Destination XL (DXLG) - 2021 Q4 - Annual Report

PART I Item 1. Business Destination XL Group, Inc. is the largest specialty retailer of big & tall men's clothing and shoes, operating an omni-channel model with retail stores, outlet stores, and a significant digital business. - Destination XL Group, Inc. is the largest specialty retailer of big & tall men's clothing and shoes, operating 226 DXL retail stores, 17 DXL outlet stores, 46 Casual Male XL retail stores, 22 Casual Male XL outlet stores, and a digital business (dxl.com) as of January 30, 2021, also having launched a wholesale business unit in fiscal 2018[9][13] - The big & tall men's clothing market is defined as starting at a waist size of 38" and greater, and tops sized 1XL and greater, with opportunities for market share growth from men with 38" to 43" waist sizes and those with 54" or greater waist sizes[10] - The company's fiscal 2021 business strategy focuses on building digital growth, executing targeted marketing, shifting merchandising towards casual wear, rightsizing the store portfolio through lease negotiations, and managing liquidity and debt[14][15] - The company offers over 5,000 styles, with tops up to 8XL and 8XLT, bottoms with waist sizes 38" to 70", and shoes in sizes 10W to 18W, emphasizing unique specifications for proper fit[16] - The direct business grew 14.7% in fiscal 2020, representing approximately 40.4% of total retail sales, up from 23.1% in fiscal 2019, primarily driven by the DXL.com website and app due to increased online shopping during the pandemic[24] - Approximately 50% of all product needs were sourced directly in fiscal 2020, with a significant percentage of private-label merchandise manufactured primarily in Southeast Asian countries, reducing dependency on China[35] Store Locations (as of January 30, 2021) | United States | DXL retail and outlet stores | Casual Male XL retail and outlet stores | | :------------ | :--------------------------- | :-------------------------------------- | | Alabama | 2 | 1 | | Arizona | 6 | — | | Arkansas | — | 1 | | California | 26 | 7 | | Colorado | 3 | 1 | | Connecticut | 3 | 1 | | Delaware | 2 | — | | Florida | 12 | 8 | | Georgia | 4 | 2 | | Idaho | 1 | — | | Illinois | 11 | 4 | | Indiana | 6 | 3 | | Iowa | 3 | 1 | | Kansas | 2 | — | | Kentucky | 3 | — | | Louisiana | 3 | 1 | | Maine | 2 | — | | Maryland | 6 | 3 | | Massachusetts | 5 | 2 | | Michigan | 13 | 1 | | Minnesota | 2 | 2 | | Mississippi | — | 2 | | Missouri | 5 | 2 | | Montana | 1 | — | | Nebraska | 2 | — | | Nevada | 3 | — | | New Hampshire | 3 | — | | New Jersey | 8 | 5 | | New Mexico | 1 | — | | New York | 17 | 1 | | North Carolina | 4 | 4 | | North Dakota | — | 1 | | Ohio | 10 | 1 | | Oklahoma | 2 | — | | Oregon | 2 | 1 | | Pennsylvania | 11 | 6 | | Rhode Island | 1 | — | | South Carolina | 4 | — | | South Dakota | 1 | — | | Tennessee | 7 | 1 | | Texas | 25 | 3 | | Utah | 2 | — | | Vermont | 1 | — | | Virginia | 6 | 2 | | Washington | 5 | — | | West Virginia | — | 1 | | Wisconsin | 5 | — | | International | | | | Toronto, Canada | 2 | — | Item 1A. Risk Factors The company faces significant risks, primarily from the ongoing COVID-19 pandemic impacting financial results, liquidity, supply chain, and workforce. - The COVID-19 pandemic has adversely affected the company's business, financial results, liquidity, supply chain, and workforce, leading to furloughs, salary reductions, cost restructuring, and lease renegotiations[50][51] - Key operational risks include the ability to execute growth strategies, develop e-commerce and omni-channel initiatives, manage the wholesale segment, and maintain the centralized distribution center, alongside global supply chain disruptions and intense market competition[56][59][60][61][62][65][67] - Financial risks encompass dependence on adequate capital, potential asset impairment charges (especially due to COVID-19), and increased interest costs from the LIBOR transition, with the business being seasonal and generating most operating income in the fourth quarter[55][68][77][78] - Other risks include reliance on third-party manufacturers, vulnerability to security breaches, challenges in predicting fashion trends, potential loss of key trademarks, labor shortages or increased costs, raw material price fluctuations, and complex regulatory compliance[69][73][74][75][80][81][83] - Stock-related risks include potential volatility and sporadic trading of common stock on the OTCQX market (following Nasdaq delisting) and transfer restrictions that could inhibit acquisition bids[84][85][86][88] Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the SEC. - No unresolved staff comments[90] Item 2. Properties The company's corporate offices and retail distribution center are located in a 755,992 sq ft building in Canton, Massachusetts, and it operates 311 leased stores across the United States and Canada. - The corporate offices and retail distribution center are located at 555 Turnpike Street, Canton, MA, in a 755,992 gross square foot building on approximately 27.3 acres, leased under a twenty-year agreement from January 30, 2006[91] - As of January 30, 2021, the company operated a total of 311 leased stores, comprising 226 DXL retail stores, 17 DXL outlet stores, 46 Casual Male XL retail stores, and 22 Casual Male XL outlet stores, located in the United States and Toronto, Canada[91] - Store sites are selected based on demographic profiles, types of surrounding retailers, store layout, and financial models projecting profitability, including sales per square foot, estimated occupancy costs, and return on investment requirements[91] Item 3. Legal Proceedings The company is subject to various legal proceedings and claims in the ordinary course of business, but management believes their resolution will not materially impact future operations or financial position. - The company is subject to various legal proceedings and claims that arise in the ordinary course of business[95] - Management believes that the resolution of these matters will not have a material adverse impact on the company's future results of operations or financial position[95] Item 4. Mine Safety Disclosures This item is not applicable to the company. - Not applicable[97] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock, previously traded on Nasdaq, was voluntarily delisted on December 22, 2020, and now trades on the OTCQX Marketplace under the symbol "DXLG." - The company's common stock was voluntarily delisted from Nasdaq on December 22, 2020, and began trading on the OTCQX Marketplace under the symbol "DXLG"[99] - As of March 15, 2021, there were approximately 83 holders of record of the company's common stock[100] - There were no stock repurchases during fiscal 2020[101] Item 6. Selected Financial Data This item is not applicable to the company. - Not Applicable[101] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2020 was significantly impacted by the COVID-19 pandemic, leading to a 32.7% decrease in total sales and a net loss of $(64.5) million. - The COVID-19 pandemic negatively affected the global economy, supply chains, and retail markets, leading to a significant adverse effect on the company's business, financial condition, and results of operations in fiscal 2020[105] - In fiscal 2020, total sales decreased 32.7% to $318.9 million from $474.0 million in fiscal 2019, with comparable sales down 32.6%, store comparable sales down 47.1%, and direct business sales up 14.9% (DXL.com sales up 38.6%)[118] Key Financial Metrics (in millions, except per share data) | Metric | Fiscal 2020 | Fiscal 2019 | Fiscal 2018 | | :----------------------------------- | :---------- | :---------- | :---------- | | Net loss | $(64.5) | $(7.8) | $(13.5) | | Adjusted net loss (1) | $(36.7) | $(3.2) | $(3.5) | | EBITDA | $(39.0) | $20.2 | $18.5 | | Adjusted EBITDA (1) | $(24.2) | $23.5 | $27.4 | | Impairment charges | $14.8 | $0.9 | $4.6 | | Diluted loss per share: Net loss | $(1.26) | $(0.16) | $(0.28) | | Adjusted net loss | $(0.72) | $(0.06) | $(0.07) | | Cash flow from operating activities | $(1.2) | $15.8 | $15.7 | | Free cash flow | $(5.5) | $2.4 | $2.8 | - The company took decisive steps to preserve liquidity in fiscal 2020, including drawing $30.0 million from its credit facility, furloughing staff, cancelling inventory orders, reducing capital spending, and renegotiating lease agreements, resulting in $10.0 million of rent abatements and deferments and $13.5 million in savings over the life of restructured leases[111][113][119][121] - Subsequent to fiscal 2020, the company raised $5 million (gross) from a common stock offering and entered into a new $17.5 million FILO loan, replacing the existing $15.0 million FILO loan, providing an additional $5.0 million to $10.0 million in borrowing capacity[114] Fiscal 2021 Financial Outlook | Metric | Range | | :------------------- | :------------------- | | Expected Sales | $385.0 - $402.0 million | | Adjusted EBITDA | $11.0 - $18.0 million | | Free Cash Flow | Positive | | Comparable Sales (vs. FY2019) | -10.8% to -14.8% | | Comparable Store Sales (vs. FY2019) | -23.8% to -27.8% | | Direct Business Sales (vs. FY2019) | +26.9% to +30.7% | Forward Looking Statements This section discusses future operational and financial outlooks, acknowledging inherent risks and potential material differences from actual results. - This Annual Report contains "forward-looking statements" regarding future operations, financial outlook for fiscal 2021 (sales, comparable sales, adjusted EBITDA, free cash flows), and the company's ability to mitigate the impact of the COVID-19 pandemic[103] - These statements are based on management's reasonable estimates but actual results could differ materially due to various factors, including risks outlined in Item 1A, Risk Factors[103] Segment Reporting The company aggregates its stores and direct businesses into a single retail segment, with the wholesale segment also combined due to immateriality. - The company has three principal operating segments: stores, direct business, and wholesale business[104] - The stores and direct business segments are aggregated into one reportable segment, 'retail segment,' due to similar economic characteristics, production processes, and operations, consistent with an omni-channel approach[104] - The wholesale segment's operating results are aggregated with the retail segment for all periods due to its immateriality in revenues, profits, and assets[104] Impact of COVID-19 Pandemic on Our Business The pandemic severely impacted the company's business, shifting consumer demand online and necessitating store closures and operational adjustments. - The COVID-19 pandemic negatively affected the global economy, supply chains, and retail markets, significantly disrupting consumer demand for men's clothing and accessories[105] - All retail stores were temporarily closed on March 17, 2020, and gradually reopened by the end of June 2020 with reduced hours, while the direct business played a vital role due to customers shifting to online shopping[105] - The company experienced a shift from event-driven shopping to need-based shopping, with improvements in core and basic categories, a trend expected to continue into early fiscal 2021[105] Comparable Sales and E-Commerce (Direct) Sales Definition This section defines how the company calculates store sales, e-commerce sales, and comparable sales for performance measurement. - Store sales are defined as sales that originate and are fulfilled directly at the store level[106] - E-commerce sales, or direct sales, are defined as sales that originate online, whether through the website, at the store level, or through a third-party marketplace[108] - Comparable sales include stores open for 13 months or more, including remodeled or relocated stores, but exclude clearance centers or stores expanded by more than 25% for the first 13 months[108] Non-GAAP Measures The company uses non-GAAP financial measures like adjusted net loss and EBITDA to provide additional insights, which are not substitutes for GAAP. - The company monitors non-GAAP financial measures such as adjusted net loss, adjusted net loss per diluted share, free cash flow, EBITDA, and adjusted EBITDA to track business progress and assist investors[109] - These non-GAAP measures are not comparable to similar measures used by other companies and should not be considered superior to or a substitute for GAAP measures[109] Executive Overview Fiscal 2020 saw a net loss and significant sales decline due to COVID-19, prompting aggressive liquidity management and cost reductions, while digital sales grew. Key Financial Metrics (in millions, except per share data) | Metric | Fiscal 2020 | Fiscal 2019 | Fiscal 2018 | | :----------------------------------- | :---------- | :---------- | :---------- | | Net loss | $(64.5) | $(7.8) | $(13.5) | | Adjusted net loss (1) | $(36.7) | $(3.2) | $(3.5) | | EBITDA | $(39.0) | $20.2 | $18.5 | | Adjusted EBITDA (1) | $(24.2) | $23.5 | $27.4 | | Impairment charges | $14.8 | $0.9 | $4.6 | | Exit costs associated with London operations | — | $1.7 | — | | CEO transition costs | — | $0.7 | $2.4 | | Corporate restructuring | — | — | $1.9 | | Diluted loss per share: Net loss | $(1.26) | $(0.16) | $(0.28) | | Adjusted net loss | $(0.72) | $(0.06) | $(0.07) | | Cash flow from operating activities | $(1.2) | $15.8 | $15.7 | | Free cash flow | $(5.5) | $2.4 | $2.8 | - In fiscal 2020, the company focused on managing liquidity and took immediate steps including drawing $30.0 million from its credit facility, furloughing staff, cancelling inventory orders, and negotiating rent deferments and abatements[111] - Cost-reduction measures included reducing the field organization by approximately 54% and corporate workforce by 29%, with expected annualized savings of $9.7 million from actions taken in November 2020[113] - The DXL.com site experienced significant growth, with sales increasing 38.6% over the prior year, serving as a bright spot amidst a 47.1% decline in comparable store sales due to the pandemic[113] Subsequent Events Post-fiscal year-end, the company raised $5.0 million through an equity offering and refinanced its FILO loan, increasing borrowing capacity. - On February 5, 2021, the company sold 11.1 million shares of common stock in a registered direct offering, raising $5.0 million (gross) for working capital and general corporate purposes[114] - On March 16, 2021, the company refinanced its existing $15.0 million FILO loan with a new $17.5 million senior secured FILO loan, which is expected to provide an additional $5.0 million to $10.0 million in borrowing capacity, albeit with higher interest rates (250 to 300 basis points)[114] Financial Outlook For fiscal 2021, the company projects sales between $385.0-$402.0 million and positive adjusted EBITDA, assuming vaccine rollout and market recovery. Fiscal 2021 Financial Projections | Metric | Range | | :------------------- | :------------------- | | Expected Sales | $385.0 - $402.0 million | | Adjusted EBITDA | $11.0 - $18.0 million | | Free Cash Flow | Positive | | Comparable Sales (vs. FY2019) | -10.8% to -14.8% | | Comparable Store Sales (vs. FY2019) | -23.8% to -27.8% | | Direct Business Sales (vs. FY2019) | +26.9% to +30.7% | - These projections assume widespread availability and administration of COVID-19 vaccines by the end of Spring 2021 and a gradual improvement in apparel demand as customers return to pre-COVID-19 activities[115] Sales Total sales decreased by 32.7% in fiscal 2020 due to the pandemic, with store sales significantly down, partially offset by strong direct business growth. Sales Performance (in millions) | Metric | Fiscal 2020 | Fiscal 2019 | | :------------------- | :---------- | :---------- | | Total Sales | $318.9 | $474.0 | | Comparable Sales | -32.6% | N/A | | Store Comparable Sales | -47.1% | N/A | | Direct Business Sales | +14.9% | N/A | | DXL.com Sales | +38.6% | N/A | | Universe Sales | -50.4% | N/A | | Wholesale Revenues | $16.6 | $12.5 | - The significant sales decrease in fiscal 2020 was primarily due to temporary store closures and reduced in-person shopping demand caused by the COVID-19 pandemic[118] - The increase in wholesale revenues was primarily due to the sale of masks during the second quarter of fiscal 2020[118] Gross Margin The gross margin rate decreased by 10.2 percentage points in fiscal 2020, primarily due to increased promotions and deleveraging of occupancy costs. - Gross margin rate for fiscal 2020 decreased by 10.2 percentage points to 32.9% from 43.1% in fiscal 2019[119] - The decrease was attributed to a 5.6 percentage point decrease in merchandise margin (due to increased promotions) and a 4.6 percentage point decrease from the deleveraging of occupancy costs against lower sales[119] - Occupancy costs decreased $8.3 million (11.8%) due to lease restructuring efforts and store closures, including $10.0 million in favorable rent abatements and deferments negotiated in the first half of fiscal 2020[119][121] Selling, General and Administrative Expenses SG&A expenses decreased by $51.6 million in fiscal 2020 due to cost reductions, but increased as a percentage of lower sales. - SG&A expenses decreased $51.6 million, or 28.6%, to $129.1 million in fiscal 2020 compared to $180.7 million in fiscal 2019, but increased as a percentage of sales to 40.5% from 38.1%[122] - The decrease was driven by reductions in variable-based costs (store payroll, supplies, travel), advertising, corporate payroll, professional services, and director compensation, partially offset by increases in performance-based incentives and insurance costs[123] - Cost savings initiatives, including workforce reductions (54% field, 29% corporate) and termination of service agreements, are expected to result in annualized savings of $9.7 million, mostly realized in fiscal 2021[123] Impairment of Assets The company recorded a significant asset impairment charge of $14.8 million in fiscal 2020, primarily due to the impact of the COVID-19 pandemic on store operations. - The company recorded a significant asset impairment charge of $14.8 million in fiscal 2020, primarily due to the impact of the COVID-19 pandemic on store operations[124] - This charge included $13.3 million for the write-down of operating lease right-of-use assets and $4.1 million for the write-down of store assets, partially offset by a $2.6 million non-cash gain from revaluation of lease liabilities due to store closures[124] - In comparison, the asset impairment charge for fiscal 2019 was $0.9 million[124] Depreciation and Amortization Depreciation and amortization expense decreased to $21.5 million in fiscal 2020, reflecting the completion of new store growth in prior years. - Depreciation and amortization expense decreased to $21.5 million in fiscal 2020 from $24.6 million in fiscal 2019[126] - This decrease is attributed to the majority of new store growth being complete in prior years[126] Interest Expense, Net Net interest expense increased to $3.9 million in fiscal 2020 due to higher average borrowings and increased effective borrowing rates. - Net interest expense increased to $3.9 million in fiscal 2020 from $3.3 million in fiscal 2019[127] - The increase was due to higher average borrowings (including a $30.0 million draw on the revolving credit facility in March 2020) and an increase in effective borrowing rates (approximately 150 basis points higher due to a credit facility amendment)[127] Income Taxes The company maintains a full valuation allowance against deferred tax assets due to current and forecasted losses, with federal NOLs expiring through 2037. - Realization of deferred tax assets, including $158.2 million in federal net operating loss carryforwards (expiring fiscal 2022-2037) and $43.1 million non-expiring, depends on generating sufficient taxable income[128] - A full valuation allowance against net deferred tax assets remains appropriate due to current period losses in fiscal 2020 and the forecast for fiscal 2021[128] - The current tax provision for fiscal 2020 and 2019 was primarily due to current state margin tax[128] Net Loss The company reported a net loss of $(64.5) million in fiscal 2020, significantly higher than the prior year, primarily due to pandemic impacts and impairment charges. - Net loss for fiscal 2020 was $(64.5) million, or $(1.26) per diluted share, compared to $(7.8) million, or $(0.16) per diluted share, in fiscal 2019[129] - Fiscal 2020 results included $14.8 million ($0.29 per diluted share) in asset impairment charges[130] - On a non-GAAP basis, adjusted net loss per share for fiscal 2020 was $(0.72), compared to $(0.06) for fiscal 2019, excluding asset impairments, London exit costs, and CEO transition costs, and assuming a normalized tax rate of 26%[130] Seasonality The business is seasonal, with the fourth quarter traditionally generating the majority of operating income, though fiscal 2020 was heavily impacted by pandemic-related store closures. - The company's business is seasonal, with the majority of operating income traditionally generated in the fourth quarter due to the holiday selling season[132] - Fiscal 2020 sales results reflect the significant impact of the COVID-19 pandemic, especially in the first and second quarters when stores were temporarily closed[132] Quarterly Sales (in millions, except percentages) | Quarter | Fiscal 2020 | % of Total | Fiscal 2019 | % of Total | Fiscal 2018 | % of Total | | :-------------------------------------- | :---------- | :--------- | :---------- | :--------- | :---------- | :--------- | | First quarter | $57.2 | 17.9% | $113.0 | 23.8% | $113.3 | 23.9% | | Second quarter | $76.4 | 24.0% | $123.2 | 26.0% | $122.2 | 25.8% | | Third quarter | $85.2 | 26.7% | $106.6 | 22.5% | $107.1 | 22.6% | | Fourth quarter | $100.1 | 31.4% | $131.2 | 27.7% | $131.2 | 27.7% | | Total | $318.9 | 100.0% | $474.0 | 100.0% | $473.8 | 100.0% | Effects of Inflation The company does not believe inflation has materially affected its operating results over the past three fiscal years. - The company does not believe that inflation has had a material effect on its results of operations in the last three fiscal years[134] Liquidity and Capital Resources The company's liquidity relies on cash from operations and its credit facility, with recent equity and loan refinancing bolstering its position for the next 12 months. - Primary sources of liquidity are cash generated from operations and availability under the credit facility with Bank of America, N.A[135] - The company believes its cash on hand, proceeds from the recent equity offering, availability under the amended Credit Facility, the new FILO loan, and cash from operations will be sufficient to cover working capital and limited capital expenditures for the next 12 months[135] Liquidity Position (in millions) | Metric | Fiscal 2020 | Fiscal 2019 | | :----------------------------------- | :---------- | :---------- | | Cash flow from operating activities | $(1.2) | $15.8 | | Capital expenditures | $(4.2) | $(13.4) | | Free Cash Flow | $(5.5) | $2.4 | | Cash on hand, at year end | $19.0 | $4.3 | | Total debt, net of unamortized debt issuance costs | $74.4 | $54.1 | | Unused excess availability under Credit Facility | $11.5 | $48.5 | Total Debt Outstanding (January 30, 2021, in thousands) | Debt Type | Gross Debt Outstanding | Less Debt Issuance Costs | Net Debt Outstanding | | :----------------- | :--------------------- | :----------------------- | :------------------- | | Credit facility | $59,733 | $(212) | $59,521 | | FILO loan | $15,000 | $(131) | $14,869 | | Total debt | $74,733 | $(343) | $74,390 | - Total inventories decreased by $17.4 million, or 17%, to $85.0 million at January 30, 2021, as a result of conservative inventory management and reduced receipts to align with lower sales volumes[141] Off-Balance Sheet Arrangements The company has no off-balance sheet arrangements as defined by Regulation S-K. - The company has no off-balance sheet arrangements as defined by 303(a)(4) of Regulation S-K[142] Contractual Obligations As of January 30, 2021, total contractual obligations were $255.6 million, primarily comprising operating leases and merchandise purchase obligations. Contractual Obligations (January 30, 2021, in millions) | Obligation Type | Total | Less than 1 year | 1 to 3 years | 3 to 5 years | More than 5 years | | :------------------------------- | :------ | :--------------- | :----------- | :----------- | :---------------- | | Operating leases | $207.6 | $53.6 | $87.7 | $51.2 | $15.1 | | Long-term debt obligations (FILO) | $15.0 | — | $15.0 | — | — | | Interest on long-term debt | $3.0 | $0.9 | $2.1 | — | — | | Merchandise purchase obligations | $30.0 | $10.0 | $20.0 | — | — | | Total Commitments | $255.6 | $64.5 | $124.8 | $51.2 | $15.1 | - The table excludes $59.7 million outstanding under the credit facility and unfunded pension obligations ($4.5 million) and Supplemental Employee Retirement Plan obligations ($0.6 million) due to uncertainty over future contributions[144] - As of January 30, 2021, the company had approximately $62.4 million in open purchase orders, with an estimated 95% considered non-cancelable[144] Capital Expenditures Capital expenditures significantly decreased to $4.2 million in fiscal 2020, reflecting a focus on liquidity preservation and no new store openings planned for fiscal 2021. Store Count and Square Footage (in thousands) | Store Concept | At January 30, 2021 (Number of Stores) | At January 30, 2021 (Square Footage) | At February 1, 2020 (Number of Stores) | At February 1, 2020 (Square Footage) | | :------------------ | :------------------------------------- | :----------------------------------- | :------------------------------------- | :----------------------------------- | | DXL Retail | 226 | 1,718 | 228 | 1,729 | | DXL Outlet | 17 | 82 | 17 | 82 | | Casual Male XL Retail | 46 | 152 | 50 | 164 | | Casual Male XL Outlet | 22 | 66 | 28 | 85 | | Total Stores | 311 | 2,018 | 323 | 2,060 | - Capital expenditures for fiscal 2020 were $4.2 million, a significant decrease from $13.4 million in fiscal 2019, as all non-essential capital projects were eliminated to preserve liquidity during the pandemic[145] - The company closed 12 stores during fiscal 2020 and does not plan to open any new stores or rebrand existing Casual Male XL stores in fiscal 2021, focusing instead on rightsizing its store portfolio through lease renegotiations or expirations for 131 stores with options in the next two years[145][147] Non-GAAP Reconciliations This section provides reconciliations for non-GAAP financial measures such as adjusted net loss, free cash flow, EBITDA, and adjusted EBITDA. Adjusted Net Loss and Adjusted Net Loss Per Diluted Share (in thousands, except per share data) | Metric | Fiscal 2020 | Per diluted share | Fiscal 2019 | Per diluted share | Fiscal 2018 | Per diluted share | | :----------------------------------------- | :---------- | :---------------- | :---------- | :---------------- | :---------- | :---------------- | | Net loss, GAAP basis | $(64,538) | $(1.26) | $(7,796) | $(0.16) | $(13,531) | $(0.28) | | Add back: Impairment of assets | $14,841 | $0.29 | $889 | $0.02 | $4,579 | $0.09 | | Add back: Exit costs (London) | — | — | $1,737 | $0.03 | — | — | | Add back: CEO transition costs | — | — | $743 | $0.01 | $2,404 | $0.05 | | Add back: Corporate restructuring | — | — | — | — | $1,904 | $0.04 | | Adjusted loss before income taxes | $(49,591) | $(0.97) | $(4,322) | $(0.09) | $(4,694) | $(0.10) | | Income tax benefit (normalized 26%) | $(12,894) | $(0.25) | $(1,124) | $(0.02) | $(1,220) | $(0.02) | | Adjusted net loss, non-GAAP basis | $(36,697) | $(0.72) | $(3,198) | $(0.06) | $(3,474) | $(0.07) | Free Cash Flow (in millions) | Metric | Fiscal 2020 | Fiscal 2019 | Fiscal 2018 | Projected 2021 | | :----------------------------------- | :---------- | :---------- | :---------- | :------------- | | Cash flow from operating activities (GAAP) | $(1.2) | $15.8 | $15.7 | >$4.3 | | Capital expenditures | $(4.2) | $(13.4) | $(13.0) | $4.3 | | Free cash flow (non-GAAP) | $(5.5) | $2.4 | $2.8 | >$0.0 | EBITDA and Adjusted EBITDA (in millions) | Metric | Fiscal 2020 | Fiscal 2019 | Fiscal 2018 | | :----------------------------------------- | :---------- | :---------- | :---------- | | Net loss, GAAP basis | $(64.5) | $(7.8) | $(13.5) | | Add back: Provision (benefit) for income taxes | $0.1 | $0.1 | $(0.1) | | Add back: Interest expense | $3.9 | $3.3 | $3.5 | | Add back: Depreciation and amortization | $21.5 | $24.6 | $28.7 | | EBITDA (non-GAAP) | $(39.0) | $20.2 | $18.5 | | Add back: Exit costs associated with London operations | — | $1.7 | — | | Add back: CEO transition costs | — | $0.7 | $2.4 | | Add back: Corporate restructuring | — | — | $1.9 | | Add back: Impairment of assets | $14.8 | $0.9 | $4.6 | | Adjusted EBITDA (non-GAAP) | $(24.2) | $23.5 | $27.4 | Critical Accounting Policies; Use of Estimates The company's critical accounting policies involve significant estimates for LTIPs, impairment of long-lived assets, and leases, particularly impacted by COVID-19. - The company's critical accounting policies involve significant estimates and assumptions, particularly for Long-Term Incentive Plans (LTIPs), impairment of long-lived assets, and leases[153] - For LTIPs, performance targets for the 2018-2020 LTIP were not achieved, and an accrual of $0.2 million was made for performance awards under the 2020-2022 LTIP[154] - Impairment of long-lived assets (property, plant, equipment, and operating lease right-of-use assets) is evaluated at the store level using projected undiscounted and discounted cash flow analyses, with fiscal 2020 recording $14.8 million in charges due to COVID-19 uncertainty[158] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks primarily from interest rate movements on borrowings and foreign currency fluctuations. - The company's financial position is subject to market risk from interest rate movements on borrowings under its Credit Facility and FILO loan, which bear variable rates based on the Federal Funds rate or LIBOR[162] - As of January 30, 2021, outstanding borrowings included approximately $59.7 million under the Revolving Facility (mostly LIBOR-based at ~4.00%) and $15.0 million under the FILO loan (LIBOR-based at 6.00%)[162] - A sensitivity analysis indicates that a 50 basis point increase in interest rates would have increased interest expense by approximately $0.4 million on an annualized basis, based on average outstanding borrowings during fiscal 2020[162] - Foreign currency risk is considered immaterial, as sales from the two DXL stores in Toronto, Canada, are not material to consolidated sales[157] Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for Destination XL Group, Inc. and its subsidiaries, along with accompanying notes and the independent auditor's report. - KPMG LLP, the independent registered public accounting firm, audited the consolidated financial statements and provided an unqualified opinion, noting a change in accounting principle for leases due to the adoption of ASU 2016-02 and ASU 2018-11 as of February 3, 2019[167] - The evaluation of the recoverability of long-lived store assets (property and equipment, operating lease right-of-use assets) was identified as a critical audit matter, involving significant auditor judgment in evaluating internally-developed assumptions for forecasted sales and gross margin[169][171][172] Consolidated Balance Sheets (in thousands) | ASSETS | Jan 30, 2021 | Feb 1, 2020 | | :----------------------------------- | :----------- | :---------- | | Cash and cash equivalents | $18,997 | $4,338 | | Inventories | $85,028 | $102,420 | | Total current assets | $114,130 | $123,860 | | Property and equipment, net | $56,552 | $78,279 | | Operating lease right-of-use assets | $134,321 | $186,413 | | Total assets | $306,755 | $390,917 | | LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | | Borrowings under credit facility | $59,521 | $39,301 | | Total current liabilities | $155,035 | $130,363 | | Long-term debt | $14,869 | $14,813 | | Operating leases, noncurrent | $135,819 | $182,051 | | Total long-term liabilities | $155,797 | $202,131 | | Total stockholders' equity (deficit) | $(4,077) | $58,423 | | Total liabilities and stockholders' equity (deficit) | $306,755 | $390,917 | Consolidated Statements of Operations (in thousands) | Metric | Jan 30, 2021 (Fiscal 2020) | Feb 1, 2020 (Fiscal 2019) | Feb 2, 2019 (Fiscal 2018) | | :----------------------------------- | :------------------------- | :------------------------ | :------------------------ | | Sales | $318,946 | $474,038 | $473,756 | | Gross profit | $104,865 | $204,201 | $211,289 | | Selling, general and administrative | $129,062 | $180,663 | $183,868 | | Impairment of assets | $14,841 | $889 | $4,579 | | Operating loss | $(60,515) | $(4,394) | $(10,119) | | Net loss | $(64,538) | $(7,796) | $(13,531) | | Net loss per share - basic and diluted | $(1.26) | $(0.16) | $(0.28) | Consolidated Statements of Cash Flows (in thousands) | Metric | Jan 30, 2021 (Fiscal 2020) | Feb 1, 2020 (Fiscal 2019) | Feb 2, 2019 (Fiscal 2018) | | :----------------------------------- | :------------------------- | :------------------------ | :------------------------ | | Net cash provided by (used for) operating activities | $(1,200) | $15,803 | $15,741 | | Net cash used for investing activities | $(4,200) | $(13,399) | $(12,961) | | Net cash provided by (used for) financing activities | $20,155 | $(2,934) | $(3,274) | | Net increase (decrease) in cash and cash equivalents | $14,759 | $(530) | $(494) | | Cash and cash equivalents: End of period | $18,997 | $4,338 | $4,868 | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with accountants on accounting and financial disclosure. - There were no changes in or disagreements with accountants on accounting and financial disclosure[276] Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of January 30, 2021. - Management, under the supervision of the CEO and CFO, evaluated and concluded that the company's disclosure controls and procedures were effective as of January 30, 2021[277] - Management assessed the design and effectiveness of the internal control over financial reporting as of January 30, 2021, using the COSO framework (2013), and determined it was effective[278] - There were no changes in internal control over financial reporting during the fourth quarter of fiscal 2020 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[279] Item 9B. Other Information The company reported no other information. - None[279] PART III Item 10. Directors, Executive Officers and Corporate Governance Information required for this item is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders. - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[283] Item 11. Executive Compensation Information required for this item is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders. - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[284] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required for this item is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders. - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[285] Item 13. Certain Relationships and Related Transactions, and Director Independence Information required for this item is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders. - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[286] Item 14. Principal Accounting Fees and Services Information required for this item is incorporated by reference from the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders. - Information for this item is incorporated by reference from the definitive proxy statement for the 2021 Annual Meeting of Stockholders[287] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements, financial statement schedules, and a comprehensive index of exhibits filed as part of the Annual Report on Form 10-K. - The list of consolidated financial statements and notes required by this Item 15(a)(1) is set forth in the "Index to Consolidated Financial Statements" on page 35 of this Annual Report[290] - All financial statement schedules have been omitted because the required information is not applicable or is not present in amounts sufficient to require submission, or because the information is included in the financial statements or notes thereto[291] - A comprehensive list of exhibits required by this Item 15(a)(3) is set forth in the "Index to Exhibits" beginning on page 67 of this Annual Report[291][294] Item 16. Form 10-K Summary The Form 10-K Summary is omitted at the registrant's option. - The Form 10-K Summary is omitted at the registrant's option[292] Signatures The report is duly signed on behalf of Destination XL Group, Inc. by its President and Chief Executive Officer, Chief Financial Officer and Treasurer, Vice President and Managing Director of Finance, Chief Accounting Officer and Corporate Controller, and members of the Board of Directors, as of March 19, 2021. - The report was signed on March 19, 2021, by Harvey S. Kanter (President and Chief Executive Officer), Peter H. Stratton, Jr. (Executive Vice President, Chief Financial Officer and Treasurer), John F. Cooney (Vice President and Managing Director of Finance, Chief Accounting Officer and Corporate Controller), and members of the Board of Directors[301]