What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-06-08 compared with 2020-12-10 · 172 added, 271 removed, 127 unchanged (78% of the section changed)

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

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

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

For example, with respect to our results for the three-month period ended April 30, 2021, the results of Vilebrequin, KLH, KLNA and Fabco are included for the three-month period ended March 31, 2021.

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

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

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

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

The Company’s three-month periods ended April 30, 2021 and 2020 were each 13-week periods for the retail operations segment.

For fiscal 2022 and 2021, the three month period for the retail operations segment ended on May 1, 2021 and May 2, 2020 respectively.

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

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

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

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

● our dependence on licensed products;

● the global health crisis caused by the COVID-19 pandemic has had, and the current and uncertain future outlook of the outbreak will likely continue to have, adverse effects on our business, financial condition and results of operations;

● the failure to maintain our material license agreements could cause us to lose significant revenues and have a material adverse effect on our results of operations;

● our dependence on the strategies and reputation of our licensors;

● costs and uncertainties with respect to expansion of our product offerings;

● the performance of our products at retail and customer acceptance of new products;

● retail customer concentration;

● risks of doing business abroad;

● risks related to the recent adoption of a national security law in Hong Kong;

● price, availability and quality of materials used in our products;

● the need to protect our trademarks and other intellectual property;

● any adverse change in our relationship with PVH and its Calvin Klein or Tommy Hilfiger brands would have a material adverse effect on our results of operations;

● risks relating to our wholesale operations including, among others, maintaining the image our proprietary brands, business practices of our customers that could adversely affect us and retail customer concentration;

● risks relating to our retail operations segment;

● our ability to achieve operating enhancements and cost reductions from the restructuring of our retail operations, as well as the impact on our business and financial statements resulting from any related costs and charges which may be dilutive to our earnings;

● the impact on our business and financial statements related to the early closure of stores or the termination of long-term leases;

● our ability to achieve operating enhancements and cost reductions from the restructuring of our retail operations;

● dependence on existing management;

● our ability to make strategic acquisitions and possible disruptions from acquisitions;

● risks related to our indebtedness;

● risks of operating through joint ventures;

● need for additional financing;

● seasonal nature of our business;

● our reliance on foreign manufacturers;

● seasonal nature of our business and effect of unseasonable or extreme weather on our business;

● possible adverse effect of problems with our logistics and distribution systems;

● price, availability and quality of materials used in our products;

● the need to protect our trademarks and other intellectual property;

● risk that our licensees may not generate expected sales or maintain the value of our brands;

● the impact of the current economic and credit environment on us, our customers, suppliers and vendors;

● effects of war, acts of terrorism, natural disasters or public health crises could adversely affect our business and results of operations;

● our dependence on foreign manufacturers;

● risks of expansion into foreign markets, conducting business internationally and exposures to foreign currencies;

● risks related to the recent adoption of a national security law in Hong Kong;

● the need to successfully upgrade, maintain and secure our information systems;

● increased exposure to consumer privacy, cybersecurity and fraud concerns, including as a result of the remote working environment;

● the impact of the current economic and credit environment on us, our customers, suppliers and vendors;

● the effects of competition in the markets in which we operate, including from online retailers;

● the redefinition of the retail store landscape in light of widespread retail store closings, the bankruptcy of a number of prominent retailers and the impact of online apparel purchases and innovations by online retailers;

● consolidation of our retail customers;

● possible adverse effects of data security or privacy breaches;

● the impact on our business of the imposition of tariffs by the United States government and the escalation of trade tensions between countries;

● additional legislation and/or regulation in the United States or around the world;

● our ability to import products in a timely and cost effective manner;

● our ability to continue to maintain our reputation;

● fluctuations in the price of our common stock;

● potential effect on the price of our common stock if actual results are worse than financial forecasts;

● risks related to the audit by the Canadian Border Services Agency;

● changes in tax legislation or exposure to additional tax liabilities could impact our business;

● the effect of regulations applicable to us as a U.S.

public company;

● focus on corporate responsibility issues by stakeholders;

● potential effect on the price of our stock if actual results are worse than financial forecasts or if we are unable to provide financial forecasts;

● fluctuations in the price of our common stock;

● impairment of our goodwill, trademarks or other intangibles may require us to record charges against earnings;

● risks related to our indebtedness.

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

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

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

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

Recent Developments

Refinancing of our Term Loan and Revolving Credit Facility

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

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

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

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

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

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

Restructuring of Our Retail Operations Segment

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

Additionally, we are closing our Calvin Klein Performance stores.

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

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

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

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

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

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

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

closing costs.

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

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

Impact of COVID-19 Pandemic

Outbreaks of COVID-19 were detected beginning in December 2019 and, in March 2020, the World Health Organization declared COVID-19 a pandemic.

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

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

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

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

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

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

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

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

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

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

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

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

In addition, we could be required to record increased excess and obsolete inventory reserves due to decreased sales or noncash impairment charges related to our intangible assets or goodwill due to reduced market values and cash flows.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We also performed quantitative tests of each of our indefinite-lived intangible assets 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.

While no impairment was identified as of April 30, 2020 as a result of these tests, $370.0 million of our indefinite-lived trademarks could be deemed to have a risk of future impairment as there is limited excess fair value over the carrying value of the assets at October 31, 2020.

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

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

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

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

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

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

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

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

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

Fabco operates our DKNY business in China.

A detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations is described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, 2021.

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

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

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DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris.

We are not only licensees, but also brand owners, and we distribute our products through multiple brick and mortar and online channels.

We are not only licensees, but also brand owners, and we distribute our products through multiple channels.

Our own proprietary brands include DKNY, Donna Karan, Vilebrequin, G.H.

Bass, Eliza J, Jessica Howard, Andrew Marc and Marc New York.

We sell products under an extensive portfolio of well-known licensed brands, including Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Levi’s and Dockers.

Bass, Eliza J, Jessica Howard, Andrew Marc, Marc New York and Wilsons Leather.

We sell products under an extensive portfolio of well-known licensed brands, including Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Levi’s, Guess?, Kenneth Cole, Cole Haan, Vince Camuto and Dockers.

Through our team sports business, we have licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League and over 150 U.S.

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We also source and sell products to major retailers under their private retail labels.

We believe that the international sales and profit opportunity is quite significant for our DKNY and Donna Karan businesses.

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

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

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

Our products are sold through a cross section of leading retailers such as Macy’s, Dillard’s, Hudson’s Bay Company, including their Saks Fifth Avenue division, Nordstrom, Kohl’s, TJX Companies, Ross Stores and Burlington.

We also sell our products over the web through retail partners such as macys.com, nordstrom.com and dillards.com, each of which has a substantial online business.

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

We also distribute apparel and other products directly to consumers through our own DKNY and Karl Lagerfeld retail stores, as well as through our digital channels for the DKNY, Donna Karan, Karl Lagerfeld Paris, G.H.

Bass, Andrew Marc and Wilsons Leather businesses.

In June 2020, we commenced the restructuring of our retail operations, including the closure of the Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores.

We completed the closing of our Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores in fiscal 2021.

We believe this restructuring will enable us to reduce our losses and re-position our retail operations with a goal of becoming a profitable contributor to our business.

We operate in fashion markets that are intensely competitive.

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Although our portfolio of brands is aimed at diversifying our risks in this regard, misjudging shifts in consumer preferences could have a negative effect on our business.

Our success in the future will depend on our ability to design products that are accepted in the marketplace, source the manufacture of our products on a competitive basis, and continue to diversify our product portfolio and the markets we serve.

Our success in the future will depend on our ability to design

products that are accepted in the marketplace, source the manufacture of our products on a competitive basis, and continue to diversify our product portfolio and the markets we serve.

We believe that consumers prefer to buy brands they know, and we have continually sought to increase the portfolio of name brands we can offer through different tiers of retail distribution, for a wide array of products at a variety of price points.

We have increased the portfolio of brands we offer through licenses, acquisitions and joint ventures.

We focus our efforts on the sale of products under our five power brands, two of which we own and three of which we license.

It is our objective to continue to expand our product offerings and we are continually discussing new licensing opportunities with brand owners and seeking to acquire established brands.

Change in Accounting Principle

Effective February 1, 2021, we elected to change our method of accounting for retail inventories from the lower of cost or market as determined by the retail inventory method to the lower of cost or net realizable value using the weighted average cost method.

We believe the new method is preferable as it provides better matching of cost of goods sold with revenue, improves the precision of inventory valuation at the balance sheet dates, and more closely aligns with the valuation methods used throughout the rest of the Company.

In addition, the change in inventory valuation better aligns with the way we manage our business with a focus on the actual margin realized.

We have determined that it is impractical to apply this change in accounting principle retrospectively due to a lack of available information.

We have instead applied the change prospectively as of February 1, 2021.

The cumulative adjustment as of February 1, 2021 was a decrease in both inventories and retained earnings of $0.3 million.

The change in accounting principle did not have a material effect on our condensed consolidated financial statements as of and for the three-month period ended April 30, 2021.

We report based on two segments:

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Bass and Andrew Marc.

Our retail operations segment historically consisted primarily of direct sales to consumers through our company-operated stores.

Prior to our restructuring of this segment, it was composed 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.

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

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

Our plan is based on the assumed continued strength of the DKNY and Karl Lagerfeld brands, improved store productivity, changes in planning and allocation and improvements in gross margin and payroll leverage.

Our retail operations segment consists primarily of direct sales to consumers through our company-operated stores and through digital channels.

In fiscal 2021, we restructured our retail operations, including the closure of our Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores.

After completion of the restructuring, our retail operations segment consists of our 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.

Trends Affecting Our Business

Impact of COVID-19 Pandemic

The COVID-19 pandemic has affected businesses around the world for over a year.

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

The COVID-19 pandemic continues to impact the global economy.

In the first quarter of fiscal 2022, consumer demand increased year-over-year, but remained below pre-pandemic levels.

Even as businesses have reopened as governmental restrictions were loosened with respect to stay at home orders and various restrictions on the operation of retail businesses, the ultimate economic impact of the COVID-19 pandemic is uncertain.

We expect that our business operations and results of operations, including our net sales, earnings and cash flows, will continue to be adversely impacted in fiscal 2022 as

compared to our results of operations prior to the COVID-19 pandemic.

We expect significant improvements in our results of operations for fiscal 2022 as compared to fiscal 2021.

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

The extent to which COVID-19 impacts our results will depend on continued developments in the public and private responses to the pandemic and the success and efficacy of efforts in the United States and around the world to vaccinate people against COVID-19.

New information may emerge concerning the severity of the outbreak and the spread of variants of the COVID-19 virus in locations that are important to our business.

Actions taken to contain COVID-19 or treat its impact may change or become more restrictive if additional waves of infections occur, or continue to occur, as a result of the loosening of governmental restrictions.

Industry Trends

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In addition, consumer shopping preferences have continued to shift from physical stores to online shopping and retail traffic remains under pressure.

All of these factors have led to a more promotional retail environment that includes aggressive markdowns in an attempt to offset declines caused by a reduction in physical store traffic.

The effects of the COVID-19 pandemic have accelerated these trends.

We sell our products over the web through retail partners such as macys.com and nordstrom.com, each of which has a substantial online business.

We sell our products online through retail partners such as macys.com, nordstrom.com and dillards.com, each of which has a substantial online business.

As digital sales of apparel continue to increase, we are developing additional digital marketing initiatives on our web sites and through social media.

We are investing in digital personnel, marketing, logistics, planning and distribution to help us expand our online opportunities going forward.

Our digital business consists of our own web platforms at www.dkny.com, www.donnakaran.com, www.wilsonsleather.com, www.ghbass.com, www.vilebrequin.com and www.andrewmarc.com.

Our digital business consists of our own web platforms at www.dkny.com, www.donnakaran.com, www.ghbass.com, www.vilebrequin.com, www.andrewmarc.com and www.wilsonsleather.com.

We also sell Karl Lagerfeld Paris products on our website, www.karllagerfeldparis.com.

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

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

A number of retailers are experiencing financial difficulties, which in some cases have resulted in bankruptcies, liquidations and/or store closings.

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

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

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

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

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

We are seeing significant acceleration in demand for day and occasion dresses, as well as career wear such as suit separates.

We are working diligently to satisfy this demand from our retail partners and consumers.

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

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We believe that our broad distribution capabilities help us to respond to the various shifts by consumers between distribution channels and that our operational capabilities will enable us to continue to be a vendor of choice for our retail partners.

The apparel and accessories industry has been impacted by tariffs implemented by the United States government on goods imported from China.

Tariffs on handbags and leather outerwear imported from China were effective beginning in September 2018, and were initially in the amount of 10% of the merchandise cost to us.

The level of tariffs on these product categories was increased to 25% beginning May 10, 2019.

On August 1, 2019, the United States government announced new 10% tariffs that cover the remaining estimated $300 billion of inbound trade from China, including most of our apparel products.

On August 23, 2019, the United States government announced that the new tariffs to go into effect would increase from 10% to 15%.

The new 15% tariffs went into effect on September 1, 2019, although the additional tariffs on certain categories of products were delayed until December 15, 2019.

The announcement followed an earlier proposal by the United States government that would have imposed 25% tariffs on the balance of inbound trade from China, but that were suspended pending trade negotiations with China.

In January 2020, the U.S.

and China signed their Phase One Deal that rolled back certain tariffs and postponed certain tariffs that had been scheduled to go into effect on December 15, 2020.

It is difficult to accurately estimate the impact on our business from these tariff actions or similar actions or when additional tariffs may become effective.

For fiscal 2019, approximately 61% of the products that we sold were manufactured in China.

For fiscal 2020, approximately 50% of the products that we sold were manufactured in China.

Notwithstanding the Phase One Deal, the United States government continues to negotiate with China with respect to a trade deal, which could lead to the removal or postponement of additional tariffs.

and China are not able to resolve their differences, additional tariffs may be put in place and additional products may become subject to tariffs.

Tariffs on additional products imported by us from China would increase our costs, could require us to increase prices to our customers and would cause us to seek price concessions from our vendors.

If we are unable to increase prices to offset an increase in tariffs, this would result in our realizing lower gross margins on the products sold by us and will negatively impact our operating results.

We have engaged in a number of efforts to mitigate the effect on our results of operations of increases in tariffs on products imported by us from China, including diversifying our sourcing network by arranging to move production out of China, negotiating with our vendors in China to receive vendor support to lessen the impact of increased tariffs on our cost of goods sold, and discussing with our customers the implementation of price increases that we believe our products can absorb because of the strength of our portfolio of brands.

Inbound Freight

The effects of the COVID-19 pandemic on the shipping industry have adversely affected our ability to ensure that we are able to import our product in a manner that allows for timely delivery to our customers.

Demand for container space has increased, as availability of container space has been reduced.

This has caused contractual shipping rates to increase.

Our shipping costs have also increased as we purchased needed container space on the secondary market at higher spot rates.

If we are unable to secure container space on a vessel due to the limited availability, we may experience delays in shipping product from our overseas suppliers to our customers.

Ports around the world are experiencing congestion, slowing transit times of product through ports of entry which affects our ability to timely receive and deliver product to our customers.

Our longstanding relationships with our steamship carriers have facilitated our ability to secure space on vessels as demand for apparel increases, although at rates that are significantly higher than in the past.

We believe that the strength of our portfolio of global power brands will allow us to selectively raise prices to largely offset higher freight costs.

Results of Operations

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

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

Net sales of our segments are reported before intercompany eliminations.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bass stores as we exit these businesses.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Three months ended April 30, 2021 compared to three months ended April 30, 2020

Net sales for the three months ended April 30, 2021 increased to $519.9 million from $405.1 million in the same period last year.

Net sales of our segments are reported before intercompany eliminations.

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

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

As a result, most of our retail partners closed their stores in North America beginning in mid-March, 2020, including our largest customer, Macy’s.

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

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

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

million in the same period last year.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Net sales of our wholesale operations segment increased to $511.5 million for the three months ended April 30, 2021 from $378.9 million in the comparable period last year.

This increase is primarily the result of a $47.7 million increase in net sales of Calvin Klein licensed products, a $42.8 million increase in net sales of Tommy Hilfiger licensed products, a $27.7 million increase in net sales of our DKNY and Donna Karan products and a $5.8 million increase in net sales of Karl Lagerfeld licensed products.

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

As a result, most of our retail partners closed their stores in North America, beginning in mid-March, 2020.

The governmental restrictions imposed in connection with the COVID-19 pandemic resulted in significant increases in unemployment, a reduction in business activity and a reduction in consumer spending on apparel and accessories, all of which contributed to the reduction of our net sales which occurred during the majority of fiscal 2021.

During the three months ended April 30, 2021, substantially all stores operated by our retail partners were open and governmental restrictions were eased in most regions of the United States due to the reduction of the severity of the COVID-19 pandemic.

The lessening of COVID-19 restrictions has resulted in an increase in business activity which has contributed to an increase in consumer spending on apparel and accessories.

Net sales of our retail operations segment decreased to $19.4 million for the three months ended April 30, 2021 from $33.9 million in the same period last year.

This decrease is primarily due to the significant reduction in our store count as a result of the restructuring of our retail operations segment that resulted in the closure of our Wilsons, G.H.

Bass and Calvin Klein Performance stores during fiscal 2021.

The number of retail stores operated by us decreased from 257 at April 30, 2020 to 50 at April 30, 2021.

In addition, while the impact of the COVID-19 pandemic has lessened in this year’s first quarter compared to last year, reduced demand and store traffic, as well as domestic and international travel restrictions, continue to have a negative impact on net sales of our retail operations segment.

Gross profit was $195.5 million, or 37.6% of net sales, for the three months ended April 30, 2021, compared to $124.4 million, or 30.7% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 36.3% in the three months ended April 30, 2021 compared to 29.6% in the same period last year.

The gross profit percentage in our retail operations segment was 50.3% for the three months ended April 30, 2021 compared to 35.9% for the same period last year.

Gross profit percentages for both our wholesale and retail operations segments in the prior year’s quarter were impacted by the negative effects of the COVID-19 pandemic on our net sales.

The gross profit percentage in our wholesale operations segment was negatively impacted last year as a result of recognizing certain fixed costs, primarily higher effective royalty rates, over the lower net sales last year.

Selling, general and administrative expenses decreased to $141.6 million in the three months ended April 30, 2021 from $154.6 million in the same period last year.

The decrease in expenses was primarily due to a decrease of $12.5 million in facility expenses as a result of the restructuring of our retail operations segment in fiscal 2021 and $9.6 million in bad debt expense related to allowances recorded against the outstanding receivables of certain department store customers in fiscal

These decreases were partially offset by a net $7.2 million increase in compensation expense, primarily from bonuses and share-based compensation.

As a result of the COVID-19 pandemic, the prior year’s period had no bonus accrual and a $3.9 million reversal in share-based compensation related to awards with performance conditions that became improbable to achieve.

In addition, contractual advertising related to increased sales of licensed product increased by $3.7 million.

Depreciation and amortization was $7.0 million for the three months ended April 30, 2021 compared to $9.9 million in the same period last year.

This decrease primarily relates to a reduction in capital expenditures during the COVID-19 pandemic.

Other income was $1.8 million in the three months ended April 30, 2021 compared to other loss of $2.1 million for the same period last year.

This change is primarily due to other income of $1.5 million from non-refundable European government-backed grants received by Vilebrequin for COVID-19 relief.

In addition, this change is also the result of recording $0.2 million of foreign currency losses during the three months ended April 30, 2021 compared to foreign currency losses of $1.5 million during the three months ended April 30, 2020 and $0.5 million in income from unconsolidated affiliates during the three months ended April 30, 2021 compared to $0.6 million of loss from unconsolidated affiliates in the same period last year.

Interest and financing charges, net, for the three months ended April 30, 2021 were $12.0 million compared to $10.4 million for the same period last year.

The increase is primarily due to the senior secured notes outstanding in the current quarter having a higher principal balance and interest rate than the term loan that was outstanding in the prior year period.

Income tax expense was $10.3 million for the three months ended April 30, 2021 compared to income tax benefit of $16.4 million for the same period last year.

Our effective tax rate decreased to 28.0% in the current year’s quarter from 29.5% in last year’s comparable quarter.

Liquidity and Capital Resources

Cash Requirements and Trends and Uncertainties Affecting Liquidity

We rely on our cash flows generated from operations and the borrowing capacity under our revolving credit facility to meet the cash requirements of our business.

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

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

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

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

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

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

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

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

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

As a result, the impact of COVID-19 on our future earnings and cash flows could continue to have a material impact on our results of operations and financial condition depending on the duration and scope of the COVID-19 pandemic.

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

Cash Availability

We rely on our cash flows generated from operations, cash and cash equivalents and the borrowing capacity under our revolving credit facility to meet the cash requirements of our business.

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

As of April 30, 2021, we had cash and cash equivalents of $396.3 million and availability under our revolving credit facility in excess of $460 million.

As of April 30, 2021, we were in compliance with all covenants under our debt agreements.

Senior Secured Notes

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

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

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

Bank, National Association, as trustee and collateral

agent (the “Collateral Agent”).

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

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

The net proceeds of the Notes have been used (i) to repay the $300 million that was outstanding under our prior term loan facility due 2022 (the “Term Loan”), (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.

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

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

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.

In addition, we had unamortized debt issuance costs of $6.1 million associated with the Term Loan.

Upon repayment of the Term Loan, these debt issuance costs were fully extinguished and charged to interest expense in our results of operations.

Second Amended and Restated ABL Credit Agreement

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

In August 2020, our subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc.

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

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

The ABL Credit Agreement 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.

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

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

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.

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

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

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

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

As of April 30, 2021, the Company was in compliance with these covenants.

As of April 30, 2021, we had no borrowings outstanding under the ABL Credit Agreement.

There were no borrowings under the ABL Credit Agreement during the three months ended April 30, 2021.

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

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

As of April 30, 2021, there were outstanding trade and standby letters of credit amounting to $10.9 million and $4.0 million, respectively.

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

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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.

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

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

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

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

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

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

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

In connection with the issuance of the LVMH Note, LVMH entered into (i) a subordination agreement providing that our obligations under the LVMH Note are subordinate and junior to our obligations under the revolving credit facility and Term Loan and (ii) a pledge and security agreement with us and our subsidiary, G-III Leather, pursuant to which we and G-III Leather granted to LVMH a security interest in specified collateral to secure our payment and performance of our obligations under the LVMH Note that is subordinate and junior to the security interest granted by us with respect to our obligations under the revolving credit facility and Term Loan.

G-III Leather granted to LVMH a security interest in specified collateral to secure our payment and performance of our obligations under the LVMH Note that is subordinate and junior to the security interest granted by us with respect to our obligations under the revolving credit facility and Term Loan.

Unsecured Loans

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

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

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

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

As of April 30, 2021, TRB had an aggregate outstanding balance of €7.5 million under these various unsecured loans.

Overdraft Facilities

During the second quarter of 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.

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.

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

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

As of April 30, 2021, TRB had an aggregate €3.3 million drawn under these various facilities.

Outstanding Borrowings

Our primary operating cash requirements usually are to fund our seasonal buildup in inventories and accounts receivable, primarily during the second and third fiscal quarters each year.

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

The primary sources to meet our

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

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

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

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

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

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

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

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

Our primary operating cash requirements are to fund our seasonal buildup in inventories and accounts receivable, primarily during the second and third fiscal quarters each year.

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

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

We had no borrowings outstanding under our revolving credit facility at April 30, 2021 and had $500.0 million of borrowings outstanding at April 30, 2020.

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

We had $400 million in borrowings outstanding under the Notes at April 30, 2021.

We had $300 million in borrowings under the Term Loan Credit Agreement at April 30, 2020.

Our contingent liability under open letters of credit was approximately $14.9 million and $15.8 million at April 30, 2021 and 2020, respectively.

In addition to the amounts outstanding under these two loan agreements, at April 30, 2021 and 2020, we had $125 million of face value principal amount outstanding under the LVMH Note.

As of April 30, 2021 and 2020, we had an aggregate of €7.5 million ($8.8 million) and €4.1 million ($4.5 million) outstanding under Vilebrequin’s unsecured loans.

As of April 30, 2021, we also had €3.3 million ($3.9 million) outstanding under Vilebrequin’s overdraft facilities.

We had cash and cash equivalents of $396.3 million on April 30, 2021 and $616.2 million on April 30, 2020.

Share Repurchase Program

Our Board of Directors has authorized a share repurchase program of 5,000,000 shares.

Our Board of Directors authorized a share repurchase program in the aggregate amount of 5,000,000 shares.

The timing and actual number of shares repurchased, if any, will depend on a number of factors, including market conditions and prevailing stock prices, and are subject to compliance with certain covenants contained in our loan agreement.

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

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

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

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

No shares were repurchased during the three months ended April 30, 2021.

As of June 3, 2021, we had 2,949,362 authorized shares remaining under this program and 48,376,794 shares of common stock outstanding.

Cash from Operating Activities

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

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

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

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

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

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

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

We generated $47.0 million in cash from operating activities during three months ended April 30, 2021, primarily as a result of our net income of $26.3 million and non-cash charges in the aggregate amount of $19.9 million relating primarily to operating lease costs of $10.3 million, depreciation and amortization of $7.0 million and share-based compensation of $2.5 million.

We also generated cash from operating activities as a result of a decrease of $69.8 million in inventories.

These items were offset, in part, by decreases of $43.8 million in accounts payable and accrued expenses, $11.5 million in operating lease liabilities and $10.4 million in customer refund liabilities, as well as an increase in accounts receivable of $16.7 million.

The decrease in accounts payable and accrued expenses is primarily attributable to vendor payments related to inventory purchases and the payment of year-end bonuses in our first fiscal quarter.

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

Cash from Investing Activities

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

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

Operating lease assets initial direct costs in the period primarily related to payments of key money and broker fees.

We used $2.7 million of cash in investing activities during three months ended April 30, 2021 for capital expenditures.

Capital expenditures in the period primarily related to infrastructure and information technology expenditures and additional fixturing costs at department stores.

Cash from Financing Activities

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

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

Net cash provided by financing activities was $1.1 million during three months ended April 30, 2021 primarily as a result of net borrowings under Vilebrequin’s overdraft facilities.

Critical Accounting Policies

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The accounting policies and related estimates described in our Annual Report on Form 10-K for the year ended January 31, 2021 are those that depend most heavily on these judgments and estimates.

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

As of April 30, 2021, there have been no material changes to our critical accounting policies, other than the change in our retail inventory valuation method from the lower of cost or market as determined by the retail inventory method to the lower of cost or market under the weighted average cost method as discussed in Note 1 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Quantitative and Qualitative Disclosures About Market Risk.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis