What changed in this filing

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Item 1. Financial Statements

2022-05-26 compared with 2021-11-19 · 256 added, 413 removed, 442 unchanged (60% of the section changed)

3 unchanged sentences

(In thousands, except share data)

October 30, 2021

April 30, 2022

January 29, 2022

10 unchanged sentences

Intangible assets

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

2 unchanged sentences

Operating leases, current

Borrowings under credit facility

Total current liabilities

Long-term liabilities:

Long-term debt

Operating leases, non-current

2 unchanged sentences

Commitments and contingencies

Stockholders' equity (deficit):

Stockholders' equity:

Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 125,000,000 shares and 100,000,000 authorized at October 30, 2021 and January 30, 2021, respectively, 76,777,738 and 64,656,384 shares issued at October 30, 2021 and January 30, 2021, respectively

Common stock, $ 0.01 par value, 125,000,000 shares authorized, 77,323,419 and 77,025,419 shares issued at April 30, 2022 and January 29, 2022, respectively

Additional paid-in capital

Treasury stock at cost, 12,755,873 shares at October 30, 2021 and January 30, 2021

Treasury stock at cost, 13,701,974 shares and 12,755,873 shares at April 30, 2022 and January 29, 2022, respectively

Accumulated deficit

Accumulated other comprehensive loss

Total stockholders' equity (deficit)

Total liabilities and stockholders' equity (deficit)

Total stockholders' equity

Total liabilities and stockholders' equity

The accompanying notes are an integral part of the consolidated financial statements.

3 unchanged sentences

For the Three Months Ended

For the Nine Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

(Fiscal 2021)

(Fiscal 2020)

April 30, 2022

(Fiscal 2022)

2 unchanged sentences

Selling, general and administrative

Impairment of assets

Impairment (gain) of assets

Depreciation and amortization

Total expenses

Operating income (loss)

Operating income

Interest expense, net

Income (loss) before provision for income taxes

Income before provision for income taxes

Provision for income taxes

Net income (loss)

Net income (loss) per share - basic

Net income (loss) per share - diluted

Net income per share - basic

Net income per share - diluted

Weighted-average number of common shares outstanding:

1 unchanged sentence

DESTINATION XL GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

For the Three Months Ended

For the Nine Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

(Fiscal 2021)

(Fiscal 2020)

April 30, 2022

(Fiscal 2022)

(Fiscal 2021)

Net income (loss)

Other comprehensive income before taxes:

4 unchanged sentences

Other comprehensive income, net of tax

Comprehensive income (loss)

Comprehensive income

The accompanying notes are an integral part of the consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

(In thousands)

1 unchanged sentence

Comprehensive

Income (Loss)

Balance at January 29, 2022

Issuance of common stock through private direct offering, net of offering costs

Board of directors compensation

Stock compensation expense

Restricted stock units (RSUs) granted for achievement of performance-based

compensation, reclassified from liability to equity

Issuance of common stock, upon RSUs release

Accumulated other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at May 1, 2021

Board of directors compensation

Stock compensation expense

Exercise of stock options

Accumulated other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at July 31, 2021

Board of directors compensation

Stock compensation expense

Issuance of common stock, upon PSUs release

Shares withheld for taxes related to net share settlement

Exercise of stock options

Shares withheld for taxes related to net share settlements

Repurchase of common stock

Accumulated other comprehensive income (loss):

1 unchanged sentence

Foreign currency, net of taxes

Balance at October 30, 2021

Balance at April 30, 2022

The accompanying notes are an integral part of the consolidated financial statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

EQUITY (DEFICIT)

(In thousands)

1 unchanged sentence

Comprehensive

Income (Loss)

Balance at February 1, 2020

Balance at January 30, 2021

Issuance of common stock through private direct offering, net of offering costs

Board of directors compensation

1 unchanged sentence

Issuance of common stock, upon RSUs release

Deferred stock vested

Accumulated other comprehensive income (loss):

2 unchanged sentences

Balance at May 1, 2021

Stock compensation expense

Deferred stock vested

Accumulated other comprehensive income (loss):

Pension plan, net of taxes

Foreign currency, net of taxes

Balance at August 1, 2020

Board of directors compensation

Stock compensation expense

Issuance of common stock, upon RSUs release

Deferred stock vested

Accumulated other comprehensive income:

Pension plan, net of taxes

Balance at October 31, 2020

The accompanying notes are an integral part of the consolidated financial statements.

2 unchanged sentences

(In thousands)

For the Nine Months Ended

October 30, 2021

October 31, 2020

April 30, 2022

(Fiscal 2022)

1 unchanged sentence

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

Amortization and write-off of deferred debt issuance costs

Impairment of assets

Impairment (gain) of assets

Depreciation and amortization

12 unchanged sentences

Cash flows from financing activities:

Repurchase of common stock

Proceeds from issuance of common stock from private direct offering, net of offering costs

Repayment of FILO loans

Repayment of FILO loan

Proceeds from new FILO loan

Net borrowings (repayments) under credit facility

Debt extinguishment costs

Net repayments under credit facility

Debt issuance costs

1 unchanged sentence

Proceeds from the exercise of stock options

Net cash provided by (used for) financing activities

Net increase (decrease) in cash and cash equivalents

Net cash used for financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents:

13 unchanged sentences

Fiscal 2022 and fiscal 2021 are 52-week periods ending on January 28, 2023 and January 29, 2022, respectively.

COVID-19 Pandemic and its impact on results and comparability of financial statements

On March 11, 2020, the World Health Organization declared the current outbreak of a novel coronavirus disease (“COVID-19”) as a global pandemic.

The COVID-19 pandemic had an adverse effect on the Company’s operations during fiscal 2020.

All of the Company’s store locations were closed temporarily on March 17, 2020 and the majority of the Company’s workforce was furloughed in March 2020.

The Company began reopening stores in late April and by the end of June 2020 all retail stores had been reopened, but the majority with reduced operating hours.

As a result of the impact of the pandemic on our business in fiscal 2020, including the temporary closure of all of our stores in fiscal 2020, results for the third quarter and first nine months of fiscal 2021 may not be comparable to the results for the third quarter and first nine months of fiscal 2020.

While vaccines are being widely distributed and many areas where our stores are located currently have limited or no restrictions, the duration of the COVID-19 pandemic and its variants remain uncertain and could continue to have a material adverse impact on the Company’s results of operations, financial condition and cash flows.

Segment Information

The Company has three principal operating segments:

its stores, direct and wholesale businesses.

The Company has two principal operating segments:

its stores and its direct business.

The Company considers its stores and direct operating segments to be similar in terms of economic characteristics, production processes and operations, and has therefore aggregated them into one reportable segment, retail segment, consistent with its omni-channel business approach.

Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results are aggregated with the retail segment for all periods presented.

The Company’s wholesale business was a third operating segment.

In the first quarter of fiscal 2022, we ended our relationship with our primary wholesale customer.

Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results are aggregated with the retail segment for both periods presented.

Fair Value of Financial Instruments

14 unchanged sentences

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, accrued expenses and short-term borrowings approximate fair value because of the short maturity of these instruments.

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.

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 nine months ended October 30, 2021 and October 31, 2020, respectively, were as follows:

October 30, 2021

October 31, 2020

Other comprehensive income (loss) and reclassifications from AOCI for the three months ended April 30, 2022 and May 1, 2021, respectively, were as follows:

April 30, 2022

For the three months ended:

7 unchanged sentences

Balance at end of quarter

October 30, 2021

October 31, 2020

For the nine months ended:

(in thousands)

Balance at beginning of fiscal year

Other comprehensive income (loss) before

reclassifications, net of taxes

Amounts reclassified from accumulated other

comprehensive income, net of taxes (1)

Other comprehensive income (loss) for the period

Balance at end of quarter

(1) Includes the amortization of the unrecognized loss on pension plans, which was charged to “Selling, General and Administrative”

Expense on the Consolidated Statements of Operations for all periods presented.

The amortization of the unrecognized loss, before tax, was $ 170,000 and $ 511,000 for the three and nine months ended October 31, 2020, respectively.

For the three and nine months ended October 30, 2021 , the Company recognized income of $ 13,000 and $ 37,000 , respectively, as a result of a change in amortization from average remaining future service to average remaining lifetime.

Expense on the Consolidated Statements of Operations for both periods presented.

The Company recognized income of $ 12,000 for both the three months ended April 30, 2022 and May 1, 2021, as a result of a change in amortization from average remaining future service to average remaining lifetime.

There was no related tax effect for either period.

2 unchanged sentences

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.

2 unchanged sentences

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 nine months of fiscal 2021 and fiscal 2020.

October 30, 2021

October 31, 2020

April 30, 2022

Expected volatility

11 unchanged sentences

The respective grant-date fair value and derived service periods assigned to the PSUs were determined using a Monte Carlo model.

The valuation included assumptions with respect to the Company’s historical volatility, risk-free rate and cost of equity.

The valuation included assumptions with respect to the Company’s historical volatility, risk-free rate and cost of equity and the related stock compensation expense was fully expensed by the end of fiscal 2021.

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.

1 unchanged sentence

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.

For the third quarter and first nine months of fiscal 2021, the Company recognized non-cash gains of $ 1.2 million and $ 2.3 million, related to the Company’s decision to close certain retail stores, which resulted in a revaluation of the existing lease liabilities.

For the first quarter of fiscal 2022 and fiscal 2021, the Company recognized non-cash gains of $ 0.5 million and $ 0.8 million, respectively, related to the Company’s decision to close certain retail stores, which resulted in a revaluation of the existing lease liabilities.

The portion of the gains that related to previously recorded impairment charges against the operating lease right-of-use asset were included as an offset to previously recorded asset impairment charges.

Accordingly, for the third quarter and first nine months of fiscal 2021, $ 1.1 million and $ 2.1 million were included as an offset to asset impairment charges, respectively.

The remaining $ 0.1 million and $ 0.2 million of the gains for the third quarter and first nine months of fiscal 2021, respectively, was included as a reduction of store occupancy costs.

For the third quarter of fiscal 2020, the Company recognized a non-cash gain of $ 1.2 million related to the closure of certain stores, which had previously been impaired.

Accordingly, $ 1.1 million of the $ 1.2 million, related to previously recorded impairment charges was included as an offset to asset impairment charges, with the remaining $ 0.1 million included as a reduction of store occupancy costs.

The results for the first nine months of fiscal 2020, include an impairment charge of $ 16.3 million, recorded in the first quarter of fiscal 2020 as a result of the significant impact that the COVID-19 pandemic was having on the Company’s business and the continued uncertainty at that time.

The impairment charge included approximately $ 12.5 million for the write-down of certain right-of-use assets and $ 3.8 million for the write-down of property and equipment, related to stores where the carrying value exceeded fair value.

Accordingly, for the first quarter of fiscal 2022 and fiscal 2021, $ 0.4 million and $ 0.7 million, respectively, were included as an offset to asset impairment charges.

The remaining gains for the first quarter of fiscal 2022 and fiscal 2021 were included as a reduction of store occupancy costs.

The Company adopted ASU 2016-02, “

7 unchanged sentences

The Company also made an accounting policy election that the recognition 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 October 30, 2021 , the Company had no short-term leases.

At April 30, 2022 , the Company had no short-term leases.

The Company’s store leases typically contain options that permit renewals for additional periods of up to five years each.

In general, for store leases with an initial term of 10 years or more, the options to extend are not considered reasonably certain at lease commencement.

For stores leases with an initial term of 5 years, the Company evaluates each lease independently and, only when the Company considers

it reasonably certain that it will exercise an option to extend, will the associated payment of that option be included in the measurement of the right-of-use asset and lease liability.

For stores leases with an initial term of 5 years, the Company evaluates each lease independently and, when the Company considers it reasonably certain that it will exercise an option to extend, the associated payment of that option will be included in the measurement of the right-of-use asset and lease liability.

Renewal options are not included in the lease term for automobile and equipment leases because they are not considered reasonably certain of being exercised at lease commencement.

10 unchanged sentences

Recently Issued Accounting Pronouncements

No new accounting pronouncements, issued or effective during the first nine months of fiscal 2021, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

No new accounting pronouncements, issued or effective during the first three months of fiscal 2022, have had or are expected to have a significant impact on the Company’s Consolidated Financial Statements.

Revenue Recognition

9 unchanged sentences

Revenue from the Company’s wholesale operations is recognized at the time the wholesale customer takes physical receipt of the merchandise, net of any identified discounts in accordance with each individual order.

For the first nine months of fiscal 2021 and fiscal 2020, chargebacks were immaterial.

For the first three months of fiscal 2022 and fiscal 2021, chargebacks were immaterial.

Unredeemed Gift Cards, Gift Certificates, and Credit Vouchers.

3 unchanged sentences

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 $ 1.1 million and $ 2.8 million at October 30, 2021 and January 30, 2021, respectively.

The gift card liability, net of breakage, was $ 2.6 million and $ 3.3 million at April 30, 2022 and January 29, 2022, respectively.

Unredeemed Loyalty Coupons.

3 unchanged sentences

The cycle of earning and redeeming loyalty points is generally under one year in duration.

The loyalty accrual, net of breakage, was $ 2.2 million and $ 1.0 million at October 30, 2021 and January 30, 2021, respectively.

The loyalty accrual, net of breakage, was $ 1.4 million and $ 1.3 million at April 30, 2022 and January 29, 2022, respectively.

Shipping and handling costs are accounted for as fulfillment costs and are included in cost of sales for all periods presented.

6 unchanged sentences

For the three months ended

For the nine months ended

(in thousands)

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

April 30, 2022

Retail segment

1 unchanged sentence

Credit Agreement with Citizens Bank, N.A.

On October 28, 2021, the Company entered into a new credit facility with Citizens Bank, N.A.

(the “New Credit Facility”).

The New Credit Facility replaced the Company's existing credit facility with Bank of America, N.A., which was due to expire on May 24, 2023 (the "Prior Credit Facility").

The New Credit Facility is a $ 125.0 million secured, asset-based credit facility with a maturity date of October 28, 2026 .

On October 28, 2021, the Company entered into a credit facility with Citizens Bank, N.A.

(the "Credit Facility”).

The Credit Facility is a $ 125.0 million secured, asset-based credit facility with a maturity date of October 28, 2026 .

The maximum committed borrowing of $ 125.0 million includes a sublimit of $ 20.0 million for commercial and standby letter of credits and a sublimit of up to $ 15.0 million for swing line loans.

The Company’s ability to borrow under the Credit Facility is determined using an availability formula based on eligible assets .

Borrowings made pursuant to the New Credit Facility will be made pursuant to either a Base Rate loan or LIBOR Rate loan, at the Company's option.

Borrowings made pursuant to the Credit Facility will be made pursuant to either a Base Rate loan or LIBOR Rate loan, at the Company's option.

Base Rate loans will bear interest, at a rate equal to (i) the greater of:

3 unchanged sentences

The Company will be subject to an unused line fee of 0.25 %.

The Company’s obligations under the New Credit Facility are secured by a lien on substantially all of its assets.

If the Company’s availability under the New Credit Facility at any time is less than the greater of (i) 10 % of the Revolving Loan Cap (the lesser of the aggregate revolving commitments or the borrowing base) and (ii) $ 7.5 million, then the Company is required to maintain a minimum consolidated fixed charge coverage ratio of 1.0 :1.0 until such time as availability has exceeded the greater of (1) 10 % of the Revolving Loan Cap and (2) $ 7.5 million for 30 consecutive days.

In connection with the execution of the New Credit Facility, the Company terminated its Prior Credit Facility and paid outstanding obligations of $ 30,874 , related to its unused line fee and letter of credit fees.

At the same time, all guarantees and security interests associated with the Prior Credit Agreement were released.

There were no outstanding borrowings under the Prior Credit Facility at the time of termination and no prepayment penalty fees.

At October 30, 2021 , the Company had no borrowings outstanding under the revolving credit facility and availability under the New Credit Facility was $ 74.0 million.

Average monthly borrowings outstanding during the first nine months of fiscal 2021 were $ 21.8 million, resulting in an average unused excess availability of approximately $ 49.7 million.

Outstanding standby letters of credit were $ 2.7 million and outstanding documentary letters of $ 1.2 million at October 30, 2021.

At October 30, 2021, the Company’s prime-based interest rate was 5.00 % .

Interest costs incurred during the first nine months of fiscal 2021 were based on the Prior Credit Facility, which bore interest based upon either the Federal Funds rate or the LIBOR rate, at a rate equal to the following:

(a) the Federal Funds rate plus a varying percentage based on the Company’s excess availability, of either 1.75 % or 2.00 %, or (b) the LIBOR rate (the Company being able to select interest periods of 1 week, 1 month, 2 months, 3 months or 6 months) plus a varying percentage based on the Company’s excess availability, of either 2.75 % or 3.00 %.

Borrowings and repayments for the first nine months ended October 30, 2021 and October 31, 2020 were as follows:

For the nine months ended

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 (i) 10 % of the Revolving Loan Cap (the lesser of the aggregate revolving commitments or the borrowing base) and (ii) $ 7.5 million, then the Company is required to maintain a minimum consolidated fixed charge coverage ratio of 1.0 :1.0 until such time as availability has exceeded the greater of (1) 10 % of the Revolving Loan Cap and (2) $ 7.5 million for 30 consecutive days.

At April 30, 2022 , the Company had no borrowings outstanding under the revolving credit facility and availability under the Credit Facility was $ 85.0 million.

The Company had no borrowings during the first three months of fiscal 2022, resulting in an average unused excess availability of approximately $ 75.0 million.

Outstanding standby letters of credit were $ 2.7 million and outstanding documentary letters were $ 1.4 million at April 30, 2022.

At April 30, 2022, the Company’s prime-based interest rate was 3.75 % .

Borrowings and repayments for the first three months ended May 1, 2021 were as follows:

For the three months ended

(in thousands)

October 30, 2021

October 31, 2020

Net borrowings (repayments)

Long-Term Debt

On March 16, 2021, the Company refinanced its then existing $ 15.0 million FILO (first-in, last-out) loan and entered into a new $ 17.5 million FILO loan (the “New FILO loan”).

On September 3, 2021, the Company repaid in full its New FILO loan.

In connection with the repayment, the FILO lender agreed to a reduction in the amount of the prepayment premium that otherwise would have been payable as a result of the Company’s early repayment.

The Company paid a prepayment penalty of $ 1.1 million.

The prepayment of the New FILO loan was made from cash on-hand.

Interest under the New FILO loan bore interest at 8.5 %.

The Company paid interest and fees totaling $ 3.1 million and $ 2.4 million for the nine months ended October 30, 2021 and October 31, 2020, respectively.

Included in the $ 3.1 million for the nine months ended October 30, 2021 was a prepayment fee associated with the prepayment of the New FILO loan, as discussed above.

In connection with the execution of the Company's New Credit Facility and the prepayment of its New FILO loan, in the third quarter of fiscal 2021, the Company also wrote-off a total of $ 0.8 million in unamortized debt issuance costs.

The Company leases all of its store locations and its corporate headquarters, which also includes its distribution center, which are classified as operating leases.

The Company has no outstanding long-term debt as of April 30, 2022.

During the first quarter of fiscal 2021, the Company refinanced its then existing $ 15.0 million FILO (first-in, last-out) loan and entered into a new $ 17.5 million FILO loan, which was subsequently repaid in full in September 2021.

The Company paid interest and fees totaling $ 0.1 million and $ 1.1 million for the three months ended April 30, 2022 and May 1, 2021, respectively.

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 5 years to 10 years , with options that usually permit renewal for additional five-year periods.

7 unchanged sentences

The Company opted not to elect this practical expedient and instead accounted for these rent concessions as lease modifications in accordance with ASC 842.

As of October 30, 2021, the Company’s operating leases liabilities represent the present value of the remaining future minimum lease payments updated based on concessions and lease modifications.

The following table is a summary of the Company’s components of net lease cost for the three and nine months ended October 30, 2021 and October 31, 2020:

As of April 30, 2022, 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 Statement of Operations.

The following table is a summary of the Company’s components of net lease cost for the three months ended April 30, 2022 and May 1, 2021:

For the three months ended

For the nine months ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

April 30, 2022

(in thousands)

3 unchanged sentences

(1) Variable lease costs include the cost of property taxes, insurance and common area maintenance fees related to its leases.

Supplemental cash flow and balance sheet information related to leases for the first nine months ended October 30, 2021 and October 31, 2020 is as follows:

Supplemental cash flow and balance sheet information related to leases for the first three months ended April 30, 2022 and May 1, 2021 is as follows:

(dollars in thousands)

For the nine months ended

For the three months ended

Cash paid for amounts included in the measurement of lease liabilities:

October 30, 2021

October 31, 2020

April 30, 2022

Operating cash flows for operating leases (1)

1 unchanged sentence

Right-of-use assets obtained in exchange for operating lease liabilities

Net decrease in right-of-use assets due to lease modifications

associated with rent concessions and lease exits

Weighted average remaining lease term

Weighted average discount rate

(1) The increase in cash payments for the first nine months of fiscal 2021 as compared to the first nine months of fiscal 2020 is due to rent abatements and deferments negotiated in the second quarter of fiscal 2020 for rent obligations while stores were closed.

The cash paid for the first nine months of fiscal 2021 also includes prepaid rent for November 2021 of $ 3.8 million.

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 October 30, 2021:

(1) The cash paid for the first quarter of fiscal 2022 and fiscal 2021 includes prepaid rent of $ 4.1 million and $ 3.8 million.

(in thousands)

9 unchanged sentences

See Note 6, Stock-Based Compensation .

At October 30, 2021 , the Company has three active LTIPs:

the 2019-2021 LTIP, 2020-2022 LTIP and 2021-2023 LTIP.

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”

1 unchanged sentence

Under each LTIP, 50 % of each participant’s Target Cash Value is subject to time-based vesting and 50 % is subject to performance-based vesting.

The time-based awards under the 2019-2021 LTIP were granted in a combination of 50 % RSUs and 50 % cash.

For the 2020-2022 LTIP, the time-based awards were granted in a combination of 50 % stock options and 50 % cash, and for the 2021-2023 LTIP, the time-based awards were granted in a combination of 25 % stock options and 75 % cash.

Performance targets for the 2019-2021 LTIP, 2020-2022 LTIP and 2021-2023 LTIP were established and approved by the Compensation Committee on August 7, 2019, June 11, 2020, and March 8, 2021, respectively.

Awards for any achievement of performance targets are not granted until the performance targets are achieved and then are subject to additional vesting through August 31 following the end of the applicable performance period.

2019-2021 LTIP

The performance targets for the Company’s 2019-2021 LTIP were approved by the Compensation Committee of the Board of Directors (the”

Compensation Committee”) on August 7, 2019 and covered a three-year period performance period, which ended on January 29, 2022.

The time-vested portion of the 2019-2021 LTIP vests in four annual installments, with the remaining installment vesting on April 1, 2023.

In the first quarter of fiscal 2022, on March 21, 2022, the Compensation Committee approved a 141.9 % payout of its performance targets for the 2019-2021 LTIP.

On that date, the Company granted awards totaling $ 2.7 million, in a combination of 50 % cash and 50 % RSUs, which will vest, net of any forfeitures, on August 31, 2022.

In connection with the grant of 269,162 RSUs, the Company reclassified $ 1.1 million of its liability accrual from “Accrued expenses and other current liabilities”

to “Additional paid-in capital”

in the first quarter of fiscal 2022.

See the Consolidated Statement of Changes in Stockholders’

At April 30, 2022 , the Company had three active LTIPs:

the 2020-2022 LTIP, the 2021-2023 LTIP and the 2022-2024 LTIP.

The time-based awards under the 2020-2022 LTIP were granted in a combination of 50 % stock options and 50 % cash;

the 2021-2023 LTIP time-based awards were granted in a combination of 25 % stock options and 75 % cash;

and the 2022-2024 LTIP time-based awards were granted in a combination of 50 % restricted stock units and 50 % cash.

Performance targets for the 2020-2022 LTIP, 2021-2023 LTIP and 2022-2024 LTIP were established and approved by the Compensation Committee on June 11, 2020, March 8, 2021 and April 9, 2022, respectively.

The performance period for each LTIP is three years .

Awards for any achievement of performance targets will not be granted until the performance targets are achieved and then will be subject to additional vesting through August 31, 2023, August 31, 2024 and August, 31, 2025, respectively.

The time-based awards under the 2019-2021 LTIP, 2020-2022 LTIP and 2021-2023 LTIP vest in four equal installments through April 1, 2023, April 1, 2024 and April 1, 2025, respectively.

The time-based awards under the 2020-2022 LTIP, 2021-2023 LTIP and 2022-2024 LITP vest in four equal installments through April 1, 2024, April 1, 2025 and April 1, 2026, respectively.

Assuming that the Company achieves the performance targets at target levels and all time-based awards vest, the compensation expense associated with the 2020-2022 LTIP, 2021-2023 LTIP and 2022-2024 LTIP is estimated to be approximately $ 3.8 million, $ 4.0 million and $ 4.5 million, respectively.

Approximately half of the compensation expense for each LTIP relates to the time-based awards, which are being expensed straight-line over 46 months, 49 months and 48 months, respectively.

At October 30, 2021 , the Company has accrued $ 1.9 million under the 2019-2021 LTIP, $ 1.3 million under the 2020-2022 LTIP and $ 0.6 million under the 2021-2023 LTIP for the performance awards.

At April 30, 2022 , the Company had accrued $ 1.7 million under the 2020-2022 LTIP, $ 1.0 million under the 2021-2023 LTIP and $ 0.1 million under the 2022-2024 LTIP for the performance awards.

Stock-Based Compensation

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The Company’s shareholders approved amendments to increase the share reserve by 2,800,000 shares on August 8, 2019, an additional 1,740,000 shares on August 12, 2020 and an additional 4,855,000 on August 5, 2021.

At October 30, 2021, the Company had 4,800,386 shares available under the 2016 Plan.

At April 30, 2022, the Company had 3,841,133 shares available under the 2016 Plan.

In accordance with the terms of the 2016 Plan, any shares outstanding under the previous 2006 Incentive Compensation Plan (the “2006 Plan”) at August 4, 2016 that subsequently terminate, expire or are cancelled for any reason without having been exercised or paid are added back and become available for issuance under the 2016 Plan, with stock options being added back on a one-for-one basis and full-value awards being added back on a 1 to 1.9 basis.

At October 30, 2021 , 389,509 stock options remained outstanding under the 2006 Plan.

At April 30, 2022 , 298,231 stock options remained outstanding under the 2006 Plan.

The 2016 Plan is administered by the Compensation Committee.

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Except with respect to 5 % of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the first nine months of fiscal 2021:

The following tables summarize the share activity and stock option activity for the first three months of fiscal 2022:

Share Units (3)

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Shares granted

Shares vested/issued

Shares vested and/or issued

Outstanding non-vested shares at end of quarter

(1) During the first nine months of fiscal 2021, the vesting of RSUs was primarily related to the time-based awards under the Company’s LTIP plans, see Note 5, Long-Term Incentive Plans .

(2) Represents compensation to certain directors, in lieu of cash, in accordance with their irrevocable elections.

Beginning in fiscal 2021, all equity issued to directors for compensation, in lieu of cash, is issued only from the Non-Employee Director Compensation Plan.

(1) During the first three months of fiscal 2022, the Company granted RSUs for the achievement of performance metrics under the 2019-2021 LTIP that are subject to additional vesting through August 31, 2022 and time-based RSUs under its 2022-2024 LTIP.

See Note 5, Long-Term Incentive Plans .

As a result of net share settlements, of the 313,422 RSUs that vested, only 228,329 shares of common stock were issued

(2) The outstanding deferred shares will be issued upon the director’s separation from service.

(3) T he 720,000 shares of performance stock units (“PSUs”), with a fair value of $ 1.0 million, represent a sign-on grant to Mr.

The PSUs vest in installments when the following milestones are met:

one-third of the PSUs vest when the trailing 90-day volume-weighted average closing stock price (“VWAP”) is $ 4.00 , one-third of the PSUs vest when the VWAP is $ 6.00 and one-third when the VWAP is $ 8.00 .

On September 9, 2021, 240,000 PSUs vested as a result of achieving a VWAP of $ 4.00 per share.

As a result of net share settlement, of the 240,000 PSUs which vested, only 181,560 shares of common stock were issued.

Subsequent to the end of the third quarter of fiscal 2021, an additional 240,000 PSUs vested when the $ 6.00 VWAP was achieved.

The remaining 240,000 PSUs will expire on April 1, 2023 if the $ 8.00 VWAP is not achieved by that date.

(3) Represents the remaining performance stock units (“PSUs”) granted to Mr.

Kanter in February 2019.

The 240,000 PSUs will vest when the trailing 90-day volume-weighted average closing stock price (“VWAP”) is $ 8.00 .

The PSUs will expire on April 1, 2023 if the $ 8.00 VWAP is not achieved by that date.

(4) Represents compensation, with a fair value of $ 40,494 , to certain directors, who are required to receive shares, in lieu of cash, in order to satisfy their minimum equity ownership under the Non-Employee Director Plan.

Voluntary shares received, in lieu of cash, are reported below under Non-Employee Director Compensation Plan .

exercise price

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Options exercisable at end of quarter

(1) Primarily represents the grant of stock options to purchase an aggregate of 1,078,913 shares of the Company’s common stock, at an exercise price of $ 0.69 per share, in connection with the time-based grant of awards under its 2021-2023 LTIP, see Note 5, Long-Term Incentive Plans.

In March 2021, the Company also granted to active participants of the LTIP a discretionary grant of stock options to purchase an aggregate of 414,337 shares of the Company’s common stock, at an exercise price of $ 0.75 per share, which will vest ratably over 3 years.

(2) As a result of net share settlement, of the 429,955 stock options exercised, only 298,150 shares of common stock were issued.

For the first nine months of fiscal 2021, the Company granted stock options to purchase an aggregate of 1,518,154 shares of common stock and 8,054 restricted stock units.

For the first nine months of fiscal 2020, the Company granted stock options to purchase an aggregate of 3,185,542 shares of common stock and 134,999 shares of deferred stock.

For the first three months of fiscal 2022, the Company granted stock options to purchase an aggregate of 2,040 shares of common stock, 494,444 restricted stock units and 9,352 fully-vested shares.

For the first three months of fiscal 2021, the Company granted stock options to purchase an aggregate of 1,518,154 shares of common stock and 8,054 restricted stock units.

Non-Employee Director Compensation Plan

The Company granted 222,478 shares of common stock, with a fair value of approximately $ 296,300 , to certain of its non-employee directors as compensation in lieu of cash in the first nine months of fiscal 2021.

The Company granted 19,570 shares of common stock, with a fair value of approximately $ 84,738 , to certain of its non-employee directors as compensation in lieu of cash in the first three months of fiscal 2022.

These shares are in addition to any shares that may be granted under the 2016 Plan related to the requirement to receive equity if a director has not yet satisfied his or her minimum equity ownership requirement under the Non-Employee Director Compensation Plan.

Stock Compensation Expense

The Company recognized total stock-based compensation expense of $ 0.9 million and $ 1.1 million for the first nine months of fiscal 2021 and fiscal 2020, respectively.

The total compensation cost related to time-vested stock options, RSU and PSU awards not yet recognized as of October 30, 2021 was approximately $ 1.9 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 26 months.

The Company recognized total stock-based compensation expense of $ 0.4 million and $ 0.3 million for the first three months of fiscal 2022 and fiscal 2021, respectively.

The total compensation cost related to time-vested stock options, RSU and PSU awards not yet recognized as of April 30, 2022 was approximately $ 2.6 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 33 months.

Equity and Earnings per Share

At the Company's Annual Meeting of Stockholders held on August 5, 2021, the shareholders approved an a mendment to the Company’s Restated Certificate of Incorporation to increase the authorized number of shares of its common stock from 100.0 million shares to 125.0 million shares.

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 nine months ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

April 30, 2022

(in thousands )

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Diluted weighted average common shares outstanding

(1) Co mmon stock equivalents of 134 shares and 172 shares for the three and nine months ended October 31, 2020 were excluded due to the net loss.

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, restricted stock units, or deferred stock had an anti-dilutive effect.

For the three months ended

For the nine months ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

April 30, 2022

(in thousands, except exercise prices)

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$ 0.69 - $ 5.50

$ 0.53 - $ 7.02

The above options, which were outstanding at October 30, 2021 , expire from January 31, 2023 to June 29, 2028 .

Excluded from the computation of basic and diluted earnings per share were 480,000 shares for the three and nine months of fiscal 2021 and 720,000 shares of unvested performance stock units for the three and nine months of fiscal 2020.

These performance-based awards

will be included in the computation of basic and diluted earnings per share if, and when, the respective performance targets are achieved.

In addition, 435,568 shares and 316,703 shares of deferred stock at October 30, 2021 and October 31, 2020 , respectively, were excluded from basic earnings per share.

The above options, which were outstanding at April 30, 2022 , expire from January 31, 2023 to June 29, 2028 .

Excluded from the computation of basic and diluted earnings per share were 240,000 shares and 720,000 shares of unvested performance stock units for the three months of fiscal 2022 and fiscal 2021, respectively.

These performance-based awards will be included in the computation of basic and diluted earnings per share if, and when, the respective performance targets are achieved.

In addition, 435,568 shares of deferred stock at April 30, 2022 and at May 1, 2021 were excluded from basic earnings per share.

Outstanding shares of deferred stock are not considered issued and outstanding until the vesting date of the deferral period.

Registered Direct Offering –

On February 5, 2021, the Company sold, pursuant to a stock purchase agreement and through a registered direct offering, an aggregate of 11,111,111 shares of its common stock, for a gross purchase price of $ 5.0 million, before payment of offering costs of $ 0.6 million.

The Company used the net proceeds from the offering for working capital and other general corporate purposes.

During the third quarter and first nine months of fiscal 2021, the Company recorded income tax expense of $ 94,000 and $ 548,000 , respectively, primarily related to income tax in states where net operating loss ("NOL") usage is statutorily limited.

During the third quarter and first nine months of fiscal 2020, the Company recorded income tax expense of $ 27,000 and $ 71,000 , respectively, related primarily to state margin tax.

Stock Repurchase Program

On March 15, 2022, 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.

The timing and the amount of any repurchases of common stock will be determined based on the Company’s evaluation of market conditions and other factors.

The stock repurchase program commenced in the first quarter of fiscal 2022 and will expire on March 15, 2023 , but may be suspended, terminated or modified at any time for any reason.

The Company expects to finance the repurchases from operating funds and/or periodic borrowings on its credit facility.

For the first quarter of fiscal 2022, the Company repurchased 946,101 shares at an aggregate cost of $ 4.8 million, including fees.

Shares of repurchased common stock are held as treasury stock.

During the first quarter of fiscal 2022 and fiscal 2021, the Company recorded income tax expense of $ 103 ,000 and $ 28 ,000, respectively, primarily related to income tax in states where net operating loss ("NOL") usage is statutorily limited.

The Company’s effective tax rate will generally differ from the U.S.

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Since the end of fiscal 2013, the Company has maintained a full valuation allowance against its deferred tax assets.

While the Company has returned to profitability for the first nine months of fiscal 2021, and has projected that it will generate taxable income and ultimately emerge from a three-year cumulative loss, the Company believes that a full valuation allowance remains appropriate until the Company generates a more consistent history of profitability.

Realization of the Company’s deferred tax assets is dependent on generating sufficient taxable income in the near term.

For federal income tax purposes, at the end of fiscal 2020, the Company had net operating loss carryforwards of approximately $ 158.2 million, which will expire from fiscal 2022 through fiscal 2037 , and net operating loss carryforwards of $ 43.1 million, that are not subject to expiration, available in the U.S.

to reduce future taxable income.

While the Company returned to profitability in fiscal 2021 and is projecting it will generate taxable income in fiscal 2022, given the limited history of profitability and uncertainty in future forecasts, at this time the Company believes that a full valuation allowance remains appropriate.

For federal income tax purposes, at the end of fiscal 2021, the Company had net operating loss carryforwards of approximately $ 100.7 million, which will expire from fiscal 2028 through fiscal 2037 , and net operating loss carryforwards of $ 43.1 million, that are not subject to expiration.

For state purposes, at the end of fiscal 2021, the Company had $ 90.0 million of net operating losses that are available to offset future taxable income, the majority of which will expire from fiscal 2028 through fiscal 2041 .

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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 the continuing impact of the COVID-19 pandemic on our business and financial results, expected savings from our efforts to right size our lease structure, expected sales trends, expected marketing spend, expected inventory levels, potential freight cost and raw materials cost increases, and our liquidity expectations for the next 12 months.

but may be found in other locations as well, and include statements regarding our expectations with respect to sales trends, marketing costs, gross margin rate, improved inventory levels and our ability to secure sufficient inventory to meet customer demand, increased freight costs, increases in certain raw materials cost, our long-term outlook, expected capital expenditures in 2022, our ability to attract new customers, and our plans with respect to our store portfolio, including anticipated closures, re-brandings, and new and 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.

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Numerous factors could cause our actual results to differ materially from such forward-looking statements.

We encourage readers to refer to our “Risk Factors”

found in Part I, Item 1A of our Fiscal 2020 Annual Report.

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 relating to the duration and continuing impact of the COVID-19 pandemic and its impact on the Company’s results of operations, the ability to navigate the supply chain uncertainties and maintain sufficient inventory levels, the execution of our corporate strategy, predict customer tastes and fashion trends, forecast sales growth trends and grow market share.

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 the ongoing effects of the COVID-19 pandemic, our ability to navigate supply chain uncertainties, our ability to maintain sufficient inventory levels, our ability to successfully execute on our corporate strategy, our ability to predict customer tastes and fashion trends, our ability to grow market share, labor shortages or increased labor costs, and the other risks and uncertainties set forth in the “Risk Factors”

section in Part I, Item 1A of our Fiscal 2021 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.

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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, wholesale and direct operations in the United States and Toronto, Canada.

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 October 30, 2021, we operated 220 Destination XL stores, 16 DXL outlet stores, 38 Casual Male XL retail stores, 20 Casual Male XL outlet stores and a digital business, including an e-commerce site at dxl.com and a mobile site m.destinationXL.com and mobile app.

At April 30, 2022, we operated 219 Destination XL stores, 16 DXL outlet stores, 32 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 and mobile app.

Unless the context indicates otherwise, all references to “we,”

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and our consolidated subsidiaries.

We refer to our fiscal years, which end on January 29, 2022, January 30, 2021 and February 1, 2020 as “fiscal 2021,”

We refer to our fiscal years, which end on January 28, 2023, January 29, 2022 and January 30, 2021 as “fiscal 2022,”

“fiscal 2021”

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SEGMENT REPORTING

We have three principal operating segments:

our stores, direct business and our wholesale business.

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.

Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results have been aggregated with the retail segment for all periods.

Our wholesale segment was a third operating segment.

In the first quarter of fiscal 2022, we ended the relationship with our primary wholesale customer.

Due to the immateriality of the wholesale segment’s revenues, profits and assets, its operating results have been aggregated with the retail segment for both periods.

COMPARABLE SALES

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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 online and pick-up in a store and, more recently due to the COVID-19 pandemic, pick-up at curbside.

We define store sales as sales

that originate and are fulfilled directly 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 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.

E-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.

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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.

The Company has not carved-out prior year sales for periods where the stores were temporarily closed in fiscal 2020 due to the pandemic.

However, because the Company’s store in Canada was closed by government edict for a significant portion of the first nine months of fiscal 2021, we have removed it from the current calculation of comparable sales.

RESULTS OF OPERATIONS

Continuing Impact of COVID-19 Pandemic on Our Business

On March 11, 2020, the World Health Organization declared COVID-19 as a global pandemic.

While the pandemic had an adverse effect on our business, financial condition and result of operations in fiscal 2020, we are hopeful that the worst is behind us and we are on the road to recovery.

Substantial uncertainty remains regarding the duration of the pandemic, the potential impact of new variants, and the long-term effect of the pandemic on the global economy and its supply chain, unemployment, and overall consumer demand and spending.

Executive Summary

The following review of our results for third quarter and first nine months of fiscal 2021 includes certain comparisons against the third quarter and first nine months of fiscal 2019 in addition to the third quarter and first nine months of fiscal 2020.

Due to the COVID-19 pandemic and its impact on our results during the first nine months of fiscal 2020, we believe that the additional discussion against the third quarter and first nine months of fiscal 2019 is a more meaningful comparison with respect to the progress the Company made through the end of the third quarter of fiscal 2021.

For the three months ended

For the nine months ended

October 30, 2021

October 31, 2020

November 2, 2019

October 30, 2021

October 31, 2020

November 2, 2019

April 30, 2022

(in millions, except percentage of sales and per share data)

Net income (loss)

Adjusted EBITDA (Non-GAAP basis)

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Per diluted share:

Net income (loss)

We are pleased to report that net income for the third quarter of fiscal 2021 was $0.20 per diluted share, as compared to a net loss of $(0.14) per diluted share in the third quarter of fiscal 2020 and a net loss of $(0.14) per diluted share in the third quarter of fiscal 2019.

Results for the third quarter exceeded our expectations and were driven by a strong sales performance in both stores and direct, an improved merchandise margin, and improved operating leverage from lower occupancy costs and SG&A expenses.

During the third quarter of fiscal 2021, we continued to see our business grow across all customer channels and we believe we are actively growing our market share.

Our primary focus has been on customer acquisition, which was up 34% over the third quarter of fiscal 2019, an increase from 28.5% in the second quarter of fiscal 2021.

This growth, coupled with our increase in conversion rates and dollars per transaction, drove a comparable sales increase of 22.9% as compared to the third quarter of fiscal 2019.

We also continued to see strong improvements in our gross margin which improved 910 basis points during the third quarter of fiscal 2021, as compared to the third quarter of fiscal 2019.

This improvement was the result of our low promotional posture and reduced occupancy costs from our lease renegotiations.

While we are excited about the results and the growth in our business that we have seen during the first nine months of fiscal 2021, we remain cautious due to the ongoing supply chain and labor issues and the potential impact those issues may have on our fourth quarter.

Our ability to secure sufficient inventory to meet sales demand remains our primary focus.

In addition, the supply chain disruptions

have increased our cost of freight due to the shortages of vessels for overseas product, port congestion, and labor shortages of truck drivers, which we expect will continue well into fiscal 2022.

From a liquidity perspective, we accomplished two significant transactions during the third quarter:

(1) we prepaid our $17.5 million FILO loan, which had an interest rate of 8.50%;

and (2) we executed a new, five-year credit facility with Citizens Bank, which replaces our prior credit facility that was scheduled to expire in May 2023.

At October 30, 2021, we had no outstanding debt, cash of $6.9 million and availability under our new credit facility of $74.0 million.

This compares to total debt, net of cash, of $61.5 million at October 31, 2020 and $77.5 million at November 2, 2019.

We are pleased to report our fifth consecutive quarter of sales and earnings growth.

Comparable sales increased 19.5% for the quarter, with increases across all of our customer channels.

Improvements in store traffic and conversion contributed to growth across all of our geographic regions.

Our digital marketing efforts and our presence on third-party marketplaces drove growth in both our direct business and in our stores during the first quarter of fiscal 2022.

Our gross margin rate for the first quarter of fiscal 2022 improved by 440 basis points driven by our brand repositioning that resulted in fewer and less frequent merchandise promotions, less penetration in lower margin wholesale revenues, and improved leverage on occupancy costs.

As expected, our selling, general and administrative expenses (SG&A) increased by 320 basis points primarily due to increased payroll costs to support sales, marketing costs, and accruals for performance-based incentive plans.

Our marketing costs for the first quarter of fiscal 2022 represented 5.3% of sales as compared to 3.0% in the first quarter of fiscal 2021.

As a result of our sales growth and margin improvement, we exceeded our first quarter financial performance expectations with net income of $13.4 million, or $0.20 per diluted share for the first quarter of fiscal 2022, as compared to net income of $8.7 million, or $0.14 per diluted share, for the first quarter of fiscal 2021.

At April 30, 2022, we had no debt outstanding and we did not make any borrowings under our credit facility during the first quarter.

Our unused excess availability at April 30, 2022 was $85.0 million.

We also are pleased with our improved inventory position at the end of the first quarter.

While we are still not at our ideal inventory level for certain categories, we have been able to secure inventory to support customer demand as we continue to manage supply chain challenges.

As we head into the second quarter, we are encouraged by the fact that our inventory position continues to improve.

As we previously disclosed, the Company's Board of Directors approved a $15.0 million stock repurchase program in March 2022 and, during the first quarter, we repurchased 0.9 million shares of our common stock, at an aggregate cost of $4.8 million, including fees.

While we believe our long-term outlook is strong, the current environment remains highly volatile, with inflation, rising interest rates, supply chain, labor and staffing challenges, the ongoing global pandemic, as well as the war in Ukraine.

Financial Summary

The following tables present sales by segment for the three and nine months ended October 30, 2021, October 31, 2020 and November 2, 2019:

The following table presents sales by segment for the three months ended April 30, 2022 and May 1, 2021:

For the three months ended

(in thousands, except percentages)

October 30, 2021

October 31, 2020

November 2, 2019

Retail segment

Wholesale segment

For the nine months ended

(in thousands, except percentages)

October 30, 2021

October 31, 2020

November 2, 2019

April 30, 2022

Retail segment

Wholesale segment

Total sales for the third quarter of fiscal 2021 were $121.5 million, as compared to $85.2 million in the third quarter of fiscal 2020 and $106.6 million in the third quarter of fiscal 2019.

At October 30, 2021, we had 294 stores as compared to 316 stores at October 31, 2020 and 326 stores at November 2, 2019.

As compared to the third quarter of fiscal 2020, comparable sales for the quarter were up 53.9%, with comparable sales from our stores up 64.8% and the direct business up 32.4%.

Due to the COVID-19 pandemic, our stores were negatively impacted in the third quarter of 2020 by temporary closings and reduced customer demand.

As compared to the third quarter of fiscal 2019, comparable sales for the third quarter were up 22.9% driven primarily by our direct business, which was up 56.5% and our stores, which were up 12.9%.

The increase in our direct business was principally due to our DXL.com e-commerce site, which had a sales increase of 66.8% as compared to the third quarter of fiscal 2019.

The comparable sales growth in stores of 12.9% was driven by strong conversion rates and an increase in dollars per transaction.

All regions reported a comparable sales increase for the third quarter, as compared to the third quarter of fiscal 2019, with the strongest improvements in the Southeast, Midwest, and South Central parts of the country, which exceeded the Pacific Northwest, Northeast and Mid-Atlantic by approximately 500 basis points.

As a result of the growth experienced in our direct business during the third quarter of fiscal 2021, direct sales represented 29.7% of total retail sales as compared to 21.9% of total retail sales in the third quarter of fiscal 2019.

Through our digital efforts and marketplace presence, we are attracting a new customer to DXL and during the third quarter we saw a 34% increase as compared to 2019 in our new-to-file which contributed to our top-line growth.

Sales from our wholesale business were $0.9 million for the third quarter, as compared to $5.0 million in the third quarter of 2020 and $2.9 million in the third quarter of 2019.

The decrease in sales from our wholesale business during the third quarter of fiscal 2021 was primarily due to supply chain challenges and their impact on order volume.

For the first nine months of fiscal 2021, total sales were $371.6 million, as compared to $218.8 million for the first nine months of fiscal 2020 and $342.8 million for the first nine months of fiscal 2019.

Comparable sales for the first nine months of fiscal 2021, as compared to fiscal 2020, increased 81.0% with comparable sales from stores up 116.0% and the direct business up 29.0%.

Comparable sales for the first nine months of fiscal 2021, as compared to fiscal 2019, increased 16.1%, with comparable sales from

stores up 6.5% and the direct business up 49.4%.

For the first nine months of fiscal 2021, sales from wholesale were $4.8 million as compared to $12.1 million for the first nine months of fiscal 2020 (which included the sale of masks) and $8.0 million for the first nine months of fiscal 2019.

Total sales for the first quarter of fiscal 2022 were $127.7 million, as compared to $111.5 million in the first quarter of fiscal 2021.

Comparable sales for the first quarter were up 19.5% with comparable sales from our stores up 20.8% and our direct business were up 16.7%.

The strength of our stores during the first quarter was driven by an increase in store traffic and dollars spent per transaction.

All regions reported a comparable sales increase for the first quarter, with our Northeast, Florida and West Coast stores showing the strongest performance, resulting in a 20.8% comparable sales increase from our stores.

As store traffic improved during the first quarter, sales growth in our direct business, which grew over 40% since fiscal 2019, started to normalize.

The 16.7% increase in comparable sales from our direct business was driven by double-digit growth from our website, an increase in our universe sales (online orders that originate in a store) and continued growth from online marketplaces.

Through our digital efforts and marketplace presence, we are continuing to attract a new customer to DXL.

As we previously disclosed, during the first quarter of fiscal 2022, we ended our relationship with our primary wholesale customer.

As a result, our wholesale revenues decreased to $0.4 million as compared to $3.1 million for the first quarter of fiscal 2021.

Gross Margin Rate

For the third quarter of fiscal 2021, our gross margin rate, inclusive of occupancy costs, was 50.2% as compared to a gross margin rate of 36.5% for third quarter of fiscal 2020 and 41.1% for the third quarter of fiscal 2019.

As compared to fiscal 2020, the 1370 basis point improvement was due to a 710 basis point improvement in merchandise margins, driven by lower promotional markdowns, and a 600 basis point improvement in occupancy costs, due to the leveraging of sales and savings realized from the renegotiated lease reductions.

As compared to fiscal 2019, our gross margin rate improved by 910 basis points, driven by a 430 basis point improvement in merchandise margins and a 480 basis point improvement in occupancy costs.

On a dollar basis, our occupancy costs decreased by $3.2 million, as a result of our lease renegotiations as well as closed stores.

The improvement in merchandise margin of 430 basis points was primarily driven by our low promotional strategy and low clearance levels.

Partially offsetting the savings from the reduction in markdowns was the continuing increase in the cost of freight due to shortages of vessels for overseas product, port congestion, and labor shortages of truck drivers.

We estimate that supply chain disruption negatively impacted gross margin by approximately 100 basis points and we expect that we will continue to experience cost increases related to these supply chain issues as well as due to the increase in the cost of certain raw materials, particularly cotton, well into fiscal 2022.

For the first nine months of fiscal 2021, our gross margin rate was 49.4% as compared to a gross margin rate of 30.1% for the first nine months of fiscal 2020 and 43.1% for the third quarter of fiscal 2019.

As compared to fiscal 2020, our gross margin rate improved by 1,930 basis points, driven by an increase in merchandise margin of 950 basis points and an improvement in occupancy costs as a percentage of sales of 980 basis points.

As compared to fiscal 2019, the 630 basis point improvement in gross margin was due to a 260 basis point improvement in merchandise margins and a 370 basis point improvement in occupancy costs.

For the first quarter of fiscal 2022, our gross margin rate, inclusive of occupancy costs, was 50.0% as compared to a gross margin rate of 45.6% for first quarter of fiscal 2021.

Our gross margin rate improved by 440 basis points, driven by a 200 basis point improvement in merchandise margins and a 240 basis point improvement in occupancy costs as compared to the first quarter of fiscal 2021.

The 240 basis point improvement in occupancy costs was due to the increased leverage from sales as well as a decrease of approximately $0.9 million in occupancy costs from closed stores.

The 200 basis point improvement in merchandise margin was driven by our brand repositioning which has resulted in lower promotional markdowns.

Merchandise margin also improved as a result of the decrease in wholesale revenues, which by its nature has a lower margin.

These improvements were partially offset by higher freight costs.

We expect that we will continue to experience an increase in freight costs and in the cost of certain raw materials, particularly cotton.

As compared to fiscal 2021, we expect that our gross margin rate for fiscal 2022 will decrease by approximately 100 basis points due to expected ongoing increased freight costs and raw material costs, as well as inventory mix with lower margin, branded collection apparel.

Selling, General and Administrative Expenses

As a percentage of sales, SG&A expenses for the third quarter of fiscal 2021 were 34.5% as compared to 38.5% for the third quarter of fiscal 2020 and 39.5% for the third quarter of fiscal 2019.

As compared to the third quarter of fiscal 2020, on a dollar basis, SG&A expenses increased by $9.1 million, or 27.9%.

The increase was primarily due to increases in store payroll costs to support the increase in sales, increased advertising costs and incentive accruals.

These increases were partially offset by realized cost savings implemented in fiscal 2020, including a reduction in corporate and field employees and the termination of certain service contracts and professional fees.

As compared to the third quarter of fiscal 2019, on a dollar basis, SG&A expenses decreased by $0.1 million.

SG&A expenses for the third quarter of fiscal 2021 reflected an increase in advertising expenses, incentive-based accruals and merit adjustments, offset by lower store and corporate payroll as a result of preserving last year’s headcount reductions.

For the first nine months of fiscal 2021, SG&A expenses were 32.5% as compared to 41.5% for the first nine months of fiscal 2020 and 39.1% for the first nine months of fiscal 2019.

As compared to the first nine months of fiscal 2019, SG&A costs were down $13.3 million, or 9.9%, as a result of our cost-savings initiatives, reductions in store payroll costs and reduced marketing costs, partially offset by an increase in incentive-based accruals.

As a percentage of sales, SG&A (selling, general and administrative) expenses for the first quarter of fiscal 2022 were 36.5% as compared to 33.3% for the first quarter of fiscal 2021.

On a dollar basis, SG&A expenses increased by $9.5 million as compared to the first quarter of fiscal 2021.

The increase was primarily due to an increase in marketing costs to drive customer acquisition and engagement, payroll costs to support sales growth, including merit adjustments and filling open positions, and an increase in performance-based incentive accruals.

Our marketing costs for the first quarter of fiscal 2022 represented 5.3% of sales as compared to 3.0% in the first quarter of fiscal 2021.

For the fiscal 2022, the Company is expecting marketing costs to be approximately 6.2% of sales.

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 18.1% of sales for the first nine months of fiscal 2021 as compared to 22.9% of sales for the first nine months of fiscal 2019.

Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 14.4% of sales for the first nine months of fiscal 2021 compared to 16.2% of sales for the first nine months of fiscal 2019.

For the first nine months of fiscal 2020, Customer Facing Costs were 19.8% of sales and Corporate Support Costs were 21.7% of sales.

Customer Facing Costs, which include store payroll, marketing and other store and direct operating costs, represented 20.2% of sales in the first quarter of fiscal 2022 as compared to 17.9% of sales in the first quarter of fiscal 2021.

Corporate Support Costs, which include the distribution center and corporate overhead costs, represented 16.3% of sales in the first quarter of fiscal 2022 compared to 15.4% of sales in the first quarter of fiscal 2021.

Impairment of Assets

For the third quarter and first nine months of fiscal 2021, we recognized non-cash gains of $1.2 million and $2.3 million, related to our decision to close certain retail stores, which resulted in a revaluation of the existing lease liabilities.

Accordingly, for the third quarter and first nine months of fiscal 2021, $1.1 million and $2.1 million were included as an offset to asset impairment charges, respectively.

The remaining $0.1 million and $0.2 million of the gains for the third quarter and first nine months of fiscal 2021, respectively, was included as a reduction of store occupancy costs.

For the third quarter of fiscal 2020, we recognized a non-cash gain of $1.2 million related to the closure of certain stores, which had previously been impaired.

Accordingly, $1.1 million of the $1.2 million, related to previously recorded impairment charges was included as an offset to asset impairment charges, with the remaining $0.1 million included as a reduction of store occupancy costs.

for the first nine months of fiscal 2020, include an impairment charge of $16.3 million, recorded in the first quarter of fiscal 2020 as a result of the significant impact that the COVID-19 pandemic had on our business and the continued uncertainty at that time.

The impairment charge included approximately $12.5 million for the write-down of certain right-of-use assets and $3.8 million for the write-down of property and equipment, related to stores where the carrying value exceeded fair value.

During the first quarter of fiscal 2022 and fiscal 2021, the Company recorded non-cash gains of $0.5 million and $0.8 million, respectively, on the reduction of its operating lease liability in connection with its decision to close certain retail stores, which resulted in a revaluation of the lease liability.

Of the total non-cash gains, $0.4 million and $0.7 million for the first quarter of fiscal 2022 and fiscal 2021, respectively, related to leases where the right-of-use assets had previously been impaired, and therefore, were recorded as a reduction of the previously-recorded impairment and were included in the Impairment of Assets line of the Consolidated Statement of Operations for the three months ended April 30, 2022 and May 1, 2021.

The remaining gain of $0.1 million in each the first quarter of fiscal 2022 and fiscal 2021 was recorded as a reduction to occupancy costs in each period.

Depreciation and Amortization

Depreciation and amortization for the third quarter of fiscal 2021 decreased to $4.1 million as compared to $5.3 million for the third quarter of fiscal 2020.

For the first nine months of fiscal 2021, depreciation and amortization decreased to $13.0 million as compared to $16.4 million for the first nine months of fiscal 2020.

The decrease was due to a lower depreciable cost base, especially from our store assets.

Depreciation and amortization for the first quarter of fiscal 2022 decreased to $4.0 million as compared to $4.5 million for the first quarter of fiscal 2021.

The decrease was due to a lower depreciable cost base, especially from our store assets, due to our limited capital spending since fiscal 2020.

Interest Expense, Net

Interest expense for the third quarter of fiscal 2021 was $2.2 million, as compared to $1.1 million for the third quarter of fiscal 2020 and $0.9 million for the third quarter of fiscal 2019.

The increase in interest expense for the third quarter of fiscal 2021 was due to a prepayment penalty of $1.1 million in connection with the Company's early repayment of its $17.5 million FILO loan as well as $0.8 million for the write-off of unamortized debt issuance costs associated with both the FILO loan and our prior credit facility.

These costs were partially offset by a decrease in interest expense due to reduced borrowing levels in the third quarter of fiscal 2021 as compared to the prior years' third quarters.

For the first nine months of fiscal 2021 interest expense was $4.3 million, as compared to $2.9 million for the first nine months of fiscal 2020 and $2.6 million for the first nine months of fiscal 2019.

The increase in interest expense is primarily related to the prepayment fee on the FILO loan of $1.1 million and the write-off of unamortized debt issuance costs for the year to date period of $0.9 million.

This increase was partially offset by a decrease in interest expense due to reduced borrowing levels for the first nine months of fiscal 2021 as compared to the prior periods.

Interest expense for first quarter of fiscal 2022 was $0.1 million, as compared to $1.1 million for the first quarter of fiscal 2021.

The Company had no outstanding debt and no borrowings under its credit facility during the first quarter of fiscal 2022 resulting in a decrease in interest expense as compared to the first quarter of fiscal 2021.

We established a full valuation allowance against our deferred tax assets at the end of fiscal 2013.

Our tax provision for the third quarter and first nine months of fiscal 2021 was primarily due to income tax in states where NOL usage is statutorily limited.

Our tax provision for the third quarter and first nine months of fiscal 2020 was primarily due to state margin tax, based on gross receipts less certain deductions.

Net Income (Loss)

For the third quarter of fiscal 2021, we recorded net income of $13.7 million, or $0.20 per diluted share, compared with a net loss of $(7.0) million, or $(0.14) per diluted share, for the third quarter of fiscal 2020 and a net loss of $(7.2) million, or $(0.14) per diluted share, for the third quarter of fiscal 2019.

For the first nine months of fiscal 2021, we had net income of $46.8 million, or $0.69 per diluted share, compared to a net loss of $(59.5) million, or $(1.16) per diluted share, for the first nine months of fiscal 2020 and a net loss of $(10.2) million, or $(0.21) per diluted share, for the first nine months of fiscal 2019.

As of October 30, 2021, our inventory decreased approximately $12.6 million to $82.3 million, as compared to $94.9 million at October 31, 2020 and decreased approximately $37.9 million as compared to $120.2 million at November 2, 2019.

Maintaining sufficient inventory levels is our primary focus, given our current sales trends and the ongoing disruptions in the global supply chain.

While we returned to profitability in fiscal 2021 and are projecting that we will generate taxable income in fiscal 2022, given our limited history of profitability and uncertainty in future forecast, at this time we believe that a full valuation allowance remains appropriate.

Our tax provision for the first quarter of fiscal 2022 and fiscal 2021 was primarily due to income tax in states where NOL usage is statutorily limited.

For the first quarter of fiscal 2022, we recorded net income of $13.4 million, or $0.20 per diluted share, compared with net income of $8.7 million, or $0.14 per diluted share, for the first quarter of fiscal 2021.

The improvement in earnings was driven by sales growth and improved margins.

As of April 30, 2022, our inventory increased approximately $8.5 million to $96.9 million, as compared to $88.4 million at May 1, 2021.

We are in a stronger inventory position at April 30, 2022 than at the end of the first quarter last year and are continuing to manage inventory closely given the ongoing issues with the global supply chain.

We believe that we will be able to secure sufficient inventory to support our sales forecasts.

At the same time, we are continuing to manage inventory conservatively, narrowing our assortment while driving meaningfully greater levels of exclusivity with national brands.

At October 30, 2021, our clearance inventory was 6.4% of our total inventory, as compared to 11.8% at October 31, 2020 and 10.0% at November 2, 2019.

At April 30, 2022, our clearance inventory was 6.9% of our total inventory, as compared to 10.1% at May 1, 2021.

Historically, and consistent with the retail industry, we have experienced seasonal fluctuations as it relates to our operating income and net income.

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LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash generated from operations and availability under our prior and new credit facilities.

We took several actions during fiscal 2020 to preserve our liquidity, and in the first quarter of fiscal 2021, we further strengthened our liquidity position by completing a direct offering of our common stock, which raised $4.4 million, net of offering costs.

In the first quarter, we refinanced our then existing $15.0 million FILO loan by entering into a new $17.5 million FILO loan, which increased our borrowing capacity.

As a result of our improved earnings and free cash flow, in the third quarter of fiscal 2021, we used a portion of the excess cash flow to prepay the FILO loan, which bore an interest rate of 8.50%.

At October 30, 2021, we had no outstanding debt, including no borrowings under our revolving credit facility.

We believe our cash on hand, availability under our new credit facility, and ongoing cash generated from our operations will be sufficient to fund our working capital requirements and capital expenditures for the next 12 months.

However, we remain cautiously optimistic regarding the duration of the pandemic and how it may continue to impact our financial results and liquidity.

For the first nine months of fiscal 2021, cash flow from operations improved to $64.2 million as compared to $(8.6) million for the first nine months of fiscal 2020 and $(14.4) million for the first nine months of fiscal 2019.

Free cash flow, a non-GAAP measure, improved to $61.3 million for the first nine months of fiscal 2021 as compared to $(11.6) million for the first nine months of fiscal 2020 and $(25.4) million for the first nine months of fiscal 2019.

The improvement in free cash flow was primarily due to our improvement in earnings as well as faster inventory turnover.

Cash flow from financing activities for the first nine months of fiscal 2021 decreased by $102.1 million as compared to fiscal 2020, primarily due to the repayment of amounts outstanding under our revolver, which included the repayment of the $30.0 million that we drew-down on our then existing Credit Facility in March 2020 to provide the Company with financial flexibility during the pandemic as well as the prepayment of our $17.5 million FILO loan in September 2021.

On October 28, 2021, we entered into a new $125.0 million revolving credit agreement, which replaced our prior credit facility that was due to expire in May 2023 (the "New Credit Facility").

The New Credit Facility has a five-year term and provides more favorable terms than the previous credit facility.

The New 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.

Borrowings made pursuant to the New Credit Facility will be made pursuant to either a Base Rate loan or LIBOR Rate loan, at the Company's option.

Base Rate loans will bear interest, at a rate equal to (i) the greater of:

Our primary sources of liquidity are cash generated from operations and availability under our credit facility.

At April 30, 2022, we had no outstanding debt, including no borrowings during the quarter under our credit facility.

We believe our cash on hand, availability under our credit facility, and ongoing cash generated from our operations will be sufficient to fund our working capital requirements, our stock repurchase program and capital expenditures for the next 12 months.

We believe that cash flows from operating activities and cash on hand will also 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 three months of fiscal 2022, cash flow from operations decreased to $(1.5) million as compared to $7.8 million for the first three months of fiscal 2021.

Free cash flow, a non-GAAP measure, decreased to $(2.7) million for the first three months of fiscal

2022 as compared to $7.0 million for the first three months of fiscal 2021.

The decrease in free cash flow was due to our seasonal inventory build in advance of Father's Day, the payout of incentive-based awards, and an increase in capital expenditures, which were partially offset by our increased earnings.

Cash flow used from financing activities for the first three months of fiscal 2022 improved by $14.9 million as compared to the first three months of fiscal 2021, primarily due to the repayment in the prior year of amounts outstanding under our revolver.

This was partially offset by the stock offering in the first quarter of fiscal 2021 and the repurchase of our common stock, as discussed below, in the first quarter of fiscal 2022.

Stock Repurchase Program

In March 2022, 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.

For the first quarter of fiscal 2022, the Company repurchased 946,101 shares at an aggregate cost, including fees, of $4.8 million.

Shares of repurchased common stock are held as treasury stock.

The stock repurchase program will expire in March 2023.

Credit Facility

On October 28, 2021, we entered into a $125.0 million revolving credit agreement, which replaced our prior credit facility that was due to expire in May 2023 (the "Credit Facility").

The Credit Facility has a five-year term and provides more favorable terms than the previous 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.

Borrowings made pursuant to the Credit Facility will be made pursuant to either a Base Rate loan or LIBOR Rate loan, at the Company's option.

Base Rate loans 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 LIBOR rate plus 1.00% per annum, plus (ii) a varying percentage, based on the Company’s average excess availability, of either 0.25% or 0.50%.

LIBOR Rate loans, which may be either for 1 month or 3 months, will bear interest at (i) the LIBOR rate, or the Benchmark Rate as defined in the credit agreement plus (ii) a varying percentage based on the Company’s average excess availability, of either 1.25% or 1.50%.

We had no outstanding borrowings under the New Credit Facility at October 30, 2021.

At October 30, 2021, outstanding standby letters of credit were $2.7 million and outstanding documentary letters of credit of $1.2 million.

The average monthly borrowing outstanding under the Credit Facility during the first nine months ended October 30, 2021 was approximately $21.8 million, resulting in an average unused excess availability of approximately $49.7 million.

Unused excess availability at October 30, 2021 was $74.0 million.

In March 2021, we refinanced our existing $15.0 million FILO loan (the “existing FILO loan”) and entered into a new $17.5 million FILO loan (the “new FILO loan”).

The new FILO loan had higher advance rates, provided additional borrowing capacity of approximately $5.0 to $10.0 million, and carried an interest rate of 8.50%.

The terms of the new FILO loan included a prepayment penalty, if any portion of the principal for the new FILO Loan was prepaid during the initial two-year period, equal to the greater of (i) the incremental interest that would have been incurred with respect to that principal repayment during the two year period and (ii) 3% of the principal prepayment, unless the prepayment occurs after March 16, 2022 in connection with the Company’s renegotiation of its Credit Agreement in which case the prepayment premium would be equal to 1% of the principal prepayment.

On September 3, 2021, we prepaid the outstanding balance of $17.5 million under the new FILO loan.

In connection with the prepayment, we negotiated a reduced prepayment penalty of $1.1 million and wrote-off unamortized debt issuance costs of $0.8 million.

LIBOR Rate loans, which may be either for 1 month or 3 months, bear interest at (i) the LIBOR rate, or the Benchmark Rate as defined in the credit agreement plus (ii) a varying percentage based on the Company’s average excess availability, of either 1.25% or 1.50%.

We had no outstanding borrowings under the New Credit Facility at April 30, 2022 and no borrowings during the first quarter of fiscal 2022.

At April 30, 2022, outstanding standby letters of credit were $2.7 million and outstanding documentary letters of credit were $1.4 million.

The average unused excess availability during the first quarter of fiscal 2022 was approximately $75.0 million and the unused excess availability at April 30, 2022 was $85.0 million.

Capital Expenditures

The following table sets forth the open stores and related square footage at October 30, 2021, October 31, 2020 and November 2, 2019, respectively:

October 30, 2021

October 31, 2020

November 2, 2019

The following table sets forth the open stores and related square footage at April 30, 2022 and May 1, 2021, respectively:

April 30, 2022

Store Concept

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Casual Male Outlets

Rochester Clothing

We do not plan to open any new stores or rebrand any of our Casual Male XL stores during the remainder of fiscal 2021.

We have 112 stores that have leases with either a natural lease expiration or a kick-out option within the next two years.

This provides us an opportunity to further evaluate our store portfolio, through ongoing lease renegotiations or lease-term expirations, to ensure that we are optimizing our store profitability and omni-channel distribution.

Since the beginning of fiscal 2020, we have renegotiated approximately 155 of our store leases, which we expect will result in over $18.1 million of savings over the life of the leases, including $6.2 million of expected savings in fiscal 2021.

Our capital expenditures for the first nine months of fiscal 2021 were $2.8 million as compared to $2.9 million for the first nine months of fiscal 2020.

During the first nine months of fiscal 2021, we closed 6 DXL retail stores, 1 DXL outlet store, 8 Casual Male XL retail stores and 2 Casual Male XL outlets.

CRITICAL ACCOUNTING POLICIES

Our capital expenditures for the past two years have been very limited due to the pandemic.

For fiscal 2022, we expect our capital expenditures will be approximately $10.0-$12.0 million as we make investments in technology related to our marketing and merchandising initiatives and actively pursue opportunities to relocate or convert our remaining Casual Male XL stores to DXL stores.

During fiscal 2022, we are planning on rebranding up to 4 of our Casual Male XL retail stores to DXL retail stores.

During the first quarter of fiscal 2022, we closed 3 Casual Male XL retail stores and 1 DXL retail store.

We are also reviewing white space opportunities in markets where our store footprint is underpenetrated.

We believe that our store portfolio is a vital asset to our business strategy and we expect to continue to invest in stores over the next several years as we further strengthen the store portfolio.

Over the next three to five years, based on our preliminary store development plan, we believe that we could potentially open up to a net of 50 new and relocated stores.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to the critical accounting policies and estimates disclosed in our Fiscal 2021 Annual Report.

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Free cash flow and Adjusted EBITDA 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 (loss) or cash flows from operating activities or any other measure of performance derived in accordance with GAAP.

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.

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The following table reconciles free cash flow:

For the nine months ended

For the three months ended

(in millions)

October 30, 2021

October 31, 2020

November 2, 2019

April 30, 2022

Cash flow from operating activities (GAAP basis)

2 unchanged sentences

Adjusted EBITDA .

Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and is before any impairment of assets, CEO transition costs and exit costs associated with London operations, if any.

Adjusted EBITDA is calculated as earnings before interest, taxes, depreciation and amortization and is before any impairment of assets, if any.

We believe that adjusted EBITDA is useful to investors in evaluating our performance and is a key metric to measure profitability and economic productivity.

The following table reconciles adjusted EBITDA from net income (loss):

The following table reconciles adjusted EBITDA from net income:

For the three months ended

For the nine months ended

October 30, 2021

October 31, 2020

November 2, 2019

October 30, 2021

October 31, 2020

November 2, 2019

April 30, 2022

(in millions)

Net income (loss) (GAAP basis)

Impairment of assets

CEO transition costs

Exit costs associated with London operations

Provision (benefit) for income taxes

Net income (GAAP basis)

Impairment (gain) of assets

Provision for income taxes

Interest expense

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements