UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act.
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 16, 2023, the registrant had
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
DESTINATION XL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
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July 29, 2023 |
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January 28, 2023 |
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(Fiscal 2023) |
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(Fiscal 2022) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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— |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Non-current assets: |
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Property and equipment, net of accumulated depreciation and amortization |
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Operating lease right-of-use assets |
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Deferred income taxes, net of valuation allowance |
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Intangible assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating leases, current |
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Total current liabilities |
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Long-term liabilities: |
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Operating leases, non-current |
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Other long-term liabilities |
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Total long-term liabilities |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Treasury stock at cost, |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
2
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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For the Three Months Ended |
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For the Six Months Ended |
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July 29, 2023 |
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July 30, 2022 |
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July 29, 2023 |
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July 30, 2022 |
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(Fiscal 2023) |
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Sales |
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$ |
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$ |
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$ |
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$ |
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Cost of goods sold including occupancy costs |
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Gross profit |
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Expenses: |
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Selling, general and administrative |
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Impairment (gain) of assets |
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— |
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— |
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Depreciation and amortization |
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Total expenses |
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Operating income |
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Loss on termination of pension plan |
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— |
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— |
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Interest income (expense), net |
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Income before provision (benefit) for income taxes |
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Provision (benefit) for income taxes |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Net income per share - basic |
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$ |
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$ |
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$ |
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$ |
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Net income per share - diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average number of common shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of the consolidated financial statements.
3
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
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For the Three Months Ended |
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For the Six Months Ended |
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July 29, 2023 |
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July 30, 2022 |
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July 29, 2023 |
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July 30, 2022 |
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(Fiscal 2023) |
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(Fiscal 2022) |
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(Fiscal 2023) |
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(Fiscal 2022) |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income before taxes: |
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Foreign currency translation |
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— |
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— |
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Pension plans |
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Recognized loss on termination of pension plan |
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— |
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— |
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Other comprehensive income before taxes |
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Tax provision related to items of other comprehensive income |
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— |
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— |
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Other comprehensive income, net of tax |
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Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
4
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
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Accumulated |
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Additional |
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Other |
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Common Stock |
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Paid-in |
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Treasury Stock |
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Accumulated |
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Comprehensive |
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Shares |
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Amounts |
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Capital |
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Shares |
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Amounts |
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Deficit |
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Loss |
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Total |
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Balance at January 28, 2023 |
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$ |
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$ |
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( |
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$ |
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$ |
( |
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$ |
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$ |
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Board of directors' compensation |
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— |
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— |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Restricted stock units (RSUs) granted for achievement of performance-based |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock, upon RSUs release |
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( |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for taxes related to net share settlement |
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( |
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( |
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( |
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— |
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— |
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— |
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— |
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( |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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Other comprehensive income, net of taxes |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance at April 29, 2023 |
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$ |
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$ |
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( |
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$ |
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$ |
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$ |
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$ |
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Board of directors' compensation |
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— |
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— |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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Repurchase of common stock, including excise tax |
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— |
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— |
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— |
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( |
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( |
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— |
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— |
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( |
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Other comprehensive income, net of taxes |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balance at July 29, 2023 |
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$ |
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$ |
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( |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of the consolidated financial statements.
5
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)
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Accumulated |
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Additional |
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Other |
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Common Stock |
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Paid-in |
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Treasury Stock |
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Accumulated |
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Comprehensive |
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Shares |
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Amounts |
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Capital |
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Shares |
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Amounts |
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Deficit |
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Loss |
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Total |
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Balance at January 29, 2022 |
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$ |
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$ |
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( |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Board of directors' compensation |
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— |
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— |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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— |
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— |
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RSUs granted for achievement of performance-based |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock, upon RSUs release |
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( |
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— |
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— |
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— |
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— |
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— |
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Shares withheld for taxes related to net share settlement |
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( |
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( |
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( |
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— |
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— |
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— |
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— |
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( |
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Exercise of stock options |
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— |
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— |
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— |
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— |
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Repurchase of common stock |
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— |
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— |
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— |
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( |
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( |
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— |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at April 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Board of directors' compensation |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Stock compensation expense |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Issuance of common stock, upon RSUs release |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Shares withheld for taxes related to net share settlement |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Exercise of stock options |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Repurchase of common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Balance at July 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of the consolidated financial statements.
6
DESTINATION XL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
For the Six Months Ended |
|
|||||
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||
|
|
(Fiscal 2023) |
|
|
(Fiscal 2022) |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Amortization of deferred debt issuance costs |
|
|
|
|
|
|
||
Impairment (gain) of assets |
|
|
— |
|
|
|
( |
) |
Loss on pension plan termination |
|
|
|
|
|
— |
|
|
Gain from the sale of equipment |
|
|
( |
) |
|
|
— |
|
Depreciation and amortization |
|
|
|
|
|
|
||
Deferred taxes, net of valuation allowance |
|
|
|
|
|
( |
) |
|
Stock compensation expense |
|
|
|
|
|
|
||
Board of directors' stock compensation |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
|
|
|
( |
) |
|
Other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
( |
) |
|
|
|
|
Operating leases, net |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Additions to property and equipment, net |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of equipment |
|
|
|
|
|
— |
|
|
Purchase of short-term investments |
|
|
( |
) |
|
|
— |
|
Net cash used for investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Repurchase of common stock |
|
|
( |
) |
|
|
( |
) |
Tax withholdings paid related to net share settlements |
|
|
( |
) |
|
|
( |
) |
Proceeds from the exercise of stock options |
|
|
|
|
|
|
||
Net cash used for financing activities |
|
|
( |
) |
|
|
( |
) |
Net increase (decrease) in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
|
||
End of period |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of the consolidated financial statements.
7
DESTINATION XL GROUP, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
In the opinion of management of Destination XL Group, Inc., a Delaware corporation (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, 2023 included in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 16, 2023.
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 2023 is a 53-week period ending on February 3, 2024, and fiscal 2022 was a 52-week period which ended on January 28, 2023.
Segment Information
The Company has
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 to business days.
Short-Term Investments
Short-term investments consist of those investments that have a maturity date, when acquired, that is greater than three months and twelve months or less. These investments are classified as held-to-maturity and are carried at amortized cost, which approximates fair value due to the short period between purchase and maturity.
Concentration of Credit Risk
Cash and cash equivalents include amounts due from third party financial institutions, which from time to time, may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company is potentially exposed to a concentration of credit risk when cash and cash equivalent deposits in these financial institutions are in excess of FDIC limits. The Company considers the credit risk associated with these financial instruments to be minimal as cash and cash equivalents are held by financial institutions with high credit ratings and it has not historically sustained any credit losses associated with its cash and cash equivalents balances. In addition, the Company's cash and cash equivalents include money market accounts with Citizens Bank, N.A. and investments in U.S. government-backed securities held with Fidelity Investments.
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.
8
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 carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of these instruments. See Note 11 - Fair Value Measurement for information regarding the fair value of certain financial assets.
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 (loss) and reclassifications from AOCI for the three and six months ended July 29, 2023 and July 30, 2022 were as follows:
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||||||||||||||||||
For the three months ended: |
|
(in thousands) |
|
|||||||||||||||||||||
|
|
Pension |
|
|
Foreign |
|
|
Total |
|
|
Pension |
|
|
Foreign |
|
|
Total |
|
||||||
Balance at beginning of the quarter |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss) before |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Recognition of loss on pension termination, net of taxes (1) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amounts reclassified from accumulated other |
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss) for the period |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at end of quarter |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||||||||||||||||||
For the six months ended: |
|
(in thousands) |
|
|||||||||||||||||||||
|
|
Pension |
|
|
Foreign |
|
|
Total |
|
|
Pension |
|
|
Foreign |
|
|
Total |
|
||||||
Balance at beginning of fiscal year |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss) before |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Recognition of loss on pension termination, net of taxes (1) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amounts reclassified from accumulated other |
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other comprehensive income (loss) for the period |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at end of quarter |
|
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
9
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 judgment. Actual results and future changes in estimates may differ from the Company’s current estimates.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions in the table below as it relates to stock options granted during the first six months of fiscal 2023 and fiscal 2022.
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||
Expected volatility |
|
|
|
|
||||
Risk-free interest rate |
|
|
|
|
||||
Expected term |
|
|
|
|
||||
Dividend rate |
|
|
— |
|
|
|
— |
|
Weighted average fair value of options granted |
|
$ |
|
|
$ |
|
||
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’s judgment regarding the identification of impairment indicators is based on operational performance at the store level. Factors considered by the Company that could result in an impairment triggering event include significant changes in the use of assets, a current period operating or cash flow loss, underperformance of a store relative to historical or expected operating results, and an accumulation of costs significantly in excess of the amount originally expected for the construction of the long-lived store assets. 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 model for undiscounted future cash flows includes assumptions, at the individual store level, with respect to expectations for future sales and gross margin rates as well as an estimate for occupancy costs used to estimate the fair value of the respective store’s operating lease right-of-use asset. 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 were
Leases
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 (“ROU”) 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 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
10
requirement of ASC 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. At July 29, 2023, the Company had
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 periodic 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. Tenant allowances are included as an offset to the right-of-use asset and amortized as reductions to rent expense over the associated lease term.
See Note 4, "Leases" for additional information.
Recently Issued Accounting Pronouncements - Adopted
In September 2022, the FASB issued Accounting Standards Update ("ASU") 2022-04, Liabilities – Supplier Finance Programs, which is intended to enhance the transparency surrounding the use of supplier finance programs in connection with the purchase of goods and services. The guidance requires companies that use supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period and associated rollforward information. The new standard does not affect the recognition, measurement, or financial statement presentation of supplier finance program obligations. ASU 2022-04 was adopted in the first quarter of fiscal 2023, with the exception of the rollforward information, which is not effective until fiscal 2024. The adoption of ASU 2022-04 did not have a material effect on the Company's Consolidated Financial Statements as the Company does not participate in supplier finance programs.
Recently Issued Accounting Pronouncements - Not Yet Adopted
In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement - Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation - Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock, which amends or supersedes various SEC paragraphs within the Accounting Standards Codification to conform to past SEC announcements and guidance issued by the SEC. The ASU does not provide any new guidance, and as such, there is no transition effective date. ASU 2023-03 is not expected to have a material impact on the Company's Consolidated Financial Statements.
There were no other new accounting pronouncements, issued or effective during the first six months of fiscal 2023, which had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.
2. Revenue Recognition
The Company operates as a retailer of big and tall men’s clothing, which includes stores and direct. Revenue is recognized by the operating segment that initiates a customer’s order. Store sales are defined as sales that originate and are fulfilled directly at the store level. Direct sales are defined as sales that originate online, including those initiated online at the store level, on its website or on third-party marketplaces. Generally, all revenues are recognized when control of the promised goods is transferred to customers, in an amount that reflects the consideration in exchange for those goods. Sales tax collected from customers and remitted to taxing authorities is excluded from revenue and is included as part of accrued expenses on the Consolidated Balance Sheets.
Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers. Upon issuance of a gift card, gift certificate, or credit voucher, a liability is established for its cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Based on historical redemption patterns, the Company can reasonably estimate the amount of gift cards, gift certificates, and credit vouchers for which redemption is remote, which is referred to as “breakage.” Breakage is recognized over two years in proportion to historical redemption trends and is recorded as sales in the Consolidated Statements of Operations. The gift card liability, net of breakage, was $
11
Unredeemed Loyalty Coupons. The Company offers a free loyalty program to its customers for which points accumulate based on the purchase of merchandise. Under ASC 606, Revenue from Contracts with Customers, these loyalty points provide the customer with a material right and a distinct performance obligation with revenue deferred and recognized when the points are expected to redeem or expire. The cycle of earning and redeeming loyalty points is generally under
Shipping. Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented. Amounts related to shipping and handling that are billed to customers are recorded in sales, and the related costs are recorded in cost of goods sold, including occupancy costs, in the Consolidated Statements of Operations.
Disaggregation of Revenue
As noted above under Segment Information in Note 1, the Company’s business consists of
|
|
For the Three Months Ended |
|
|
|
For the Six Months Ended |
|
|
|
|||||||||||||
(in thousands) |
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
|
July 29, 2023 |
|
|
|
July 30, 2022 |
|
|
|
||||||
Store sales |
|
$ |
|
$ |
|
|
$ |
|
|
% |
$ |
|
|
% |
||||||||
Direct sales |
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
||||||||
Retail segment |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
||||||
Wholesale segment |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Total sales |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
||||||
3. Debt
Credit Agreement with Citizens Bank, N.A.
On October 28, 2021, the Company entered into a credit facility with Citizens Bank, N.A. On April 20, 2023, the Company entered into the First Amendment to Credit Agreement which provided for the replacement of the London Interbank Offering Rate (“LIBOR”) interest rate options with the secured overnight financing rate ("SOFR") based options (as amended, the "Credit Facility").
The Credit Facility provides for a $
As of April 20, 2023,
The Company’s obligations under the Credit Facility are secured by a lien on substantially all of its assets. If the Company’s availability under the Credit Facility at any time is less than the greater of
At July 29, 2023, the Company had
4. Leases
The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, under operating leases. The store leases typically have initial terms of
12
consecutive periods of
ASC 842 requires the assessment of any lease modification to determine if the modification should be treated as a separate lease and if not, modification accounting would be applied. Lease modification accounting requires the recalculation of the ROU asset, lease liability and lease expense over the respective lease term. As of July 29, 2023, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications.
Lease costs related to store locations are included in cost of goods sold including occupancy costs on the Consolidated Statements of Operations, and expenses and lease costs related to the corporate headquarters and equipment leases are included in selling, general and administrative expenses on the Consolidated Statements of Operations.
The following table is a summary of the Company’s components of net lease cost for the three and six months ended July 29, 2023 and July 30, 2022:
|
|
For the three months ended |
|
|
For the six months ended |
|
||||||||||
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease costs(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Supplemental cash flow and balance sheet information related to leases for the first six months ended July 29, 2023 and July 30, 2022 was as follows:
|
|
|
|
|
|
|
||
(dollars in thousands) |
|
For the six months ended |
|
|||||
Cash paid for amounts included in the measurement of lease liabilities: |
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||
Operating cash flows for operating leases (1) |
|
$ |
|
|
$ |
|
||
Non-cash operating activities: |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for operating lease liabilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Weighted average remaining lease term |
|
|
|
|
||||
Weighted average discount rate |
|
|
|
|
||||
The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the Consolidated Balance Sheet as of July 29, 2023:
(in thousands) |
|
|
|
|
2023 (remaining) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total minimum lease payments |
|
$ |
|
|
Less: amount of lease payments representing interest |
|
|
|
|
Present value of future minimum lease payments |
|
$ |
|
|
Less: current obligations under leases |
|
|
|
|
Long-term lease obligations |
|
$ |
|
|
As of July 29, 2023, the Company had entered into a
13
5. Long-Term Incentive Plans
The following is a summary of the Company’s Long-Term Incentive Plan (“LTIP”). All equity awards granted under long-term incentive plans are issued from the Company’s stockholder-approved 2016 Incentive Compensation Plan. See Note 6, Stock-Based Compensation.
The LTIPs are granted annually and each LTIP covers a three-year performance period. Each participant in the LTIP participates based on that participant’s “Target Cash Value” which is defined as the participant’s annual base salary (on the participant’s effective date) multiplied by his or her LTIP percentage. Under each LTIP,
2020-2022 LTIP
The performance targets for the Company’s 2020-2022 LTIP were approved by the Compensation Committee of the Board of Directors (the "Compensation Committee”) on June 11, 2020, and covered a
On March 6, 2023, the Compensation Committee approved a grant of awards equal to $
Active LTIPs
At July 29, 2023, the Company had three active LTIPs: the 2021-2023 LTIP, the 2022-2024 LTIP and the 2023-2025 LTIP. The time-based awards under the 2021-2023 LTIP were granted in a combination of
Performance targets for the 2021-2023 LTIP, 2022-2024 LTIP and the 2023-2025 LITP were established and approved by the Compensation Committee on March 8, 2021, April 9, 2022 and May 1, 2023, respectively.
At July 29, 2023, the Company had accrued $
6. Stock-Based Compensation
The Company has one active stock-based compensation plan: the 2016 Incentive Compensation Plan (as amended, the “2016 Plan”). The initial share reserve under the 2016 Plan was
14
The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant.
The following tables summarize the share activity and stock option activity for the first six months of fiscal 2023:
|
|
RSUs (1) |
|
|
Deferred |
|
|
Performance |
|
|
Fully-Vested |
|
|
Total number |
|
|
Weighted- |
|
||||||
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Outstanding non-vested shares at beginning of year |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
$ |
|
|||||
Shares granted |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
$ |
|
||||
Shares vested and/or issued |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
$ |
|
|
Shares expired |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
$ |
|
|
Shares forfeited |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
$ |
|
|
Outstanding non-vested shares at end of quarter |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
$ |
|
||||
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Stock Options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding options at beginning of year |
|
|
|
|
$ |
|
|
|
|
$ |
|
|||||
Options granted |
|
|
|
|
$ |
|
|
|
— |
|
|
|
— |
|
||
Options exercised |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Options expired and canceled |
|
|
( |
) |
|
$ |
|
|
|
— |
|
|
|
|
||
Outstanding options at end of quarter |
|
|
|
|
$ |
|
|
|
|
$ |
|
|||||
Options exercisable at end of quarter |
|
|
|
|
$ |
|
|
|
|
$ |
|
|||||
For the first six months of fiscal 2023, the Company granted stock options to purchase an aggregate of
Subsequent to the end of the second quarter of fiscal 2023, on August 11, 2023, in connection with the extension of Mr. Kanter's employment agreement, the Company granted
Non-Employee Director Compensation Plan
The Company granted
15
Stock Compensation Expense
The Company recognized total stock-based compensation expense of $
7. Equity and Earnings per Share
The following table provides a reconciliation of the number of shares outstanding for basic and diluted earnings per share:
|
|
For the three months ended |
|
|
For the six months ended |
|
||||||||||
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common stock equivalents – stock options, restricted stock units and deferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The following potential common stock equivalents were excluded from the computation of diluted earnings per share in each period, because the exercise price of such options was greater than the average market price per share of common stock for the respective periods or because the unearned compensation associated with stock options or restricted stock units had an anti-dilutive effect.
|
|
For the three months ended |
|
|
For the six months ended |
|
||||||||||
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||||
(in thousands, except exercise prices) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Range of exercise prices of such options |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The above options, which were outstanding at July 29, 2023, expire from
Deferred stock of
8. Stock Repurchase Program
On March 14, 2023, the Company's Board of Directors approved a stock repurchase program, effective March 16, 2023. Under the program, the Company is authorized to repurchase up to $
During the second quarter of fiscal 2023, the Company repurchased
9. Income Taxes
In the second quarter of fiscal 2022, the Company determined that it was more likely than not that it would be able to realize the benefits of substantially all of its deferred tax assets in the United States. Accordingly, in the second quarter of fiscal 2022, the Company released substantially all of its deferred tax valuation allowance. As a result of the valuation allowance being released, the Company returned to a normal tax provision for fiscal 2023.
For the second quarter and first six months of fiscal 2023, the Company’s effective tax rate was
During the second quarter and first six months of fiscal 2022, the Company recorded an income tax benefit of $
16
The Company made tax payments of $
10. Termination of Noncontributory Pension Plan
In connection with the acquisition of Casual Male Corp. in May 2002, the Company assumed the assets and liabilities of the Casual Male Noncontributory Pension Plan “Casual Male Corp. Retirement Plan”, which was previously known as the J. Baker, Inc. Qualified Plan (the “Pension Plan”). Casual Male Corp. froze all future benefits under this plan on May 1, 1997.
On May 3, 2023, the Audit Committee approved the termination of the Pension Plan, which was then approved and ratified by the Board of Directors on May 4, 2023 with a final termination approval on June 8, 2023. On July 1, 2023, the Company completed a partial settlement through the purchase of nonparticipating annuities. The Company made a cash contribution during the first six months of fiscal 2023 of $
In the second quarter of fiscal 2023, the Company recognized a charge of $
Net periodic pension cost for the three and six months ended July 29, 2023 and July 30, 2022 was as follows:
|
|
For the three months ended |
|
|
For the six months ended |
|
||||||||||
|
|
July 29, 2023 |
|
|
July 30. 2022 |
|
|
July 29, 2023 |
|
|
July 30. 2022 |
|
||||
Net periodic pension cost: |
|
(in thousands) |
|
|||||||||||||
Interest cost on projected benefit obligation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Amortization of unrecognized loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on pension plan termination |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Net periodic pension cost (income) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Assumptions used were as follows:
|
|
For the six months ended |
|
|
|||||
|
|
July 29, 2023 |
|
|
July 30. 2022 |
|
|
||
Discount rate |
|
|
% |
|
|
% |
|
||
Expected return on plan assets |
|
|
% |
|
|
% |
|
||
11. Fair Value Measurement
At July 29, 2023 and January 28, 2023, the Company held U.S. treasury bills which were classified as held-to maturity and carried at amortized cost.
|
|
|
|
Fair Value |
|
||||||||||
(in thousands) |
Carrying value |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant Unobservable |
|
||||
At July 29, 2023: |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury Bills |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury Bills |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||
At January 28, 2023 |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury Bills |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||
17
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect” or “anticipate” or the negatives thereof, variations thereon or similar terminology. The forward-looking statements contained in this Quarterly Report are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” but may be found in other locations as well, and include statements regarding our long-range strategic growth plan and our ability to achieve accelerated growth in the future; the expected impact of our strategic initiatives, including with respect to raising brand awareness, store development and future alliances and collaborations; expected marketing costs, gross margin rates and expected capital expenditures in 2023; expected timing of stock repurchases under our board-approved stock repurchase program; and expected changes in our store portfolio and long-term plans for new or relocated stores. These forward-looking statements generally relate to plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends. The forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved. The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited Consolidated Financial Statements and notes to those statements included elsewhere in this Quarterly Report and our audited Consolidated Financial Statements for the year ended January 28, 2023, included in our Annual Report on Form 10-K for the year ended January 28, 2023, as filed with the Securities and Exchange Commission on March 16, 2023 (our “Fiscal 2022 Annual Report”).
Numerous factors could cause our actual results to differ materially from such forward-looking statements. This discussion sets forth certain risks and uncertainties that may have an impact on future results and direction of our Company, including, without limitation, risks related to inflationary pressures, changes in consumer spending in response to economic factors, increased labor costs and potential labor shortages, the continuing economic impact of the Russian invasion of Ukraine, our ability to manage appropriate inventory levels, our ability to successfully execute on our strategic initiatives, our ability to predict customer tastes and fashion trends, our ability to grow market share, our ability to forecast sales growth trends and compete in the market, and the other risks and uncertainties set forth in the “Risk Factors” section in Part I, Item 1A of our Fiscal 2022 Annual Report.
All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing. These forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances in which the forward-looking statement is based.
BUSINESS SUMMARY
Destination XL Group, Inc., together with our consolidated subsidiaries (the “Company”), is the largest specialty retailer of big and tall men’s clothing with retail and direct operations in the United States. We operate under the trade names of Destination XL®, DXL®, DXL Outlets, Casual Male XL® and Casual Male XL Outlets. At July 29, 2023, we operated 219 Destination XL stores, 16 DXL outlet stores, 27 Casual Male XL retail stores, 19 Casual Male XL outlet stores and a digital business, including an e-commerce site at dxl.com and a mobile site, m.destinationXL.com, mobile app and third-party marketplaces.
Unless the context indicates otherwise, all references to “we,” “our,” “us” and “the Company” refer to Destination XL Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years, which end on February 3, 2024, January 28, 2023 and January 29, 2022 as "fiscal 2023", “fiscal 2022,” and “fiscal 2021” respectively. Fiscal 2023 is a 53-week period and fiscal 2022 and fiscal 2021 were 52-week periods.
SEGMENT REPORTING
We currently have two principal operating segments: our stores and direct business. We consider our stores and direct business segments to be similar in terms of economic characteristics, production processes and operations, and have therefore aggregated them into one reportable segment, retail segment, consistent with our omni-channel business approach.
COMPARABLE SALES
Our customer’s shopping experience continues to evolve across multiple channels, and we are continually adapting to meet the guest’s needs. The majority of our stores have the capability of fulfilling online orders if merchandise is not available in the warehouse. As a result, we continue to see more transactions that begin online but are ultimately completed at the store level. Similarly, if a customer visits a store and the item is out of stock, the associate can order the item through our website. A customer also has the ability to order
19
online and pick-up in a store and at curbside. We define store sales as sales that originate and are fulfilled directly at the store level. Digital commerce sales, which we also refer to as direct sales, are defined as sales that originate online, whether through our website, at the store level or through a third-party marketplace.
Stores that have been open for at least 13 months are included in comparable sales. Stores that have been remodeled or re-located during the period are also included in our determination of comparable stores sales. Stores that have been expanded by more than 25% are considered non-comparable for the first 13 months. If a store is temporarily closed for more than 7 days, it is removed from the calculation of comparable sales until it reopens and upon its anniversary is once again removed from the calculation until the reopen date. The method of calculating comparable sales varies across the retail industry and, as a result, our calculation of comparable sales is not necessarily comparable to similarly titled measures reported by other retailers.
EXECUTIVE SUMMARY
|
|
For the three months ended |
For the six months ended |
||||||||||||||
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
||||
(in millions, except percentage of sales and per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales |
|
$ |
140.0 |
|
|
$ |
144.6 |
|
|
$ |
265.5 |
|
|
$ |
272.3 |
|
|
Net income |
|
$ |
11.6 |
|
|
$ |
56.9 |
|
|
$ |
18.6 |
|
|
$ |
70.3 |
|
|
Adjusted net income (Non-GAAP basis) |
|
$ |
14.8 |
|
|
$ |
16.1 |
|
|
$ |
21.8 |
|
|
$ |
25.8 |
|
|
Adjusted EBITDA (Non-GAAP basis) |
|
$ |
22.9 |
|
|
$ |
25.9 |
|
|
$ |
35.6 |
|
|
$ |
43.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin. as a percentage of sales |
|
|
50.3 |
% |
|
|
52.1 |
% |
|
|
49.5 |
% |
|
|
51.1 |
% |
|
SG&A expenses, as a percentage of sales |
|
|
33.9 |
% |
|
|
34.2 |
% |
|
|
36.1 |
% |
|
|
35.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Per diluted share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
0.18 |
|
|
$ |
0.85 |
|
|
$ |
0.28 |
|
|
$ |
1.04 |
|
|
Adjusted net income (Non-GAAP basis) |
|
$ |
0.23 |
|
|
$ |
0.24 |
|
|
$ |
0.33 |
|
|
$ |
0.38 |
|
|
Our comparable sales for the second quarter of fiscal 2023 decreased 1.4%, our first decrease since the fourth quarter of fiscal 2020, as we compared against a strong prior year second quarter. During the second quarter, we saw a decrease in dollars per transaction, a reflection of the continuing economic headwinds. However, traffic improved as the quarter progressed, resulting in a positive comp of 1.0% in July. Despite the pressure on top-line growth, we continue to proactively manage our inventory and operating costs, which has resulted in a strong adjusted EBITDA margin (a non-GAAP measure) for the quarter of 16.4%. While we saw improvement at the end of the second quarter, traffic has slowed during the first few weeks of the third quarter, up against a strong prior year, with comparable sales trending down in the mid-single digits.
In the second quarter of fiscal 2023, our Board approved the termination of our frozen, noncontributory pension plan. Given the current high interest rates, we saw this as an opportunistic use of excess cash to eliminate this variable liability. In connection with that decision, during the second quarter, we completed a partial settlement of our pension obligations through the purchase of nonparticipating annuities. As a result, during the second quarter of fiscal 2023, we recognized a loss of $4.2 million, representing a pro-rata portion of the unrealized loss in Accumulated Other Comprehensive Loss. We expect to complete the termination of the pension plan by the end of fiscal 2023.
Net income for the second quarter of fiscal 2023 was $11.6 million, or $0.18 per diluted share, as compared to net income of $56.9 million, or $0.85 per diluted share, for the second quarter of fiscal 2022. Net income for the second quarter of fiscal 2022 included the release of substantially all of the valuation allowance against our deferred tax assets. Assuming a normalized tax rate and adjusting for the loss from the pension plan termination and asset impairments (gains), if any, on a non-GAAP basis, net income for the second quarter of fiscal 2023 was $14.8 million, or $0.23 per diluted share, as compared to adjusted net income of $16.1 million, or $0.24 per diluted share, for the second quarter of fiscal 2022.
For the first six months of fiscal 2023, net income was $18.6 million, or $0.28 per diluted share, as compared to net income of $70.3 million, or $1.04 per diluted share, for the first six months of fiscal 2022. Adjusted net income for the first six months of fiscal 2023, was $21.8 million, or $0.33 per diluted share, as compared to net income of $25.8 million, or $0.38 per diluted share, for the first six months of fiscal 2022.
As of July 29, 2023, we had cash and investments of $62.8 million as compared to $22.2 million at July 30, 2022. As of July 29, 2023, we had no debt outstanding, unused excess availability of $81.8 million, and no borrowings during the quarter. Our inventory was in a healthy position at quarter-end, down 9.5% as compared to July 30, 2022. Inventory turnover, as of July 29, 2023, has improved over 28% from fiscal 2019 levels. With cash on hand, no outstanding debt and full availability under our credit facility, we are continuing to pursue our strategic initiatives this year to grow our business.
As discussed below, during the second quarter of fiscal 2023, we repurchased 2.2 million shares at a total cost, including fees of $10.8 million, within the Board's authorized $15.0 million share repurchase.
Our Future Growth Strategy
20
Our Company is in a fundamentally different position today than it was pre-pandemic. We have achieved a heightened level of operational excellence, recapitalized our balance sheet to provide a greater level of financial flexibility, made investments in our technical capabilities, and upgraded our leadership team. As we look beyond fiscal 2023, we are excited about our long-term growth plan. Our goal is to meaningfully accelerate the trajectory of the Company over the next three to five years, by focusing on three specific growth initiatives: brand-building, store development, and alliances/collaborations.
Marketing and Brand-Building: We believe one of our greatest opportunities is to address our overall brand awareness levels. Over the past few years, we have transformed our brand position and differentiated ourselves in terms of experience, fit, and assortment. However, many of our target consumers simply do not know DXL. We now have the financial flexibility, informed consumer research, and the right messaging to invest in building our brand. For the past several years, our advertising-to-sales ratio has been between 5.0% to 6.0%. Our plan is to increase our advertising-to-sales ratio over the next few years. We expect over the next few years to invest more in brand building and top-of-funnel marketing to grow our customer file.
Store Development: As we have stated before, we believe there are at least 50 net new store opportunities. New store development addresses another factor critical to our growth. While we have stores in every major metro market across the United States, there are voids in certain markets where big & tall consumers are not being serviced by a DXL. In our most recent research across 2,500 big + tall men, both customers and non-customers, 49% self-reported that they do not shop with us because a store is not near them, while 37% self-reported that they do not shop with us because a store location is not convenient. This year, we expect to open our first three new stores since fiscal 2018, with plans to open another 10 new stores in fiscal 2024 and 15 to 20 new stores in fiscal 2025.
Alliances/Collaborations: We strongly believe that our "fit authority" is one of our biggest assets and that we can develop successful collaborations with other brands, who are interested in finding a cost-effective way to expand their offering to include big & tall men's apparel. In September, we will be launching Untuckit, Fit by DXL in partnership with Untuckit to be sold exclusively by DXL. In addition, we also are adding Hugo Boss and Faherty to our list of national brands this Fall, each with a level of merchandise exclusivity that cannot be found elsewhere. We believe these examples are only the beginning, and we are working in real-time on additional retail brand alliances. Lastly, we also launched our new fit technology and size mapping in two of our stores, with plans to expand to an additional 10 stores by the end of the month.
RESULTS OF OPERATIONS
Sales
The following table presents sales by segment for the three and six months ended July 29, 2023 and July 30, 2022:
|
|
For the Three Months Ended |
|
|
|
For the Six Months Ended |
|
|
|
|||||||||||||
(in thousands) |
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
|
July 29, 2023 |
|
|
|
July 30, 2022 |
|
|
|
||||||
Store sales |
|
$ |
97,445 |
|
69.6% |
$ |
100,924 |
|
69.8% |
|
$ |
184,742 |
|
|
69.6 |
% |
$ |
189,203 |
|
|
69.6 |
% |
Direct sales |
|
|
42,598 |
|
30.4% |
|
43,693 |
|
30.2% |
|
|
80,743 |
|
|
30.4 |
% |
|
82,687 |
|
|
30.4 |
% |
Retail segment |
|
$ |
140,043 |
|
|
$ |
144,617 |
|
|
|
$ |
265,485 |
|
|
|
$ |
271,890 |
|
|
|
||
Wholesale segment |
|
|
— |
|
|
|
17 |
|
|
|
|
— |
|
|
|
|
399 |
|
|
|
||
Total sales |
|
$ |
140,043 |
|
|
$ |
144,634 |
|
|
|
$ |
265,485 |
|
|
|
$ |
272,289 |
|
|
|
||
Total sales for the second quarter of fiscal 2023 were $140.0 million, as compared to $144.6 million in the second quarter of fiscal 2022. Comparable sales for the second quarter decreased 1.4% with comparable sales from our stores down 1.4% and our direct business down 1.3%. The remainder of the decrease was due to sales from closed stores and a decrease in non-comparable sales.
During the quarter, we saw a decrease in dollars per transaction, which we believe was the result of inflationary pressures impacting customer spending. These decreases were partially offset by an increase in conversion. Despite these headwinds, during the quarter we saw comparable sales improve each month, with May down 2.8%, June down 1.7% and July up 1.0%. Both stores and our direct business improved throughout the quarter, driven largely by improvement in traffic to our stores and growth in our mobile app and email marketing.
Sales for the first six months of fiscal 2023 were $265.5 million as compared to $272.3 million for the first six months of fiscal 2022. Comparable sales for the first six months of fiscal 2023 decreased 0.5%, with comparable sales from our stores flat to the prior year period and direct down 1.5%.
Gross Margin Rate
For the second quarter of fiscal 2023, our gross margin rate, inclusive of occupancy costs, was 50.3% as compared to a gross margin rate of 52.1% for the second quarter of fiscal 2022.
Our gross margin rate decreased by 180-basis points, with a decrease in merchandise margin of 110-basis points and an increase of 70-basis points in occupancy costs primarily due to the deleveraging of sales and increased rents as a result of lease extensions. The
21
decrease in merchandise margin of 110-basis points was due to continued cost pressures on certain private-label merchandise, much of which we continued to absorb rather than passing on to the customer through price increases. We also experienced increased shipping costs related to direct-to-consumer shipments and costs related to our loyalty program with more sales tendered with loyalty certificates, as compared to the second quarter of fiscal 2022. These cost increases were partially offset by lower inbound freight costs. For the year, we expect gross margin rates to be approximately 100-basis points lower than fiscal 2022.
For the first six months of fiscal 2023, our gross margin rate, inclusive of occupancy costs, was 49.5% as compared to a gross margin rate of 51.1% for the first six months of fiscal 2022. The decrease of 160-basis points was due to a decrease in merchandise margins of 110-basis points and a 50-basis point increase in occupancy costs. Similar to the second quarter merchandise margin, the decrease was due to cost pressures on certain private-label merchandise, increased direct-to-consumer shipping costs and costs related to our loyalty program.
Selling, General and Administrative Expenses
As a percentage of sales, SG&A (selling, general and administrative) expenses for the second quarter of fiscal 2023 were 33.9% as compared to 34.2% for the second quarter of fiscal 2022. For the first six months of fiscal 2023, SG&A expenses, as a percentage of sales, were 36.1% as compared to 35.3% for the first six months of fiscal 2022.
On a dollar basis, SG&A expenses decreased by $2.0 million and $0.3 million for the second quarter and first six months of fiscal 2023, respectively as compared to the second quarter and first six months of fiscal 2022. The decreases were primarily due to a decrease in performance-based incentive accruals and marketing costs, partially offset by an increase in payroll-related costs from new positions added in the past year to support our long-range growth initiatives.
Management views SG&A expenses through two primary cost centers: Customer Facing Costs and Corporate Support Costs. Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 20.3% of sales in the first six months of fiscal 2023 as compared to 19.8% of sales in the first six months of fiscal 2022. Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 15.8% of sales in the first six months of fiscal 2023 as compared to 15.5% of sales in the first six months of fiscal 2022. Marketing costs for the first six months were 5.3% of sales for both fiscal 2023 and fiscal 2022. For fiscal 2023, marketing costs are expected to be approximately 5.7% of sales.
Impairment (Gain) of Assets
There were no impairments or non-cash gains recognized in the first six months of fiscal 2023. During the second quarter and first six months of fiscal 2022, we recorded non-cash gains of $0.1 million and $0.6 million related to the reduction of our operating lease liability in connection with our decision to close certain retail stores, which resulted in a revaluation of the lease liability. The portion of the gain that related to a previously recorded impairment charge against the operating lease right-of-use asset was included as an offset to previously recorded asset impairment charge. Accordingly, $0.1 million and $0.4 million were included in the Impairment (Gain) of Assets line of the Consolidated Statement of Operations for the second quarter and first six months of fiscal 2022. The remaining gain was recorded as a reduction to occupancy costs.
Depreciation and Amortization
Depreciation and amortization for the second quarter of fiscal 2023 decreased to $3.5 million as compared to $4.0 million for the second quarter of fiscal 2022. For the first six months of fiscal 2023, depreciation and amortization decreased to $6.9 million as compared to $8.0 million for the first six months of fiscal 2022. The decrease was due to a lower depreciable cost base, especially from our store assets, due to our limited capital spending since fiscal 2020.
Loss from Termination of Pension Plan
During the second quarter of fiscal 2023, we identified an opportunity to eliminate a variable liability by taking advantage of the current high-interest rate environment and terminating the frozen pension plan. We completed a partial settlement of the pension obligation in the second quarter through the purchase of nonparticipating annuities. We made a cash contribution to the plan during the first six months of fiscal 2023 of $1.6 million. The remaining pension liability as of July 29, 2023, was approximately $0.2 million. In the second quarter of fiscal 2023, we recognized a charge of $4.2 million, representing a pro-rata portion of the unrealized loss that is part of accumulated other comprehensive loss on the balance sheet. We expect to settle the remaining obligation, recognize the remaining unrealized loss and terminate the plan by the end of fiscal 2023.
Interest Income/Expense, Net
Net interest income for the second quarter of fiscal 2023 was $0.5 million, as compared to net interest expense of $0.1 million for the second quarter of fiscal 2022. For the first six months of fiscal 2023, net interest income was $0.8 million as compared to net interest expense of $0.2 million for the first six months of fiscal 2022. For the second quarter and first six months of fiscal 2023, interest income was earned from investments in U.S. government-backed investments and money market accounts. Interest costs for both periods were minimal because we had no outstanding debt and no borrowings under our credit facility during either period.
22
Income Taxes
As a result of releasing substantially all of the valuation allowance against our deferred tax assets during fiscal 2022, we have returned to a normal tax provision for fiscal 2023. Accordingly, for the second quarter and first six months of fiscal 2023, the effective tax rate was 26.4% and 26.5%, respectively. For the second quarter and first six months of fiscal 2022, we recognized a tax benefit of $35.1 million and $35.0 million, respectively, which reflects the release of approximately $35.5 million, or $0.53 per diluted share, in valuation allowance against our deferred tax assets, partially offset by income tax expense of $0.4 million and $0.5 million, respectively, in states where our usage of net operating losses ("NOL") is limited.
We are able to utilize our remaining NOL carryforwards to reduce our cash federal and state income taxes. We began the year with $78.9 million in federal NOL carryforwards.
Net Income
For the second quarter of fiscal 2023, we recorded net income of $11.6 million, or $0.18 per diluted share, as compared to net income of $56.9 million, or $0.85 per diluted share, for the second quarter of fiscal 2022. Net income for the first six months of fiscal 2023 was $18.6 million, or $0.28 per diluted share, as compared to net income of $70.3 million, or $1.04 per diluted share for the first six months of fiscal 2022.
On a non-GAAP basis, assuming a normalized tax rate of 26% and adjusting for asset impairments (gains), if any, and for the loss on the termination of the pension plan, adjusted net income for the second quarter of fiscal 2023 was $14.8 million, or $0.23 per diluted share, as compared to adjusted net income of $16.1 million, or $0.24 per diluted share for the second quarter of fiscal 2022. For the first six months of fiscal 2023, adjusted net income was $21.8 million, or $0.33 per diluted share, as compared to adjusted net income of $25.8 million, or $0.38 per diluted share.
Inventory
As of July 29, 2023, our inventory decreased by approximately $9.2 million to $87.5 million, as compared to $96.7 million at July 30, 2022. Managing our inventory remains a primary focus for us given the impact that inflation appears to have had on consumer spending. Based on the sales trends we started to see in March 2023, we took proactive measures and adjusted our receipt plan. At July 29, 2023, our clearance inventory was 9.3% of our total inventory, as compared to 6.9% at July 30, 2022 and still below our historical benchmark of approximately 10.0%.
SEASONALITY
Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income, net income, and free cash flow. Traditionally, a significant portion of our operating income, net income, and free cash flow is generated in the second and fourth quarters. Our inventory is typically at peak levels by the end of the third quarter, which represents a significant use of cash, which is then relieved in the fourth quarter as we sell-down our inventory through the holiday shopping season.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are our cash and cash equivalents, short-term investments, cash generated from operations and availability under our credit facility, which is discussed below. At July 29, 2023, we had no outstanding debt, including no borrowings under our credit facility during the first six months of fiscal 2023. Cash that is in excess of our forecasted needs may be invested in money market accounts and U.S. government-backed securities.
We believe that our cash and cash equivalent balances, short-term investments, cash generated from operations, and borrowings available to us under our credit facility will be adequate to meet our liquidity needs and capital expenditure requirements for at least the next 12 months. However, we remain cautious regarding the effect that the current macroeconomic conditions, including inflation and rising interest costs, may have on consumer spending as well as the continuing geopolitical impact of Russia's invasion of Ukraine on our business and the global economy. We also believe that cash flows from operating activities and cash on hand will be sufficient to satisfy our capital requirements in the longer-term, however, to the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our credit facility, as discussed below.
For the first six months of fiscal 2023, cash flow from operations increased to $26.2 million as compared to $23.8 million for the first six months of fiscal 2022. Free cash flow, a non-GAAP measure, increased to $21.6 million for the first six months of fiscal 2023 as compared to $19.8 million for the first six months of fiscal 2022. The increase in free cash flow was primarily due to a decrease in merchandise purchases as we continue to proactively manage inventory levels.
Cash flow used for investing activities increased by $44.0 million for the first six months of fiscal 2023 as compared to the first six months of fiscal 2022, primarily due to the purchase of $43.5 million of short-term investments.
23
Cash flow used for financing activities for the first six months of fiscal 2023 decreased by $2.1 million as compared to the first six months of fiscal 2022, primarily due to a decrease in shares repurchased as compared to the second quarter of fiscal 2022.
Stock Repurchase Program
In March 2023, the Company’s Board of Directors approved a stock repurchase program. Under the stock repurchase program, the Company may repurchase up to $15.0 million of its common stock through open market and privately negotiated transactions. During the second quarter of fiscal 2023, we repurchased 2.2 million shares at a total cost, including fees of $10.8 million. Shares of repurchased common stock are held as treasury stock. The timing and the amount of any remaining repurchases will be determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program will expire on March 16, 2024 and may be suspended, terminated or modified at any time for any reason.
Credit Facility
On October 28, 2021, we entered into a $125.0 million revolving credit agreement with Citizens Bank, N.A., with a maturity date of October 28, 2026. On April 20, 2023, the Company entered into the First Amendment to Credit Agreement which provided for the replacement of the London Interbank Offering Rate (“LIBOR”) interest rate options with the secured overnight financing rate ("SOFR") based options (as amended, the "Credit Facility"). The Credit Facility includes a sublimit of $20.0 million for commercial and standby letters of credit and a sublimit of up to $15.0 million for swingline loans. April 20, 2023, borrowings under the Credit Facility bear interest at either a Base Rate loan or Daily Simple SOFR rate, at the Company's option. Base Rate loans will bear interest at a rate equal to (i) the greater of: (a) the Prime Rate, (b) the Federal Funds effective rate plus 0.50% per annum and (c) the Daily Simple SOFR rate plus 1.00% per annum (provided the Base Rate shall never be less than the Floor (as defined in the Credit Facility)), plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50% (the “Applicable Margin”). Daily Simple SOFR loans will bear interest at a rate equal to (i) the Daily Simple SOFR rate plus an adjustment of 0.10% (provided the Daily Simple SOFR rate shall never be less than the Floor), plus (ii) the Applicable Margin. Any swingline loan will continue to bear interest at a rate equal to the Base Rate plus the Applicable Margin. We are subject to an unused line fee of 0.25%.
We had no outstanding borrowings under the Credit Facility at July 29, 2023 and no borrowings during the first six months of fiscal 2023. At July 29, 2023, outstanding standby letters of credit were $4.0 million and outstanding documentary letters of credit were $1.2 million. The average unused excess availability during the first six months of fiscal 2023 was approximately $85.6 million and the unused excess availability at July 29, 2023 was $81.8 million.
Capital Expenditures
For fiscal 2023, we expect our capital expenditures to range from $19.0 million to $21.0 million, of which approximately $7.8 million is discretionary spending for new or improved stores with the remaining for non-discretionary, infrastructure improvements.
The following table sets forth the open stores and related square footage at July 29, 2023 and July 30, 2022, respectively:
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
||||||||||
Store Concept |
|
Number of |
|
|
Square |
|
|
Number of |
|
|
Square |
|
|
||||
(square footage in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
DXL Retail |
|
|
219 |
|
|
|
1,666 |
|
|
|
218 |
|
|
|
1,664 |
|
|
DXL Outlets |
|
|
16 |
|
|
|
80 |
|
|
|
16 |
|
|
|
80 |
|
|
Casual Male XL Retail |
|
|
27 |
|
|
|
88 |
|
|
|
31 |
|
|
|
103 |
|
|
Casual Male Outlets |
|
|
19 |
|
|
|
57 |
|
|
|
19 |
|
|
|
57 |
|
|
Total Stores |
|
|
281 |
|
|
|
1,891 |
|
|
|
284 |
|
|
|
1,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
We have executed lease agreements for three new stores, one in each of the Los Angeles, New York and Cincinnati markets. We expect these stores to open by the end of 2023. During the second quarter, we completed the conversion of one Casual Male store to the DXL store format. By the end of fiscal 2023, we expect to open 3 new DXL stores and 10 Casual Male-to-DXL conversion stores and to have begun construction on at least 5 DXL remodels. Over the next three to five years, we believe we could potentially open 50 net new DXL stores across the United States.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
24
There have been no material changes to the critical accounting policies and estimates disclosed in our Fiscal 2022 Annual Report. See Note 1 to the Consolidated Financial Statements included in this report for information on recent accounting pronouncements and changes in accounting principles.
Non-GAAP Financial Measures
Free cash flow, adjusted net income, adjusted net income per diluted share, adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures. These non-GAAP measures are not presented in accordance with GAAP and should not be considered superior to or as a substitute for net income or cash flows from operating activities or any other measure of performance derived in accordance with GAAP. In addition, all companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the non-GAAP measures presented in this Quarterly Report may not be comparable to similar measures used by other companies. We believe that inclusion of these non-GAAP measures helps investors gain a better understanding of our performance, especially when comparing such results to previous periods and that they are useful as an additional means for investors to evaluate our operating results, when reviewed in conjunction with our GAAP financial statements.
Reconciliations of these non-GAAP measures are presented in the following tables (certain columns may not foot due to rounding):
Free Cash Flow. We define free cash flow as cash flow from operating activities less capital expenditures. Free cash flow excludes the mandatory and discretionary repayment of debt. Free cash flow is a metric that management uses to monitor liquidity. Management believes this metric is important to investors because it demonstrates the Company's ability to strengthen liquidity while supporting its capital projects and new store growth. We expect to fund our ongoing capital expenditures with cash flow from operations.
The following table reconciles free cash flow:
|
|
For the six months ended |
|||||||
(in millions) |
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
||
Cash flow from operating activities (GAAP basis) |
|
$ |
26.2 |
|
|
$ |
23.8 |
|
|
Capital expenditures |
|
|
(4.7 |
) |
|
|
(4.1 |
) |
|
Free Cash Flow (non-GAAP basis) |
|
$ |
21.6 |
|
|
$ |
19.8 |
|
|
Adjusted Net Income and Adjusted Net Income Per Diluted Share: Adjusted net income and adjusted net income per diluted share is calculated by excluding any asset impairment charge (gain) and the loss from the termination of the pension plan, subtracting the actual income tax provision (benefit) and applying an effective tax rate of 26%. The Company believes that this comparability is useful in comparing the actual results period to period. Adjusted net income per diluted share is then calculated by dividing the adjusted net income by the weighted average shares outstanding for the respective period, on a diluted basis.
|
|
For the three months ended |
|
|
For the six months ended |
|
||||||||||||||||||||||||||
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||||||||||||||||||||
|
|
$ |
|
|
Per |
|
|
$ |
|
|
Per |
|
|
$ |
|
|
Per |
|
|
$ |
|
|
Per |
|
||||||||
(in millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (GAAP basis) |
|
$ |
11.6 |
|
|
$ |
0.18 |
|
|
$ |
56.9 |
|
|
$ |
0.85 |
|
|
$ |
18.6 |
|
|
$ |
0.28 |
|
|
$ |
70.3 |
|
|
$ |
1.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Adjust for impairment (gain) of assets |
|
|
— |
|
|
|
|
|
|
(0.0 |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
(0.4 |
) |
|
|
|
||||
Add back loss on termination of pension plan |
|
|
4.2 |
|
|
|
|
|
|
— |
|
|
|
|
|
|
4.2 |
|
|
|
|
|
|
— |
|
|
|
|
||||
Add back actual income tax provision |
|
|
4.2 |
|
|
|
|
|
|
(35.1 |
) |
|
|
|
|
|
6.7 |
|
|
|
|
|
|
(35.0 |
) |
|
|
|
||||
Add income tax provision, assuming a normal tax rate of 26% |
|
|
(5.2 |
) |
|
|
|
|
|
(5.7 |
) |
|
|
|
|
|
(7.7 |
) |
|
|
|
|
|
(9.1 |
) |
|
|
|
||||
Adjusted net income (non-GAAP basis) |
|
$ |
14.8 |
|
|
$ |
0.23 |
|
|
|
16.1 |
|
|
$ |
0.24 |
|
|
$ |
21.8 |
|
|
$ |
0.33 |
|
|
$ |
25.8 |
|
|
$ |
0.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average number of common shares outstanding on a diluted basis |
|
|
|
|
|
65.4 |
|
|
|
|
|
|
66.7 |
|
|
|
|
|
|
65.8 |
|
|
|
|
|
|
67.5 |
|
||||
Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and is before any impairment of assets, if any. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by Sales. We believe that providing adjusted EBITDA and adjusted EBITDA margin is useful to investors in evaluating our performance
25
and are key metrics to measure profitability and economic productivity. The following table reconciles adjusted EBITDA from net income and calculates adjusted EBITDA margin:
|
|
For the three months ended |
|
|
For the six months ended |
|
||||||||||
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
|
July 29, 2023 |
|
|
July 30, 2022 |
|
||||
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (GAAP basis) |
|
$ |
11.6 |
|
|
$ |
56.9 |
|
|
$ |
18.6 |
|
|
$ |
70.3 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment (gain) of assets |
|
|
— |
|
|
|
(0.0 |
) |
|
|
— |
|
|
|
(0.4 |
) |
Loss on termination of pension plan |
|
|
4.2 |
|
|
|
— |
|
|
|
4.2 |
|
|
|
— |
|
Provision (benefit) for income taxes |
|
|
4.2 |
|
|
|
(35.1 |
) |
|
|
6.7 |
|
|
|
(35.0 |
) |
Interest (income) expense |
|
|
(0.5 |
) |
|
|
0.1 |
|
|
|
(0.8 |
) |
|
|
0.2 |
|
Depreciation and amortization |
|
|
3.5 |
|
|
|
4.0 |
|
|
|
6.9 |
|
|
|
8.0 |
|
Adjusted EBITDA (non-GAAP basis) |
|
$ |
22.9 |
|
|
$ |
25.9 |
|
|
$ |
35.6 |
|
|
$ |
43.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales |
|
$ |
140.0 |
|
|
$ |
144.6 |
|
|
$ |
265.5 |
|
|
$ |
272.3 |
|
Adjusted EBITDA margin (non-GAAP), as a percentage of sales |
|
|
16.4 |
% |
|
|
17.9 |
% |
|
|
13.4 |
% |
|
|
15.8 |
% |
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
In the normal course of business, our financial position and results of operations are routinely subject to a variety of risks, including market risk associated with interest rate movements on borrowings. We regularly assess these risks and have established policies and business practices to protect against the adverse effects of these and other potential exposures.
There have not been any material changes to our interest rate previously disclosed in Part II, Item 7A of our Fiscal 2022 Annual Report.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of July 29, 2023. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of July 29, 2023, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
We have not experienced any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended July 29, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are subject to various legal proceedings and claims that arise in the ordinary course of business. Management currently believes that the resolution of these matters will not have a material adverse impact on our future results of operations or financial position.
Item 1A. Risk Factors.
There have been no material changes to the risk factors as previously disclosed in Part I, Item 1A of our Fiscal 2022 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 14, 2023, the Company’s Board of Directors approved a stock repurchase program pursuant to which the Company may repurchase up to $15.0 million of its common stock through open market and privately negotiated transactions. The timing and the amount of any repurchases will be determined based on the Company’s evaluation of market conditions and other factors. The stock repurchase program will expire in March 2024 and may be suspended, terminated or modified at any time for any reason.
Stock repurchase activity during the three months ended July 29, 2023 was as follows:
Period |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
April 30, 2023 to May 27, 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
15,000,000 |
|
May 28, 2023 to July 1, 2023 |
|
|
1,595,897 |
|
|
$ |
4.70 |
|
|
|
1,595,897 |
|
|
$ |
7,500,001 |
|
July 2, 2023 to July 29, 2023 |
|
|
653,253 |
|
|
$ |
5.07 |
|
|
|
653,253 |
|
|
$ |
4,185,921 |
|
Total |
|
|
2,249,150 |
|
|
$ |
4.81 |
|
|
|
2,249,150 |
|
|
$ |
4,185,921 |
|
(1) Average price paid per share and the approximate dollar value of shares that may yet be purchased under the plan excludes the accrual of excise tax of $0.1 million as of July 29, 2023.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
c) Insider Trading Arrangements
Trading Plans
On
No other directors or executive officers of the Company adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5 trading arrangement, (as defined in Item 408(c) of Regulation S-K) during the quarterly period covered by this report.
27
Item 6. Exhibits.
10.1 |
|
|
|
|
|
31.1 |
|
|
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
|
|
32.2 |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
|
|
|
104 |
|
Cover Page Interactive Data File – The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
* Filed herewith. |
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
DESTINATION XL GROUP, INC. |
||
|
|
|
|
|
Date: August 24, 2023 |
|
By: |
|
/s/ John F. Cooney |
|
|
|
|
John F. Cooney |
|
|
|
|
Senior Vice President, Chief Accounting Officer and Corporate Controller (Duly Authorized Officer and Chief Accounting Officer)
|
29
Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Amended Agreement") is made effective as of May 10, 2023 (the “Effective Date”) between CMRG APPAREL, LLC, (the “Company”), a “Related Entity” as defined in the 2016 Incentive Compensation Plan (as amended), of Destination XL Group, Inc., a Delaware corporation with an office at 555 Turnpike Street, Canton, Massachusetts 02021 (“DXLG” which term includes any affiliates and subsidiaries), and JAMES REATH (the “Executive”) having an address at 159 Watchung Ave., Montclair, NJ 07043.
WITNESSETH:
WHEREAS, the Company desires that Executive work for the Company and Executive desires to be so employed by the Company as its Chief Marketing Officer.
WHEREAS, Executive and the Company desire to set forth in writing the terms and conditions of the Executive's employment with the Company from the date hereof.
NOW, THEREFORE, in consideration of the promises and the mutual promises, representations and covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT
The Company hereby employs Executive and Executive hereby accepts such employment, subject to the terms and conditions herein set forth.
2. TERM
The term of employment under this Amended Agreement (the “Term of Employment”) shall begin on the Effective Date and shall continue until terminated by either party as hereinafter set forth.
3. COMPENSATION
(a) During the Term of Employment, as compensation for the employment services to be rendered by Executive hereunder, the Company agrees to pay to Executive, and Executive agrees to accept, payable in equal bi-weekly installments in accordance with Company practice, an annual base salary of Four Hundred Thousand Dollars and 00/100 Cents ($400,000.00) (the “Base Salary”) as of the Effective Date. The Base Salary shall be reviewed at least annually to ascertain whether, in the judgment of the Company, such Base Salary should be adjusted. If so, the adjusted Base Salary shall be adjusted for all purposes of this Amended Agreement.
(b) In addition to the Base Salary, during the Term of Employment, Executive is eligible to participate in the Company’s Annual Incentive Plan. Such incentive shall be determined and payable in accordance with the Company's incentive program in effect at the time, subject to change from year to year in the Company’s sole discretion. Executive will participate in the
Company’s incentive program and Executive’s target bonus under such plan (if all individual and Company performance conditions are met) shall be 50% of Executive’s actual annual base earnings (which shall be the total Base Salary as may be paid during the fiscal year (“Base Earnings”)). The actual award under the incentive program, if any, may be more or less than the target and will be based on Executive’s performance and the performance of the Company and payment will be made in accordance with and subject to the terms and conditions of the incentive program then in effect.
(c) In addition, during the Term of Employment, Executive is eligible to participate in the Company’s Long-Term Incentive Plan (“LTIP”). Such incentive shall be determined and distributable in accordance with and subject to the terms and conditions as described in the LTIP documents in effect at the time of the award, subject to change from year-to-year in the Compensation Committee’s sole discretion. Executive will participate in the Company’s LTIP at a target incentive rate of 70% of Executive’s Base Salary in effect on the Executive’s Effective Date of Participation, for the incentive period, based upon the Company’s targeted performance as defined in the LTIP documents in effect at the time of the award.
(d) In consideration for the promises in Paragraph 10 below, the Company shall pay Executive a sign-on award consisting of $150,000 cash payable as of October 7, 2022 (the “Sign-on Award” and an inducement grant of $200,000 of restricted stock units of the Common Stock of Destination XL Group, Inc. (“RSUs”) effective October 7, 2022 (the “Inducement Award”). The RSUs granted in the Inducement Award shall be determined based on the close price of the Company’s stock on Thursday, October 6, 2022 and shall vest ratably over three (3) years on the anniversary of the date of grant. Details will be provided in a formal Stand-Alone Inducement Restricted Stock Unit Agreement. The Sign-on Award and Inducement Award are subject to clawback as set forth in Paragraph 7(j).
(e) Executive has requested that he not be required to relocate and the Company has agreed at this time. The Company already advanced $25,000 of the relocation allowance (the “Advance”) to Executive, but will not make any additional Advance to Executive pursuant to this Amended Agreement. In the event Executive ceases to be employed by the Company due to his voluntary termination (other than for Good Reason) prior to June 1, 2024, Executive shall repay such Advance to the Company within thirty (30) days following Executive’s termination of employment; provided, however, that the amount of the Advance that is required to be repaid shall be reduced by 1/12th of the Advance for each completed month that Executive is employed by the Company.
4. EXPENSES
The Company shall pay or reimburse Executive, in accordance with the Company's policies and procedures and upon presentment of suitable vouchers, for all reasonable business and travel expenses, which may be incurred or paid by Executive during the Term of Employment in connection with his employment hereunder. Executive shall be entitled to be reimbursed up to $25,000 per year for commuting expenses to/from the Company's offices in Canton, Massachusetts or at such other location as may be designated from time to time by the Company. Executive shall comply with such restrictions and shall keep such records as the Company may reasonably deem
2
necessary to meet the requirements of the Internal Revenue Code of 1986, as amended from time to time, and regulations promulgated thereunder.
5. OTHER BENEFITS
(a) During the Term of Employment, Executive shall be entitled to such vacations and to participate in and receive any other benefits customarily provided by the Company to its management (including any profit sharing, pension, 401(k), short and long-term disability insurance, medical and dental insurance and group life insurance plans in accordance with and subject to the terms of such plans, including, without limitation, any eligibility requirements contained therein), all as determined from time to time by the Compensation Committee of the Board of Directors in its discretion.
(b) Executive will be eligible to participate in the Company’s annual performance appraisal process.
6. DUTIES
(a) Executive shall perform such duties and functions consistent with the position of Chief Marketing Officer and/or as the Company shall from time to time determine and Executive shall comply in the performance of his duties with the policies of, and be subject to, the direction of the Company.
(b) During the Term of Employment, Executive shall devote substantially all of his time and attention, vacation time and absences for sickness excepted, to the business of the Company, as necessary to fulfill his duties. Executive shall perform the duties assigned to him with fidelity and to the best of his ability. Notwithstanding anything herein to the contrary, and subject to the foregoing and review by the Company’s Board of Directors, Executive shall not be prevented from accepting positions in outside organizations so long as such activities do not interfere with Executive's performance of his duties hereunder and do not violate paragraph 10 hereof.
(c) The principal location at which the Executive shall perform his duties hereunder shall be in Montclair, New Jersey Notwithstanding the foregoing, Executive shall perform such services at such other locations as may be required for the proper performance of his duties hereunder, and Executive recognizes that such duties may involve travel.
7. TERMINATION OF EMPLOYMENT; EFFECT OF TERMINATION
(a) The Term of Employment may be terminated by the Company at any time:
3
(i) upon the determination by the Company that Executive's performance of his duties has not been fully satisfactory for any reason which would not constitute justifiable cause (as hereinafter defined) or for other business reasons necessitating termination which do not constitute justifiable cause, in either case upon thirty (30) days' prior written notice to Executive; or
(ii) upon the determination of the Company that there is justifiable cause (as hereinafter defined) for such termination.
(b) The Term of Employment shall terminate upon:
(i) the death of Executive;
(ii) the date on which the Company elects to terminate the Term of Employment by reason of the "disability" of Executive (as hereinafter defined in subsection (c) herein) pursuant to subsection (g) hereof; or
(iii) Executive’s resignation of employment.
(c) For the purposes of this Amended Agreement, the term "disability" shall mean Executive is physically or mentally incapacitated so as to render Executive incapable of performing the essentials of Executive's job, even with reasonable accommodation, as reasonably determined by the Company, which determination shall be final and binding.
(d) For the purposes hereof, the term "justifiable cause" shall mean: any failure or refusal to perform any of the duties pursuant to this Amended Agreement or any breach of this Amended Agreement by the Executive; Executive’s breach of any material written policies, rules or regulations which have been adopted by the Company; Executive’s repeated failure to perform his duties in a satisfactory manner; Executive's performance of any act or his failure to act, as to which if Executive were prosecuted and convicted, a crime or offense involving money or property of the Company or its subsidiaries or affiliates, or a crime or offense constituting a felony in the jurisdiction involved, would have occurred; any unauthorized disclosure by Executive to any person, firm or corporation of any confidential information or trade secret of the Company or any of its subsidiaries or affiliates; any attempt by Executive to secure any personal profit in connection with the business of the Company or any of its subsidiaries and affiliates; or the engaging by Executive in any business other than the business of the Company and its subsidiaries and affiliates which interferes with the performance of his duties hereunder. Upon termination of Executive's employment for justifiable cause, Executive shall not be entitled to any amounts or benefits hereunder other than such portion of Executive's Base Salary and reimbursement of expenses pursuant to paragraph 4 hereof as have been accrued through the date of his termination of employment.
(e) If the Company terminates this Amended Agreement without "justifiable cause" as provided in subsection 7(a)(i), the Company shall pay Executive his then current base salary for six months (that is, the one month notice period referenced in Paragraph 7(a)(i) and five months after the effectiveness of such termination), payable in equal payments in accordance with the Company’s customary payroll practices commencing with the first payroll period that begins at least 30 days after the termination of the Executive’s Term of Employment conditioned upon the
4
Executive having provided the Company with an executed general release substantially in the form attached hereto as Exhibit A or such other form that is acceptable to the Company, in its sole discretion (the “General Release”) and the time for Executive’s revocation of the General Release having expired. Such payments shall be made in accordance with the Company’s customary payroll practices until paid in full. Any payment pursuant to this paragraph 7(e) is contingent upon Executive’s execution of the General Release within 21 days (or such longer period as may be authorized by the Company or otherwise required by applicable law) after termination of the Term of Employment (and the Executive’s not revoking that General Release) and will be in lieu of payments to which Executive might have been entitled under any other severance plan of the Company.
(f) If Executive shall die during the term of his employment hereunder, this Amended Agreement shall terminate immediately. In such event, the estate of Executive shall thereupon be entitled to receive such portion of Executive's base annual salary and reimbursement of expenses pursuant to paragraph 4 as have been accrued through the date of his death.
(g) Upon Executive's "disability", the Company shall have the right to terminate Executive's employment. Any termination pursuant to this subsection (g) shall be effective on the earlier of (i) the date 30 days after which Executive shall have received written notice of the Company's election to terminate or (ii) the date he begins to receive long-term disability insurance benefits under the policy provided by the Company pursuant to paragraph 5 hereof.
(h) Upon the resignation of Executive in any capacity, that resignation will be deemed to be a resignation from all offices and positions that Executive holds with respect to the Company and any of its subsidiaries and affiliates. In the event of Executive’s resignation, he shall be entitled only to receive such portion of his annual Base Salary and reimbursement of expenses pursuant to paragraph 4 as have been accrued through the date of his resignation.
(i) Change of Control. In the event the Term of Employment is terminated by the Company without justifiable cause (as defined herein) or Executive resigns with Good Reason (as defined herein) within one (1) year following a Change of Control of the Company has occurred, then, in such event, the Company shall pay Executive an amount equal to twelve (12) months of Base Salary in effect at the time of the termination. For the purposes of the foregoing, Change of Control shall have the meaning set forth in the Company’s 2016 Incentive Compensation Plan (without regard to any subsequent amendments thereto). For purposes of the foregoing, “Good Reason” means the occurrence of any of the following: (i) a material diminution in the Executive’s base compensation; (ii) a material diminution in the Executive’s authority, duties, or responsibilities; (iii) a material change in the geographic location at which the Employee must perform the services under this Amended Agreement; or (iv) any other action or inaction that constitutes a material breach by the Company of this Amended Agreement. For purposes of this provision, Good Reason shall not be deemed to exist unless the Employee’s termination of employment for Good Reason occurs within 2 years following the initial existence of one of the conditions specified in clauses (i) through (iv) above, the Employee provides the Company with written notice of the existence of such condition within 90 days after the initial existence of the condition, and the Company fails to remedy the condition within 30 days after its receipt of such notice. The Company shall pay the amount required under this paragraph 7(i) in a single payment thirty (30) days after termination of the Term of Employment, subject to and conditioned upon the Executive’s execution of the General Release required pursuant to
5
paragraph 7(k) hereof and such release becoming irrevocable. Any payments made pursuant to this paragraph 7(i) will be in lieu of payments to which Executive might have been entitled under paragraph 7(e) of this Amended Agreement or under any other severance plan of the Company. The payments under this Amended Agreement shall be reduced if and to the extent necessary to avoid any payments or benefits to Executive being treated as “excess parachute payments” within the meaning of Internal Revenue Code Section 280G(b)(i).
(j) Clawback of Certain Compensation and Benefits. If, after the termination of the Term of Employment for any reason other than by the Company for “justifiable cause”:
6
(k) Any payment pursuant to paragraph 7(e) or 7(i) shall be contingent upon Executive’s execution of the General Release within 21 days after termination of the Term of Employment (or such longer time as may be authorized by the Company or otherwise required by applicable law), and the Executive’s not revoking that release.
8. COMPLIANCE WITH SECTION 409A
(a) General. It is the intention of both the Company and the Executive that the benefits and rights to which the Executive could be entitled pursuant to this Amended Agreement comply with Section 409A of the Code and the Treasury Regulations and other guidance promulgated or issued thereunder (“Section 409A”), to the extent that the requirements of Section 409A are applicable thereto, and the provisions of this Amended Agreement shall be construed in a manner consistent with that intention. If the Executive or the Company believes, at any time, that any such benefit or right that is subject to Section 409A does not so comply, it shall promptly advise the other and shall negotiate reasonably and in good faith to amend the timing of such benefits and rights such that they comply with Section 409A (with the most limited possible economic effect on the Executive).
(b) Distributions on Account of Separation from Service. If and to the extent required to comply with Section 409A, no payment or benefit required to be paid under this Amended Agreement on account of termination of the Executive’s employment shall be made unless and until the Executive incurs a “separation from service” within the meaning of Section 409A.
(c) 6 Month Delay for “Specified Employees”.
(i) If the Executive is a “specified employee”, then no payment or benefit that is payable on account of the Executive’s “separation from service”, as that term is defined for purposes of Section 409A, shall be made before the date that is six months after the Executive’s “separation from service” (or, if earlier, the date of the Executive’s death) if and to the extent that such payment or benefit constitutes deferred compensation (or may be nonqualified deferred compensation) under Section 409A and such deferral is required to comply with the requirements of Section 409A. Any payment or benefit delayed by reason of the prior sentence shall be paid out or provided in a single lump sum at the end of such required delay period in order to catch up to the original payment schedule. There shall be added to any payments that are delayed pursuant to this provision interest at the prime rate as reported in the Wall Street Journal for the date of the Executive’s separation from service. Such interest shall be calculated from the date on which the payment otherwise would have been made until the date on which the payment is made.
(ii) For purposes of this provision, the Executive shall be considered to be a “specified employee” if, at the time of his separation from service, the Executive is a “key employee”, within the meaning of Section 416(i) of the Code, of the Company (or any person or entity with whom the Company would be considered a single employer under Section 414(b) or Section 414(c) of the Code) any stock in which is publicly traded on an established securities market or otherwise.
(d) No Acceleration of Payments. Neither the Company nor the Executive, individually or in combination, may accelerate any payment or benefit that is subject to Section 409A, except in compliance with Section 409A and the provisions of this Amended Agreement,
7
and no amount that is subject to Section 409A shall be paid prior to the earliest date on which it may be paid without violating Section 409A.
(e) Treatment of Each Installment as a Separate Payment. For purposes of applying the provisions of Section 409A to this Amended Agreement, each separately identified amount to which the Executive is entitled under this Amended Agreement shall be treated as a separate payment. In addition, to the extent permissible under Section 409A, any series of installment payments under this Amended Agreement shall be treated as a right to a series of separate payments.
(f) Taxable Reimbursements.
(i) Any reimbursements by the Company to the Executive of any eligible expenses under this Amended Agreement that are not excludable from the Executive’s income for Federal income tax purposes (the “Taxable Reimbursements”) shall be made by no later than the earlier of the date on which they would be paid under the Company’s normal policies and the last day of the taxable year of the Executive following the year in which the expense was incurred.
(ii) The amount of any Taxable Reimbursements to be provided to the Executive during any taxable year of the Executive shall not affect the expenses eligible for reimbursement to be provided in any other taxable year of the Executive.
(iii) The right to Taxable Reimbursements shall not be subject to liquidation or exchange for another benefit.
9. REPRESENTATION AND AGREEMENTS OF EXECUTIVE
(a) Executive represents and warrants that he is free to enter into this Amended Agreement and to perform the duties required hereunder, and that there are no employment contracts or understandings, restrictive covenants or other restrictions, whether written or oral, preventing the performance of his duties hereunder.
(b) Executive agrees to submit to a medical examination and to cooperate and supply such other information and documents as may be required by any insurance company in connection with the Company's obtaining life insurance on the life of Executive, and any other type of insurance or fringe benefit as the Company shall determine from time to time to obtain.
(c) Executive represents and warrants that he has never been convicted of a felony and he has not been convicted or incarcerated for a misdemeanor within the past five years, other than a first conviction for drunkenness, simple assault, speeding, minor traffic violations, affray, or disturbance of the peace.
(d) Executive represents and warrants that he has never been a party to any judicial or administrative proceeding that resulted in a judgment, decree, or final order (i) enjoining his from future violations of, or prohibiting any violations of any federal or state securities law, or (ii) finding any violations of any federal or state securities law.
(e) Executive represents and warrants that he has never been accused of any impropriety in connection with any employment;
8
Any breach of any of the above representations and warranties is "justifiable cause" for termination under paragraph 7(d) of this Amended Agreement.
10. NON-COMPETITION
(a) In consideration for the Sign-On Award, the Inducement Award referenced in Paragraph 3(d), the Advance referenced in paragraph 3(e) and the potential to receive additional compensation pursuant to paragraph 7(a)(i) and 7(e) above, Executive further covenants and agrees that during the Term of Employment and during the one (1) year period immediately following the Termination Date (the "Non-Competitive Period"), Executive shall not, directly or indirectly, as owner, partner, joint venturer, stockholder, employee, broker, agent, principal, trustee, corporate officer, director, licensor, or in any capacity whatsoever, engage in, become financially interested in, be employed by, render any consultation or business advice with respect to, accept any competitive business on behalf of, or have any connection with any business which is competitive with products or services of the Company or any subsidiaries and affiliates, in any geographic area in which the Executive provided services or had a material presence or influence on behalf of the Company, whether in the United States, Canada, Europe or elsewhere during the two years prior to Executive’s separation from the Company; provided, however, that Executive may own any securities of any corporation which is engaged in such business and is publicly owned and traded but in an amount not to exceed at any one time one percent (1%) of any class of stock or securities of such corporation. In addition, Executive shall not, during the Non-Competitive Period, directly or indirectly: (1) request or cause any suppliers or customers with whom the Company or any of its subsidiaries or affiliates has a business relationship to cancel or terminate any such business relationship with the Company or any of its subsidiaries or affiliates or otherwise compromise the Company’s good will; or (2) solicit, hire, interfere with or entice from the Company or any of its subsidiaries or affiliates any employee (or former employee who has been separated from service for less than 12 months) of the Company or any of its subsidiaries or affiliates.
(b) If any portion of the restrictions set forth in this paragraph 10 should, for any reason whatsoever, be declared invalid by a court of competent jurisdiction, the validity or enforceability of the remainder of such restrictions shall not thereby be adversely affected. For the purposes of this paragraph 10, a business competitive with the products and services of the Company (or such subsidiaries and affiliates) is limited to a specialty retailer which primarily distributes, sells or markets so-called "big and tall" apparel of any kind for men or which utilizes the "big and tall" retail or wholesale marketing concept as part of its business.
(c) Executive acknowledges that the Company conducts business throughout the world, that Executive’s duties and responsibilities on behalf of the Company are of a worldwide nature, that its sales and marketing prospects are for continued expansion throughout the world and therefore, the territorial and time limitations set forth in this paragraph 10 are reasonable and properly required for the adequate protection of the business of the Company and its subsidiaries and affiliates. In the event any such territorial or time limitation is deemed to be unreasonable by a court of competent jurisdiction, Executive agrees to the reduction of the territorial or time limitation to the area or period which such court shall deem reasonable.
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(d) The existence of any claim or cause of action (a claim or cause of action is defined as a claim or cause of action which results from a breach of the terms and provisions of this Amended Agreement by the Company, regardless of whether the breach is material) by Executive against the Company or any subsidiary or affiliate shall not constitute a defense to the enforcement by the Company or any subsidiary or affiliate of the foregoing restrictive covenants, but such claim or cause of action shall be litigated separately.
11. INVENTIONS AND DISCOVERIES
(a) Upon execution of this Amended Agreement and thereafter, Executive shall promptly and fully disclose to the Company, and with all necessary detail for a complete understanding of the same, all existing and future developments, know-how, discoveries, inventions, improvements, concepts, ideas, writings, formulae, processes and methods (whether copyrightable, patentable or otherwise) made, received, conceived, acquired or written during working hours, or otherwise, by Executive (whether or not at the request or upon the suggestion of the Company) during the period of his employment with, or rendering of advisory or consulting services to, the Company or any of its subsidiaries and affiliates, solely or jointly with others, in or relating to any activities of the Company or its subsidiaries and affiliates known to his as a consequence of his employment or the rendering of advisory and consulting services hereunder (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and transfer, to the Company, all his rights, title and interest in and to the Subject Matter, and Executive further agrees to deliver to the Company any and all drawings, notes, specifications and data relating to the Subject Matter, and to execute, acknowledge and deliver all such further papers, including applications for copyrights or patents, as may be necessary to obtain copyrights and patents for any thereof in any and all countries and to vest title thereto to the Company. Executive shall assist the Company in obtaining such copyrights or patents during the term of this Amended Agreement, and at any time thereafter on reasonable notice and at mutually convenient times, and Executive agrees to testify in any prosecution or litigation involving any of the Subject Matter; provided, however, after the Term of Employment that Executive shall be compensated in a timely manner at the rate of $250 per day (or portion thereof), plus out-of-pocket expenses incurred in rendering such assistance or giving or preparing to give such testimony if it is required after the termination of this Amended Agreement.
12. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
(a) Executive acknowledges that the Company possesses certain confidential and propriety information that has been or may be revealed to, or learned by, Executive during the course of Executive’s employment with the Company and that it would be unfair to use that information or knowledge to compete with or to otherwise disadvantage the Company. Executive shall not, during the Term of Employment or at any time following the Term of Employment, directly or indirectly, disclose or permit to be known (other than as is required in the regular course of his duties (including without limitation disclosures to the Company's advisors and consultants), as required by law (in which case Executive shall give the Company prior written notice of such required disclosure) or with the prior written consent of the Board of Directors, to any person, firm, corporation, or other entity, any confidential information acquired by him during the course of, or as an incident to, his employment or the rendering of his advisory or
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consulting services hereunder, relating to the Company or any of its subsidiaries or affiliates, the directors of the Company or its subsidiaries or affiliates, any supplier or customer of the Company or any of their subsidiaries or affiliates, or any corporation, partnership or other entity owned or controlled, directly or indirectly, by any of the foregoing, or in which any of the foregoing has a beneficial interest, including, but not limited to, the business affairs of each of the foregoing. Such confidential information shall include, but shall not be limited to, proprietary technology, trade secrets, patented processes, research and development data, know-how, market studies and forecasts, financial data, competitive analyses, pricing policies, employee lists, personnel policies, employee compensation and benefits information, the substance of agreements with customers, suppliers and others, marketing or dealership arrangements, servicing and training programs and arrangements, supplier lists, customer lists and any other documents embodying such confidential information. This confidentiality obligation shall not apply to any confidential information, which is or becomes publicly available other than pursuant to a breach of this paragraph 12(a) by Executive.
(b) All information and documents relating to the Company and its subsidiaries or affiliates as herein above described (or other business affairs) shall be the exclusive property of the Company, and Executive shall use commercially reasonable best efforts to prevent any publication or disclosure thereof. Upon termination of Executive's employment with the Company, all documents, records, reports, writings and other similar documents containing confidential information, including copies thereof then in Executive's possession or control shall be returned and left with the Company.
(c) In accordance with the Federal Defend Trade Secrets Act, Executive cannot be held criminally or civilly liable under any federal or state trade secret law for disclosing a trade secret (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed under seal in a lawsuit or other proceeding. Notwithstanding this immunity from liability, Executive may be held liable if Executive unlawfully accesses trade secrets by unauthorized means.
13. SPECIFIC PERFORMANCE
Executive agrees that if he breaches, or threatens to commit a breach of, any enforceable provision of paragraphs 10, 11 or 12 (the "Restrictive Covenants"), the Company shall have, in addition to, and not in lieu of, any other rights and remedies available to the Company under law and in equity, the right to have the Restrictive Covenants specifically enforced by a court of competent jurisdiction, it being agreed that any such breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Notwithstanding the foregoing, nothing herein shall constitute a waiver by Executive of his right to contest whether such a breach or threatened breach of any Restrictive Covenant has occurred. In the event of litigation between the parties to this Amended Agreement regarding their respective rights and obligations under paragraphs 10, 11, or 12 hereof, the prevailing party shall be entitled to recover from the other all attorneys’ fees and expenses reasonably incurred in obtaining a ruling in the prevailing party’s favor. Any such damages, attorneys’ fees and costs shall be in addition to and not in lieu of any injunctive relief that may be available to the Company.
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14. AMENDMENT OR ALTERATION
No amendment or alteration of the terms of this Amended Agreement shall be valid unless made in writing and signed by both of the parties hereto.
15. GOVERNING LAW
This Amended Agreement shall be governed by, and construed and enforced in accordance with the substantive laws of the Commonwealth of Massachusetts, without regard to its principles of conflicts of laws.
16. SEVERABILITY
The holding of any provision of this Amended Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Amended Agreement, which shall remain in full force and effect.
17. NOTICES
Any notices required or permitted to be given hereunder shall be sufficient if in
writing, and if delivered by hand or courier, or sent by certified mail, return receipt requested, to the addresses set forth above or such other address as either party may from time to time designate in writing to the other, and shall be deemed given as of the date of the delivery or of the placement of the notice in the mail.
18. WAIVER OF BREACH
It is agreed that a waiver by either party of a breach of any provision of this Amended Agreement shall not operate, or be construed as a waiver of any subsequent breach by that same party.
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19. ENTIRE AGREEMENT AND BINDING EFFECT
This Amended Agreement contains the entire agreement of the parties with respect to the subject matter hereof and shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, distributors, successors and assigns and supersedes any and all prior agreements between the parties whether oral or written. This Amended Agreement may not be modified except upon further written agreement executed by both parties. Executive agrees that the Company may in its sole discretion, during the term of Executive’s employment with the Company and thereafter, provide copies of this Amended Agreement (or excerpts of the Amended Agreement) to others, including businesses or entities that may employ, do business with, or consider employing Executive in the future. Executive further agrees that any subsequent change or changes in his duties, compensation or areas of responsibility shall in no way affect the validity of this Amended Agreement or otherwise render inapplicable any of the provisions of paragraphs 10 through 13 of this Amended Agreement, which shall remain in full force and effect except as may be modified by a subsequent written agreement.
20. SURVIVAL
Except as otherwise expressly provided herein, the termination of Executive's employment hereunder or the expiration of this Amended Agreement shall not affect the enforceability of paragraphs 7 through 26 hereof, which shall survive the termination or expiration.
21. RESOLUTION OF DISPUTES
Any and all disputes arising under or in connection with this Amended Agreement shall be resolved in accordance with this paragraph 21 and paragraph 15.
The parties shall attempt to resolve any dispute, controversy or difference that may arise between them through good faith negotiations. In the event the parties fail to reach resolution of any such dispute within thirty (30) days after entering into negotiations, either party may proceed to institute action in any state or federal court located within the Commonwealth of Massachusetts, which courts shall have exclusive jurisdiction, and each party consents to the personal jurisdiction of any such state or federal court. Both parties waive their right to a trial by jury.
22. NON-DISPARAGEMENT
Executive agrees not to make disparaging, critical or otherwise detrimental comments to any person or entity concerning the Company, its officers, directors, trustees, and employees or the services or programs provided or to be provided by the Company and the Company agrees not to make any disparaging, critical or otherwise detrimental comments to any person or entity concerning Executive.
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23. FURTHER ASSURANCES
The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Amended Agreement.
24. SUBSIDIARIES AND AFFILIATES
For purposes of this Amended Agreement:
(a) “affiliate” means any entity that controls, is controlled by, or is under common control with, the Company, and “control” means the power to exercise a controlling influence over the management or policies of an entity, unless such power is solely the result of an official position with such entity; and
(b) “subsidiary” means any corporation or other entity in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of the then outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors (or similar governing body of a non-corporate entity) or in which the Company has the right to receive 50% or more of the distribution of profits or 50% or more of the assets on liquidation or dissolution.
25. HEADINGS
The paragraph headings appearing in this Amended Agreement are for the purposes of easy reference and shall not be considered a part of this Amended Agreement or in any way modify, amend or affect its provisions.
26. COUNTERPARTS
This Amended Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amended Agreement, under
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seal, as of the date and year first above written.
CMRG APPAREL, LLC
By: /s/ Harvey S. Kanter |
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May 10, 2023 |
Name: Harvey S. Kanter |
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Its: President, Chief Executive Officer |
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/s/ James Reath |
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May 10, 2023 |
James Reath |
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EXHIBIT A
FORM OF RELEASE OF CLAIMS
GENERAL RELEASE OF CLAIMS
Executive acknowledges that Executive is specifically advised to consult with an attorney of Executive’s choosing before signing this General Release of Claims, and through this General Release of Claims advises Executive to consult with his attorney with respect to possible claims, including but not limited to claims under the ADEA, and that Executive understands that the ADEA is a Federal statute that, among other things, prohibits discrimination on the basis of age in employment and employee benefits and benefit plans. Without limiting the generality of the release provided above, Executive expressly waives any and all claims under ADEA that he may have as of the date hereof. Executive further understands that by signing this General Release of Claims he is in fact waiving, releasing and forever giving up any claim under the ADEA as well as all other laws within the scope of this paragraph 1 that may have existed on or prior to the date hereof. Notwithstanding anything in this paragraph 1 to the contrary, this General Release of
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Claims shall not apply to (i) any rights to receive any payments pursuant to the Employment Agreement, or any accrued but unpaid benefits under any employee benefit plan maintained by the Company (ii) any rights or claims that may arise as a result of events occurring after this General Release of Claims is executed, (iii) any indemnification rights Executive may have as a former officer or director of the Company or its subsidiaries or affiliated companies, (iv) any claims for benefits under any directors’ and officers’ liability policy maintained by the Company or its subsidiaries or affiliated companies in accordance with the terms of such policy, (v) any rights as a holder of equity securities of the Company, and (vi) any rights or claims that, by law, may not be waived, including claims for unemployment compensation and workers' compensation. Nothing contained in this Agreement prevents Executive from filing a charge, cooperating with or participating in any investigation or proceeding before any federal or state Fair Employment Practices Agency, including, without limitation, the Equal Employment Opportunity Commission, except that Executive acknowledges that he will not be able to recover any monetary benefits in connection with any such claim, charge or proceeding.
3. Non-Competition.
(a) In consideration for the consideration set forth in the Employment Agreement and the payment of severance benefits set forth in Section 7 of the Employment Agreement, Executive further covenants and agrees that during the Term of Employment and during the one (1) year period immediately following the Termination Date (the "Non-Competitive Period"), Executive shall not, directly or indirectly, as owner, partner, joint venturer, stockholder, employee, broker, agent, principal, trustee, corporate officer, director, licensor, or in any capacity whatsoever, engage in, become financially interested in, be employed by, render any consultation or business advice with respect to, accept any competitive business on behalf of, or have any connection with any business which is competitive with products or services of the Company or any subsidiaries and affiliates, in any geographic area in which the Executive provided services or had a material presence or influence on behalf of the Company, whether in the United States, Canada, Europe or elsewhere during the two years prior to Executive’s separation from the Company; provided, however, that Executive may own any securities of any corporation which is engaged in such business and is publicly owned and traded but in an amount not to exceed at any one time one percent (1%) of any class of stock or securities of such corporation. In addition, Executive shall not, during the Non-Competitive Period, directly or indirectly: (1) request or cause any suppliers or customers with whom the Company or any of its subsidiaries or affiliates has a business relationship to cancel or terminate any such business relationship with the Company or any of its subsidiaries or affiliates or otherwise compromise the Company’s good will; or (2) solicit, hire, interfere with or entice from the Company or any of its subsidiaries or affiliates any employee (or former employee who has been separated from service for less than 12 months) of the Company or any of its subsidiaries or affiliates.
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(b) If any portion of the restrictions set forth in this paragraph 3 should, for any reason whatsoever, be declared invalid by a court of competent jurisdiction, the validity or enforceability of the remainder of such restrictions shall not thereby be adversely affected. For the purposes of this paragraph 3, a business competitive with the products and services of the Company (or such subsidiaries and affiliates) is limited to a specialty retailer which primarily distributes, sells or markets so-called "big and tall" apparel of any kind for men or which utilizes the "big and tall" retail or wholesale marketing concept as part of its business.
(c) Executive acknowledges that the Company conducts business throughout the world, that Executive’s duties and responsibilities on behalf of the Company are of a worldwide nature, that its sales and marketing prospects are for continued expansion throughout the world and therefore, the territorial and time limitations set forth in this paragraph 3 are reasonable and properly required for the adequate protection of the business of the Company and its subsidiaries and affiliates. In the event any such territorial or time limitation is deemed to be unreasonable by a court of competent jurisdiction, Executive agrees to the reduction of the territorial or time limitation to the area or period which such court shall deem reasonable.
(d) The existence of any claim or cause of action (a claim or cause of action is defined as a claim or cause of action which results from a breach of the terms and provisions of this Agreement by the Company, regardless of whether the breach is material) by Executive against the Company or any subsidiary or affiliate shall not constitute a defense to the enforcement by the Company or any subsidiary or affiliate of the foregoing restrictive covenants, but such claim or cause of action shall be litigated separately.
4. Inventions and Discoveries.
(a) Upon execution of this General Release of Claims and thereafter, Executive shall promptly and fully disclose to the Company, and with all necessary detail for a complete understanding of the same, all existing and future developments, know-how, discoveries, inventions, improvements, concepts, ideas, writings, formulae, processes and methods (whether copyrightable, patentable or otherwise) made, received, conceived, acquired or written during working hours, or otherwise, by Executive (whether or not at the request or upon the suggestion of the Company) during the period of his employment with, or rendering of advisory or consulting services to, the Company or any of its subsidiaries and affiliates, solely or jointly with others, in or relating to any activities of the Company or its subsidiaries and affiliates known to him as a consequence of his employment or the rendering of advisory and consulting services hereunder (collectively the "Subject Matter").
(b) Executive hereby assigns and transfers, and agrees to assign and transfer, to the Company, all his rights, title and interest in and to the Subject Matter, and Executive further agrees to deliver to the Company any and all drawings, notes, specifications and data relating to the Subject Matter, and to execute, acknowledge and deliver all such further papers, including applications for copyrights or patents, as may be necessary to obtain copyrights and patents for any thereof in any and all countries and to vest title thereto to the Company. Executive shall assist the Company in obtaining such copyrights or patents during the term of this General Release Of Claims, and at any time thereafter on reasonable notice and at mutually convenient times, and Executive agrees to testify in any prosecution or litigation involving any of the Subject Matter; provided, however, that Executive shall be compensated in a timely manner at the rate of $250 per
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day (or portion thereof), plus out-of-pocket expenses incurred in rendering such assistance or giving or preparing to give such testimony.
5. Non-Disclosure of Confidential Information.
(a) Executive acknowledges that the Company possesses certain confidential and propriety information that has been revealed to him or learned by Executive during the course of Executive’s employment with the Company and that it would be unfair to use that information or knowledge to compete with or to otherwise disadvantage the Company. Executive shall not, at any time following the end of Executive’s employment with the Company, directly or indirectly, disclose or permit to be known (other than as is required in the regular course of his duties (including without limitation disclosures to the Company's advisors and consultants), as required by law (in which case Executive shall give the Company prior written notice of such required disclosure) or with the prior written consent of the Board of Directors, to any person, firm, corporation, or other entity, any confidential information acquired by him during the course of, or as an incident to, his employment or the rendering of his advisory or consulting services hereunder, relating to the Company or any of its subsidiaries or affiliates, the directors of the Company or its subsidiaries or affiliates, any supplier or customer of the Company or any of their subsidiaries or affiliates, or any corporation, partnership or other entity owned or controlled, directly or indirectly, by any of the foregoing, or in which any of the foregoing has a beneficial interest, including, but not limited to, the business affairs of each of the foregoing. Such confidential information shall include, but shall not be limited to, proprietary technology, trade secrets, patented processes, research and development data, know-how, market studies and forecasts, financial data, competitive analyses, pricing policies, employee lists, personnel policies, the substance of agreements with customers, suppliers and others, marketing or dealership arrangements, servicing and training programs and arrangements, supplier lists, customer lists and any other documents embodying such confidential information. This confidentiality obligation shall not apply to any confidential information, which is or becomes publicly available other than pursuant to a breach of this paragraph 5(a) by Executive.
(b) All information and documents relating to the Company and its subsidiaries or affiliates as herein above described (or other business affairs) shall be the exclusive property of the Company, and Executive shall use commercially reasonable best efforts to prevent any publication or disclosure thereof. Upon termination of Executive's employment with the Company, all documents, records, reports, writings and other similar documents containing confidential information, including copies thereof then in Executive's possession or control shall be returned and left with the Company.
(c) In accordance with the Federal Defend Trade Secrets Act, Executive cannot be held criminally or civilly liable under any federal or state trade secret law for disclosing a trade secret (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed under seal in a lawsuit or other proceeding. Notwithstanding this immunity from liability, Executive may be held liable if Executive unlawfully accesses trade secrets by unauthorized means.
6. Specific Performance. Executive agrees that if he breaches, or threatens to commit a breach of, any enforceable provision of paragraphs 3, 4 or 5 (the "Restrictive Covenants"), the
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Company shall have, in addition to, and not in lieu of, any other rights and remedies available to the Company under law and in equity, the right to have the Restrictive Covenants specifically enforced by a court of competent jurisdiction, it being agreed that any such breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company. Notwithstanding the foregoing, nothing herein shall constitute a waiver by Executive of his right to contest whether such a breach or threatened breach of any Restrictive Covenant has occurred. Any such damages, attorneys’ fees and costs shall be in addition to and not in lieu of any injunctive relief that may be available to the Company.
7. Executive is advised that Executive has up to twenty-one (21) calendar days to consider this General Release before signing it. Executive may knowingly and voluntarily waive that up to twenty-one (21) day period by signing this General Release of Claims earlier. However, in the event Executive’s employment terminated as part of a group termination within the meaning of the Older Workers Benefits Protection Act, the up to twenty-one (21) day consideration period shall be enlarged to up to forty-five (45) calendar days, and Executive shall be provided with additional disclosures required by the Older Workers Benefit Protection Act prior to the start of the up to forty-five (45) calendar day consideration period. In either case, Executive also shall have seven (7) business days following the date on which Executive signs this General Release of Claims within which to revoke it by providing a written notice of his revocation to the Company. Any such revocation shall be directed to the HR Director, Associate Relations & Compliance and must be delivered to the HR Director, Associate Relations & Compliance within that seven (7) day revocation period, or mailed to Destination XL Group, Inc., Attn: HR Director, Associate Relations & Compliance, 555 Turnpike Street, Canton, MA 02021 and postmarked within the seven (7) day revocation period.
8. Executive acknowledges that this General Release of Claims will be governed by and construed and enforced in accordance with the internal laws of the Commonwealth of Massachusetts applicable to contracts made and to be performed entirely within the Commonwealth.
9. Executive acknowledges that he has read this General Release of Claims, has been advised that he should consult with an attorney before executing this general release of claims, and that he understands all of its terms and executes it voluntarily and with full knowledge of its significance and the consequences thereof.
10. This General Release of Claims shall take effect on the eighth business day following Executive’s execution of this General Release of Claims unless Executive’s written
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revocation is delivered to the Company within seven (7) business days after such execution.
James Reath
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Exhibit 31.1
CERTIFICATION
I, Harvey S. Kanter, certify that:
Date: |
August 24, 2023 |
By: |
/s/ Harvey S. Kanter |
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Harvey S. Kanter |
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Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Peter H. Stratton, Jr., certify that:
Date: |
August 24, 2023 |
By: |
/s/ Peter H. Stratton, Jr. |
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Peter H. Stratton, Jr. |
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Destination XL Group, Inc. (the “Company”) for the period ended July 29, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Harvey S. Kanter, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
This certification is being furnished as an exhibit to the Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except to the extent that the Company specifically incorporates this certification by reference.
Date: |
August 24, 2023 |
By: |
/s/ Harvey S. Kanter |
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Harvey S. Kanter |
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Chief Executive Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Destination XL Group, Inc. (the “Company”) for the period ended July 29, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter H. Stratton, Jr., Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
This certification is being furnished as an exhibit to the Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. This certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing, except to the extent that the Company specifically incorporates this certification by reference.
Date: |
August 24, 2023 |
By: |
/s/ Peter H. Stratton, Jr. |
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Peter H. Stratton, Jr. |
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Chief Financial Officer |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.