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 28, 2017 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 20, 2017. 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 is a 53-week period ending on February 3, 2018 and fiscal 2016 was a 52-week period ending on January 28, 2017. 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 has 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 ® ® Intangibles At October 28, 2017, the “Casual Male” trademark had a carrying value of $0.4 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, 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 October 28, 2017, 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 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 nine months ended October 28, 2017 and October 29, 2016, respectively, were as follows: October 28, 2017 October 29, 2016 For the three months ended: (in thousands) 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 ) Other comprehensive income (loss) before reclassifications, net of taxes 43 (52 ) (9 ) 61 (176 ) (115 ) Amounts reclassified from accumulated other comprehensive income, net of taxes (1) 167 — 167 176 — 176 Other comprehensive income (loss) for the period 210 (52 ) 158 237 (176 ) 61 Balance at end of quarter $ (4,606 ) $ (617 ) $ (5,223 ) $ (5,402 ) $ (858 ) $ (6,260 ) October 28, 2017 October 29, 2016 For the nine months ended: (in thousands) 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 ) Other comprehensive income (loss) before reclassifications, net of taxes 128 164 292 183 (319 ) (136 ) Amounts reclassified from accumulated other comprehensive income, net of taxes (1) 503 — 503 528 — 528 Other comprehensive income (loss) for the period 631 164 795 711 (319 ) 392 Balance at end of quarter $ (4,606 ) $ (617 ) $ (5,223 ) $ (5,402 ) $ (858 ) $ (6,260 ) (1) Includes the amortization of the unrecognized 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 $167,000 and $503,000 for the three and nine months ended October 28, 2017, respectively, and $176,000 and $528,000 for the three and nine months ended October 29, 2016, respectively. There was no tax benefit for any period. Revenue Recognition 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. Stock-based Compensation 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. Impairment of Long-Lived Assets 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. In the second quarter of fiscal 2017, the Company recorded an impairment charge of $1.7 million for 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 was included in Depreciation and Amortization on the Consolidated Statement of Operations 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. Recently Adopted Accounting Pronouncements In July 2015, the FASB issued ASU 2015-11, " Inventory (Topic 330): Simplifying the Measurement of Inventory, 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 Since there were 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. 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 In February 2016, the FASB issued ASU 2016-02, “ Leases (Topic 842) In the financial statements 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 Consolidated Financial Statements, the 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 adoption of this pronouncement to have a material impact on its 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 Company does not expect the adoption of this pronouncement to have a material impact on its Consolidated Financial Statements . In October 2016, the FASB issued ASU 2016-16, “ Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory 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 Company does not expect the adoption of this pronouncement to have a material impact on its Consolidated Financial Statements . In May 2017, the FASB issued ASU 2017-09 Compensation—Stock Compensation (Topic 718)” 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 adoption of this pronouncement to have a material impact on its Consolidated Financial Statements . No other new accounting pronouncements, issued or effective during the first nine months of fiscal 2017, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements. |