Basis of Presentation | 1. Basis of Presentation 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 31, 2015 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 25, 2015. 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 2015 and fiscal 2014 are 52-week periods ending January 30, 2016 and January 31, 2015, respectively. Segment Information 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 have therefore aggregated them into a single reporting segment, consistent with its omni-channel business approach. The direct operating segment includes the operating results and assets for LivingXL ® ® Change in Accounting Principle The Company historically presented deferred debt issuance costs, or fees directly related to issuing debt, as assets on the consolidated balance sheets. In the first quarter of fiscal 2015, the Company elected early adoption of ASU 2015−03, “ Interest − Imputation of Interest (Subtopic 835−30), Simplifying the Presentation of Debt Issuance Costs” The reclassification did not impact net income (loss) previously reported or any prior amounts reported on the Consolidated Statements of Operations. The following table presents the effect of the retrospective application of this change in accounting principle on the Company’s Consolidated Balance Sheets as of January 31, 2015. As Reported Effect of Change in After Change in Consolidated Balance Sheets (in thousands) January 31, 2015 Accounting Principle Accounting Principle ASSETS: Current assets: Prepaid expenses and other current assets $ 9,190 $ (277 ) $ 8,913 Total current assets 132,615 (277 ) 132,338 Noncurrent assets: Other assets 4,849 (942 ) 3,907 Total assets 261,100 (1,219 ) 259,881 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 7,489 $ (154 ) $ 7,335 Borrowings under credit facility 19,402 (585 ) 18,817 Total current liabilities 90,307 (739 ) 89,568 Long-term liabilities: Long-term debt, net of current portion 26,651 (480 ) 26,171 Total long-term liabilities 78,403 (480 ) 77,923 Total liabilities and stockholders' equity 261,100 (1,219 ) 259,881 Reclassification As a result of the Company adopting ASU 2015-03, for the first six months of fiscal 2014, the Company has reclassified $78,000 from “Change in Other Assets” to “Amortization of Deferred Debt Issuance Costs” in the Consolidated Statement of Cash Flows. Intangibles At August 1, 2015, the “Casual Male” trademark had a carrying value of $1.2 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 first six months ended August 1, 2015, 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. Fair Value of Financial Instruments ASC Topic 825, Financial Instruments, requires disclosure of the fair value of certain financial instruments. ASC Topic 820, “ Fair Value Measurements and Disclosures 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 August 1, 2015, the fair value approximates 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 are classified within Level 3 of the valuation hierarchy. See Intangibles 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. 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 (Loss). Other comprehensive income and reclassifications from AOCI for the three and six months ended August 1, 2015 and August 2, 2014 are as follows: August 1, 2015 August 2, 2014 For the three months ended: (in thousands) Pension Plans Foreign Currency Total Pension Plans Foreign Currency Total Balance at beginning of the quarter $ (7,559 ) $ (420 ) $ (7,979 ) $ (4,408 ) $ 79 $ (4,329 ) Other comprehensive income before reclassifications, net of taxes 93 39 132 82 15 97 Amounts reclassified from accumulated other comprehensive income, net of taxes (1) 184 — 184 56 — 56 Other comprehensive income for the period 277 39 316 138 15 153 Balance at end of quarter $ (7,282 ) $ (381 ) $ (7,663 ) $ (4,270 ) $ 94 $ (4,176 ) August 1, 2015 August 2, 2014 For the six months ended: (in thousands) Pension Plans Foreign Currency Total Pension Plans Foreign Currency Total Balance at beginning of fiscal year $ (7,795 ) $ (443 ) $ (8,238 ) $ (4,547 ) $ (13 ) $ (4,560 ) Other comprehensive income before reclassifications, net of taxes 190 62 252 164 107 271 Amounts reclassified from accumulated other comprehensive income, net of taxes (1) 323 — 323 113 — 113 Other comprehensive income for the period 513 62 575 277 107 384 Balance at end of quarter $ (7,282 ) $ (381 ) $ (7,663 ) $ (4,270 ) $ 94 $ (4,176 ) (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 $184,000 and $56,000 for the three months ended August 1, 2015 and August 2, 2014, respectively, and $323,000 and $113,000 for the six months ended August 1, 2015 and August 2, 2014, respectively. There was no tax benefit for any period. 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 e-commerce operations is recognized at the time a customer order is delivered, net of an allowance for sales returns. Revenue is recognized by the operating segment that fulfills a customer’s order. Stock-based Compensation All share-based payments, including grants of employee stock options and restricted stock, are recognized as an expense in the Consolidated Statement 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. Recently Issued Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, “ Revenue from Contracts with Customers Revenue Recognition Other Assets and Deferred Costs - Capitalized Advertising Costs Revenue from Contracts with Customers (Topic 606), In June 2014, the FASB issued ASU 2014-12, “ Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period”. In January 2015, the FASB issued ASU 2015-01, “ Income Statement - Extraordinary and Unusual Items (Subtopic 225-20)”. In May 2015, the FASB issued ASU 2015-05, “ Intangibles - Goodwill and Other - Internal - Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”. In July 2015, the FASB issued ASU 2015-11, " Inventory (Topic 330): Simplifying the Measurement of Inventory, No other new accounting pronouncements, issued or effective during the first six months of fiscal 2015, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements. |