What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-26 compared with 2020-03-30 · 473 added, 356 removed, 1066 unchanged (44% of the section changed)

61 unchanged sentences

The following exhibits filed as part of this report or incorporated herein by reference are management contracts or compensatory plans or arrangements:

Exhibits 10.1, 10.1(a), 10.1(b), 10.1(c), 10.1(d), 10.6, 10.6(a), 10.6(b), 10.6 (c), 10.6 (d), 10.6(e), 10.7, 10.7(a), 10.7(b), 10.7(c), 10.7(d), 10.7(e), 10.8, 10.9, 10.9(a), 10.9(b), 10.9(c), 10.9(d), 10.12, 10.13, 10.13(a), 10.14, 10.15 and 10.16.

Exhibits 10.1, 10.1(a), 10.1(b), 10.1(c), 10.1(d), 10.6, 10.6(a), 10.6(b), 10.7, 10.7(a), 10.7(b), 10.7(c), 10.8, 10.9, 10.9(a), 10.9(b), 10.9(c), 10.9(d), 10.12, 10.13, 10.13(a), 10.14, 10.15 and 10.16.

Incorporated by Reference

11 unchanged sentences

Promissory Note, dated December 1, 2016, from G-III to LVMH.

Indenture, dated as of August 7, 2020, among G-III Apparel Group, Ltd., the guarantors party thereto and U.S.

Bank, National Association, as trustee and collateral agent, relating to the 7.875% Senior Secured Notes due 2025.

Description of Securities

6 unchanged sentences

Letter Amendment, dated April 28, 2014, to Employment Agreement, dated February 1, 1994, between G-III and Morris Goldfarb.

Amended and Restated Credit Agreement, dated as of December 1, 2016, among G-III Leather, Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc, and The Donna Karan Company Store, LLC, as Borrowers, the other Borrowers party thereto, the Loan Guarantors party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as the Administrative Agent.

Credit Agreement dated as of December 1, 2016, among G-III, the other loan parties thereto, the lenders party thereto and Barclays Bank PLC, as the Administrative Agent.

Second Amended and Restated ABL Credit Agreement, dated as of August 7, 2020, among G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc.

and The Donna Karan Company Store LLC, as Borrowers, the other Borrowers party thereto, the Loan Guarantors party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as the Administrative Agent.

Lease, dated June 1, 1993, between 512 Seventh Avenue Associates (“512”) and G-III Leather Fashions, Inc.

9 unchanged sentences

10-K/A (2006)

Incorporated by Reference

Second Amendment of Lease, dated March 26, 2010, between 512 and G-III Leather (33rd floor).

7 unchanged sentences

10-Q (Q1 2014)

Incorporated by Reference

Seventh Amendment of Lease dated April 25, 2014, by and between G-III Leather Fashions, Inc.

11 unchanged sentences

Form of Restricted Stock Agreement for restricted stock awards made pursuant to the 2005 Plan.

Form of Deferred Stock Award Agreement for October 23, 2014 restricted stock unit grant.

Form of Deferred Stock Award Agreement for May 12, 2015 restricted stock unit grant vesting on April 12, 2019.

Form of Deferred Stock Award Agreement for May 12, 2015 restricted stock unit grant vesting on June 12, 2020.

G-III 2015 Long-Term Incentive Plan, as amended.

Form of Restricted Stock Unit Agreement for December 10, 2015 restricted stock unit grants.

Form of Restricted Stock Unit Agreement for January 27, 2017 restricted stock unit grants.

Form of Restricted Stock Unit Agreement for March 28, 2017 restricted stock unit grants.

Form of Restricted Stock Unit Agreement for April 26, 2018 restricted stock unit grants.

Form of Performance Share Unit Agreement for April 17, 2019 performance share unit grants.

Form of Restricted Stock Unit Agreement for April 27, 2020 restricted stock unit grants.

10-Q (Q1 2021)

Form of Executive Transition Agreement, as amended.

2 unchanged sentences

Amendment, dated October 3, 2008, to Employment Agreement, dated as of July 11, 2005, by and between Sammy Aaron and G-III.

Incorporated by Reference

Amendment, dated January 28, 2009, to Employment Agreement, dated as of July 11, 2005, by and between Sammy Aaron and G-III.

6 unchanged sentences

10-Q (Q3 2011)

First Amendment of Lease, dated September 16, 2020, by and between G-III Apparel Group, Ltd.

as Tenant and Granite South Brunswick LLC as Landlord .

10-Q (Q3 2021)

Form of Indemnification Agreement.

5 unchanged sentences

Severance Agreement, dated as of December 9, 2016, between G-III and Neal Nackman.

Incorporated by Reference

Lease, dated August 1, 2006, between 240 West 40th LLC.

14 unchanged sentences

iXBRL Schema Document.

Incorporated by Reference

iXBRL Calculation Linkbase Document.

12 unchanged sentences

EXHIBIT INDEX

Description of Securities.

Subsidiaries of G-III.

41 unchanged sentences

Victor Herrero

/s/ Robert L.

March 26, 2021

/s/ Jeanette Nostra

7 unchanged sentences

Willem van Bokhorst

/s/ Cheryl Vitali

March 26, 2021

Cheryl Vitali

23 unchanged sentences

Adoption of ASU No.

As discussed in Note B to the consolidated financial statements, the Company changed its method for recognizing revenue as a result of the adoption of Accounting Standards Update (ASU) No.

2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments in ASUs 2015-14, 2016-08, 2016-10 and 2016-12 effective February 1, 2018.

Adoption of ASU No.

As discussed in Note A to the consolidated financial statements, the Company changed its method for accounting for leases as a result of the adoption of Accounting Standards Update (ASU) No.

17 unchanged sentences

Description of the Matter

As described in Note A and Note B to the consolidated financial statements, wholesale revenue is adjusted by variable consideration arising from implicit or explicit obligations.

As described in Note A and Note C to the consolidated financial statements, wholesale revenue is adjusted by variable consideration arising from implicit or explicit obligations.

The reserves for variable consideration are recorded as customer refund liabilities and totaled $99.4 million as of January 31, 2021.

Auditing the Company's measurement of variable consideration related to non-contractual markdowns and returns from wholesalers is especially challenging because the calculation involves subjective management assumptions about estimates of the expected markdowns and returns.

For example, in addition to historical experience, estimates of future markdown allowances and returns from wholesale customers are adjusted to reflect management’s assumptions about performance of the Company’s merchandise, specific known events, and industry trends.

Auditing the Company's measurement of variable consideration related to non-contractual markdowns and returns from wholesale customers is especially challenging because the method of calculation involves subjective management assumptions about estimates of the expected markdowns and returns.

Changes in the assumptions can have a material effect on the amount of variable consideration recognized.

2 unchanged sentences

For example, we tested controls over management’s review of the significant assumptions underlying the estimates of the refund liabilities for markdown allowances and returns from wholesale customers.

To test the Company’s measurement of variable consideration related to wholesale customers, our audit procedures included, among others, evaluating the significant assumptions described above and testing the completeness and accuracy of the underlying data used in management's analyses.

For example, we tested the calculation of the historical chargeback and return rates and assessed management’s evaluation of the appropriateness of the rates used in developing its customer refund liabilities based on economic factors and other qualitative conditions including specific known events or industry trends.

To test the Company’s measurement of variable consideration related to wholesale customers, our audit procedures included, among others, evaluating the Company’s methodology for calculating future markdown allowances, evaluating the significant assumptions described above and testing the completeness and accuracy of the underlying data used in management's analyses.

We compared the significant assumptions used by management to current market and economic trends, historical results and other relevant factors.

Further, we performed sensitivity analyses to evaluate the changes in variable consideration that would result from changes in the significant assumptions.

In addition, we performed a retrospective review of actual chargebacks and returns to evaluate the historical accuracy of the Company’s estimates.

Fair value of operating lease assets

In addition, we performed a retrospective review of actual customer chargebacks for markdowns and returns to evaluate the historical accuracy of the Company’s estimates.

Valuation of indefinite-lived trademarks

Description of the Matter

As of January 31, 2020, the Company’s operating lease assets had an aggregate carrying value of $270 million.

As described in Note D and Note E to the consolidated financial statements, long-lived assets, including operating lease assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

An impairment is recognized equal to the amount by which the carrying value of the asset exceeds its fair value.

During the year ended January 31, 2020, the Company recognized an impairment charge of $9.9 million related to the operating lease assets at certain of its retail stores.

In addition, upon adoption of ASC 842, Leases, the Company recorded a $9.6 million impairment, net of tax, of operating lease assets at certain of its retail stores as a reduction to retained earnings on February 1, 2019.

Auditing the Company’s measurement of the impairment of its operating lease assets related to retail store leases was especially challenging and involved a high degree of subjectivity as a result of the uncertainty inherent in estimating their fair value.

The fair value estimates developed by the Company, with the assistance of a third-party valuation specialist, were sensitive to significant assumptions such as current comparable market rental rates, market rental growth rates, occupancy cost ratios, fixed expenses growth rates and discount rates.

Changes in these assumptions could have a significant effect on the fair value of operating lease assets and the related impairment charge recognized.

At January 31, 2021, the carrying value of the Company’s indefinite-lived trademarks was approximately $443.6 million.

As discussed in Notes A and H to the consolidated financial statements, indefinite-lived trademarks are assessed for impairment on an annual basis, or whenever impairment indicators exist.

Auditing certain of the Company’s indefinite-lived trademark impairment assessments was complex and judgmental due to the significant estimation required to determine the fair value of the indefinite-lived trademarks.

In particular, the fair value estimates were sensitive to significant assumptions such as the revenue growth rate, royalty rate and discount rate, which are affected by expectations about future market or economic conditions (including the effects of the global pandemic).

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls related to the Company's process to evaluate its long-lived assets for impairment including the process to estimate the fair value of the operating lease assets.

For example, we tested controls over management’s review of the valuation of the operating lease assets prepared by management’s valuation specialists as well as the calculation of the impairments recorded.

To test the estimated fair value of the operating lease assets related to retail stores, our audit procedures included, among others, involving our internal valuation specialists to assist in evaluating the methodologies used and significant assumptions described above and testing the completeness and accuracy of the data used in the analyses.

For example, our internal valuation specialists performed independent market research to evaluate the appropriateness of the significant assumptions used in the valuation of a sample of leases.

This included identifying comparable leases for similar properties taking into consideration the remaining lease term.

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s indefinite-lived trademark impairment review process.

Our procedures included testing controls over management’s review of the significant assumptions described above.

To test the estimated fair value of the indefinite-lived trademarks, we performed audit procedures that included, among others, assessing the methodology used to determine the fair value, testing the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the Company.

We compared the significant assumptions used by management to historical results, current industry, market and economic trends and other relevant factors.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of the significant assumptions to evaluate the changes in the fair value of the indefinite-lived trademarks that would result from changes in the assumptions.

We also involved our internal valuation specialists to assist in our evaluation of the valuation methodology and significant assumptions used by the Company in developing the fair value estimates.

/s/ Ernst & Young LLP

46 unchanged sentences

Current liabilities

Income tax payable

Current portion of notes payable

Accounts payable

2 unchanged sentences

Current operating lease liabilities

Current portion of notes payable

Income tax payable

Other current liabilities

5 unchanged sentences

Total liabilities

Redeemable noncontrolling interests

Stockholders' Equity

10 unchanged sentences

Total stockholders' equity

Total liabilities and stockholders' equity

Total liabilities, redeemable noncontrolling interests and stockholders' equity

The accompanying notes are an integral part of these statements.

9 unchanged sentences

Operating profit

Other income (loss)

Interest and financing charges, net

1 unchanged sentence

Income tax expense

NET INCOME PER COMMON SHARE:

Loss attributable to noncontrolling interests

Net income attributable to G-III Apparel Group, Ltd.

NET INCOME PER COMMON SHARE ATTRIBUTABLE TO G-III APPAREL GROUP, LTD.:

Net income per common share

2 unchanged sentences

Weighted average number of shares outstanding

Other comprehensive income (loss):

Other comprehensive loss:

Foreign currency translation adjustments

Other comprehensive income (loss)

Other comprehensive loss

Comprehensive income

Comprehensive income attributable to noncontrolling interests:

Foreign currency translation adjustments

Comprehensive income attributable to noncontrolling interests

Comprehensive income attributable to G-III Apparel Group, Ltd.

The accompanying notes are an integral part of these statements.

8 unchanged sentences

Taxes paid for net share settlements

Other comprehensive gain, net

Other comprehensive loss, net

Repurchases of common stock

Cumulative effect of adoption of ASC 606

Balance as of January 31, 2019

9 unchanged sentences

Taxes paid for net share settlements

Other comprehensive gain/loss, net

Repurchases of common stock

Cumulative effect of adoption of ASC 842

Other comprehensive gain, net

Net income attributable to G-III Apparel Group, Ltd.

Balance as of January 31, 2021

6 unchanged sentences

Cash flows from operating activities

Net income attributable to G-III Apparel Group, Ltd.

Adjustments to reconcile net income to net cash provided by operating activities, net of assets and liabilities acquired:

8 unchanged sentences

Deferred financing charges and debt discount amortization

Extinguishment of deferred financing costs

Deferred income taxes

Non-cash gains recorded in conjunction with Fabco acquisition

Changes in operating assets and liabilities:

22 unchanged sentences

Proceeds from borrowings - unsecured term loan

Proceeds from borrowings - senior secured notes

Payment of financing costs

Proceeds from exercise of equity awards

1 unchanged sentence

Taxes paid for net share settlements

Net cash used in financing activities

Net cash provided by (used in) financing activities

Foreign currency translation adjustments

19 unchanged sentences

The Company consolidates the accounts of all its wholly-owned and majority-owned subsidiaries.

Fabco Holding B.V.

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

Effective December 1, 2020, the Company increased its ownership interest in Fabco to 75 % (see Note P – Fabco) and Fabco is treated as a consolidated majority-owned subsidiary.

KL North America B.V.

(“KLNA”) and Fabco Holding B.V.

(“Fabco”) are Dutch joint venture limited liability companies that are 49 % owned by the Company.

(“KLNA”) is a Dutch joint venture limited liability company that is 49 % owned by the Company.

Karl Lagerfeld Holding B.V.

6 unchanged sentences

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

The Company’s years ended January 31, 2020 and 2019 were both 52-week fiscal years for the retail operations segment.

The Company’s year ended January 31, 2018 was a 53-week fiscal year for the retail operations segment.

For fiscal 2020, 2019 and 2018, the retail operations segment year end was February 1, 2020, February 2, 2019 and February 3, 2018, respectively.

The Company’s years ended January 31, 2021, 2020 and 2019 were all 52-week fiscal years for the retail operations segment.

For fiscal 2021, 2020 and 2019, the retail operations segment year end was January 30, 2021, February 1, 2020 and February 2, 2019, respectively.

Liquidity and Impact of COVID-19

The Company relies on its cash flows generated from operations and the borrowing capacity under its credit facilities to meet the cash requirements of its business.

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

The COVID-19 pandemic resulted in a sharp decline in net sales in the first, second and, to a lesser extent, third and fourth quarters of fiscal 2021.

It also resulted in the Company recognizing a net loss in the first and second quarters and a significant reduction in net income in the third and fourth quarters compared to prior years.

The Company is focused on preserving its liquidity and managing its cash flow during these unprecedented conditions.

The Company had taken preemptive actions to enhance its ability to meet its 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.

The Company has received royalty relief from certain licensors.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of January 31, 2021, the Company had cash and cash equivalents of $ 351.9 million and availability under its revolving credit facility in excess of $ 450.0 million.

The Company believes it has adequate cash flows to meet the cash requirements of its business.

As of January 31, 2021, the Company was in compliance with all covenants under its debt agreements.

Cash Equivalents

1 unchanged sentence

Revenue Recognition

On February 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 606 – Revenue From Contracts With Customers (“ASC 606”) using the modified retrospective method as of January 31, 2018.

Under ASC 606, wholesale revenue is recognized when control transfers to the customer.

Wholesale revenue is recognized when control transfers to the customer.

The Company considers control to have been transferred when the Company has transferred physical possession of the product, the Company has a right to payment for the product, the customer has legal title to the product and the customer has the significant risks and rewards of the product.

1 unchanged sentence

Variable consideration includes trade discounts, end of season markdowns, sales allowances, cooperative advertising, return liabilities and other customer allowances.

Under ASC 606, the Company estimates the anticipated variable consideration and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

Prior to adopting ASC 606, certain components of variable consideration were recorded at a later date when the liability was known or incurred.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company estimates the anticipated variable consideration and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

Variable consideration is estimated based on historical experience, current contractual and statutory requirements, specific known events and industry trends.

The reserves for variable consideration are recorded under customer refund liabilities.

Customer refund liabilities were recorded as a reduction to accounts receivable prior to the adoption of ASC 606.

The reserves for variable consideration are recorded as customer refund liabilities.

Historical return rates are calculated on a product line basis.

1 unchanged sentence

The Company recognizes retail sales when the customer takes possession of the goods and tenders payment, generally at the point of sale.

E-commerce revenues from customers through the Company’s e-commerce platforms are recognized when the customer takes possession of the goods.

Digital revenues from customers through the Company’s digital platforms are recognized when the customer takes possession of the goods.

The Company’s sales are recorded net of applicable sales taxes.

Both wholesale revenues and retail store revenues are shown net of returns, discounts and other allowances.

Under ASC 606, the Company now classifies cooperative advertising as a reduction of net sales.

Previously, cooperative advertising was recorded in selling, general and administrative expenses.

Royalty revenue is recognized at the higher of royalty earned or guaranteed minimum royalty.

Licensing revenue is recognized at the higher of royalty earned or guaranteed minimum royalty.

Accounts Receivable

3 unchanged sentences

For all other wholesale customers, an allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the date of the financial statements, assessments of collectability based on historical trends and an evaluation of the impact of economic conditions.

Estimated costs associated with trade discounts, advertising allowances, markdowns, and reserves for returns are reflected as a reduction of net sales.

Under ASC 606, all of these reserves, which constitute variable consideration, are classified as current liabilities under “Customer refund liabilities”.

Prior to ASC 606, these reserves were part of the allowances netted against accounts receivable.

The Company reserves against known chargebacks, as well as for an estimate of potential future deductions by customers.

These provisions result from seasonal negotiations with the Company’s customers, as well as historical deduction trends, net of historical recoveries and the evaluation of current market conditions.

On February 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” which had no material impact on the Company’s financial statements.

The Company’s financial instruments consist of trade receivables arising from revenue transactions in the ordinary course of business.

The Company considers its trade receivables to consist of two portfolio segments:

wholesale and retail trade receivables.

Wholesale trade receivables result from credit the Company has extended to its wholesale customers based on pre-defined criteria and are generally due within 30 to 60 days.

Retail trade receivables

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

primarily relate to amounts due from third-party credit card processors for the settlement of debit and credit card transactions and are typically collected within 3 to 5 days.

See Note D – Allowance For Doubtful Accounts.

Wholesale inventories are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value, which comprises a significant portion of the Company’s inventory.

3 unchanged sentences

Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations accounted for under the purchase method of accounting.

Goodwill and certain intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests using a qualitative evaluation or a quantitative test combining a discounted cash flow analysis and a market approach.

Goodwill is subject to annual impairment tests using a qualitative evaluation or a quantitative test using an income approach through a discounted cash flow analysis methodology.

The discounted cash flow approach requires that certain assumptions and estimates be made regarding industry economic factors and future profitability.

Intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests using a qualitative evaluation or a quantitative test using a relief from royalty method, another form of the income approach.

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

Other intangibles with finite lives, including license agreements, trademarks and customer lists are amortized on a straight-line basis over the estimated useful lives of the assets (currently ranging from 5 to 17 years ).

Impairment charges, if any, on intangible assets with finite lives are recorded when indicators of impairment are present and the discounted cash flows estimated to be derived from those assets are less than the carrying amounts of the assets.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In fiscal 2018, the Company wrote off goodwill of $ 0.7 million related to the retail operations segment, as a result of the performance of the retail operations segment.

On February 1, 2019, the Company adopted ASC Topic 842 – Leases (“ASC 842”) using the optional transition method to apply the standard as of the effective date.

8 unchanged sentences

All of the Company’s leases are classified as operating leases.

On April 10, 2020, the Financial Accounting Standards Board (“FASB”) issued a Staff Q&A to respond to frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 outbreak.

Consequently, for lease concessions related to the effects of the COVID-19 outbreak, an entity will not have to analyze each lease to determine whether the enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance to those leases.

Entities may make the elections for any lessor-provided concessions related to the effects of the outbreak (e.g., deferrals of lease payments, lease payment forgiveness, cash payments made to the lessee or reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

The Company has elected to not apply the lease modification guidance for

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

contracts with COVID-19 related rent concessions.

As of January 31, 2021, the Company has $ 3.4 million of deferred lease payments recorded within accounts payable on its consolidated balance sheets.

Depreciation and Amortization

6 unchanged sentences

A potential impairment has occurred if projected future undiscounted cash flows are less than the carrying value of the assets.

In fiscal 2021, the Company recorded a $ 20.1 million impairment charge related to the operating lease assets, leasehold improvements and furniture and fixtures at certain Wilsons Leather and G.H.

Bass stores, primarily due to the retail restructuring, as well as at certain DKNY and Vilebrequin stores as a result of the performance at these stores.

In fiscal 2020, the Company recorded a $ 21.8 million impairment charge primarily related to leasehold improvements, furniture and fixtures and operating lease assets at certain of its Wilsons Leather, G.H.

2 unchanged sentences

Bass and DKNY stores as a result of the performance at these stores.

In fiscal 2018, the Company recorded a $ 6.5 million impairment charge related to leasehold improvements and furniture and fixtures at certain of our Wilsons Leather, G.H.

Bass and Vilebrequin stores as a result of the performance at these stores.

In addition, the Company recorded a $ 0.7 million impairment charge with respect to furniture and fixtures located in certain customers’ stores.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company accounts for income taxes and uncertain tax positions in accordance with ASC Topic 740 — Income Taxes (“ASC 740”).

6 unchanged sentences

The Tax Cuts and Jobs Act of 2017 (“TCJA”) provides for a reduced corporate income tax rate of 21 % and requires that certain income earned by foreign subsidiaries, known as global intangible low-tax income (“GILTI”), must be included in the gross income of their U.S.

For fiscal 2020, the Company recognized an immaterial provision for GILTI and has elected to treat the tax effect of GILTI as a current period expense.

For fiscal 2021, the Company has elected to treat the tax effect of GILTI as a

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

current period expense.

For the current and future tax years, the Company expects other TCJA tax implications to be immaterial.

On May 19, 2019, Switzerland approved the Federal Act on Tax Reform and Old-Age and Survivors Insurance Financing.

The effective date of the Swiss tax reform for federal and cantonal jurisdictions began on January 1, 2020.

Tax implications on the enacted Swiss tax reform are discussed in Note H - Income Taxes.

The United States government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020, which includes various income tax provisions aimed at providing economic relief.

One of those provisions allows any loss generated in 2020 to be carried back to each of the 5 taxable years preceding the taxable year of such a loss.

The Company has elected to use this relief and will carry back the 2020 net operating loss to a tax year with a 35% federal rate.

Additionally, the CARES Act permits Qualified Improvement Property to qualify for 15-year depreciation and therefore be also eligible for 100 percent first-year bonus depreciation.

The Company has elected to take 100% bonus depreciation for all qualified improvement property.

Net Income Per Common Share

4 unchanged sentences

The Company issued 0 , 8,851 and 168,179 shares of common stock in connection with the exercise or vesting of equity awards during the years ended January 31, 2021, 2020 and 2019, respectively.

In addition, the Company re-issued 619,651 and 150,809 treasury shares in connection with the vesting of equity awards in fiscal 2020 and fiscal 2019, respectively.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition, the Company re-issued 367,290 , 619,651 and 150,809 treasury shares in connection with the vesting of equity awards in fiscal 2021, 2020 and 2019, respectively.

The following table reconciles the numerators and denominators used in the calculation of basic and diluted net income per share:

1 unchanged sentence

(In thousands, except per share amounts)

Net income attributable to G-III Apparel Group, Ltd.

Basic net income per share:

3 unchanged sentences

Basic common shares

Dilutive restricted stock awards and stock options

Dilutive restricted stock unit awards and stock options

Diluted common shares

2 unchanged sentences

ASC Topic 718, Compensation — Stock Compensation , requires all share-based payments to employees, including grants of restricted stock unit awards and employee stock options, to be recognized as compensation expense over the service period (generally the vesting period) based on their fair values.

The Company accounts for forfeited awards as they occur as permitted by Accounting Standard Update (“ASU”) 2016-09.

The Company accounts for forfeited awards as they occur as permitted by ASC 718.

Ultimately, the actual expense recognized over the vesting period will be for those shares that vested.

Restricted stock units (“RSU’s”) are time based awards that do not have market or performance conditions and generally vest over a three year period.

Restricted stock units (“RSU’s”) are time based awards that do not have market or performance conditions and generally (i) cliff vest after three years or (ii) vest over a

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

three year period.

Performance based restricted stock units (“PRSU’s”) granted to executives prior to fiscal 2020 include (i) market price performance conditions that provide for the award to vest only after the average closing price of the Company’s stock trades above a predetermined market level and (ii) another performance condition that requires the achievement of an operating performance target.

6 unchanged sentences

It is the Company’s policy to grant stock options at prices not less than the fair market value on the date of the grant.

Option terms, vesting and exercise periods vary, except that the term of an option may not exceed ten years .

Also, in accordance with ASU 2016-09, excess tax benefits arising from the lapse or exercise of an equity award are no longer recognized in additional paid-in capital.

Option terms, vesting and exercise periods vary, except that the term of an option may not exceed ten year s.

Also, excess tax benefits arising from the lapse or exercise of an equity award are no longer recognized in additional paid-in capital.

The assumed proceeds from applying the treasury stock method when computing net income per share is amended to exclude the amount of excess tax benefits that would be recognized in additional paid-in capital.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Cost of Goods Sold

1 unchanged sentence

Gross margins may not be directly comparable to those of the Company’s competitors, as income statement classifications of certain expenses may vary by company.

Additionally, ASC 606 requires that costs expected to be incurred when products are returned should be accrued for upon the sale of the product as a component of cost of goods sold.

These restocking costs were previously recognized when incurred and recorded in selling, general and administrative expenses.

Additionally, costs expected to be incurred when products are returned should be accrued for upon the sale of the product as a component of cost of goods sold.

Shipping and Handling Costs

9 unchanged sentences

In determining these estimates, management must use amounts that are based upon its informed judgments and best estimates.

The Company continually evaluates its estimates, including those related to customer allowances and discounts, product returns, bad debts, inventories, equity awards, income taxes, carrying values of intangible assets and long-lived assets including right of use assets.

The Company continually evaluates its estimates, including those related to customer allowances and discounts, product returns, bad debts, inventories, equity awards, income taxes,

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

carrying values of intangible assets and long-lived assets including right of use assets.

Estimates are based on historical experience and on various other assumptions that the Company believes are reasonable under the circumstances.

7 unchanged sentences

Level 1 — inputs to the valuation methodology based on quoted prices (unadjusted) for identical assets or liabilities in active markets.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Level 2 — inputs to the valuation methodology based on quoted prices for similar assets or liabilities in active markets for substantially the full term of the financial instrument;

6 unchanged sentences

(In thousands)

Revolving credit facility

Secured Notes

Note issued to LVMH

Unsecured loan

Unsecured loans

Overdraft facilities

The Company’s debt instruments are recorded at their carrying values in its consolidated balance sheets, which may differ from their respective fair values.

1 unchanged sentence

Furthermore, the carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash, accounts receivable and accounts payable) also approximates fair value due to the short-term nature of these accounts.

The 2 % note issued to LVMH Moet Hennessy Louis Vuitton Inc.

On August 7, 2020, the Company refinanced its term loan and revolving credit facility.

See Note I – Notes Payable and Other Liabilities.

The 2 % note in the principal amount of $ 125 million (the “LVMH Note”) issued to LVMH Moet Hennessy Louis Vuitton Inc.

(“LVMH”) in connection with the acquisition of DKI was issued at a discount of $ 40.0 million in accordance with ASC 820 — Fair Value Measurements .

For purposes of this fair value disclosure, the Company based its fair value estimate for the note issued to LVMH on the initial fair value as determined at the date of the acquisition of DKI and records the amortization using the effective interest method over the term of the note.

The fair value of the note issued to LVMH was considered a Level 3 valuation in the fair value hierarchy.

For purposes of this fair value disclosure, the Company based its fair value estimate for the LVMH Note on the initial fair value as determined at the date of the acquisition of DKI and records the amortization using the effective interest method over the term of the LVMH Note.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The fair value of the LVMH Note was considered a Level 3 valuation in the fair value hierarchy.

Non-Financial Assets and Liabilities

The Company’s non-financial assets that are measured at fair value on a nonrecurring basis include long-lived assets, which consist primarily of property and equipment and operating lease assets.

The Company reviews these assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable.

The Company reviews these assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

For impaired assets, an impairment loss is recognized equal to the difference between the carrying amount of the asset or asset group and its estimated fair value.

1 unchanged sentence

These fair value measurements are considered level 3 measurements in the fair value hierarchy.

During the fourth quarter of fiscal 2020, the Company recorded a $ 21.8 million impairment charge primarily related to leasehold improvements, furniture and fixtures and operating lease assets at certain Wilsons Leather, G.H.

During fiscal 2021, the Company recorded a $ 20.1 million impairment charge primarily related to operating lease assets, leasehold improvements and furniture and fixtures at certain Wilsons Leather and G.H.

Bass stores, primarily due to the retail restructuring, as well as at certain DKNY and Vilebrequin stores as a result of the performance at these stores.

During fiscal 2020, the Company recorded a $ 21.8 million impairment charge primarily related to leasehold improvements, furniture and fixtures and operating lease assets at certain Wilsons Leather, G.H.

Bass and DKNY stores as a result of the performance at these stores.

In addition, during the first quarter of fiscal 2020, the Company recorded an impairment of $ 9.6 million, net of tax, in connection with the adoption of ASC 842 – Leases (“ASC 842”) that was recognized through retained earnings.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In addition, during fiscal 2020, the Company recorded an impairment of $ 9.6 million, net of tax, in connection with the adoption of ASC 842 – Leases (“ASC 842”) that was recognized through retained earnings.

Foreign Currency Translation

5 unchanged sentences

Recently Adopted Accounting Guidance

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (other than leases that meet the definition of a short-term lease).

The liability will be equal to the present value of lease payments.

The asset will be based on the liability, subject to certain adjustments.

The Company adopted ASU 2016-02 during the first quarter of fiscal 2020 using the optional transition method to apply the standard as of the effective date.

As a result of adopting this standard, as of February 1, 2019, the Company recognized operating lease liabilities of $ 384.5 million and corresponding operating lease assets of $ 341.2 million.

In addition, the Company recorded a $ 9.6 million impairment of the operating lease assets, net of tax, at adoption.

The impairment was recorded as a reduction to retained earnings.

In June 2018, the FASB issued ASU 2018-07, “FASB Simplifies Guidance on Nonemployee Share-Based Payments,” which supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees.

As a result, most of the guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements.

The Company adopted ASU 2018-07 during the first quarter of fiscal 2020.

The adoption did not have an impact on the Company’s consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement — Reporting Comprehensive Income (Topic 220):

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S.

federal corporate income tax rate (or portion thereof) in the TCJA is recorded.

The Company adopted ASU 2018-02 during the first quarter of fiscal 2020.

The adoption did not have an impact on the Company’s consolidated financial statements.

Accounting Guidance Issued Being Evaluated for Adoption

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” Subsequently, the FASB issued amendments to clarify the codification, in addition to also clarifying the implementation dates and the items that fall within the scope of the pronouncement.

This pronouncement will change how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments.

ASU 2016-13 will replace the current “incurred loss” model with an “expected loss” model.

Under the “incurred loss” model, a loss (or allowance) is recognized only when an event has occurred (such as a payment delinquency) that causes the entity to believe that a loss is probable (i.e., that it has been “incurred”).

Under the “expected loss” model, an entity will recognize a loss (or allowance) upon initial recognition of the asset that reflects all future events that may lead to a loss being realized, regardless of whether it is probable that the future event will occur.

The “incurred loss” model considers past events and current conditions, while the “expected loss” model includes expectations for the future which have yet to occur.

The new standard will require entities to record a cumulative-effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective.

Measurement of Credit Losses on Financial Instruments.” This pronouncement changed how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments.

ASU 2016-13 replaced the “incurred loss” model with an “expected loss” model.

Under the “incurred loss” model, a loss (or allowance) was recognized only when an event had occurred (such as a payment delinquency) that caused the entity to believe that a loss was probable (i.e., that it had been “incurred”).

Under the “expected loss” model, an entity recognizes a loss (or allowance) upon initial recognition of the asset that reflects all future events that may lead to a loss being realized, regardless of whether it is probable that the future event will occur.

The “incurred loss” model considered past events and current conditions, while the “expected loss” model includes expectations for the future which have yet to occur.

The Company adopted ASU 2016-16 as of February 1, 2020.

The adoption of this standard did not result in a material change to the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which made a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement among or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements.

The amendments in ASU 2018-13 modified the disclosure requirements with respect to fair value measurements based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8:

Notes to Financial Statements, including the consideration of costs and benefits.

The amendments to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ASU 2016-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted.

used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty have been applied prospectively in the initial fiscal year of adoption.

All other amendments have been applied retrospectively to all periods presented in the initial year of adoption.

The Company adopted the standard effective February 1, 2020.

The Company does not expect the adoption of ASU 2016-13 to result in a material change to its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement among or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements.

The amendments in ASU 2018-13 modify the disclosure requirements with respect to fair value measurements based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8:

Notes to Financial Statements, including the consideration of costs and benefits.

The amendments to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted.

The adoption of this standard did not result in a material change to the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is A Service Contract, which addresses the accounting for implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract.

ASU 2018-15 aligned the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

Specifically, ASU 2018-15 amended ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered a service contract.

The Company adopted the standard effective February 1, 2020.

The Company does not expect the adoption of ASU 2018-13 to result in a material change to its consolidated financial statements.

On August 29, 2018, the FASB issued ASU 2018-15, Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is A Service Contract which addresses the accounting for implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract.

ASU 2018-15 aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

Specifically, ASU 2018-15 amends ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered a service contract.

The Company adopted ASU 2018-15 effective February 1, 2020.

The Company does not expect the adoption ASU 2018-15 to result in a material change to its consolidated financial statements.

NOTE B — REVENUE RECOGNITION

The adoption of this standard did not result in a material change to the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASC 848”):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The standard is intended to provide optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria that reference LIBOR or another rate that is expected to be discontinued.

The guidance was effective upon issuance, and may be applied prospectively through December 31, 2022.

The adoption of this standard did not result in a material change to the Company’s consolidated financial statements.

Accounting Guidance Issued Being Evaluated for Adoption

The Company has reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the consolidated financial statements.

NOTE B — RETAIL RESTRUCTURING

In June 2020, the Company commenced the restructuring of its retail operations segment including the closing of the Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores.

In connection with the restructuring of the retail operations segment, the Company incurred 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.

The Company’s cash portion of this charge was approximately $ 65 million.

Restructuring charges are recorded within selling, general and administrative expenses in the Company’s consolidated statements of income and comprehensive income.

The following is a reconciliation of the accrual for the period ended January 31, 2021:

Severance and Benefit Costs

Store Closing Costs

(In thousands)

Balance at January 31, 2020

Amounts charged to expense

Cash payments

Balance at January 31, 2021

The remaining severance and benefit costs and store closing costs are expected to be paid during the first two quarters of fiscal 2022.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE C — REVENUE RECOGNITION

On February 1, 2018, the Company adopted ASC 606 using the modified retrospective method as of January 31, 2018.

The Company recognized a cumulative effect adjustment to the opening balance of stockholders’ equity at February 1, 2018 that reduced stockholders’ equity by $ 53.7 million, net of tax, as a result of the adoption of ASC 606.

Prospectively, the adoption of ASC 606 primarily affects the timing of recognition of certain adjustments that are recorded in net sales for the wholesale operations segment.

Under ASC 606, revenue is recognized upon the transfer of goods to customers in an amount that reflects the expected consideration to be received in exchange for these goods.

Wholesale revenue is recognized upon the transfer of goods to customers in an amount that reflects the expected consideration to be received in exchange for these goods.

The difference between the amount initially billed and the amount collected represents variable consideration.

Variable consideration includes trade discounts, end of season markdowns, sales allowances, cooperative advertising, return liabilities and other customer allowances.

Under ASC 606, the Company estimates the anticipated variable consideration and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

Prior to adopting ASC 606, certain components of variable consideration were recorded at a later date when the liability was known or incurred.

The adoption of ASC 606 also resulted in prospectively changing the presentation of certain items on the Consolidated Balance Sheets and the Consolidated Statements of Income and Comprehensive Income.

Under the prior guidance, the liability recorded in connection with variable consideration was recorded as a reduction to accounts receivable.

With the adoption of ASC 606, these amounts have been classified as a current liability under “Customer refund liabilities” in the Consolidated Balance Sheet.

Additionally, the Company now classifies cooperative advertising as a reduction of net sales

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

in the Consolidated Statements of Income and Comprehensive Income.

Previously, cooperative advertising was recorded in selling, general and administrative expenses.

ASC 606 requires that costs expected to be incurred when products are returned should be accrued for upon the sale of the product as a component of cost of goods sold.

These restocking costs were previously recognized when incurred and recorded in selling, general and administrative expenses.

The adoption of ASC 606 had no net impact on the Company’s cash flows from operations.

The Company estimates the anticipated variable consideration and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

The liability recorded in connection with variable consideration has been classified as a current liability under “Customer refund liabilities” in the Consolidated Balance Sheet.

Additionally, the Company classifies cooperative advertising as a reduction of net sales in the Consolidated Statements of Income and Comprehensive Income.

Costs expected to be incurred when products are returned should be accrued for upon the sale of the product as a component of cost of goods sold.

Disaggregation of Revenue

12 unchanged sentences

Retail Operations Segment.

Retail store revenues are generated by direct sales to consumers through company-operated stores and product sales through the Company’s owned websites for the DKNY, Donna Karan, Wilsons Leather, G.H.

Bass, Andrew Marc and Karl Lagerfeld Paris businesses.

Retail stores primarily consist of Wilsons Leather, G.H.

Bass and DKNY retail stores, substantially all of which are operated as outlet stores.

Retail store revenues are generated by direct sales to consumers through company-operated stores and product sales through the Company’s digital channels for the DKNY, Donna Karan, G.H.

Bass, Karl Lagerfeld Paris, Andrew Marc and Wilsons Leather businesses.

Prior to completion of the restructuring in fiscal 2021, retail stores primarily consisted of Wilsons Leather, G.H.

Bass, DKNY and Karl Lagerfeld Paris retail stores, substantially all of which are operated as outlet stores.

Our Wilsons Leather and G.H.

Bass stores were closed as a result of the restructuring.

Retail operations segment revenues are recognized at the point of sale when the customer takes possession of the goods and tenders payment.

E-commerce revenues primarily consist of sales to consumers through the Company’s e-commerce platforms.

E-commerce revenue is recognized when a customer takes possession of the goods.

Digital revenues primarily consist of sales to consumers through the Company’s digital platforms.

Digital revenue is recognized when a customer takes possession of the goods.

Retail sales are recorded net of applicable sales tax.

4 unchanged sentences

These adjustments to the initial selling price often occur after the sales process is completed.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company identified the following elements of variable consideration:

8 unchanged sentences

Non-contractual sales allowances may be granted in connection with billing adjustments and, in some cases, for product related issues.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Advertising Allowances .

6 unchanged sentences

For wholesale customers, the Company may make accommodations for returns of merchandise that is underperforming at a customer’s retail stores.

For retail customers, as a matter of Company policy, whether merchandise is purchased at the Company’s stores or on its e-commerce platforms, the consumer generally has up to 90 days to return merchandise from the date of purchase.

For retail customers, as a matter of Company policy, whether merchandise is purchased at the Company’s stores or on its digital platforms, the consumer generally has up to 90 days to return merchandise from the date of purchase.

Variable consideration is estimated based on historical experience, current contractual and statutory requirements, specific known events and industry trends.

6 unchanged sentences

In some of its retail concepts, the Company also offers a limited loyalty program where customers accumulate points redeemable for cash discount certificates that expire 90 days after issuance.

Total contract liabilities were $ 5.9 million and $ 6.4 million at January 31, 2020 and 2019, respectively.

Total contract liabilities were $ 5.9 million at January 31, 2021 and 2020.

The Company recognized $ 4.5 million in revenue for the year ended January 31, 2021 which related to contract liabilities that existed at January 31, 2020.

1 unchanged sentence

Substantially all of the advance payments from licenses as of January 31, 2021 are expected to be recognized as revenue within the next twelve months.

NOTE C — INVENTORIES

NOTE D — ALLOWANCE FOR DOUBTFUL ACCOUNTS

On February 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments” which had no material impact on the Company’s financial statements.

The Company’s financial instruments consist of trade receivables arising from revenue transactions in the ordinary course of business.

The Company considers its trade receivables to consist of two portfolio segments:

wholesale and retail trade receivables.

Wholesale trade receivables result from credit the Company has extended

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to its wholesale customers based on pre-defined criteria and are generally due within 30 to 60 days.

Retail trade receivables primarily relate to amounts due from third-party credit card processors for the settlement of debit and credit card transactions and are typically collected within 3 to 5 days.

The Company’s accounts receivable and allowance for doubtful accounts as of January 31, 2021 were:

January 31, 2021

(In thousands)

Accounts receivable, gross

Allowance for doubtful accounts

Accounts receivable, net

The allowance for doubtful accounts for wholesale trade receivables is estimated based on several factors.

In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations (such as in the case of bankruptcy filings (including potential bankruptcy filings), extensive delay in payment or substantial downgrading by credit rating agencies), a specific reserve for bad debts is recorded against amounts due from that customer to reduce the net recognized receivable to the amount reasonably expected to be collected.

For all other wholesale customers, an allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the end of the reporting period for financial statements, assessments of collectability based on historical trends and an evaluation of the impact of economic conditions.

The Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

The allowance for doubtful accounts for retail trade receivables is estimated at the credit card chargeback rate applied to the previous 90 days of credit card sales.

In addition, the Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

During the year ended January 31, 2021, the Company recorded a $ 16.7 million increase in its allowance for doubtful accounts primarily due to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or possible bankruptcy filings.

The Company had the following activity in its allowance for credit losses for the year ended January 31, 2021:

January 31, 2021

(In thousands)

Balance as of January 31, 2020

Provision for credit losses

Accounts written off as uncollectible

Balance as of January 31, 2021

NOTE E — INVENTORIES

Wholesale inventories, which comprise a significant portion of the Company’s inventory, are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value.

2 unchanged sentences

Substantially all of the Company’s inventories consist of finished goods.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, represented $ 22.5 million and $ 31.0 million at January 31, 2021 and 2020, respectively.

3 unchanged sentences

The Company reflects this inventory on its consolidated balance sheets.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE D — PROPERTY AND EQUIPMENT

NOTE F — PROPERTY AND EQUIPMENT

Property and equipment consist of:

8 unchanged sentences

Depreciation expense was $ 34.0 million, $ 33.8 million and $ 33.9 million for the years ended January 31, 2021, 2020 and 2019, respectively.

For the year ended January 31, 2021, the Company recorded a $ 0.8 million impairment charge related to leasehold improvements and furniture and fixtures of certain Wilsons Leather and G.H.

Bass stores, primarily due to the retail restructuring, as well as at certain DKNY stores as a result of the performance of these stores.

For the year ended January 31, 2020, the Company recorded a $ 11.5 million impairment charge related to leasehold improvements and furniture and fixtures of certain Wilsons Leather, G.H.

2 unchanged sentences

Bass and Vilebrequin stores as a result of the performance of these stores.

For the year ended January 31, 2018, the Company recorded a $ 10.5 million impairment charge on leasehold improvements and furniture and fixtures of certain of its Wilsons Leather and G.H.

Bass stores as a result of the performance of these stores and a $ 0.7 million impairment charge with respect to furniture and fixtures located in certain customers’ stores.

The Company evaluates long-lived assets, which consist primarily of property and equipment and operating lease assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

7 unchanged sentences

If the Company recognizes an impairment charge for a depreciable long-lived asset, the adjusted carrying amount of the asset becomes its new cost basis and will be depreciated (amortized) over the remaining useful life of that asset.

NOTE E — LEASES

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE G — LEASES

On February 1, 2019, the Company adopted ASC 842 using the optional transition method to apply the standard as of the effective date and, therefore, the standard has not been applied retroactively to the comparative periods presented in its financial statements.

2 unchanged sentences

leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company determines whether an arrangement is, or contains, a lease at contract inception.

20 unchanged sentences

The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.

The Company’s lease assets and liabilities as of January 31, 2020 consist of the following:

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s lease assets and liabilities as of January 31, 2021 and 2020 consist of the following:

Classification

January 31, 2021

January 31, 2020

(In thousands)

6 unchanged sentences

Total lease liabilities

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s operating lease assets and operating lease liabilities significantly declined during fiscal 2021 due to the restructuring of the retail operations segment, partially offset by other leasing activity.

As a result of this restructuring, the Company closed its Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores during fiscal 2021.

In addition, during fiscal 2021 the Company recorded a $ 19.4 million impairment charge related to the operating lease assets at certain Wilsons Leather and G.H.

Bass stores, primarily due to the retail restructuring, as well as at certain DKNY and Vilebrequin stores as a result of the performance at these stores.

During fiscal 2020, the Company recorded a $ 9.9 million impairment charge related to the operating lease assets at certain of our Wilsons Leather, G.H.

Bass and DKNY stores as a result of the performance of these stores.

The Company determines the fair value of operating lease assets by discounting the estimated market rental rates over the remaining term of the lease.

The Company’s leases do not provide the rate of interest implicit in the lease.

Therefore, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Therefore, the Company uses its incremental borrowing rate based on the information available at commencement date of each lease in determining the present value of lease payments.

For transition purposes, the incremental borrowing rate on February 1, 2019 was used for operating leases that commenced prior to that date.

The Company recorded lease costs of $ 98.4 million during the year ended January 31, 2020.

The Company recorded lease costs of $ 92.4 million and $ 98.4 million during the years ended January 31, 2021 and 2020, respectively.

Lease costs are recorded within selling, general and administrative expenses in the Company’s consolidated statements of income and comprehensive income.

The Company recorded variable lease costs and short-term lease costs of $ 16.8 million for the year ended January 31, 2020.

The Company recorded variable lease costs and short-term lease costs of $ 6.7 million and $ 16.8 million for the years ended January 31, 2021 and 2020, respectively.

Short-term lease costs are immaterial.

During fiscal 2020, the Company recorded a $ 9.9 million impairment charge related to the operating lease assets at certain of our Wilsons Leather, G.H.

Bass and DKNY stores as a result of the performance of these stores.

The Company determines the fair value of operating lease assets by discounting the estimated market rental rates over the remaining term of the lease.

As of January 31, 2021, the Company’s maturity of operating lease liabilities in the years ending up to January 31, 2026 and thereafter are as follows:

3 unchanged sentences

Present value of lease liabilities

As of January 31, 2020, there are no material leases that are legally binding but have not yet commenced.

As of January 31, 2020, the weighted average remaining lease term related to operating leases is 5.2 years.

The weighted average discount rate related to operating leases is 7.8 %.

Cash paid for amounts included in the measurement of operating lease liabilities is $ 100.8 million as of January 31, 2020.

Right-of-use assets obtained in exchange for lease obligations were $ 27.0 million during the year ended January 31, 2020.

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE F — INTANGIBLE ASSETS

As of January 31, 2021, there are no material leases that are legally binding but have not yet commenced.

As of January 31, 2021, the weighted average remaining lease term related to operating leases is 5.7 years.

The weighted average discount rate related to operating leases is 8.3 %.

Cash paid for amounts included in the measurement of operating lease liabilities is $ 108.9 million and $ 100.8 million as of January 31, 2021 and 2020, respectively.

Right-of-use assets obtained in exchange for lease obligations were $ 56.6 million and $ 27.0 million during the years ended January 31, 2021 and 2020, respectively.

NOTE H — INTANGIBLE ASSETS

Intangible assets consist of:

44 unchanged sentences

The Company reviews and tests its goodwill and intangible assets with indefinite lives for impairment at least annually, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may be impaired.

The Company performs the test as of January 31 of each year using a qualitative evaluation or a quantitative test that is a combination of a discounted cash flow analysis and a market approach.

The Company performs its goodwill test as of January 31 of each year using a qualitative evaluation or a quantitative test using an income approach through a discounted cash flow analysis methodology.

The discounted cash flow approach requires that certain assumptions and estimates be made regarding industry economic factors and future profitability.

The market approach estimates the fair value based on comparisons with the market values and market multiples of earnings and revenues of similar public companies.

The Company also performs its annual test for intangible assets with indefinite lives as of January 31 of each year using a qualitative evaluation or a quantitative test using a relief from royalty method, another form of the income approach.

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

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

The Company also performed quantitative tests of each of its indefinite-lived intangible assets using a relief from royalty method.

There were no impairments identified as of April 30, 2020 as a result of these tests.

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

The fair value of the Company’s goodwill and indefinite-lived intangible assets are considered a Level 3 valuation in the fair value hierarchy.

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE G — NOTES PAYABLE AND OTHER LIABILITIES

NOTE I — NOTES PAYABLE AND OTHER LIABILITIES

Long-term debt

3 unchanged sentences

(in thousands)

Secured Notes

Revolving credit facility

1 unchanged sentence

Unsecured loan

Overdraft facilities

Net debt issuance costs (1)

2 unchanged sentences

(1) Does not include the debt issuance costs, net of amortization, totaling $ 7.2 million and $ 4.6 million as of January 31, 2021 and 2020, respectively, related to the revolving credit facility.

The debt issuance costs have been deferred and are classified in prepaid expenses and other current assets in the accompanying Consolidated Balance Sheets as required under ASU 2015-15.

The Company borrowed $ 350.0 million under a senior secured term loan facility (the “Term Loan”) that matures in December 2022.

The Company prepaid $ 50.0 million in principal amount of the Term Loan, reducing the principal balance of the Term Loan to $ 300 million.

The Term Loan is guaranteed by certain of the Company’s subsidiaries.

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 % or (iii) the LIBOR rate for a borrowing with an interest period of one month) plus 4.25 %, per annum, payable in cash.

Subject to certain permitted liens and other exclusions and exceptions, the Term Loan is secured (i) on a first-priority basis by a lien on the Company’s real estate assets, equipment and fixtures, equity interests and intellectual property and certain related rights owned by the Company and by certain of the Company’s subsidiaries and (ii) by a second-priority security interest in other assets of the Company and certain of its subsidiaries, which secure on a first-priority basis the Company’s asset-based loan facility described below under the caption “Revolving Credit Facility”.

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

sell or dispose of certain assets;

merge with other companies;

liquidate or dissolve the Company;

acquire other companies;

make loans, advances, or guarantees;

and make certain investments.

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 January 31, 2020, the Company was in compliance with these covenants.

The debt issuance costs have been deferred and are classified in assets in the accompanying Consolidated Balance Sheets in accordance with ASC 835.

Senior Secured Notes

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

The terms of the Notes are governed by an indenture (the “Indenture”), among the Company, 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 the Company’s 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 the Company’s current and future wholly-owned domestic subsidiaries that guarantee any of the Company’s credit facilities, including the Company’s ABL facility (the “ABL Facility”) pursuant to the second amended and restated credit agreement (the “ABL Credit Agreement”), or certain future capital markets indebtedness of the Company or guarantors.

The Notes and the related guarantees are secured by (i) first priority liens on the Company’s Cash Flow Priority Collateral (as defined in the Indenture), and (ii) a second-priority lien on the Company’s 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, the Company and the Guarantors entered into a pledge and security agreement (the “Pledge and Security Agreement”), among the Company, 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.

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Term Loan may be prepaid, at the option of the Company, in whole or in part, at any time at par plus accrued interest.

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 Term Loan within certain specified deadlines.

The Term Loan is also required to be prepaid in an amount equal to 75 % of the “Excess Cash Flow” (as defined in the Term Loan) of the Company 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 the Company’s senior secured leverage ratio is less than 3.00 to 1.00 , to 25 % if the Company’s senior secured leverage ratio is less than 2.75 to 1.00 and to 0 % if the Company’s senior secured leverage ratio is less than 2.25 to 1.00 .

As of January 31, 2020, the Company was not required to make a mandatory prepayment provision on excess cash flow as defined within the Term Loan.

The Company also incurred debt issuance costs totaling $ 18.3 million related to the Term Loan, of which $ 2.6 million were expensed during each of the years ended January 31, 2020, 2019 and 2018 in connection with the $ 50 million prepayment.

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 Term Loan, and are amortized using the effective interest method over the remaining life of the Term Loan.

The weighted average interest rate for amounts borrowed under the Term Loan was 7.58 % for the year ended January 31, 2020.

A 25 basis point change in the interest rates applied to the Term Loan would change annual interest expense under the Term Loan by $ 0.8 million.

Revolving Credit Facility

The Company has a $ 650 million credit agreement (the “revolving credit facility”) under which amounts available are subject to borrowing base formulas and over advances as specified in the revolving credit facility agreement.

Borrowings bear interest, at the Company’s 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 % or (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 the availability under the revolving credit facility agreement.

The revolving credit facility has a five-year term ending December 1, 2021 .

In addition to paying interest on any outstanding borrowings under the revolving credit facility, the Company is 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 rate equal to 0.25 % per annum on the average daily amount of the available commitments.

The Company also incurred debt issuance costs totaling $ 12.4 million related to the revolving credit facility.

As permitted under ASU 2015-15, the debt issuance costs have been deferred and are presented as an asset, which is amortized ratably over the term of the revolving credit facility.

The revolving credit facility is secured by specified assets of the Company and certain of its subsidiaries.

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, the Company 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, the Company 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, the Company 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, the Company 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 the Company experiences a Change of Control (as defined in the Indenture), the Company is 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 the Company’s ability and the ability of its restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other restricted payments, make certain investments, incur restrictions on the ability of the Company’s 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 the Company’s 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.

The Company 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 ASC 835, the debt issuance costs have been deferred and are presented as a contra-liability, offsetting the outstanding balance of the Notes, and are amortized over the remaining life of the Notes.

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

In fiscal 2017, the Company 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, the Company 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 facility.

At the date of repayment, the Company 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 the Company’s results of operations.

Second Amended and Restated ABL Credit Agreement

On August 7, 2020, the Company’s 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 ABL Credit Agreement with the Lenders named therein and with JPMorgan Chase Bank, N.A., as Administrative Agent.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Credit Agreement is a five year senior secured credit facility subject to a springing maturity date if, subject to certain conditions, the LVMH Note 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.

The Company and its 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 to August 2025, subject to a springing maturity date if, subject to certain conditions, the LVMH Note 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.

In addition to paying interest on any outstanding borrowings under the ABL Credit Agreement, the Company is 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 the Company’s ability, subject to specified exceptions, to incur additional debt;

7 unchanged sentences

As of January 31, 2021, the Company was in compliance with these covenants.

As of January 31, 2020, interest under the revolving credit facility was being charged at the weighted average rate of 3.26 % per annum.

The revolving credit facility also includes amounts available for letters of credit.

As of January 31, 2020, the Company had no borrowings outstanding under the revolving credit facility.

As of January 31, 2021, the Company had no borrowings outstanding under the ABL Credit Agreement.

As of January 31, 2021, interest under the ABL Credit Agreement was being paid at an average rate of 2.04 % per annum.

The ABL Credit Agreement also includes amounts available for letters of credit.

As of January 31, 2021, there were outstanding trade and standby letters of credit amounting to $ 6.6 million and $ 3.9 million, respectively.

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

The Company extinguished and charged to interest expense $ 0.4 million of the prior debt issuance costs and incurred new debt issuance costs totaling $ 5.1 million related to the ABL Credit Agreement.

The Company has a total of $ 8.0 million debt issuance costs related to its ABL Credit Agreement.

As permitted under ASC 835, 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.

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As a portion of the consideration for the acquisition of DKI, the Company issued to LVMH a junior lien secured promissory note in the principal amount of $ 125.0 million (the “LVMH Note”) that bears interest at the rate of 2 % per year.

As a portion of the consideration for the acquisition of DKI, the Company issued to LVMH a junior lien secured promissory note in the principal amount of $ 125.0 million that bears interest at the rate of 2 % per year.

$ 75.0 million of the principal amount of the LVMH Note is due and payable on June 1, 2023 and $ 50.0 million of such principal amount is due and payable on December 1, 2023 .

4 unchanged sentences

This discount is being amortized as interest expense using the effective interest method over the term of the LVMH Note.

Unsecured Loan

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

International SA (“TRB”), a subsidiary of Vilebrequin, borrowed € 3.0 million under an unsecured loan with Banque du Leman S.A (the “Unsecured Loan”).

The Unsecured Loan matures on April 15, 2024 .

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

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

Unsecured Loans

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 under these loans.

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 and fiscal 2024.

The unsecured loans have maturity dates ranging from September 15, 2024 through October 22, 2026.

As of January 31, 2021, TRB had an aggregate outstanding balance of € 7.4 million under these various unsecured loans.

Overdraft Facilities

During fiscal 2021, TRB entered into several overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft.

TRB entered into an uncommitted overdraft facility with HSBC Bank allowing for a maximum overdraft of € 5 million.

Interest on drawn balances accrues at a rate equal to the Euro Interbank Offered Rate plus a margin of 1.75 % per annum, payable quarterly.

The facility may be cancelled at any time by TRB or HSBC Bank.

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 January 31, 2021, TRB had an aggregate of € 2.5 million drawn under these various facilities.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Future Debt Maturities

10 unchanged sentences

Other accrued expenses

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE H — INCOME TAXES

NOTE J — INCOME TAXES

The income tax provision is comprised of the following:

7 unchanged sentences

Non-United States

During the fourth quarter of fiscal 2020, the United States Treasury issued final regulations related to certain aspects of the TCJA.

The tax implications of the final regulations were not material to the Company’s consolidated financial statements as the majority of the TCJA tax implications was recorded in fiscal years prior to January 31, 2020.

Effective January 1, 2018, TCJA subjects a U.S.

parent company to current tax on its GILTI.

The Company has elected to account for any tax on GILTI in the period in which it was incurred.

At January 31, 2020, the Company incurred a GILTI net tax impact of $ 0.1 million.

One of those provisions allows any loss generated in 2020 to be carried back to each of the 5 taxable years preceding the taxable year of such a loss.

The Company has elected to use this relief and will carry back the 2020 net operating loss to a tax year with a 35%

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

federal rate.

Additionally, the CARES Act permits Qualified Improvement Property to qualify for 15-year depreciation and therefore be also eligible for 100 percent first-year bonus depreciation.

The Company has elected to take 100 % bonus depreciation for all qualified improvement property.

During the fourth quarter of fiscal 2020, the United States Treasury issued final regulations related to certain aspects of the TCJA.

The tax implications of the final regulations were not material to the Company’s consolidated financial statements as the majority of the TCJA tax implications were recorded in fiscal years prior to the year ended January 31, 2021.

Effective January 1, 2018, TCJA subjects a U.S.

parent company to current tax on its GILTI.

At January 31, 2021, there was no net tax impact to the Company for GILTI.

The significant components of the Company’s net deferred tax asset at January 31, 2021 and 2020 are summarized as follows:

1 unchanged sentence

Deferred income tax assets:

Straight-line lease

Provision for bad debts and sales allowances

2 unchanged sentences

Operating lease liability

Foreign tax credit carryforward

Gross deferred income tax assets

6 unchanged sentences

Total deferred income tax liabilities

Net deferred tax assets

As of January 31, 2020 and 2019, deferred tax liabilities of $ 7.9 million and $ 15.1 million, respectively, relate to intangible assets in Switzerland.

In May 2019, Switzerland approved the Federal Act on Tax Reform and Old-Age and Survivors Insurance Financing as adopted by its Federal Parliament last fall.

The tax reform replaces certain preferential tax regimes and provides a broad reduction of the cantonal corporate tax rates.

As a result of this Swiss tax reform, the Company recognized a $ 6.1 million tax benefit related to revaluing its Swiss deferred tax liabilities.

Net deferred tax (liabilities) assets

The total undistributed earnings of the Company’s foreign subsidiaries are approximately $ 80.0 million for the fiscal year ended January 31, 2021.

Those earnings are considered indefinitely reinvested.

Even though the undistributed earnings can be distributed back generally without U.S.

federal income tax as a result of the one-time transition tax under the TCJA regime, the Company will not change its indefinite reinvestment assertion with respect to those earnings.

Upon distribution of those earnings in the form of dividends, the Company does not anticipate any material tax costs.

As such, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of undistributed foreign earnings.

Those earnings are considered indefinitely reinvested.

Even though the undistributed earnings can be distributed back generally without U.S.

federal income tax as a result of the one-time transition tax under the TCJA regime, the Company does not expect to change its indefinite reinvestment categorization with respect to those earnings.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the financial statements for the years ended January 31:

6 unchanged sentences

Valuation allowance

Net operating loss carryback

Actual provision for income taxes

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our effective tax rate decreased 3.9 % percent in fiscal 2020 compared to fiscal 2019.

The Company’s effective tax rate increased 13.2 % percent in fiscal 2021 compared to fiscal 2020.

This increase in the Company’s effective tax rate is primarily the result of the Company’s significant reduction in pretax book income in relation to its tax expense.

The Company’s effective tax rate decreased 3.9 % percent in fiscal 2020 as compared to fiscal 2019.

The decrease in the tax rate is primarily attributable to the Swiss tax reform that was enacted in May 2019.

Our effective tax rate decreased 18.7 % percent in fiscal 2019 as compared to fiscal 2018.

This decrease in the tax rate was primarily due to the effects of the TCJA, which included the reduction in the statutory U.S.

federal corporate income tax rate from 35 % to 21 % and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings.

Valuation allowances represent deferred tax benefits where management is uncertain if the Company will have the ability to recognize those benefits in the future.

During the year ended January 31, 2020, the Company recorded an additional valuation allowance of $ 1.9 million against its deferred tax assets for its standalone state tax losses.

During the year ended January 31, 2021, the Company recorded an additional valuation allowance of $ 8.3 million against its deferred tax assets for its standalone state tax losses and foreign retail losses.

Unrecognized Tax Benefits

15 unchanged sentences

The Company believes that it is reasonably possible there will be no change to its unrecognized income tax position reserves during the next twelve months due to the applicable statues of limitations.

NOTE I — COMMITMENTS AND CONTINGENCIES

License Agreements

The Company has entered into license agreements that provide for royalty payments based on net sales of licensed products.

The Company incurred royalty expense (included in cost of goods sold) of $ 178.8 million, $ 165.7 million and $ 154.3 million for the years ended January 31, 2020, 2019 and 2018, respectively.

Contractual advertising expense, which is included in selling, general and administrative expenses and is normally based on a percentage of net sales associated with certain license agreements, was $ 48.3 million, $ 46.2 million and $ 43.4 million for the years ended January 31, 2020,

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2019 and 2018, respectively.

NOTE K — COMMITMENTS AND CONTINGENCIES

License Agreements

The Company has entered into license agreements that provide for royalty payments based on net sales of licensed products.

The Company incurred royalty expense (included in cost of goods sold) of $ 116.8 million, $ 178.8 million and $ 165.7 million for the years ended January 31, 2021, 2020 and 2019, respectively.

Contractual advertising expense, which is included in selling, general and administrative expenses and is normally based on a percentage of net sales associated with certain license agreements, was $ 29.5 million, $ 48.3 million and $ 46.2 million for the years ended January 31, 2021, 2020 and 2019, respectively.

Based on minimum net sales requirements, future minimum royalty and advertising payments required under these agreements are:

15 unchanged sentences

Beginning February 1, 2018, the Company began paying duties based on the new valuation method.

Expense amounts deferred for the year ended January 31, 2020, related to the higher dutiable values, were CAD$ 12.8 million ($ 9.7 million).

Effective June 1, 2019, G-III commenced paying based on the dutiable value of G-III Canada’s imports based on the pre-audit levels.

G-III continued to defer the additional duty paid through the month of May 2019 pending the final outcome of the appeal.

G-III Canada, based on the advice of counsel, believes it has positions that support its ability to receive a refund of amounts claimed to be owed to the CBSA on appeal and intends to vigorously contest the findings of the CBSA.

G-III Canada filed its appeal with the CBSA in May 2018.

There were no amounts paid and deferred during the year ended January 31, 2021 related to the higher dutiable values, however, the Company paid interest in the amount of CAD$ 1.0 million ($ 0.8 million) on the additional duties for the period January 15, 2018 through November 25, 2020, the date of the CBSA’s final decision as discussed below.

Cumulative amounts paid and deferred through January 31, 2021, related to the higher dutiable values, were CAD$ 14.4 million ($ 11.6 million).

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE J — STOCKHOLDERS’ EQUITY

Effective June 1, 2019, G-III commenced paying based on the dutiable value of G-III Canada’s imports based on the pre-audit levels.

G-III continued to defer the additional duty paid through the month of May 2019 pending the final outcome of the appeal.

The CBSA has issued its final decision denying the appeal filed by G-III Canada with the President’s Office of the CBSA.

G-III Canada has filed a Notice of Appeal with the Canadian International Trade Tribunal (the “Tribunal”) further appealing the CBSA decision.

The Tribunal has confirmed receipt of the Notice of Appeal.

The deadline for filing the case brief and evidence is April 13, 2021 and a hearing date has been set for August 10, 2021.

G-III Canada, based on the advice of counsel, believes it has positions that support its valuations for duty as declared and therefore its ability to receive a refund of amounts claimed to be owed to the CBSA on appeal and intends to vigorously contest the findings of the CBSA.

NOTE L — STOCKHOLDERS’ EQUITY

Share Repurchase Program

2 unchanged sentences

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 of common stock were acquired pursuant to this program during fiscal 2021.

During fiscal 2020, pursuant to this program, the Company acquired 1,327,566 of its shares of common stock for an aggregate purchase price of $ 35.2 million.

3 unchanged sentences

The plan provides for the grant of equity and cash awards, including restricted stock awards, stock options and other stock unit awards to directors, officers and employees.

RSU’s generally vest over a three year period.

RSU’s generally (i) cliff vest after three years or (ii) vest over a three year period.

PRSU’s granted to executives prior to fiscal 2020 include (i) market price performance conditions that provide for the award to vest only after the average closing price of the Company’s stock trades above a predetermined market level and (ii) another performance condition that requires the achievement of an operating performance target.

2 unchanged sentences

It is the Company’s policy to grant stock options at prices not less than the fair market value on the date of the grant.

Option terms, vesting and exercise periods vary, except that the term of an option may not exceed ten years .

Option terms, vesting and exercise periods vary, except that the term of an option may not exceed ten year s.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Stock Units and Performance Based Restricted Stock Units

7 unchanged sentences

Unvested as of January 31, 2021

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Restricted Stock Units

Restricted stock units (“RSU’s”) are time based awards that do not have market or performance conditions and vest over a three year period.

Restricted stock units (“RSU’s”) are time based awards that do not have market or performance conditions and (i) cliff vest after three year s or (ii) vest over a three year period.

The grant date fair value for RSU’s are based on the quoted market price on the date of grant.

11 unchanged sentences

PSU’s are expensed over the service period under the requisite acceleration method and based on an estimated percentage of achievement of certain pre-established goals.

The Company accounts for forfeited awards as they occur as permitted by ASU 2016-09.

The Company accounts for forfeited awards as they occur as permitted by ASC 718.

Ultimately, the actual expense recognized over the vesting period will be for those shares that vest.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recognized $ 6.1 million, $ 17.6 million and $ 19.7 million in share-based compensation expense for the years ended January 31, 2021, 2020 and 2019, respectively, related to restricted stock unit grants.

5 unchanged sentences

Stock options outstanding at end of year

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes information about stock options outstanding:

4 unchanged sentences

$ 18.11 - $ 30.32

Stock Options

6 unchanged sentences

The Company granted 8,245 stock options during the year ended January 31, 2019.

The Company accounts for forfeited awards as they occur as permitted by ASU 2016-09.

The Company accounts for forfeited awards as they occur as permitted by ASC 718.

Ultimately, the actual expense recognized over the vesting period will be for those shares that vest.

2 unchanged sentences

The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of the Company’s common stock as of January 31, 2021, the reporting date.

Proceeds received from the exercise of stock options were $ 0.1 million during the years ended January 31, 2020 and 2019.

Proceeds received from the exercise of stock options were $ 0.3 million and $ 0.1 million during the years ended January 31, 2021 and 2020, respectively.

The intrinsic value of stock options exercised was $ 0.1 million and $ 0.3 million for the years ended January 31, 2021 and 2020, respectively.

A portion of this amount is currently deductible for tax purposes.

The Company recognized $ 0.1 million in compensation expense for the year ended January 31, 2020 related to stock options.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recognized $ 0.1 million and $ 0.1 million in compensation expense for the years ended January 31, 2021 and 2020, respectively, related to stock options.

The Company recognized a nominal amount in compensation expense for the year ended January 31, 2019.

No compensation expense related to stock options was recognized for the year ended January 31, 2018.

NOTE K — CONCENTRATION

Major Customers

NOTE M — CONCENTRATION

Two customers in the wholesale operations segment accounted for approximately 20.9 % and 12.9 %, respectively, of the Company’s net sales for the year ended January 31, 2021.

Two customers accounted for 26.3 % and 13.2 % of the Company’s net sales for the year ended January 31, 2020.

One customer accounted for 22.2 % of the Company’s net sales for the year ended January 31, 2018.

Two customers accounted for 24.8 % and 12.4 % of the Company’s net sales for the year ended January 31, 2019.

Four customers in the wholesale operations segment accounted for approximately 19.8 %, 19.5 %, 15.1 % and 10.1 %, respectively, of the Company’s net accounts receivable as of January 31, 2021.

Three customers in the wholesale operations segment accounted for approximately 25.7 %, 17.0 % and 10.0 %, respectively, of the Company’s net accounts receivable as of January 31, 2020.

Two customers accounted for approximately 27.5 % and 16.5 %, respectively, of the Company’s net accounts receivable as of January 31, 2019.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Inventory Sourcing

The Company sourced from China approximately 49.5 %, 61.5 % and 65.1 % of the inventory purchased for the years ended January 31, 2020, 2019 and 2018, respectively.

During the years ended January 31, 2020, 2019 and 2018, respectively, the Company sourced 11.4 %, 14.4 % and 14.7 % of its purchases from one vendor in China.

The Company believes it has alternative manufacturing sources available to meet its current and future production requirements in the event the Company is required to change current manufacturers or current manufacturers are unavailable to fulfill the Company’s production needs.

NOTE L — EMPLOYEE BENEFIT PLANS

NOTE N — EMPLOYEE BENEFIT PLANS

The Company maintains a 401(k) plan (the “GIII Plan”) and trust for non-union employees.

1 unchanged sentence

The Company made matching contributions of $ 1.5 million, $ 4.7 million and $ 3.8 million for the years ended January 31, 2021, 2020 and 2019, respectively.

The DKI 401(k) plan and trust for U.S.

based non-union employees was merged with the GIII Plan on June 1, 2017.

NOTE M — SEGMENTS

Effective May 2020, the Company temporarily suspended 401(k) matching contributions due to the COVID-19 pandemic.

NOTE O — SEGMENTS

The Company’s reportable segments are business units that offer products through different channels of distribution.

4 unchanged sentences

Bass and Andrew Marc.

The retail operations segment consists primarily of direct sales to consumers through Company-operated stores, consisting primarily of Wilsons Leather, G.H.

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.

Sales through the Company’s owned websites, with the exception of Vilebrequin, are also included in the retail operations segment.

The retail operations segment consists primarily of direct sales to consumers through Company-operated stores, which, prior to the completion of the retail restructuring in fiscal 2021, consisted primarily of Wilsons Leather, G.H.

Bass, DKNY and Karl Lagerfeld Paris stores, substantially all of which are operated as outlet stores.

Sales through the Company’s owned digital channels, with the exception of Vilebrequin, are also included in the retail operations segment.

As a result of the restructuring of the Company’s retail operations, the Company closed its Wilsons Leather and G.H.

Bass retail stores during fiscal 2021.

After completion of the restructuring, the Company’s retail operations segment consists of DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, G.H Bass, Andrew Marc and Wilsons Leather.

The following segment information, in thousands, is presented for the fiscal years ended:

6 unchanged sentences

Operating profit (loss)

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

January 31, 2020

5 unchanged sentences

Operating profit (loss)

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

January 31, 2019

15 unchanged sentences

Capital expenditures for locations outside of the United States totaled $ 3.0 million, $ 4.6 million and $ 4.3 million for the years ended January 31, 2021, 2020 and 2019, respectively.

NOTE N — EQUITY INVESTMENTS

Investment in Fabco Holding B.V.

In August 2017, the Company entered into a joint venture agreement with Amlon Capital B.V.

(“Amlon”), a private company incorporated in the Netherlands, to produce and market women’s and men’s apparel and accessories pursuant to a long-term license for DKNY and Donna Karan in the People’s Republic of China, including Macau, Hong Kong and Taiwan.

The Company owns 49 % of the joint venture, with Amlon owning the remaining 51 %.

The joint venture was funded with $ 25 million of equity to be used to strengthen the DKNY and Donna Karan brands and accelerate the growth of the business in the region.

Of this amount, the Company contributed an aggregate of $ 10.0 million.

Starting January 1, 2018, this joint venture is the exclusive seller of women’s and men’s apparel, handbags, luggage and certain accessories under the DKNY and Donna Karan brands in the territory.

The investment in Fabco, which is being accounted for under the equity method of accounting, is reflected in Investment in Unconsolidated Affiliates on the Consolidated Balance Sheets at January 31, 2020 and 2019.

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE P — FABCO HOLDING B.V.

In August 2017, the Company entered into a joint venture agreement with Amlon Capital B.V.

The Company owned 49 % of the joint venture through November 30, 2020, with Amlon owning the remaining 51 %.

During the fourth quarter of fiscal 2021, the Company acquired an additional ownership interest for nominal consideration that increased its ownership interest in Fabco to 75 % effective December 1, 2020, with Amlon owning the remaining 25 % (the “Fabco Acquisition”).

The joint venture was funded with $ 25 million of equity to be used to strengthen the DKNY and Donna Karan brands and accelerate the growth of the business in the region.

Of this amount, the Company contributed an aggregate $ 10.0 million.

Beginning January 1, 2018, this joint venture is the exclusive seller of women’s and men’s apparel, handbags, luggage and certain accessories under the DKNY and Donna Karan brands in the territory.

Fabco is accounted for as a consolidated majority-owned subsidiary on the consolidated financial statements as of January 31, 2021.

The investment in Fabco was previously accounted for under the equity method of accounting on the consolidated balance sheets at January 31, 2020.

On the effective date of the Fabco Acquisition, the previously held investment was remeasured at fair value and a $ 1.0 million gain was recorded.

The Fabco Acquisition was accounted for under the acquisition method of accounting.

Accordingly, the purchase price was allocated to the acquired assets based on their estimated fair values.

In connection with the acquisition, during the year ended January 31, 2021, the Company recorded a $ 1.7 million pretax bargain purchase gain.

The Company was able to realize a gain because Fabco was in need of capital to continue its operations and was unable to secure sufficient capital in the time frame it required.

The Company has assessed the identification of and valuation assumptions surrounding the assets acquired and the consideration transferred and has determined that the recognition of a bargain purchase gain is appropriate.

The operating results for Fabco are included in the Company’s consolidated financial statements from the effective date of the Fabco Acquisition.

The noncontrolling interest is classified as temporary equity in the mezzanine section of the balance sheet between liabilities and permanent equity.

The temporary equity designation is due to a put feature that is outside of the Company’s control.

NOTE Q — EQUITY INVESTMENTS

Investment in Karl Lagerfeld Holding B.V.

6 unchanged sentences

The Company paid KLBV $ 25.0 million for a 49 % ownership interest in KLNA.

KLNA holds brand rights to all Karl Lagerfeld trademarks, including the Karl Lagerfeld Paris brand the Company currently uses, for all consumer products (except eyewear, fragrance, cosmetics, watches, jewelry, and hospitality services) and apparel in the United States, Canada and Mexico.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The investment in KLNA, which is being accounted for under the equity method of accounting, is reflected in Investment in Unconsolidated Affiliates on the Consolidated Balance Sheets at January 31, 2021 and 2020.

NOTE O — RELATED PARTY TRANSACTIONS

NOTE R — RELATED PARTY TRANSACTIONS

Transactions with Fabco

G-III owns a 49 % ownership interest in Fabco and is considered a related party of Fabco (see Note N).

Prior to December 1, 2020, G-III owned a 49 % ownership interest in Fabco and was considered a related party of Fabco (see Note N).

The Company sells inventory to Fabco and granted Fabco’s subsidiary the right to use certain Donna Karan and DKNY trademarks.

In fiscal 2020, the Company sold $ 4.4 million in inventory to Fabco.

In fiscal 2021 and 2020, the Company sold $ 2.7 million and $ 4.4 million in inventory to Fabco, respectively.

The Company recorded $ 0.9 million of licensing revenue from Fabco during the period of the year prior to Fabco becoming a consolidated majority-owned subsidiary of the Company.

The Company recorded $ 3.1 million and $ 2.2 million of licensing revenue from Fabco during the years ended January 31, 2020 and 2019, respectively.

1 unchanged sentence

Transactions with KL North America

G-III owns a 49 % ownership interest in KLNA and is considered a related party of KLNA (see Note N).

G-III owns a 49 % ownership interest in KLNA and is considered a related party of KLNA (see Note Q).

The Company entered into a licensing agreement to use the brand rights to certain Karl Lagerfeld trademarks held by KLNA.

3 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE P — QUARTERLY FINANCIAL DATA (UNAUDITED)

NOTE S — QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for the fiscal years ended January 31, 2021 and 2020 are as follows (in thousands, except per share amounts):

Quarter Ended

Net income per common share

Net income attributable to G-III Apparel Group, Ltd.

per common share

Quarter Ended

Net income per common share

(1) During the second quarter of fiscal 2021, the Company recorded a $ 19.8 million impairment charge primarily related to operating lease assets, leasehold improvements, furniture and fixtures and store related intangible assets at certain Wilsons Leather and G.H.

Bass stores primarily due to the retail restructuring, and certain DKNY and Vilebrequin stores as a result of the performance at these stores.

(2) During the fourth quarter of fiscal 2021, the Company recorded a $ 0.7 million impairment charge primarily related to operating lease assets, leasehold improvements, furniture and fixtures and store related intangible assets at certain DKNY and Vilebrequin stores as a result of the performance at these stores.

(3) During the fourth quarter of fiscal 2020, the Company recorded a $ 21.8 million impairment charge primarily related to leasehold improvements, furniture and fixtures and operating lease assets at certain Wilsons Leather, G.H.

Bass and DKNY stores as a result of the performance at these stores.

(2) During the fourth quarter of fiscal 2019, the Company recorded a $ 2.8 million impairment charge related to leasehold improvements and furniture and fixtures at certain of Wilsons Leather, G.H.

Bass and DKNY stores as a result of the performance at these stores.

NOTE Q — SUBSEQUENT EVENTS

On March 11, 2020, the World Health Organization declared the novel strain of coronavirus a global pandemic and recommended containment and mitigation measures worldwide.

As of the date of this filing, the Company’s retail stores and the stores of some of its department store partners globally have been impacted by temporary closures.

The Company cannot reasonably estimate the length or severity of this pandemic, but it currently anticipates a material adverse impact on the consolidated financial statements in fiscal 2021.

Revolving Credit Facility

During March 2020, the Company borrowed an aggregate of $ 500.0 million under its revolving credit facility.

G-III Apparel Group, Ltd.

and Subsidiaries

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

19 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-K

Item 9A. Controls and Procedures