of the fiscal year | | $ | (5,828 | ) | | $ | 267 | | | $ | (5,561 | ) | | $ | (5,949 | ) | | $ | 233 | | | $ | (5,716 | ) | | $ | (4,297 | ) | | $ | 261 | | | $ | (4,036 | ) |
Other comprehensive income (loss) before reclassifications, net of taxes | | | 887 | | | | (280 | ) | | | 607 | | | | (191 | ) | | | 34 | | | | (157 | ) | | | (1,850 | ) | | | (28 | ) | | | (1,878 | ) |
Amounts reclassified from accumulated other comprehensive income (loss), net of taxes (1) | | | 394 | | | | — | | | | 394 | | | | 312 | | | | — | | | | 312 | | | | 198 | | | | — | | | | 198 | |
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Other comprehensive income (loss) for the period | | | 1,281 | | | | (280 | ) | | | 1,001 | | | | 121 | | | | 34 | | | | 155 | | | | (1,652 | ) | | | (28 | ) | | | (1,680 | ) |
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Balance at end of the fiscal year | | $ | (4,547 | ) | | $ | (13 | ) | | $ | (4,560 | ) | | $ | (5,828 | ) | | $ | 267 | | | $ | (5,561 | ) | | $ | (5,949 | ) | | $ | 233 | | | $ | (5,716 | ) |
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-1 | Includes the amortization of the unrecognized (gain)/loss on pension plans which was charged to Selling, General and Administrative expense on the Consolidated Statements of Operations for all periods presented. The amortization of the unrecognized loss, before tax, was $394,000, $516,000 and $328,000 for fiscal 2013, fiscal 2012 and fiscal 2011, respectively. The corresponding tax benefit was $204,000 and $130,000 for fiscal 2012 and fiscal 2011, respectively. There was no corresponding tax benefit for fiscal 2013. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign Currency Translation | ' |
Foreign Currency Translation |
At February 1, 2014, the Company operates a direct business in Canada and has one Rochester Clothing store located in London, England. Assets and liabilities of these operations are translated into U.S. dollars at the exchange rates in effect at each balance sheet date. Stockholders’ equity is translated at applicable historical exchange rates. Income, expense and cash flow items are translated at average exchange rates during the period. Resulting translation adjustments are reported as a separate component of stockholders’ equity. |
Shipping and Handling Costs | ' |
Shipping and Handling Costs |
Shipping and handling costs are included in cost of sales for all periods presented. |
Income Taxes | ' |
Income Taxes |
Deferred income taxes are provided to recognize the effect of temporary differences between tax and financial statement reporting. Such taxes are provided for using enacted tax rates expected to be in place when such temporary differences are realized. A valuation allowance is recorded to reduce deferred tax assets if it is determined that it is more likely than not that the full deferred tax asset would not be realized. If it is subsequently determined that a deferred tax asset will more likely than not be realized, a credit to earnings is recorded to reduce the allowance. |
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ASC Topic 740, Income Taxes (“ASC 740”) clarifies a company’s accounting for uncertain income tax positions that are recognized in its financial statements and also provides guidance on a company’s de-recognition of uncertain positions, financial statement classification, accounting for interest and penalties, accounting for interim periods, and disclosure requirements. In accordance with ASC 740, 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 Company’s policy is to recognize accrued interest and penalties related to unrecognized tax benefits in its income tax provision. The Company has not accrued or paid interest or penalties which were material to its results of operations for fiscal 2013, fiscal 2012 and fiscal 2011. |
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 1998, with remaining fiscal years subject to income tax examination by federal tax authorities. |
Net Income (Loss) Per Share | ' |
Net Income (Loss) Per Share |
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Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the respective period. Diluted earnings per share is determined by giving effect to unvested shares of restricted stock and the exercise of stock options using the treasury stock method. The following table provides a reconciliation of the number of shares outstanding for basic and diluted earnings per share: |
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| | FISCAL YEARS ENDED | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands) | | February 1, 2014 | | | February 2, 2013 | | | January 28, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | |
Net Income (Loss): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) – Basic and Diluted | | $ | (59,786 | ) | | $ | 6,126 | | | $ | 42,663 | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted Average Shares Outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic weighted-average common shares outstanding | | | 48,473 | | | | 47,947 | | | | 47,424 | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock equivalents - stock options and restricted stock. Common stock equivalents of 443 shares for February 1, 2014 were excluded due to the net loss | | | — | | | | 438 | | | | 620 | | | | | | | | | | | | | | | | | | | | | | | | | |
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Diluted weighted-average shares outstanding | | | 48,473 | | | | 48,385 | | | | 48,044 | | | | | | | | | | | | | | | | | | | | | | | | | |
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The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each year because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or the impact of ASC Topic 718, Compensation – Stock Compensation, primarily related to unearned compensation. |
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| | FISCAL YEARS ENDED | | | | | | | | | | | | | | | | | | | | | | | | | |
(in thousands, except exercise prices) | | February 1, | | | February 2, | | | January 28, | | | | | | | | | | | | | | | | | | | | | | | | | |
2014 | 2013 | 2012 | | | | | | | | | | | | | | | | | | | | | | | | |
Stock options (time-vested) | | | 2,088 | | | | 1,634 | | | | 2,755 | | | | | | | | | | | | | | | | | | | | | | | | | |
Ranges of exercise prices of such options | | $ | 4.96 – $10.26 | | | $ | 3.76 – $10.26 | | | $ | 3.23 – $10.26 | | | | | | | | | | | | | | | | | | | | | | | | | |
Excluded from the Company’s computation of basic and diluted earnings per share for fiscal 2013, were 944,236 shares of unvested performance-based restricted stock and 1,156,894 performance-based stock options. These performance-based awards will be included in the computation of basic and diluted earnings per share if, and when, the respective performance targets are achieved. In addition, 944,236 shares of unvested time-based restricted stock are excluded from the computation of basic earnings per share until such shares vest. See Note F, Long-Term Performance Share Bonus Plan, for a discussion of the Company’s 2013-2016 LTIP and the respective performance targets. |
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Although the shares of performance-based and time-based restricted stock issued in connection with the 2013-2016 LTIP are not considered outstanding or common stock equivalents for earnings per share purposes until certain vesting and performance thresholds are achieved, all 1,888,472 shares of restricted stock 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. |
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Stock-based Compensation | ' |
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Stock-based Compensation |
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ASC Topic 718, Compensation – Stock Compensation, requires measurement of compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest. 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”). As required under the accounting rules, 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 expense over the vesting period, net of estimated forfeitures. The estimation of stock awards that will ultimately vest requires significant judgment. Actual results, and future changes in estimates, may differ from the Company’s current estimates. |
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The Company recognized total compensation expense of $1.9 million, with no tax effect, in fiscal 2013. For fiscal 2012 and fiscal 2011, the Company recognized total compensation expense of $0.8 million, or $0.5 million after tax, and $1.3 million, or $1.2 million after tax, for fiscal 2013, fiscal 2012 and fiscal 2011, respectively. |
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The total compensation cost related to time-vested stock options and time-based restricted stock awards not yet recognized as of February 1, 2014 is approximately $5.0 million which will be expensed over a weighted average remaining life of approximately 27 months. At February 1, 2014, the Company had $7.2 million of unrecognized compensation expense related to its performance-based stock options and restricted stock. As discussed below in Note F, “Long-Term Performance Share Bonus Plan”, the Company would begin recognizing compensation when achievement of the performance targets becomes probable. |
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The total fair value of options vested was $0.1 million, $0.1 million and $1.1 million for fiscal 2013, 2012 and 2011, respectively. |
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The cumulative compensation cost of stock based awards is treated as a temporary difference for stock-based awards that are deductible for tax purposes. If a deduction reported on a tax return exceeds the cumulative compensation cost for those awards, any resulting realized tax benefit that exceeds the previously recognized deferred tax asset for those awards (the excess tax benefit) is recognized as additional paid-in capital. If the amount deductible is less than the cumulative compensation cost recognized for financial reporting purposes, the write-off of a deferred tax asset related to that deficiency, net of the related valuation allowance, if any, is first offset to the extent of any remaining additional paid-in capital from excess tax benefits from previous awards with the remainder recognized through income tax expense. |
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Valuation Assumptions for Stock Options |
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The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in fiscal 2013, 2012 and 2011: |
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| | FISCAL YEARS ENDED | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | February 1, 2014 | | February 2, 2013 | | January 28, 2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected volatility | | 52.00% | | 55.00% | | 55.00% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Risk-free interest rate | | 0.34%-0.79% | | 0.31%-0.67% | | 0.32%-1.89% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Expected life | | 3.0-4.1 | | 3.0-4.5 | | 2.5-4.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dividend rate | | — | | — | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Weighted average fair value of options granted | | $2.07 | | $1.46 | | $1.53 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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Expected volatilities are based on historical volatilities of the Company’s common stock; the expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and historical exercise patterns; and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. |
Impairment of Long-Lived Assets | ' |
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Impairment of Long-Lived Assets |
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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. |
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In the fourth quarter of fiscal 2013, the Company recorded an impairment charge of $1.5 million for the write-down of property and equipment. The impairment charge related to stores where the carrying value exceeded fair value. The fair value of these assets, based on Level 3 inputs, was determined using the estimated discounted cash flows. The impairment charge is included in Depreciation and Amortization on the Consolidated Statement of Operations for fiscal 2013. There were no material impairment charges in fiscal 2012 or fiscal 2011. |
Recent Accounting Pronouncements | ' |
Recent Accounting Pronouncements |
The Company has reviewed accounting pronouncements and interpretations thereof that have effective dates during the periods reported and in future periods. The Company believes that the following impending standards may have an impact on its future filings. The applicability of any standard will be evaluated by the Company and is still subject to review by the Company. |
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). U.S. GAAP does not include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments in this ASU state that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company currently presents these tax items in accordance with this guidance, therefore, no changes are necessary for adoption. |