What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-28 compared with 2021-03-26 · 275 added, 364 removed, 1175 unchanged (35% of the section changed)

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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), 10.7, 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.

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

Incorporated by Reference

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

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.

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10-Q (Q1 2021)

Form of Amended and Restated Restricted Stock Unit Agreement, dated June 28, 2021, with respect to revised awards under the 2015 Plan.

Form of Performance Share Unit Agreement for March 18, 2022 performance share unit grants.

Form of Executive Transition Agreement, as amended.

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10-Q (Q3 2011)

Employment Agreement, made as of January 9, 2013, between G-III and Wayne S.

Amendment to Employment Agreement and Executive Transition Agreement, dated as of December 9, 2016, between G-III and Wayne S.

Employment Agreement, dated as of December 9, 2016, between G-III and Jeffrey D.

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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.

and G-III Leather Fashions, Inc.

Incorporated by Reference

Lease, dated December 7, 2011, between 400 Commerce Boulevard LLC.

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and Subsidiaries

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID 42 )

Consolidated Balance Sheets

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 28, 2022 expressed an unqualified opinion thereon.

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.

2016-02, Leases (Topic 842), and the related amendments effective February 1, 2019.

Basis for Opinion

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Wholesale revenue variable consideration

Description of the Matter

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.

As described in Note 1 and Note 2 to the consolidated financial statements, 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 $86.8 million as of January 31, 2022.

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.

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 (including the effects of the global pandemic).

Company’s merchandise, specific known events and industry trends.

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

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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 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.

To test the Company’s measurement of variable consideration related to non-contractual markdowns and returns from wholesale customers, our audit procedures included, among others, evaluating the Company’s methodologies, 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.

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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

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 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

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Cumulative effect of adoption of ASC 842

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

Balance as of January 31, 2020

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Taxes paid for net share settlements

Other comprehensive 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

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Taxes paid for net share settlements

Other comprehensive gain, net

Other comprehensive loss, net

Repurchases of common stock

Cumulative effect of change in accounting principle

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

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Equity (gain)/loss in unconsolidated affiliates

Change in fair value of equity investment

Share-based compensation

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Operating lease assets initial direct costs

Minority investment in e-commerce retailer

Sale of portion of investment in e-commerce retailer

Capital expenditures

Investment in unconsolidated affiliate

Return of capital from unconsolidated affiliate

Proceeds from sale of a retail store

Investment in brand acquisition

Net cash used in investing activities

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( 2,388,766 )

( 2,315,935 )

Proceeds from borrowings - revolving credit facility

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Payment of financing costs

Repayment of loan from acquired brand

Proceeds from exercise of equity awards

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Foreign currency translation adjustments

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

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Income tax payments, net

Stock received from licensing agreement

The accompanying notes are an integral part of these statements.

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January 31, 2022, 2021 and 2020

NOTE A — SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:

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The Company also operates retail stores and licenses its proprietary brands under several product categories.

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

The Company consolidates the accounts of 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.

(“Fabco”) is a Dutch joint venture limited liability company that was 49% owned by the Company through November 30, 2020 and was accounted for using the equity method of accounting.

Effective December 1, 2020, the Company increased its ownership interest in Fabco to 75 % and, as a result, Fabco is treated as a consolidated majority-owned subsidiary.

KL North America B.V.

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(“KLH”) is a Dutch limited liability company that is 19 % owned by the Company.

These investments are accounted for using the equity method of accounting.

The Company accounts for these two investments using the equity method of accounting.

All material intercompany balances and transactions have been eliminated.

Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, KLH, KLNA and Fabco report results on a calendar year basis rather than on the January 31 fiscal year basis used by the Company.

Accordingly, the results of Vilebrequin, KLH, KLNA and Fabco are, and will be, included in the financial statements for the year ended or ending closest to the Company’s fiscal year.

For example, with respect to the Company’s results for the year ended January 31, 2021, the results of Vilebrequin, KLH, KLNA and Fabco are included for the year ended December 31, 2020.

In October 2021, the Company purchased Sonia Rykiel, a wholly-owned operating subsidiary.

The results of Sonia Rykiel are included in our consolidated financial statements beginning in the fourth quarter of fiscal 2022 (See Note 15 – Sonia Rykiel).

Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, KLH, KLNA, Fabco and Sonia Rykiel report results on a calendar year basis rather than on the January 31 fiscal year basis used by the Company.

Accordingly, the results of Vilebrequin, KLH, KLNA, Fabco and Sonia Rykiel are, and will be, included in the financial statements for the year ended or ending closest to the Company’s fiscal year.

For example, with respect to the Company’s results for the fiscal year ended January 31, 2022, the results of Vilebrequin, KLH, KLNA, Fabco and Sonia Rykiel are included for the year ended December 31, 2021.

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

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.

For fiscal 2022, 2021 and 2020, the fiscal years for the retail operations segment were each 52-week periods, ended on January 29, 2022, January 30, 2021 and February 1, 2020, respectively.

Cash Equivalents

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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.

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and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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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.

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.

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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

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.

See Note 3 – 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.

Effective February 1, 2021, the Company elected to change its 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.

The Company believes 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 the Company manages its business with a focus on the actual margin realized.

The Company determined that it was impractical to apply this change in accounting principle retrospectively due to a lack of available information.

As a result, the Company applied the change prospectively as of February 1, 2021.

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

The change in accounting principle did not have a material effect on the Company’s consolidated financial statements as of and for the year ended January 31, 2022.

G-III Apparel Group, Ltd.

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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.

Retail inventories are valued at the lower of cost or market as determined by the retail inventory method.

Vilebrequin inventories are stated at the lower of cost (determined by the weighted average method) or net realizable value.

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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

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In fiscal 2022, the Company recorded a $ 1.5 million impairment charge related to the leasehold improvements, furniture and fixtures and operating lease assets at certain DKNY, Karl Lagerfeld Paris and Vilebrequin stores as a result of the performance at these stores.

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.

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

In fiscal 2019, the Company recorded a $ 2.8 million impairment charge related to leasehold improvements and furniture and fixtures at certain of our Wilsons Leather, G.H.

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

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

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To the extent the Company prevails in matters for which a liability for an unrecognized tax benefit is established, or is required to pay amounts in excess of the liability, or when other facts and circumstances change, the Company's effective tax rate in a given financial statement period may be materially affected.

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 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.

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.

One of those provisions allows any loss generated in fiscal 2021 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 carried back the fiscal 2021 tax 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.

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Basic net income per common share has been computed using the weighted average number of common shares outstanding during each period.

Diluted net income per share is computed using the weighted average number of common shares and potential dilutive common shares, consisting of unvested restricted stock unit awards and stock options outstanding during the period.

Approximately 182,000 , 692,000 and 336,000 shares for the years ended January 31, 2021, 2020 and 2019, respectively, have been excluded from the diluted net income per share calculation.

In addition, all share-based payments outstanding that vest based on the achievement of performance and/or market price conditions, and for which the respective performance and/or market price conditions have not been achieved, have been excluded from the diluted per share calculation.

Diluted net income per share, when applicable, is computed using the weighted average number of common shares and potential dilutive common shares, consisting of unvested restricted stock unit awards and stock options outstanding during the period.

Approximately 11,000 , 182,000 and 692,000 shares of common stock have been excluded from the diluted net income per share calculation for the years ended January 31, 2022, 2021 and 2020, respectively.

All share-based payments outstanding that vest based on the achievement of performance conditions, and for which the respective performance conditions have not been achieved, have been excluded from the diluted per share calculation.

The Company issued 0 , 0 and 8,851 shares of common stock in connection with the exercise or vesting of equity awards during the years ended January 31, 2022, 2021 and 2020, respectively.

In addition, the Company re-issued 194,965 , 367,290 and 619,651 treasury shares in connection with the vesting of equity awards in fiscal 2022, 2021 and 2020, respectively.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Year Ended January 31,

(In thousands, except per share amounts)

(In thousands, except share and per share amounts)

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

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Equity Award Compensation

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 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 (i) cliff vest after three years or (ii) vest over a

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and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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.

PRSU’s generally vest over a two to five year period.

Performance stock units (“PSU’s”) were granted to executives in fiscal 2020 and vest after a three year performance period during which certain earnings before interest and taxes and return on invested capital performance standards must be satisfied for vesting to occur.

PSU’s are also subject to a lock up period that prevents the sale, contract to sell or transfer of shares for two years subsequent to the date of vesting.

Performance stock units (“PSU’s”) were granted to executives in fiscal 2022 and 2020 and vest after a three year performance period during which certain earnings before interest and taxes and return on invested capital performance conditions must be satisfied for vesting to occur.

The PSU’s granted in fiscal 2020 are also subject to a lock up period that prevents the sale, contract to sell or transfer of shares for two years subsequent to the date of vesting.

RSU’s and employee stock options are expensed on a straight-line basis.

PRSU’s are expensed under the requisite acceleration method.

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

PRSU’s are expensed under the accelerated attribution method.

PSU’s are expensed under the accelerated attribution method and based on an estimated percentage of achievement of certain pre-established goals.

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 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.

Also, excess tax benefits arising from the lapse or exercise of an equity award are recognized in income tax expense.

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.

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Cost of goods sold includes the expenses incurred to acquire, produce and prepare inventory for sale, including product costs, warehouse staff wages, freight in, import costs, packaging materials, the cost of operating the overseas offices and royalty expense.

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.

Gross margins may not be directly comparable to those of the Company’s competitors, as income

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and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

statement classifications of certain expenses may vary by company.

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.

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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,

G-III Apparel Group, Ltd.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, 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.

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and model-derived valuations whose inputs or significant value drivers are observable.

G-III Apparel Group, Ltd.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Level 3 — inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value measurement.

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Secured Notes

Revolving credit facility

Note issued to LVMH

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

The fair value of the Company’s secured notes is based on their current market price as of January 31, 2022.

The carrying amount of the Company’s variable rate debt approximates the fair value, as interest rates change with the market rates.

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.

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 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.

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and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(“LVMH”) in connection with the acquisition of DKNY and Donna Karan was recorded on the balance sheet 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 LVMH Note on the initial fair value as determined at the date of the acquisition of DKNY and Donna Karan and records the amortization using the effective interest method over the term of the LVMH Note.

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

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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 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.

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

For assets that are not recoverable, an impairment loss is recognized equal to the difference between the carrying amount of the asset or asset group and its estimated fair value.

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

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

During fiscal 2022, the Company recorded a $ 1.5 million impairment charge primarily related to leasehold improvements, furniture and fixtures and operating lease assets at certain DKNY, Karl Lagerfeld Paris and Vilebrequin stores as a result of the performance at these stores.

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.

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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.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Foreign Currency Translation

5 unchanged sentences

Recently Adopted Accounting Guidance

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

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.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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 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.

There was no new accounting guidance adopted during the year ended January 31, 2022.

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.

NOTE 2 — REVENUE RECOGNITION

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.

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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.

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

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.

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Wholesale revenues also include revenues from license agreements related to the DKNY, Donna Karan, G.H.

Bass, Andrew Marc and Vilebrequin trademarks owned by the Company.

Bass, Andrew Marc and Vilebrequin

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

trademarks owned by the Company.

As of January 31, 2022, revenues from license agreements represented an insignificant portion of wholesale revenues.

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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.

The Company’s Wilsons Leather and G.H.

Bass stores were closed in fiscal 2021 as a result of the retail restructuring.

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

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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:

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The remainder of the historical rates for variable consideration are calculated by customer by product lines.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contract Liabilities

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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 at January 31, 2021 and 2020.

Total contract liabilities were $ 5.1 million and $ 5.9 million at January 31, 2022 and 2021, respectively.

The Company recognized $ 4.9 million in revenue for the year ended January 31, 2022 which related to contract liabilities that existed at January 31, 2021.

1 unchanged sentence

Substantially all of the advance payments from licenses as of January 31, 2022 are expected to be recognized as revenue within the next twelve months.

NOTE D — ALLOWANCE FOR DOUBTFUL ACCOUNTS

NOTE 3 — ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

3 unchanged sentences

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.

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.

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

The Company’s accounts receivable and allowance for doubtful accounts as of January 31, 2022 and 2021 were:

January 31, 2022

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Accounts receivable, net

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.

2 unchanged sentences

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

1 unchanged sentence

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:

The Company had the following activity in its allowance for credit losses:

January 31, 2022

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Balance as of January 31, 2022

NOTE E — INVENTORIES

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 4 — 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.

Retail inventories are valued at the lower of cost or market as determined by the retail inventory method.

Prior to February 1, 2021, retail inventories were valued at the lower of cost or market as determined by the retail inventory method.

Effective February 1, 2021, the Company elected to change its method of accounting for retail inventories to the lower of cost (determined by the weighted average method) or net realizable value.

See Note 1 – Significant Accounting Policies for more details on the preferability and application of this change in accounting principle.

Vilebrequin inventories are stated at the lower of cost (determined by the weighted average method) or net realizable value.

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.

The inventory return asset is recorded within prepaid expenses and other current assets as of January 31, 2021 and 2020.

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, was $ 18.9 million and $ 22.5 million at January 31, 2022 and 2021, respectively.

The inventory return asset is recorded within prepaid expenses and other current assets on the consolidated balance sheets as of January 31, 2022 and 2021.

Inventory held on consignment by the Company’s customers totaled $ 4.5 million and $ 3.5 million at January 31, 2022 and 2021, respectively.

1 unchanged sentence

The Company reflects this inventory on its consolidated balance sheets.

NOTE F — PROPERTY AND EQUIPMENT

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 5 — PROPERTY AND EQUIPMENT

Property and equipment consist of:

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Depreciation expense was $ 23.6 million, $ 34.0 million and $ 33.8 million for the years ended January 31, 2022, 2021 and 2020, 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.

For the year ended January 31, 2022, the Company recorded a $ 1.3 million impairment charge related to leasehold improvements and furniture and fixtures of certain DKNY and Karl Lagerfeld Paris stores as a result of the performance of these stores.

For the year ended January 31, 2021, the Company recorded an $ 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.

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

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

For the year ended January 31, 2019, the Company recorded a $ 2.8 million impairment charge related to leasehold improvements and furniture and fixtures of certain Wilsons Leather, G.H.

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE G — LEASES

NOTE 6 — 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.

4 unchanged sentences

For leases with an initial term greater than 12 months, a lease liability is recorded on the balance sheet at the present value of future payments discounted at the incremental borrowing rate (discount rate) corresponding with the lease term.

An operating lease asset is recorded based on the initial amount of the lease liability, plus any lease payments made to the lessor before or at the lease commencement date and any initial direct costs incurred, less any tenant improvement allowance incentives received.

The difference between the minimum rents paid and the straight-line rent (deferred rent) is reflected within the associated operating lease asset.

4 unchanged sentences

Operating lease expense is generally recognized on a straight-line basis over the lease term.

Certain leases contain provisions that require contingent rent payments based upon sales volume (variable lease cost).

Contingent rent is accrued each period as the liabilities are incurred.

Most leases are for a term of one to ten years .

3 unchanged sentences

The exercise of lease termination options is generally by mutual agreement between the Company and the lessor.

Certain of the Company’s lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation.

Certain of the Company’s lease agreements include contingent rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation.

Contingent rent is accrued each period as the liabilities are incurred.

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s lease assets and liabilities as of January 31, 2022 and 2021 consist of the following:

10 unchanged sentences

Total lease liabilities

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 2022, the Company recorded a $ 0.2 million impairment charge related to the operating lease assets at certain Vilebrequin and DKNY stores as a result of the performance at these stores.

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

4 unchanged sentences

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 $ 92.4 million and $ 98.4 million during the years ended January 31, 2021 and 2020, respectively.

The Company recorded lease costs of $ 55.7 million, $ 92.4 million and $ 98.4 million during the years ended January 31, 2022, 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 $ 6.7 million and $ 16.8 million for the years ended January 31, 2021 and 2020, respectively.

The Company recorded variable lease costs and short-term lease costs of $ 10.5 million, $ 6.7 million and $ 16.8 million for the years ended January 31, 2022, 2021 and 2020, respectively.

Short-term lease costs are immaterial.

4 unchanged sentences

Present value of lease liabilities

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of January 31, 2022, there are no material leases that are legally binding but have not yet commenced.

3 unchanged sentences

Right-of-use assets obtained in exchange for lease obligations were $ 30.8 million and $ 56.6 million during the years ended January 31, 2022 and 2021, respectively.

NOTE H — INTANGIBLE ASSETS

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 7 — INTANGIBLE ASSETS

Intangible assets consist of:

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Amortization expense with respect to finite-lived intangibles amounted to $ 3.7 million, $ 4.3 million and $ 4.5 million for the years ended January 31, 2022, 2021 and 2020, respectively.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The estimated amortization expense with respect to intangibles for the next five years is as follows:

2 unchanged sentences

(In thousands)

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Intangible assets with finite lives are amortized over their estimated useful lives and measured for impairment when events or circumstances indicate that the carrying value may be impaired.

4 unchanged sentences

January 31, 2021

Acquisition of Sonia Rykiel

Currency translation

6 unchanged sentences

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 Company performed its annual tests of its wholesale reporting unit and its indefinite-lived trademarks as of January 31, 2022, 2021 and 2020 and determined that no impairment existed at those dates.

The results of the Company’s annual tests determined that the estimated fair values of its wholesale reporting unit and its indefinite-lived trademarks were substantially in excess of their carrying values.

The Company’s indefinite-lived trademark balance is primarily composed of the Donna Karan/DKNY trademark that was acquired in fiscal 2017.

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

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE I — NOTES PAYABLE AND OTHER LIABILITIES

NOTE 8 — NOTES PAYABLE AND OTHER LIABILITIES

Long-term debt

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Note issued to LVMH

Unsecured loan

Unsecured loans

Overdraft facilities

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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”).

In August 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 net proceeds of the Notes have been used (i) to repay the $ 300 million that was outstanding under the Company’s 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 .

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 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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

The Notes are also subject to the terms of the LVMH Note subordination agreement which governs the relative rights of the secured parties in respect of the LVMH Note, 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.

7 unchanged sentences

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.

In addition, the Company 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 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.

In August 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 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, 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.

1 unchanged sentence

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.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The ABL Credit Agreement refinanced, amended and restated 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.

The ABL Credit Agreement extended 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.

14 unchanged sentences

As of January 31, 2022, 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.

3 unchanged sentences

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.

As permitted under ASC 835, the debt issuance costs have been deferred and are presented as an asset which is amortized ratably over the term of the ABL Credit Agreement.

As a portion of the consideration for the acquisition of DKNY and Donna Karan, 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 .

In connection with the issuance of the LVMH Note, LVMH entered into (i) a subordination agreement providing that the Company’s obligations under the LVMH Note are subordinate and junior to the Company’s obligations under the revolving credit facility and the Term Loan, and (ii) a pledge and security agreement with the Company and its subsidiary,

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 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 .

granted to LVMH a security interest in specified collateral to secure the Company’s payment and performance of the Company’s obligations under the LVMH Note that is subordinate and junior to the security interest granted by the Company with respect to the Company’s obligations under the revolving credit facility agreement and Term Loan.

G-III Leather Fashions, Inc., pursuant to which the Company and G-III Leather Fashions, Inc.

granted to LVMH a security interest in specified collateral to secure the Company’s payment and performance of the Company’s obligations under the LVMH Note that are subordinate and junior to the security interest granted by the Company with respect to the Company’s obligations under the revolving credit facility agreement and Term Loan.

ASC 820 requires the note to be recorded at fair value at issuance.

4 unchanged sentences

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.

Additionally, Sonia Rykiel borrowed funds pursuant to European state backed loans that were part of COVID-19 relief programs.

In the aggregate, the Company 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.

As of January 31, 2022, the Company had an aggregate outstanding balance of € 7.4 million ($ 8.4 million) under these various unsecured loans.

Overdraft Facilities

4 unchanged sentences

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)

As of January 31, 2022, TRB had an aggregate of € 2.6 million ($ 2.9 million) drawn under these various facilities.

Future Debt Maturities

3 unchanged sentences

2027 and thereafter

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accrued expenses

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Other accrued expenses

NOTE J — INCOME TAXES

NOTE 9 — INCOME TAXES

The income tax provision is comprised of the following:

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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.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

federal rate.

One of those provisions allows any loss generated in fiscal 2021 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 carried back the fiscal 2021 tax 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.

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.

parent company to current tax on its global intangible low-taxed income (“GILTI”).

For fiscal 2022, the Company has elected to treat the tax effect of GILTI as a current period expense.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The significant components of the Company’s net deferred tax asset at January 31, 2022 and 2021 are summarized as follows:

12 unchanged sentences

Operating lease asset

Accrued expenses

Prepaid expenses and other

Total deferred income tax liabilities

Net deferred tax (liabilities) assets

Net deferred tax liabilities

The total undistributed earnings of the Company’s foreign subsidiaries are approximately $ 131.0 million for the fiscal year ended January 31, 2022.

2 unchanged sentences

Those earnings are considered indefinitely reinvested.

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

Even though the undistributed earnings could have been 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:

8 unchanged sentences

Actual provision for income taxes

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.

The Company’s effective tax rate decreased 8.0 % percent in fiscal 2022 compared to fiscal 2021.

This decrease in the Company’s effective tax rate is primarily the result of the Company’s significant increase in pretax book income in relation

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to its tax expense.

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

The increase in the Company’s fiscal 2021 effective tax rate compared to the fiscal 2020 effective tax rate is primarily the result of the Company’s significant reduction in pretax book income in relation to its tax expense.

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

17 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.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE K — COMMITMENTS AND CONTINGENCIES

NOTE 10 — COMMITMENTS AND CONTINGENCIES

License Agreements

1 unchanged sentence

The Company incurred royalty expense (included in cost of goods sold) of $ 145.1 million, $ 116.8 million and $ 178.8 million for the years ended January 31, 2022, 2021 and 2020, 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.

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 $ 41.2 million, $ 29.5 million and $ 48.3 million for the years ended January 31, 2022,

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2021 and 2020, respectively.

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

17 unchanged sentences

Cumulative amounts paid and deferred through January 31, 2022, related to the higher dutiable values, were CAD$ 14.7 million ($ 11.6 million).

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

2 unchanged sentences

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.

A hearing on the appeal was held on December 7, 2021.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

NOTE 11 — STOCKHOLDERS’ EQUITY

Share Repurchase Program

The Company’s Board of Directors has authorized a share repurchase program of 5,000,000 shares.

The Company’s Board of Directors had authorized a share repurchase program 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 the 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.

During fiscal 2022, pursuant to this program, the Company acquired 656,213 shares of its common stock for an aggregate purchase price of $ 17.3 million.

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.

During fiscal 2019, the Company acquired 723,072 of its shares of common stock for an aggregate purchase price of $ 20.3 million.

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

As of January 31, 2022, we had 2,293,149 authorized shares remaining under this program.

In March 2022, the Board increased the number of authorized shares under this program to 10,000,000 .

Long-Term Incentive Plan

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This valuation is performed with the assistance of a third party valuation specialist.

PRSU’s are expensed over the service period under the requisite acceleration method.

PSU’s were granted to executives in fiscal 2020 and vest after a three year performance period during which certain earnings before interest and taxes and return on invested capital performance standards must be satisfied for vesting to occur.

PSU’s are also subject to a lock up period that prevents the sale, contract to sell or transfer shares for two years subsequent to the date of vesting.

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.

PRSU’s are expensed over the service period under the accelerated attribution method.

PSU’s were granted in fiscal 2020 and fiscal 2022 to executives that vest after a three year performance period during which certain earnings before interest and taxes and return on invested capital performance conditions must be satisfied for vesting to occur.

The PSU’s granted to executives in fiscal 2020 are also subject to a lock up period that prevents the sale, contract to sell or transfer shares for two years subsequent to the date of vesting.

PSU’s are expensed over the service period under the accelerated attribution 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 ASC 718.

15 unchanged sentences

Contractual Life

$ 18.11 - $ 30.32

Stock Options

4 unchanged sentences

Changes in these inputs and assumptions can materially affect the estimate of fair value and the amount of our compensation expenses for stock options.

No stock options were granted during the years ended January 31, 2021 and January 31, 2020.

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

No stock options were granted during the years ended January 31, 2022, January 31, 2021 and January 31, 2020.

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

3 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, 2022, the reporting date.

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.

There were no stock options exercised during the year ended January 31, 2022.

Proceeds received from the exercise of stock options were $ 0.3 million during the year ended January 31, 2021.

The intrinsic value of stock options exercised was $ 0.1 million for the year ended January 31, 2021.

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

2 unchanged sentences

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.

NOTE M — CONCENTRATION

The Company did no t recognize compensation expense for year ended January 31, 2022 related to stock options.

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

NOTE 12 — CONCENTRATION

Three customers in the wholesale operations segment accounted for approximately 23.9 %, 14.8 % and 12.7 %, respectively, of the Company’s net sales for the year ended January 31, 2022.

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.

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.

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

Three customers in the wholesale operations segment accounted for approximately 26.4 %, 15.5 % and 11.3 %, respectively, of the Company’s net accounts receivable as of January 31, 2022.

NOTE N — EMPLOYEE BENEFIT PLANS

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.

NOTE 13 — EMPLOYEE BENEFIT PLANS

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

2 unchanged sentences

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

NOTE O — SEGMENTS

The Company reinstated 401(k) matching contributions effective January 1, 2022.

NOTE 14 — SEGMENTS

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

6 unchanged sentences

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.

Sales through Company-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, G.H.

Bass and Calvin Klein Performance 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.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, 2021

13 unchanged sentences

(1) Represents intersegment sales to the Company’s retail operations segment .

The total net sales by licensed and proprietary product sales for each of the Company’s reportable segments are as follows:

(In thousands)

Licensed brands

Proprietary brands

Wholesale net sales

Licensed brands

Proprietary brands

Retail net sales

The Company allocates overhead to its business segments on various bases, which include units shipped, space utilization, inventory levels, and relative sales levels, among other factors.

The method of allocation has been applied consistently on a year-to-year basis.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The total assets for each of the Company’s reportable segments, as well as assets not allocated to a segment, are as follows:

5 unchanged sentences

Capital expenditures for locations outside of the United States totaled $ 4.3 million, $ 3.0 million and $ 4.6 million for the years ended January 31, 2022, 2021 and 2020, respectively.

G-III Apparel Group, Ltd.

and Subsidiaries

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.

(“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 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.

NOTE 15 — SONIA RYKIEL

In October 2021, the Company purchased all of the issued and outstanding shares of European luxury fashion brand Sonia Rykiel.

Sonia Rykiel, who created this iconic brand, was one of the leading figures of Parisian fashion.

The Company plans to accelerate the relaunch of the brand in France in the fall of 2022, and then expand into Europe and other areas.

The Company believes this purchase further enables it to expand into the luxury space and that there is untapped potential for this brand.

The Sonia Rykiel acquisition, which was immaterial, 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

The operating results for Sonia Rykiel are included in the Company’s consolidated financial statements beginning in the fourth quarter of fiscal 2022 from the effective date of the Sonia Rykiel acquisition.

NOTE 16 — 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

KLNA holds brand rights to all Karl Lagerfeld trademarks, including the Karl Lagerfeld Paris brand the Company currently uses, for all consumer products (except

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

eyewear, fragrance, cosmetics, watches, jewelry, and hospitality services) and apparel in the United States, Canada and Mexico.

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, 2022 and 2021.

NOTE R — RELATED PARTY TRANSACTIONS

NOTE 17 — RELATED PARTY TRANSACTIONS

Transactions with Fabco

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).

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

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

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.

As of January 31, 2020, Fabco prepaid $ 0.5 million to the Company for minimum royalties and marketing fees relating to the first quarter of 2020 and has a $ 0.1 million payable balance relating to inventory purchased from the Company and its subsidiaries.

The Company recorded $ 0.9 million of licensing revenue from Fabco during the period of fiscal 2021 prior to Fabco becoming a consolidated majority-owned subsidiary of the Company.

The Company recorded $ 3.1 million of licensing revenue from Fabco during the year ended January 31, 2020.

Transactions with KL North America

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

G-III owns a 49 % ownership interest in KLNA and is considered a related party of KLNA (see Note 16).

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

The Company incurred royalty and advertising expense of $ 8.1 million, $ 3.5 million and $ 6.8 million for the years ended January 31, 2022, 2021 and 2020, respectively.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 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.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

17 unchanged sentences

Accounts written off as uncollectible, net of recoveries.

See Note A in the accompanying Notes to Consolidated Financial Statements for a description of sales allowances.

See Note 1 in the accompanying Notes to Consolidated Financial Statements for a description of sales allowances .

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