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Basis of Presentation (Policies) | 3 Months Ended
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May 04, 2019
Accounting Policies [Abstract] |
Segment Information | Segment Information The Company has historically had two principal operating segments: its stores and direct businesses. The Company considers these two operating segments to be similar in terms of economic characteristics, production processes and operations, and has therefore aggregated them into one reportable segment, retail segment, consistent with its omni-channel business approach. In fiscal 2018, the Company launched a wholesale segment, which the Company considers a third operating segment. However, due to the immateriality of the wholesale segment’s revenues, profits and assets at May 4, 2019, its operating results are aggregated with the retail segment for the first three months of fiscal 2019.
Reclassification | Reclassification The Company has reclassified $190,228 in costs, incurred in the first quarter of fiscal 2018 from “Selling, general and administrative” to “CEO transition costs” and “Corporate restructuring.” These costs were initially reported in “Selling, general and administrative” in the first quarter of fiscal 2018.
Intangibles | Intangibles In the fourth quarter of fiscal 2018, the Company purchased the rights to the domain name “dxl.com.” The domain name has a carrying value of $1.2 million and is considered an indefinite-lived asset. During the first three months ended May 4, 2019, no event or circumstance occurred which would cause a reduction in the fair value of this intangible asset.
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. ASC Topic 820, “Fair Value Measurements and Disclosures,” defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities. The Company utilizes observable market inputs (quoted market prices) when measuring fair value whenever possible. The fair value of long-term debt is classified within Level 2 of the valuation hierarchy. At May 4, 2019, 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 the “dxl.com” domain name, an indefinite-lived asset, is measured on a non-recurring basis in connection with the Company’s annual impairment test. The fair value of the domain name was determined to approximate carrying value, due to its recent acquisition in December, and is classified within Level 3 of the valuation hierarchy. See Intangibles above. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and short-term borrowings approximate fair value because of the short maturity of these instruments.
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 (Loss). Other comprehensive income and reclassifications from AOCI for the three months ended May 4, 2019 and May 5, 2018, respectively, were as follows:
|  | May 4, 2019 |  |  | May 5, 2018 |
For the three months ended: |  | (in thousands) |
|  | Pension Plans |  |  | Foreign Currency |  |  | Total |  |  | Pension Plans |  |  | Foreign Currency |  |  | Total |
Balance at beginning of the quarter |  | $ | (5,521 | ) |  | $ | (662 | ) |  | $ | (6,183 | ) |  | $ | (5,840 | ) |  | $ | (403 | ) |  | $ | (6,243 | )
Other comprehensive income (loss) before reclassifications, net of taxes |  |  | 28 |  |  |  | (24 | ) |  |  | 4 |  |  |  | 57 |  |  |  | (126 | ) |  |  | (69 | )
Amounts reclassified from accumulated other comprehensive income, net of taxes (1) |  |  | 122 |  |  |  | — |  |  |  | 122 |  |  |  | 72 |  |  |  | — |  |  |  | 72 |
Other comprehensive income (loss) for the period |  |  | 150 |  |  |  | (24 | ) |  |  | 126 |  |  |  | 129 |  |  |  | (126 | ) |  |  | 3 |
Balance at end of quarter |  | $ | (5,371 | ) |  | $ | (686 | ) |  | $ | (6,057 | ) |  | $ | (5,711 | ) |  | $ | (529 | ) |  | $ | (6,240 | )
| (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 $165,000 and $97,000 for the three months ended May 4, 2019 and May 5, 2018, respectively.
Stock-based Compensation | 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. During the first quarter of fiscal 2019, the Company granted performance stock units with a market condition. See Note 6 for disclosure concerning the assumptions and valuation method used to determine the fair value of the award and the associated derived service period over which the associated stock compensation will be recognized.
Impairment of Long-Lived Assets | 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. There was no material impairment of long-lived assets in the first quarter of fiscal 2019 or fiscal 2018.
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This ASU is a comprehensive new standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It requires lessees to recognize lease assets and lease liabilities for most leases, including those leases previously classified as operating leases under GAAP. The ASU retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance. ASU 2016-02 requires a modified retrospective transition for financing or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued ASU 2018-11 “Leases (Topic 842): Targeted Improvements” that allows entities to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption without adjustment to the financial statements for periods prior to adoption. The Company adopted ASU 2016-02 on February 3, 2019 on a modified retrospective basis and applied the new standard to all leases through a cumulative-effect adjustment to beginning accumulated deficit. As a result, comparative financial information has not been restated and continues to be reported under the accounting standards in effect for the respective periods. On February 3, 2019, the Company recognized leases, primarily related to its stores and corporate headquarters, on its Consolidated Balance Sheet, as right-of use assets of $214.1 million with corresponding lease liabilities of $254.5 million and eliminated certain existing lease-related asset and liabilities as a net adjustment to the right-of-use assets. In connection with this adoption, the Company recorded a transition adjustment, which was a net credit of $5.3 million to opening accumulated deficit. This adjustment reflected the net of (i) the recognition of the Company’s deferred gain from a sale-leaseback of $10.3 million, (ii) the write-off of initial direct costs of $1.2 million and (iii) the recognition of impairments, upon adoption, on certain right-of-use assets totaling $3.8 million. The new standard had a material impact on the Consolidated Balance Sheet as a result of the recognition of the right-of-use assets, the corresponding lease obligations and the net credit to accumulated deficit of $5.3 million. Because the Company recognized the outstanding deferred gain from a sale-leaseback of $10.3 million, with the adoption of the new standard, results of operations will not have the future benefit of approximately $1.5 million, which was the annual amortization being recognized over the initial 20-year term of the sale-leaseback of the Company’s corporate office. The adoption of the new standard had no material impact on Consolidated Statement of Cash Flows. The following is a discussion of the Company’s lease policy under the new lease accounting standard: The Company determines if an arrangement contains a lease at the inception of a contract. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments, initial direct costs and any lease incentives are included in the value of those right-of use assets. As the interest rate implicit in the Company’s leases is not readily determinable, the Company utilizes its incremental borrowing rate, based on information available at the lease measurement date to determine the present value of future payments. The Company’s store leases typically contain options that permit renewals for additional periods of up to five years each. In general, for store leases with an initial term of 10 years or more, the options to extend are not considered reasonably certain at lease commencement. For stores leases with an initial term of 5 years, the Company evaluates each lease independently and, only when the Company considers it reasonably certain that it will exercise an option to extend, will the associated payment of that option be included in the measurement of the right-of-use asset and lease liability. Renewal options are not included in the lease term for our automobile and equipment leases because they are not considered reasonably certain of being exercised at lease commencement. Renewal options were not considered for our corporate headquarter and distribution center lease, which was entered into in 2006 and was for an initial 20-year term. At the end of the initial term, the Company will have the opportunity to extend this lease for six additional successive periods of five years. The Company elected the lessee non-lease component separation practical expedient, which permits the Company to not separate non-lease components from the lease components to which they relate. The Company also made an accounting policy election that the recognition requirement of ASU 842 will not be applied to certain, if any, non-store leases, with a term of 12 months or less, recognizing those lease payments on a straight-line basis over the lease term. For store leases, the Company accounts for lease components and non-lease components as a single lease component. Certain store leases may require additional payments based on sales volume, as well as reimbursement for real estate taxes, common area maintenance and insurance, and are expensed as incurred as variable lease costs. Other store leases contain one fixed lease payment that includes real estate taxes, common area maintenance and insurance. These fixed payments are considered part of the lease payment and included in the right-of-use assets and lease liabilities. See Note 4 ‘‘Leases’’ for additional information.
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” This guidance modifies the disclosure requirements on fair value measurements in Topic 820 by removing disclosures regarding transfers between Level 1 and Level 2 of the fair value hierarchy, by modifying the measurement uncertainty disclosure, and by requiring additional disclosures for Level 3 fair value measurements, among others. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently evaluating the impact this pronouncement will have on its Consolidated Financial Statements. No other new accounting pronouncements, issued or effective during the first three months of fiscal 2019, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

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