What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-12-10 compared with 2020-09-09 · 199 added, 217 removed, 199 unchanged (68% of the section changed)

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Accordingly, the results of Vilebrequin, KLH, KLNA and Fabco are, and will be, included in our financial statements for the quarter ended or ending closest to G-III’s fiscal quarter end.

For example, with respect to our results for the six-month period ended July 31, 2020, the results of Vilebrequin, KLH, KLNA and Fabco are included for the six-month period ended June 30, 2020.

For example, with respect to our results for the nine-month period ended October 31, 2020, the results of Vilebrequin, KLH, KLNA and Fabco are included for the nine-month period ended September 30, 2020.

We account for our investment in each of KLH, KLNA and Fabco using the equity method of accounting.

The Company’s retail operations segment uses a 52/53-week fiscal year.

The Company’s three and six-month periods ended July 31, 2020 and 2019 were each 13-week and 26-week periods, respectively, for the retail operations segment.

For fiscal 2021 and 2020, the three and six month periods for the retail operations segment ended on August 1, 2020 and August 3, 2019 respectively.

The Company’s three and nine-month periods ended October 31, 2020 and 2019 were each 13-week and 39-week periods, respectively, for the retail operations segment.

For fiscal 2021 and 2020, the three and nine month periods for the retail operations segment ended on October 31, 2020 and November 2, 2019 respectively.

Various statements contained in this Form 10-Q, in future filings by us with the SEC, in our press releases and in oral statements made from time to time by us or on our behalf constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

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Forward-looking statements also include representations of our expectations or beliefs concerning future events that involve risks and uncertainties, including, but not limited to, the following:

● the outbreak of COVID-19 and its numerous adverse effects, including the closing of stores and shopping malls, the reduction of consumer purchases of the types of products we sell, the impact on our supply chain, restrictions on travel and group gatherings and the general material adverse effect on the economy in the U.S.

and around the world, all of which negatively impact our business, sales and results of operations;

● the outbreak of COVID-19 and its numerous adverse effects, including the temporary closing of stores and shopping malls and subsequent restrictions on the operation of stores and malls, the reduction of consumer purchases of the types of products we sell, the impact on our supply chain, restrictions on travel and group gatherings and the general material adverse effect on the economy in the U.S.

and around the world caused by the COVID-19 pandemic, all of which negatively impact our business, sales and results of operations;

● our dependence on licensed products;

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Any forward-looking statements are based largely on our expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control.

A detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations is described in Part II—Other Information below in this Quarterly Report under the heading “Item 1A.

A detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations is described in Part II—Other Information in (i) our Quarterly Report on Form 10-Q for the period ended July 31, 2020 under the heading “Item 1A.

Risk Factors” and (ii) this Quarterly Report under the heading “Item 1A.

Risk Factors.” We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Recent Developments

Secured Notes

Refinancing of our Term Loan and Revolving Credit Facility

On August 7, 2020, we completed a private debt offering of $400 million aggregate principal amount of our 7.875% Senior Secured Notes due 2025 (the “Notes).

The terms of the Notes are governed by an indenture, dated as of August 7, 2020 (the “Indenture”), among us, the guarantors party thereto and U.S.

Bank, National Association, as trustee and collateral agent (the “Collateral Agent”).

The net proceeds of the Notes have been used (i) to repay our existing term loan facility due 2022, (ii) to pay related fees and expenses and (iii) for general corporate purposes.

The net proceeds of the Notes have been used (i) to repay our prior term loan facility due 2022, (ii) to pay related fees and expenses and (iii) for general corporate purposes.

The Notes bear interest at a rate of 7.875% per year payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2021.

The Notes are unconditionally guaranteed on a senior-priority secured basis by our current and future wholly-owned domestic subsidiaries that guarantee any of our credit facilities, including our ABL facility (the “ABL Facility”) pursuant to the ABL Credit Agreement, or certain future capital markets indebtedness of ours or the guarantors.

The Notes and the related guarantees are secured by (i) first priority liens on our Cash Flow Priority Collateral (as defined in the Indenture), and (ii) a second-priority lien on our ABL Priority Collateral (as defined in the Indenture), in each case subject to permitted liens described in the Indenture.

In connection with the issuance of the Notes and execution of the Indenture, we and the Guarantors entered into a pledge and security agreement (the “Pledge and Security Agreement”), among us, the Guarantors and the Collateral Agent.

The Notes are subject to the terms of the intercreditor agreement which governs the relative rights of the secured parties in respect of the ABL Facility and the Notes (the “Intercreditor Agreement”).

The Intercreditor Agreement restricts the actions permitted to be taken by the Collateral Agent with respect to the Collateral on behalf of the holders of the Notes.

The Notes are also subject to the terms of the seller note subordination agreement which governs the relative rights of the secured parties in respect of the Seller Note (as defined therein), the ABL Facility and the Notes.

At any time prior to August 15, 2022, we may redeem some or all of the Notes at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date plus a “make-whole” premium, as described in the Indenture.

On or after August 15, 2022, we may redeem some or all of the Notes at any time and from time to time at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

In addition, at any time prior to August 15, 2022, we may redeem up to 40% of the aggregate principal amount of the Notes with the proceeds of certain equity offerings at the redemption price set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable

redemption date.

In addition, at any time prior to August 15, 2022, during any twelve month period, we may redeem up to 10% of the aggregate principal amount of the Notes at a redemption price equal to 103% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

If we experience a Change of Control (as defined in the Indenture), we are required to offer to repurchase the Notes at 101% of the principal amount of such Notes plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

The Indenture contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other restricted payments, make certain investments, incur restrictions on the ability of our restricted subsidiaries that are not guarantors to pay dividends or make certain other payments, create or incur certain liens, sell assets and subsidiary stock, impair the security interests, transfer all or substantially all of our assets or enter into merger or consolidation transactions, and enter into transactions with affiliates.

The Indenture provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others, nonpayment of principal or interest, breach of other agreements in the Indenture, failure to pay certain other indebtedness, failure of certain guarantees to be enforceable, failure to perfect certain collateral securing the Notes failure to pay certain final judgments, and certain events of bankruptcy or insolvency.

Second Amended and Restated ABL Credit Agreement

On August 7, our subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc.

and The Donna Karan Company Store LLC (collectively, the “Borrowers”), entered into the second amended and restated credit agreement (the “ABL Credit Agreement”) with the Lenders named therein and with JPMorgan Chase Bank, N.A., as Administrative Agent.

The ABL Credit Agreement is a five year senior secured credit facility subject to a springing maturity date if, subject to certain conditions, certain material indebtedness is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

The ABL Credit Agreement provides for borrowings in the aggregate principal amount of up to $650 million.

We and our subsidiaries, G-III Apparel Canada ULC, Gabrielle Studio, Inc., Donna Karan International Inc.

and Donna Karan Studio LLC (the “Guarantors”), are Loan Guarantors under the ABL Credit Agreement.

The ABL Credit Agreement refinances, amends and restates the Amended Credit Agreement, dated as of December 1, 2016 (as amended, supplemented or otherwise modified from time to time prior to August 7, 2020, the “Prior Credit Agreement”), by and among the Borrowers and the Loan Guarantors (each as defined therein) party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., in its capacity as the administrative agent thereunder.

The Prior Credit Agreement provided for borrowings of up to $650 million and was due to expire in December 2021.

The ABL Credit Agreement extends the maturity date, subject to a springing maturity date if, subject to certain conditions, certain material indebtedness is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

Amounts available under the ABL Credit Agreement are subject to borrowing base formulas and overadvances as specified in the ABL Credit Agreement.

Borrowings bear interest, at the Borrowers’ option, at LIBOR plus a margin of 1.75% to 2.25% or an alternate base rate margin of 0.75% to 1.25% (defined as the greatest of (i) the “prime rate” of JPMorgan Chase Bank, N.A.

from time to time, (ii) the federal funds rate plus 0.5% and (iii) the LIBOR rate for a borrowing with an interest period of one month) plus 1.00%, with the applicable margin determined based on Borrowers’ availability under the ABL Credit Agreement.

The ABL Credit Agreement is secured by specified assets of the Borrowers and the Guarantors.

Also on August 7, 2020, we entered into the second amended and restated credit agreement (the “ABL Credit Agreement”) The ABL Credit Agreement is a five year senior secured credit facility and provides for borrowings in the aggregate principal amount of up to $650 million.

The ABL Credit Agreement refinances, amends and restates our prior Amended Credit Agreement which provided for borrowings of up to $650 million and was due to expire in December 2021.

For a description of the Notes, the ABL Credit Agreement and our other debt instruments, see “Liquidity and Capital Resources” under this Item 2.

Restructuring of Our Retail Operations Segment

On June 5, 2020, we announced a restructuring of our retail operations segment, including the closing of all Wilsons Leather and G.H.

Additionally, we will close our Calvin Klein Performance stores.

We have hired Hilco Global to assist in the liquidation of these stores.

We anticipate that the restructuring will be completed by the end of fiscal 2021.

In June 2020, we announced a restructuring of our retail operations segment, including the closing of all Wilsons Leather and G.H.

Additionally, we are closing our Calvin Klein Performance stores.

We hired Hilco Global to assist in the liquidation of these stores.

We anticipate that the store closings will be completed by the end of fiscal 2021.

After completion of the restructuring, our retail operations segment will consist of DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and G.H.

Part of our restructuring plan includes making significant changes to our DKNY and Karl Lagerfeld store operations.

In addition to the stores operated as part of our retail operations segment, as of July 31, 2020, Vilebrequin products were distributed through 104 company-operated stores and owned digital channels in Europe and the United States, as well as through 63 franchised locations.

Part of our restructuring plan includes making significant changes to our DKNY and Karl Lagerfeld retail operations.

In addition to the stores operated as part of our retail operations segment, as of October 31, 2020, Vilebrequin products were distributed through 101 company-operated stores and owned digital channels in Europe and the United States, as well as through 69 franchised locations.

In connection with the restructuring of our retail operations, we expect to incur an aggregate charge of approximately $100 million related to store operating costs, landlord termination fees, severance costs, store liquidation and closing costs, write-offs related to right-of-use assets and legal and professional fees.

We recorded $1.2 million of this charge during the three months ended July 31, 2020, consisting primarily of severance payments, benefit continuation costs and store closing costs.

We expect the net cash outflow of the retail restructuring to be approximately $65 million.

We believe that this restructuring plan will enable us to greatly reduce our retail losses and to ultimately have this segment become profitable.

We recorded $2.2 million of this charge during the nine months ended October 31, 2020, consisting primarily of severance payments, benefit continuation costs and store

closing costs.

We expect the net cash outflow as a result of the retail restructuring to be approximately $65 million.

We believe that this restructuring plan will enable us to greatly reduce our retail losses and to ultimately position this segment to become profitable.

Impact of COVID-19 Pandemic

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The President of the United States has declared a national emergency as a result of the COVID-19 pandemic.

Federal, state and local governments and private entities mandated various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus.

Federal, state and local governments and private entities mandated various restrictions, including closing of retail stores and restaurants, travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus.

The response to the COVID-19 pandemic has negatively affected the global economy, disrupted global supply chains, and created significant disruption of the financial and retail markets, including a disruption in consumer demand for apparel and accessories.

The COVID-19 pandemic has had multiple impacts on our business, including, but not limited to, the temporary closure of our customers’ stores and closures of our own stores in North America, a mandate to require our employees who work in our headquarters to work remotely and temporary disruption of our global supply chain.

The COVID-19 pandemic has impacted our business operations and results of operations for the first and second quarters of fiscal 2021 resulting in lower sales, lower liquidity and an adverse impact on free cash flow.

The COVID-19 pandemic has had multiple impacts on our business, including, but not limited to, the temporary closure of our customers’ stores and closures of our own stores in North America, disruption to both international and domestic tourism and disruption to consumer shopping habits.

The COVID-19 pandemic has impacted our business operations and results of operations throughout fiscal 2021 resulting in lower sales and profitability.

COVID-19 could continue to have an adverse impact on our results of operations and liquidity, the operations of our suppliers, vendors and customers, and on our employees as a result of quarantines, facility closures, and travel and logistics restrictions.

Even as businesses slowly begin to reopen as governmental restrictions are loosened with respect to stay at home orders and previously closed businesses, the ultimate economic impact of the COVID-19 pandemic is highly uncertain.

Even as businesses began to reopen as governmental restrictions were loosened with respect to stay at home orders and previously closed businesses, the ultimate economic impact of the COVID-19 pandemic is highly uncertain.

We expect that our business operations and results of operations, including our net sales, earnings and cash flows, will be materially adversely impacted for at least the balance of fiscal 2021.

During this crisis we are focused on protecting the health and safety of our employees, our customers, and our communities.

We have taken precautionary measures intended to help minimize the risk of COVID-19 to our employees, including temporarily requiring employees to work remotely and temporarily closing all of our retail stores.

We have taken precautionary measures intended to help minimize the risk of COVID-19 to our employees, including temporarily requiring employees to work remotely.

Requiring our employees to work remotely may disrupt our operations or increase the risk of a cybersecurity incident.

Only recently, we have begun re-opening stores and our personnel have started working again in our offices.

Most of our retail partners closed their stores in North America, including our largest customer, Macy’s, while some of our customers, such as Costco and Sam’s Club, remained open for business.

Our retail partners that have closed stores have asked to extend their payment terms with us.

We continue to negotiate resolutions with our retail partners that are equitable and fiscally responsible for each of us.

Certain of our retail partners have publicized actual or potential bankruptcy filings or other liquidity issues that could impact our anticipated income and cash flows, as well as require us to record additional accounts receivable reserves.

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Further, a more promotional retail environment may cause us to lower our prices or sell existing inventory at larger discounts than in the past, negatively impacting our margins.

There is significant uncertainty around the breadth and duration of store closures and other business disruptions related to the COVID-19 pandemic, as well as its impact on the U.S.

and global economies and on consumer willingness to visit stores once they re-open.

Recently, consumer businesses have begun to re-open in many areas of the United States under governmental social distancing and other restrictions that are expected to limit the scope of operations compared to pre-COVID-19 business operations for an unknown period of time.

These restrictions are expected to adversely impact sales even as retail stores continue to reopen.

There is significant uncertainty around the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as its impact on the U.S.

and global economies and on consumer willingness to visit stores as they re-open.

Consumer businesses have re-opened in most areas of the United States under governmental social distancing and other restrictions that are expected to limit the scope of operations for an unknown period of time compared to pre-COVID-19 business operations.

These restrictions are expected to adversely impact sales even as retail stores are open again.

The extent to which COVID-19 impacts our results will depend on continued developments in the public and private responses to the pandemic.

The continued impact of COVID-19 remains highly uncertain and cannot be predicted.

New information may emerge concerning the severity of the outbreak and the actions taken to contain COVID-19 or treat its impact may change or become more restrictive if a second wave of infections occurs, or continues to occur, as a result of the loosening of governmental restrictions.

In response to these challenges, we have taken measures to contain costs that include, but are not limited to, employee furloughs, job eliminations, temporary salary reductions, reduced advertising and other promotional spending and deferral of capital projects.

We are also reviewing our inventory needs and working with suppliers to curtail, or cancel, production of product which we believe will not be able to be sold in season.

We have also been working with our suppliers, landlords and licensors to renegotiate related agreements and extend payment terms in order to preserve capital.

New information may emerge concerning the severity of the outbreak and the actions taken to contain COVID-19 or treat its impact may change or become more restrictive as additional waves of infections occur, or continue to occur, as a result of the loosening of governmental restrictions.

We are focused on preserving liquidity and managing cash flow during these unprecedented conditions.

We have taken preemptive actions to enhance our ability to meet our short-term liquidity needs, including, but not limited to, reducing payroll costs through employee furloughs, job eliminations, salary reductions, reductions in marketing and other discretionary spending, deferring certain lease payments and deferral of capital projects.

During the quarter ended October 31, 2020, certain furloughed employees were reinstated and salaries that had been reduced were increased to their pre-pandemic levels.

We have received royalty relief from certain licensors and we continues to negotiate with licensors for additional relief.

Due to the impact of the COVID-19 pandemic on our operations, we performed a quantitative test of our goodwill as of April 30, 2020 using an income approach through a discounted cash flow analysis methodology.

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The relief from royalty method requires assumptions regarding industry economic factors and future profitability.

While no impairment was identified as of April 30, 2020 as a result of these tests, $370.0 million of our indefinite-lived trademarks could be deemed to have a risk of future impairment as there is limited excess fair value over the carrying value of the assets at April 30, 2020.

During the second quarter of 2020, we conducted a review to assess whether indicators of impairment existed.

During the third quarter of 2020, we conducted a review to assess whether indicators of impairment existed.

As a result of this review, we concluded that no indicators existed that would make management believe it is more likely than not that the fair value of its goodwill or indefinite-lived trademarks is less than its carrying value.

The continued impact of the COVID-19 pandemic could give rise to global and regional macroeconomic factors that could impact our assumptions relating to net sales growth rates, discount rates, tax rates or royalty rates and may result in future impairment charges for indefinite-lived intangible assets.

We believe that we have sufficient cash and available capacity under our revolving credit facility to meet our liquidity needs.

As of July 31, 2020, we had cash of approximately $252.8 million.

License Renewal

In August 2020, we renewed our license agreements with Levi Strauss & Co.

for the Levi’s and Dockers brands.

These licenses have been renewed through November 30, 2024 and cover men’s and women’s outerwear under the Levi’s brand and men’s outerwear under the Dockers brand.

We believe that we have sufficient cash and availability under our ABL Credit Agreement to meet our liquidity needs.

As of October 31, 2020, we had cash of approximately $149.7 million and availability of over $600.0 million under our ABL Credit Agreement.

Fabco Holding B.V (“Fabco”) is a Dutch joint venture limited liability company that was 49% owned by us through November 30, 2020.

Effective December 1, 2020, we acquired an additional ownership interest in Fabco for nominal consideration, resulting in an increase of our ownership interest in Fabco to 75%.

Effective December 1, 2020, Fabco is a consolidated majority-owned subsidiary of ours.

Prior to December 1, 2020, we accounted for our investment in Fabco using the equity method of accounting.

Fabco operates our DKNY business in China.

G-III designs, sources and markets an extensive range of apparel, including outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear, as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage.

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We are also expanding our DKNY business globally through our distribution partners in key regions.

The key markets in which our DKNY merchandise is currently distributed include the Middle East, Russia, Indonesia, the Philippines, South East Asia and South Korea, as well as in China where we operate through a joint venture.

The key international markets in which our DKNY merchandise is currently distributed include the Middle East, Russia, Indonesia, the Philippines, South East Asia and South Korea, as well as in China where we operate through a joint venture.

Continued growth, brand development and marketing in these key markets is critical to driving global brand recognition.

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Bass and DKNY stores, substantially all of which are operated as outlet stores, as well as a smaller number of Karl Lagerfeld Paris and Calvin Klein Performance stores.

After completion of the restructuring, our retail operations segment will initially consist of DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and G.H.

After completion of the restructuring which is expected to occur by the end of fiscal 2021, our retail operations segment will consist of DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and G.H.

Our ongoing plan for our retail business focuses on the operations and growth of our DKNY and Karl Lagerfeld Paris stores, as well as our digital business.

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In addition, we sell to pure play online retail partners such as Amazon and Fanatics.

A number of retailers are experiencing financial difficulties, which in some cases have resulted in bankruptcies, liquidations and/or store closings, such as the announced store closing plans for Macy’s, the bankruptcy and announced liquidation of Lord & Taylor, the announced bankruptcy filings of JC Penney, Neiman Marcus and other retailers and the potential bankruptcy of other retailers.

A number of retailers are experiencing financial difficulties, which in some cases have resulted in bankruptcies, liquidations and/or store closings, such as the announced store closing plans for Macy’s, the bankruptcy and announced liquidation of Century 21 and Lord & Taylor, the announced bankruptcy filings of JC Penney, Neiman Marcus and other retailers and the potential bankruptcy of additional retailers.

The financial difficulties of a retail customer of ours could result in reduced business with that customer.

We may also assume higher credit risk relating to receivables of a retail customer experiencing

financial difficulty that could result in higher reserves for doubtful accounts or increased write-offs of accounts receivable.

We may also assume higher credit risk relating to receivables of a retail customer experiencing financial difficulty that could result in higher reserves for doubtful accounts or increased write-offs of accounts receivable.

We attempt to mitigate credit risk from our customers by closely monitoring accounts receivable balances and shipping levels, as well as the ongoing financial performance and credit standing of customers.

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Exclusive brands are only made available to a specific retailer, and thus customers loyal to their brands can only find them in the stores of that retailer.

We have attempted to respond to trends in our industry by continuing to focus on selling products with recognized brand equity, by attention to design, quality and value and by improving our sourcing capabilities.

Consumers have shifted their apparel purchases based on their adjusted lifestyle needs resulting from changes to the work environment and leisure activities caused by the COVID-19 pandemic.

We have revised our product offerings in response to this shift toward casual and comfortable work-from-home clothing, as well as to activewear and leisure attire.

We continue to revise our product lines to satisfy the needs of our retail customers and consumers.

We have attempted to respond to general trends in our industry by continuing to focus on selling products with recognized brand equity, by attention to design, quality and value and by improving our sourcing capabilities.

We have also responded with the strategic acquisitions made by us and new license agreements entered into by us that added to our portfolio of licensed and proprietary brands and helped diversify our business by adding new product lines and expanding distribution channels.

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Results of Operations

Three months ended July 31, 2020 compared to three months ended July 31, 2019

Net sales for the three months ended July 31, 2020 decreased to $297.2 million from $643.9 million in the same period last year.

Three months ended October 31, 2020 compared to three months ended October 31, 2019

Net sales for the three months ended October 31, 2020 decreased to $826.6 million from $1.13 billion in the same period last year.

Net sales of our segments are reported before intercompany eliminations.

Net sales of our wholesale operations segment decreased to $266.8 million for the three months ended July 31, 2020 from $588.6 million in the comparable period last year.

Net sales of our wholesale operations segment decreased to $783.0 million for the three months ended October 31, 2020 from $1.07 billion in the comparable period last year.

We experienced a significant decrease in net sales across substantially all of our brands due to the effects of restrictions on business and personal activities imposed by governments in connection with the COVID-19 pandemic.

Most of our retail partners began to reopen a majority of their stores in North America beginning in June 2020, including our largest customer, Macy’s.

However, a majority of these stores continue to operate under government mandated social distancing restrictions as the COVID-19 pandemic continues to spread across large portions of North America.

However, a majority of these stores continue to operate under government mandated social distancing restrictions as the COVID-19 pandemic continues to affect large portions of North America.

The governmental restrictions imposed in connection with the COVID-19 pandemic have resulted in significant increases in unemployment, a reduction in business activity and a reduction in consumer spending on apparel and accessories, all of which contributed to the reduction of our net sales which occurred throughout the three month period.

Net sales of our retail operations segment were $34.5 million for the three months ended July 31, 2020 compared to $83.7 million in the same period last year.

This decrease primarily reflected the closure of our retail stores in March 2020.

Our stores did not begin to reopen until June 2020.

In addition, there was reduced demand as a result of disruptions related to COVID-19.

Net sales of our retail operations segment were $58.0 million for the three months ended October 31, 2020 compared to $89.7 million in the same period last year.

This decrease primarily reflected reduced demand as a result of disruptions related to COVID-19.

Same store sales decreased across all store brands due to the COVID-19 related store closures.

In addition, the decrease in domestic and international tourism resulting from COVID-19 travel restrictions also had a negative impact on net sales of our retail operations segment.

As we began the restructuring of our retail operations segment during the current period, net sales were also negatively impacted by significant promotional activity from liquidation sales.

Net sales of our retail operations segment were also negatively affected by the decrease in the number of stores operated by us from 292 at July 31, 2019 to 247 at July 31, 2020.

As we proceeded to liquidate inventory and close stores in connection with the restructuring of our retail operations segment, net sales were also negatively impacted by significant promotional activity from liquidation sales.

Net sales of our retail operations segment were also negatively affected by the decrease in the number of stores operated by us from 288 at October 31, 2019 to 202 at October 31, 2020.

The number of retail stores operated by us and, as a result, the net sales of our retail operations segment will be reduced significantly as a result of the restructuring of our retail operations segment.

Gross profit was $134.7 million, or 45.3% of net sales, for the three months ended July 31, 2020, compared to $231.8 million, or 36.0% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 46.3% in the three months ended July 31, 2020 compared to 32.8% in the same period last year.

Gross profit was $297.8 million, or 36.0% of net sales, for the three months ended October 31, 2020, compared to $399.0 million, or 35.4% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 35.5% in the three months ended October 31, 2020 compared to 33.2% in the same period last year.

The gross profit percentage for our wholesale segment was positively impacted by the reversal of previously anticipated markdown accruals that are no longer necessary due to the reduction in sales to our retail customers.

In addition, there was a reversal of a portion of previously accrued royalty expense associated with royalty reductions provided by licensors.

The gross profit percentage in our retail operations segment was 32.5% for the three months ended July 31, 2020 compared to 46.5% for the same period last year.

The gross profit percentage for our retail segment was negatively impacted by the reduction of our net sales caused by COVID-19 related closures of our retail stores, increased promotional activity due to the COVID-19 pandemic and the restructuring of our retail operations segment.

Selling, general and administrative expenses decreased to $122.1 million in the three months ended July 31, 2020 from $196.4 million in the same period last year.

The decrease in expenses was primarily due to a decrease of $55.9 million in personnel costs including salaries, bonus, share-based compensation and other incentives and benefits as a result of employee furloughs and job eliminations, as well as salary reductions implemented by us in response to the impact of the COVID-19 pandemic on our operations.

In addition, there were decreases of $9.6 million in advertising and $6.6 million in third-party warehouse expenses.

Selling, general and administrative expenses will be further reduced as a result of the restructuring of our retail operations segment.

This reduction is expected to be offset, in part, as we bring back furloughed employees in our wholesale operations segment as we respond to the re-opening of the U.S.

Depreciation and amortization was $9.7 million for the three months ended July 31, 2020 compared to $9.8 million in the same period last year.

Other income was $1.9 million in the three months ended July 31, 2020 compared to an other loss of $0.8 million for the same period last year.

This change is primarily the result of recording $1.5 million of foreign currency income during the three months ended July 31, 2020 compared to foreign currency losses of $0.4 million during the three months ended July 31, 2019.

In addition, we recorded $0.4 million in income from unconsolidated affiliates during the three months ended July 31, 2020 compared to $0.4 million of losses from unconsolidated affiliates in the same period last year.

Interest and financing charges, net, for the three months ended July 31, 2020 were $9.2 million compared to $10.8 million for the same period last year.

Borrowings were lower in the three months ended July 31, 2020 compared to the second quarter of fiscal 2020 due to reduced inventory purchases this year.

Further, interest rates were lower during the three months ended July 31, 2020 as compared to the same period last year.

Income tax benefit was $3.7 million for the three months ended July 31, 2020 compared to income tax expense of $4.3 million for the same period last year primarily due to our net loss position resulting from the significant decrease in net sales due to the effects of the COVID-19 pandemic.

Our effective tax rate decreased to 19.6% in the current year’s quarter from 27.7% in last year’s comparable quarter primarily due to a U.S.

federal net operating loss carryback to a tax year with a 35% federal tax rate compared to the current federal tax rate of 21% as well as a decrease in excess tax benefits in connection with the vesting of equity awards.

Six months ended July 31, 2020 compared to six months ended July 31, 2019

Net sales for the six months ended July 31, 2020 decreased to $702.3 million from $1.28 billion in the same period last year.

The gross profit percentage in our retail operations segment was 33.9% for the three months ended October 31, 2020 compared to 49.3% for the same period last year.

The gross profit percentage for our retail segment was negatively impacted by the liquidation of inventory in our Wilsons Leather and G.H.

Bass stores as we exit these businesses.

Selling, general and administrative expenses decreased to $177.6 million in the three months ended October 31, 2020 from $246.6 million in the same period last year.

The decrease in expenses was primarily due to a decrease of $38.3 million in personnel costs including salaries, bonuses, share-based compensation and other incentives and benefits as a result of employee furloughs, job eliminations and decreased profitability, as well as temporary salary reductions implemented by us in response to the impact of the COVID-19 pandemic on our operations.

Salaries were reinstated to pre-pandemic levels towards the end of our third fiscal quarter.

In addition, there were decreases of $16.3 million in advertising, $5.8 million in facility expenses and $4.8 million in third-party warehouse expenses.

These decreases were partially offset by a $4.2 million increase in bad debt expense related to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or potential bankruptcy filings and $3.1 million of professional fees incurred in connection with the restructuring of our retail operations segment.

Selling, general and administrative expenses was further reduced as a result of the restructuring of our retail operations segment.

This reduction was offset, in part, as a result of bringing back certain furloughed employees in our wholesale operations segment during the three months ended October 31, 2020 as we responded to the re-opening of the U.S.

Depreciation and amortization was $10.2 million for the three months ended October 31, 2020 compared to $9.7 million in the same period last year.

Other income was $0.2 million in the three months ended October 31, 2020 compared to other income of $0.7 million for the same period last year.

This change is the result of recording $0.3 million of foreign currency losses during the three months ended October 31, 2020 compared to foreign currency losses of $0.2 million during the three months ended October 31, 2019 and $0.5 million in income from unconsolidated affiliates during the three months ended October 31, 2020 compared to $0.8 million of income from unconsolidated affiliates in the same period last year.

Interest and financing charges, net, for the three months ended October 31, 2020 were $18.7 million compared to $12.5 million for the same period last year.

The increase is primarily due to a $6.5 million charge to interest expense to extinguish debt issuance costs upon the repayment of our term loan facility and amendment of our revolving credit facility.

Income tax expense was $28.4 million for the three months ended October 31, 2020 compared to $35.6 million for the same period last year.

Our effective tax rate increased to 31.0% in the current year’s quarter from 27.2% in last year’s comparable quarter because the impact of tax adjustments related to executive compensation, foreign tax expense and disallowed state tax benefits on losses incurred had a greater impact on the lower amount of pre-tax income in the current quarter compared to last year’s quarter.

Nine months ended October 31, 2020 compared to nine months ended October 31, 2019

Net sales for the nine months ended October 31, 2020 decreased to $1.53 billion from $2.41 billion in the same period last year.

Net sales of our segments are reported before intercompany eliminations.

Net sales of our wholesale operations segment decreased to $645.7 million for the six months ended July 31, 2020 from $1.16 billion in the comparable period last year.

Net sales of our wholesale operations segment decreased to $1.43 billion for the nine months ended October 31, 2020 from $2.23 billion in the comparable period last year.

We experienced a significant decrease in net sales across substantially all of our brands primarily due to the effects of restrictions that began in March 2020 on business and personal activities imposed by governments in connection with the COVID-19 pandemic.

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Most of our retail partners began to reopen a majority of their stores in North America beginning in June 2020.

However, a majority of these stores continue to operate under governmental mandated social distancing restrictions as the COVID-19 pandemic continues to spread across large portions of North America.

Net sales of our retail operations segment were $68.4 million for the six months ended July 31, 2020 compared to $165.6 million in the same period last year.

This decrease primarily reflected the closure of our retail stores in March 2020.

Our stores did not begin to reopen until June 2020.

In addition, there was reduced demand as a result of disruptions related to COVID-19.

However, a majority of these stores continue to operate under governmental mandated social distancing restrictions as the COVID-19 pandemic continues to affect large portions of North America.

Net sales of our retail operations segment were $126.4 million for the nine months ended October 31, 2020 compared to $255.3.

million in the same period last year.

This decrease primarily reflected reduced demand as a result of disruptions related to COVID-19.

Same store sales decreased across all store brands due to the COVID-19 related store closures and reduced store traffic.

In addition, the decrease in domestic and international tourism resulting from COVID-19 travel restrictions also had a negative impact on net sales of our retail operations segment.

As we began the restructuring of our retail operations segment during the second quarter of the current year, net sales were also negatively impacted by significant promotional activity from liquidation sales.

Net sales of our retail operations segment were also negatively affected by the decrease in the number of stores operated by us from 292 at July 31, 2019 to 247 at July 31, 2020.

As we proceeded to liquidate inventory and close stores in connection with the restructuring of our retail operations segment during the second quarter of the current fiscal year, net sales were also negatively impacted by significant promotional activity from liquidation sales.

Net sales of our retail operations segment were also negatively affected by the decrease in the number of stores operated by us from 288 at October 31, 2019 to 202 at October 31, 2020.

Gross profit was $259.1 million, or 36.9% of net sales, for the six months ended July 31, 2020, compared to $467.8 million, or 36.6% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 36.5% in the six months ended July 31, 2020 compared to 33.8% in the same period last year.

Gross profit was $556.8 million, or 36.4% of net sales, for the nine months ended October 31, 2020, compared to $866.9 million, or 36.0% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 36.0% in the nine months ended October 31, 2020 compared to 33.5% in the same period last year.

This positive impact was partially offset by the impact of the COVID-19 pandemic resulting in the recognition of certain fixed costs, primarily higher effective royalty rates, over a reduced sales base.

The gross profit percentage in our retail operations segment was 34.2% for the six months ended July 31, 2020 compared to 45.8% for the same period last year.

The gross profit percentage in our retail operations segment was 34.0% for the nine months ended October 31, 2020 compared to 47.1% for the same period last year.

Selling, general and administrative expenses decreased to $276.7 million in the six months ended July 31, 2020 from $398.3 million in the same period last year.

The decrease in expenses was primarily due to a decrease of $92.5 million in personnel costs including salaries, bonus, share-based compensation and other incentives and benefits as a result of employee furloughs and job eliminations, as well as salary reductions implemented by us in response to the impact of the

COVID-19 pandemic on our operations.

Selling, general and administrative expenses decreased to $454.3 million in the nine months ended October 31, 2020 from $644.9 million in the same period last year.

The decrease in expenses was primarily due to a decrease of $130.8 million in personnel costs including salaries, bonuses, share-based compensation and other incentives and benefits as a result of employee furloughs, job eliminations and decreased profitability.

In addition, there were decreases of $36.1 million in advertising, $8.8 million in rent and facility costs and $14.3 million in third-party warehouse expenses.

These decreases were offset, in part, by a $10.4 million increase in bad debt expense primarily related to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or potential bankruptcy filings.

Selling, general and administrative expenses will be further reduced as a result of the restructuring of our retail operations segment.

This reduction is expected to be offset, in part, as we bring back furloughed employees in our wholesale operations segment as we respond to the re-opening of the U.S.

Depreciation and amortization was $19.6 million for the six months ended July 31, 2020 compared to $19.3 million in the same period last year.

The increase in expense is due to capital expenditures during the last twelve months.

Other loss was $0.1 million in the six months ended July 31, 2020 compared to $1.4 million for the same period last year.

This decrease is primarily the result of recording $0.1 million of foreign currency income during the six months ended July 31, 2020 compared to $1.0 million of foreign currency losses during the six months ended July 31, 2019.

In addition, we recorded $0.2 million in losses from unconsolidated affiliates during the six months ended July 31, 2020 compared to $0.4 million of losses from unconsolidated affiliates in the same period last year.

Interest and financing charges, net, for the six months ended July 31, 2020 were $19.6 million compared to $21.1 million for the same period last year.

Average borrowings were higher in the six months ended July 31, 2020 than in the same period last year due to our $500 million in borrowings under our revolving credit facility during March 2020 as a precautionary measure to maintain our financial liquidity during the COVID-19 pandemic.

Interest rates were lower during the six month ended July 31, 2020 as compared to the same period last year.

Income tax benefit was $20.1 million for the six months ended July 31, 2020 compared to income tax expense of $6.8 million for the same period last year primarily due to our net loss position resulting from the significant decrease in net sales due to the effects of the COVID-19 pandemic.

Our effective tax rate increased to 27.0% in the current year’s quarter from 22.7% in last year’s comparable quarter primarily due to a U.S.

These decreases were offset, in part, by a $14.6 million increase in bad debt expense primarily related to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or potential bankruptcy filings and $4.3 million of professional fees incurred in connection with the restructuring of our retail operations segment.

Selling, general and administrative expenses were further reduced as a result of the restructuring of our retail operations segment.

This reduction was offset, in part, as a result of bringing back certain furloughed employees in our wholesale operations segment as we responded to the re-opening of the U.S.

Depreciation and amortization was $29.7 million for the nine months ended October 31, 2020 compared to $29.0 million in the same period last year.

The increase in expense is primarily due to capital expenditures during the last twelve months.

Other income was $0.1 million in the nine months ended October 31, 2020 compared to other loss of $0.7 million for the same period last year.

This increase is primarily the result of recording $0.2 million of foreign currency losses during the nine months ended October 31, 2020 compared to $1.1 million of foreign currency losses during the nine months ended October 31, 2019.

In addition, we recorded $0.3 million in losses from unconsolidated affiliates during the nine months ended October 31, 2020 compared to $0.4 million of losses from unconsolidated affiliates in the same period last year.

Interest and financing charges, net, for the nine months ended October 31, 2020 were $38.2 million compared to $33.6 million for the same period last year.

Income tax expense was $8.4 million for the nine months ended October 31, 2020 compared to $42.5 million for the same period last year.

Our effective tax rate increased to 48.4% in the current year’s period from 26.4% in last year’s comparable period because the impact of tax adjustments related to executive compensation, foreign tax expense and disallowed state tax benefits on losses incurred had a greater impact on the lower amount of pre-tax income in the current period compared to last year’s period.

Our effective tax rate includes the effect of an income tax charge of $1.4 million in the nine months ended October 31, 2020 and an income tax benefit of $1.0 million in the nine months ended October 31, 2019 in connection with the vesting of equity awards.

Historically, we calculated our provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period.

Due to the uncertainty related to the impact of the COVID-19 pandemic on our operations, we have used a discrete effective tax rate method to calculate taxes for the three-month period ended July 31, 2020.

We will continue to evaluate income tax estimates under the historical method in subsequent quarters and employ a discrete effective tax rate method if warranted.

Due to the uncertainty related to the impact of the COVID-19 pandemic on our operations, we have used a discrete effective tax rate method to calculate taxes first and second quarters of fiscal 2021.

However, during the third quarter of fiscal 2021, we returned to the historical practice of using an annual effective tax rate based on full year fiscal income.

Liquidity and Capital Resources

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The primary cash requirements of our business usually are the seasonal buildup in inventories, compensation paid to employees, payments to vendors in the normal course of business, capital expenditures, maturities of debt and related interest payments and income tax payments.

The rapid expansion of the COVID-19 pandemic resulted in a sharp decline in net sales and earnings in the six months of fiscal 2021, which has a corresponding impact on our liquidity.

The rapid expansion of the COVID-19 pandemic resulted in a sharp decline in net sales and net income in the nine months ended October 31, 2020, which has a corresponding impact on our liquidity.

We are focused on preserving our liquidity and managing our cash flow during these unprecedented conditions.

We have taken preemptive actions to enhance our ability to meet our short-term liquidity needs including, but not limited to, reducing payroll costs through employee furloughs, job eliminations, salary reductions, reductions in discretionary expenses, deferring certain lease payments and deferral of capital projects.

In addition, we are closely monitoring our inventory needs and we are working with our suppliers to curtail, or cancel, production of product that we believe will not be able to be sold in season.

We have also been working with our suppliers, landlords and licensors to renegotiate related agreements and extend payment terms in order to preserve capital.

As of July 31, 2020, we had cash and cash equivalents of $252.8 million.

As of July 31, 2020, we were in compliance with all covenants under our term loan and revolving credit facility.

We had taken preemptive actions to enhance our ability to meet our short-term liquidity needs including, but not limited to, reducing payroll costs through employee furloughs, job eliminations, reductions in discretionary expenses, deferring certain lease payments and deferral of capital projects.

During the quarter ended October 31, 2020, certain furloughed employees were reinstated and salaries that had been reduced where increased to their pre-pandemic levels.

We have received royalty relief from certain licensors and we continue to negotiate with licensors for additional relief.

As of October 31, 2020, we had cash and cash equivalents of $149.7 million and availability under our revolving credit facility in excess of $600.0 million.

As of October 31, 2020, we were in compliance with all covenants under our senior secured notes and revolving credit facility.

We cannot be sure that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 outbreak.

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We believe we have sufficient cash and available borrowings for our foreseeable liquidity needs.

On August 7, 2020, we refinanced our term loan and revolving credit facility.

See “Recent Developments.”

Revolving Credit Facility

We are party to a five-year senior secured credit facility providing for borrowings in the aggregate principal amount of up to $650 million (the “revolving credit facility”).

Amounts available under the revolving credit facility are subject to borrowing base formulas and over advances as specified in the revolving credit facility.

Borrowings bear interest, at our option, at LIBOR plus a margin of 1.25% to 1.75% or an alternate base rate (defined as the greatest of (i) the “prime rate” of JPMorgan Chase Bank, N.A.

from time to time, (ii) the federal funds rate plus 0.5% and (iii) the LIBOR rate for a borrowing with an interest period of one month) plus a margin of 0.25% to 0.75%, with the applicable margin determined based on Borrowers’ availability under the revolving credit facility .

As of July 31, 2020, interest under the revolving credit facility was being paid at the weighted average rate of 2.06% per annum.

The revolving credit facility is secured by specified assets of us and certain of our subsidiaries.

In addition to paying interest on any outstanding borrowings under the revolving credit facility, we are required to pay a commitment fee to the lenders under the revolving credit facility with respect to the unutilized commitments.

The commitment fee shall accrue at a rate equal to 0.25% per annum on the average daily amount of the available commitment.

Senior Secured Notes

On August 7, 2020, we completed a private debt offering of $400 million aggregate principal amount of our 7.875% Senior Secured Notes due 2025 (the “Notes).

The terms of the Notes are governed by an indenture, dated as of August 7, 2020 (the “Indenture”), among us, the guarantors party thereto and U.S.

Bank, National Association, as trustee and collateral

agent (the “Collateral Agent”).

The net proceeds of the Notes have been used (i) to repay our prior term loan facility due 2022, (ii) to pay related fees and expenses and (iii) for general corporate purposes.

The Notes bear interest at a rate of 7.875% per year payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2021.

The Intercreditor Agreement restricts the actions permitted to be taken by the Collateral Agent with respect to the Collateral on behalf of the holders of the Notes.

We incurred debt issuance costs totaling $8.5 million related to the Notes that will be amortized over the term of the Notes.

In accordance with ASU 2015-15, the debt issuance costs have been deferred and are presented as a contra-liability, offsetting the outstanding balance of the Notes, and are amortized using the effective interest method over the remaining life of the Notes.

Second Amended and Restated ABL Credit Agreement

On August 7, our subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc.

The ABL Credit Agreement provides for borrowings in the aggregate principal amount of up to $650 million.

We and our subsidiaries, G-III Apparel Canada ULC, Gabrielle Studio, Inc., Donna Karan International Inc.

and Donna Karan Studio LLC (the “Guarantors”), are Loan Guarantors under the ABL Credit Agreement.

The Prior Credit Agreement provided for borrowings of up to $650 million and was due to expire in December 2021.

The ABL Credit Agreement extends the maturity date to August 2025, subject to a springing maturity date if, subject to certain conditions, certain material indebtedness is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

Amounts available under the ABL Credit Agreement are subject to borrowing base formulas and overadvances as specified in the ABL Credit Agreement.

The ABL Credit Agreement is secured by specified assets of the Borrowers and the Guarantors.

In addition to paying interest on any outstanding borrowings under the ABL Credit Agreement, we are required to pay a commitment fee to the lenders under the credit agreement with respect to the unutilized commitments.

The commitment fee accrues at a tiered rate equal to 0.50% per annum on the average daily amount of the available commitments when the average usage is less than 50% of the total available commitments and decreases to 0.35% per annum on the average daily amount of the available commitments when the average usage is greater than or equal to 50% of the total available commitments.

The revolving credit facility contains covenants that, among other things, restrict our ability, subject to specified exceptions, to incur additional debt;

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merge with other companies;

liquidate or dissolve G-III;

acquire other companies;

make loans, advances, or guarantees;

and make certain investments.

In certain circumstances, the revolving credit facility also requires us to maintain a fixed charge coverage ratio, as defined in the agreement, which may not be less than 1.00 to 1.00 for each period of twelve consecutive fiscal months.

As of July 31, 2020, we were in compliance with these covenants.

On December 1, 2016, we borrowed $350 million under a senior secured term loan facility (the “Term Loan”).

Additionally, on December 1, 2016, we prepaid $50 million in principal amount of the Term Loan, reducing the principal balance of the Term Loan to $300 million.

The Term Loan will mature in December 2022.

Interest on the outstanding principal amount of the Term Loan accrues at a rate equal to the London Interbank Offered Rate (“LIBOR”), subject to a 1% floor, plus an applicable margin of 5.25% or an alternate base rate (defined as the greatest of (i) the “prime rate” as published by the Wall Street Journal from time to time, (ii) the federal funds rate plus 0.5% and (iii) the LIBOR rate for a borrowing with an interest period of one month) plus 4.25%, per annum, payable in cash.

As of July 31, 2020, interest under the Term Loan was being paid at the average rate of 6.45% per annum.

The Term Loan is secured (i) on a first-priority basis by a lien on, among other things, our real estate assets, equipment and fixtures, equity interests and intellectual property and certain related rights owned by us and by certain of our subsidiaries and (ii) by a second-priority security interest in our and certain of our subsidiaries other assets, which will secure on a first-priority basis our revolving credit facility.

The Term Loan is required to be prepaid with the proceeds of certain asset sales if such proceeds are not applied as required by the agreement within specified deadlines.

The Term Loan is also required to be prepaid in an amount equal to 75% of our Excess Cash Flow (as defined in the agreement) with respect to each fiscal year ending on or after January 31, 2018.

The percentage of Excess Cash Flow that must be so applied is reduced to 50% if our senior secured leverage ratio is less than 3.00 to 1.00, to 25% if our senior secured leverage ratio is less than 2.75 to 1.00 and to 0% if our senior secured leverage ratio is less than 2.25 to 1.00.

The Term Loan contains covenants that, among other things, restrict our ability, subject to certain exceptions, to incur additional debt;

sell or dispose of certain assets;

merge with other companies;

liquidate or dissolve G-III;

liquidate or dissolve the Company;

acquire other companies;

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and make certain investments.

As described above, the Term Loan also includes a mandatory prepayment provision with respect to Excess Cash Flow.

A first lien leverage covenant requires the Company to maintain a level of debt to EBITDA at a ratio as defined in the term loan agreement.

As of July 31, 2020, we were in compliance with these covenants.

In certain circumstances, the revolving credit facility also requires us to maintain a fixed charge coverage ratio, as defined in the agreement, not less than 1.00 to 1.00 for each period of twelve consecutive fiscal months of the Company.

As of October 31, 2020, the Company was in compliance with these covenants.

As of October 31, 2020, we had no borrowings outstanding under the ABL credit agreement.

As of October 31, 2020, interest under the ABL credit agreement was being paid at an average rate of 2.05% per annum.

The ABL credit agreement also includes amounts available for letters of credit.

As of October 31, 2020, there were outstanding trade and standby letters of credit amounting to $5.8 million and $3.9 million, respectively.

At the date of the refinancing of the Prior Credit Agreement, we had $3.3 million of unamortized debt issuance costs remaining from the Prior Credit Agreement.

We extinguished and charged to interest expense $0.4 million of the prior debt issuance costs and incurred new debt issuance costs totaling $4.8 million related to the ABL Credit Agreement.

We have a total of $7.7 million debt issuance costs related to our ABL Credit Agreement.

As permitted under ASC 2015-15, the debt issuance costs have been deferred and are presented as an asset which is to be subsequently amortized ratably over the term of the ABL Credit Agreement.

We had previously borrowed $ 350.0 million under a senior secured term loan facility (the “Term Loan”) that was scheduled to mature in December 2022.

We prepaid $ 50.0 million in principal amount of the Term Loan, reducing the principal balance of the Term Loan to $ 300.0 million.

On August 7, 2020, we used a portion of the proceeds from the issuance of the Notes to repay the outstanding principal balance of $300.0 million under the Term Loan.

At the date of repayment, we had unamortized debt issuance costs of $6.1 million associated with the Term Loan.

These debt issuance costs were fully extinguished and charged to interest expense in our results of operations.

We issued to LVMH, as a portion of the consideration for the acquisition of DKI, a junior lien secured promissory note in favor of LVMH in the principal amount of $125 million (the “LVMH Note”) that bears interest at the rate of 2% per year.

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Unsecured Loans

On April 15, 2019, T.R.B.

International SA (“TRB”), a subsidiary of Vilebrequin, borrowed €3.0 million under an unsecured loan (the “2019 Unsecured Loan”).

During the term of the 2019 Unsecured Loan, TRB is required to make quarterly installment payments of €0.2 million.

Interest on the outstanding principal amount of the 2019 Unsecured Loan accrues at a fixed rate equal to 1.50% per annum, payable quarterly.

The 2019 Unsecured Loan originally matured on April 15, 2024.

Due to the COVID-19 pandemic, the bank agreed to amend the 2019 Unsecured Loan to suspend the March and June 2020 quarterly installment payments and add these payments to the balance due at the end of the loan term.

The 2019 Unsecured Loan now matures on September 15, 2024.

On February 3, 2020, TRB borrowed €1.7 million under another unsecured loan (the “February 2020 Unsecured Loan”).

During the term of the February 2020 Unsecured Loan, TRB is required to make quarterly installment payments of €0.1 million.

Interest on the outstanding principal amount of the February 2020 Unsecured Loan accrues at a fixed rate equal to 1.50% per annum, payable quarterly.

The February 2020 Unsecured Loan originally matured on March 31, 2025.

Due to the COVID-19 pandemic, the bank agreed to amend the February 2020 Unsecured Loan to suspend the June 2020 quarterly installment payment and add this payment to the balance due at the end of the loan term.

The February 2020 Unsecured Loan now matures on June 30, 2025.

On June 12, 2020, a subsidiary of TRB borrowed €1.5 million under a French state backed loan provided by UBS Bank (the “June 2020 Unsecured Loan”) as part of a COVID-19 relief program.

The June 2020 Unsecured Loan provides for an initial one year term with the option to extend the term by an additional one to five years at the end of the initial term.

The June 2020 Unsecured Loan requires no interest or principal payments during the initial term of the agreement.

During fiscal 2020 and fiscal 2021, T.R.B International SA (“TRB”), a subsidiary of Vilebrequin, borrowed funds under several unsecured loans.

A portion of the unsecured loans were to provide funding for operations in the normal course of business, while other unsecured loans were various European state backed loans as part of COVID-19 relief programs.

In the aggregate, TRB is currently required to make quarterly installment payments of €0.2 million.

Interest on the outstanding principal amount of the unsecured loans accrues at a fixed rate equal to 0% to 2.0% per annum, payable on either a quarterly or monthly basis.

Certain unsecured loans will require monthly installment payments beginning in fiscal 2022.

The unsecured loans have maturity dates ranging from September 15, 2024 through August 30, 2025.

As of October 31, 2020, TRB had an aggregate outstanding balance of €6.2 million under these various unsecured loans.

Overdraft Facilities

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As part of a COVID-19 relief program, TRB and its subsidiaries have also entered into several state backed overdraft facilities with UBS Bank in Switzerland for an aggregate of CHF 4.7 million at varying interest rates of 0% to 0.5%.

As of July 31, 2020, TRB had an aggregate €3.1 million drawn across these various facilities.

As of October 31, 2020, TRB had an aggregate €2.5 million drawn under these various facilities.

Outstanding Borrowings

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Due to the seasonality of our business, we generally reach our peak borrowings under our revolving credit facility during our third fiscal quarter.

The primary sources to meet our operating cash requirements have been borrowings under this credit facility and cash generated from operations.

We had no borrowings outstanding under our revolving credit facility at July 31, 2020 and had $160 million of borrowings outstanding at July 31, 2019.

We borrowed $500 million in March 2020 as a precautionary measure in connection with disruptions caused by the COVID-19 pandemic and repaid an aggregate of $500 million of those borrowings in May and June 2020.

In addition, we had $300 million in borrowings outstanding under the Term Loan at both July 31, 2020 and 2019.

Our contingent liability under open letters of credit was approximately $10.4 million and $13.4 million at July 31, 2020 and 2019, respectively.

In addition to the amounts outstanding under these two loan agreements, at July 31, 2020 and 2019, we had $125.0 million of face value principal amount outstanding under the LVMH Note.

As of July 31, 2020, we also had €5.7 million ($6.4 million) outstanding under the 2019, February 2020 and June 2020 Unsecured Loans and €3.1 million ($3.5 million) outstanding under the Overdraft Facilities.

We had cash and cash equivalents of $252.8 million on July 31, 2020 and $39.6 million on July 31, 2019.

The primary sources to meet our

operating cash requirements have been borrowings under this credit facility and cash generated from operations.

The reduction in net sales in the current year resulted in reductions in our seasonal inventory needs in the current year, and as a result, there were no borrowings outstanding under the ABL Credit Agreement as of October 31, 2020.

We had no borrowings outstanding under our revolving credit facility at October 31, 2020 and had $279.9 million of borrowings outstanding at October 31, 2019.

We had $400 million in borrowings outstanding under the Notes at October 31, 2020.

Our contingent liability under open letters of credit was approximately $9.7 million and $7.0 million at October 31, 2020 and 2019, respectively.

In addition to the amounts outstanding under these two loan agreements, at October 31, 2020 and 2019, we had $125.0 million of face value principal amount outstanding under the LVMH Note.

As of October 31, 2020, we also had an aggregate of €6.2 million ($7.2 million) outstanding under Vilebrequin’s various Unsecured Loans and €2.5 million ($2.9 million) outstanding under the Overdraft Facilities.

We had cash and cash equivalents of $149.7 million on October 31, 2020 and $55.8 million on October 31, 2019.

Share Repurchase Program

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Share repurchases may take place on the open market, in privately negotiated transactions or by other means, and would be made in accordance with applicable securities laws.

No shares were repurchased during the three months ended July 31, 2020.

No shares were repurchased during the three months ended October 31, 2020.

We have 2,949,362 authorized shares remaining under this program.

As of September 4, 2020, we had 48,358,688 shares of common stock outstanding.

As of December 4, 2020, we had 48,358,688 shares of common stock outstanding.

Cash from Operating Activities

We generated $59.8 million of cash from operating activities during six months ended July 31, 2020, primarily due to decreases of $253.6 million in accounts receivable, $25.1 million in prepaid expenses and other current assets and non-cash charges relating primarily to operating lease costs of $44.7 million, asset impairment charges of $20 million and depreciation and amortization of $19.6 million.

These items were offset, in part, by our net loss of $54.3 million, and decreases of $118 million in customer refund liabilities, $55.9 million in accounts payable, accrued expenses and other liabilities, and $37.8 million in operating lease liabilities.

In addition, we had a non-cash charge of $16.4 million in deferred income taxes.

Inventory normally increases for the build-up of inventory for the fall shipping season.

We used $127.6 million in cash from operating activities during nine months ended October 31, 2020, primarily due to an increase of $190.8 million in accounts receivable and decreases of $113.0 million in customer refund liabilities and $61.8 million in operating lease liabilities.

These items were offset, in part, by our net income of $8.9 million, and decreases of $90.1 million in inventories and $42.7 million in prepaid expenses and other current assets.

In addition, we had non-cash charges of $29.7 million in depreciation and amortization and $59.6 million in operating lease costs.

Inventory normally increases for the build-up of inventory for the fall shipping and holiday shopping seasons.

Due to the COVID-19 pandemic, inventory purchasing was at a lower volume than in prior years.

As a result, accounts payable decreased due to the lower volume of inventory purchases resulting from the COVID-19 pandemic.

Our accounts receivable and customer refund liabilities decreased because we experience lower sales levels in our first and second quarters than in our third and fourth quarters.

The COVID-19 pandemic exacerbated these trends in the second quarter.

As a result, accounts payable and inventory decreased due to the lower volume of inventory purchases resulting from the COVID-19 pandemic.

In addition, our customer refund liabilities decreased because we experienced lower sales levels and were able to reverse previously accrued amounts that are no longer needed.

Cash from Investing Activities

We used $13.1 million of cash in investing activities during six months ended July 31, 2020 for capital expenditures and initial direct costs of operating lease assets.

We used $16.4 million of cash in investing activities during nine months ended October 31, 2020 for capital expenditures and initial direct costs of operating lease assets.

Capital expenditures in the period primarily related to infrastructure and information technology expenditures and additional fixturing costs at department stores prior to the onset of the COVID-19 pandemic.

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Cash from Financing Activities

Net cash provided by financing activities was $6.9 million during six months ended July 31, 2020 primarily as a result of the proceeds of $7.1 million in borrowings under our unsecured loans and overdraft facilities during the first and second quarters of fiscal 2021.

Net cash provided by financing activities was $93.4 million during nine months ended October 31, 2020 primarily as a result of proceeds of $400 million from the issuance of our Notes partially offset by the $300 million repayment of our term loan facility from the proceeds of the Notes.

We also made payments of $13.3 million in financing costs related to the issuance of our Notes and entering into the ABL Credit Agreement.

Critical Accounting Policies

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The accounting policies and related estimates described in our Annual Report on Form 10-K for the year ended January 31, 2020 are those that depend most heavily on these judgments and estimates.

As of July 31, 2020, there have been no material changes to our critical accounting policies, other than the adoption ASU 2016-13 as discussed in Note 3 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

As of October 31, 2020, there have been no material changes to our critical accounting policies, other than the adoption ASU 2016-13 as discussed in Note 3 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Quantitative and Qualitative Disclosures About Market Risk.

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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 2. Management’s Discussion and Analysis