What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-06-07 compared with 2021-12-09 · 124 added, 184 removed, 392 unchanged (44% of the section changed)

49 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended October 31,

Nine Months Ended October 31,

Three Months Ended April 30,

(In thousands, except per share amounts)

2 unchanged sentences

Depreciation and amortization

Asset impairments, net of loss (gain) on lease modifications

Operating profit

Other (loss) income

Interest and financing charges, net

1 unchanged sentence

Income tax expense

Loss attributable to noncontrolling interests

(Loss) income attributable to noncontrolling interests

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

4 unchanged sentences

Weighted average number of shares outstanding

Other comprehensive income (loss):

Other comprehensive loss:

Foreign currency translation adjustments

Other comprehensive income (loss):

Other comprehensive loss:

Comprehensive income

Comprehensive loss attributable to noncontrolling interests:

Comprehensive (loss) income attributable to noncontrolling interests:

Net (loss) income

Foreign currency translation adjustments

Comprehensive loss attributable to noncontrolling interests

Comprehensive (loss) income attributable to noncontrolling interests

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

5 unchanged sentences

(In thousands)

Balance as of July 31, 2021

Equity awards exercised/vested, net

Share-based compensation expense

Taxes paid for net share settlements

Other comprehensive income, net

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

Balance as of October 31, 2021

Balance as of July 31, 2020

Share-based compensation expense

Other comprehensive loss, net

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

Balance as of October 31, 2020

Balance as of January 31, 2022

2 unchanged sentences

Taxes paid for net share settlements

Cumulative effect of change in accounting principle

Other comprehensive income, net

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

Balance as of October 31, 2021

Balance as of April 30, 2022

Balance as of January 31, 2021

1 unchanged sentence

Share-based compensation expense

Taxes paid for net share settlements

Other comprehensive loss, net

Cumulative effect of change in accounting principle

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

Balance as of October 31, 2020

Balance as of April 30, 2021

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended October 31,

Three Months Ended April 30,

(In thousands)

5 unchanged sentences

Non-cash operating lease costs

Gain on lease modifications

Asset impairments

Dividend received from unconsolidated affiliate

Equity (gain)/loss in unconsolidated affiliates

Equity gain in unconsolidated affiliates

Change in fair value of equity investment

1 unchanged sentence

Deferred financing charges and debt discount amortization

Extinguishment of deferred financing costs

Deferred income taxes

7 unchanged sentences

Accounts payable, accrued expenses and other liabilities

Net cash used in operating activities

Net cash provided by operating activities

Cash flows from investing activities

Operating lease assets initial direct costs

Minority investment in e-commerce retailer

Investment in e-commerce retailer

Capital expenditures

Investment in brand acquisition

Net cash used in investing activities

4 unchanged sentences

Proceeds from borrowings - foreign facilities

Repayment of borrowings - unsecured term loan

Proceeds from borrowings - unsecured term loan

Proceeds from borrowings - senior secured notes

Payment of financing costs

Proceeds from exercise of equity awards

Taxes paid for net share settlements

1 unchanged sentence

Foreign currency translation adjustments

Net decrease in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

4 unchanged sentences

Income tax payments, net

Stock received from licensing agreement

The accompanying notes are an integral part of these statements .

8 unchanged sentences

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 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.

4 unchanged sentences

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 quarter ended or ending closest to the Company’s fiscal quarter end.

For example, with respect to the Company’s results for the nine-month period ended October 31, 2021, the results of Vilebrequin, KLH, KLNA and Fabco are included for the nine-month period ended September 30, 2021.

See Note 13 – Subsequent Events with respect to an agreement entered into by the Company to increase its percentage ownership interest in KLH to 100 %.

Once KLH becomes wholly-owned by the Company, KLNA will become an indirect wholly owned subsidiary of the Company.

Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, KLH, KLNA, Fabco Holding B.V.

(“Fabco”) and Sonia Rykiel, which the Company purchased in October 2021, 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 quarter ended or ending closest to the Company’s fiscal quarter end.

For example, with respect to the Company’s results for the three-month period ended April 30, 2022, the results of Vilebrequin, KLH, KLNA, Fabco and Sonia Rykiel are included for the three-month period ended March 31, 2022.

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

For fiscal 2022 and 2021, the three and nine-month periods for the retail operations segment were each 13-week and 39-week periods, respectively, and ended on October 30, 2021 and October 31, 2020, respectively.

The results for the three and nine months ended October 31, 2021 are not necessarily indicative of the results expected for the entire fiscal year, given the seasonal nature of the Company’s business and the effects of the COVID-19 pandemic on the Company’s business.

The Company’s three-month periods ended April 30, 2022 and 2021 were each 13-week periods for the retail operations segment.

For fiscal 2023 and 2022, the three-month periods for the retail operations segment ended on April 30, 2022 and May 1, 2021, respectively.

The results for the three months ended April 30, 2022 are not necessarily indicative of the results expected for the entire fiscal year, given the seasonal nature of the Company’s business and the effects of the COVID-19 pandemic on the Company’s business.

The accompanying financial statements included herein are unaudited.

5 unchanged sentences

The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive loss within stockholders’ equity.

Change in Accounting Principle

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 condensed consolidated financial statements as of and for the three and nine-month periods ended October 31, 2021.

Note 2 – Retail Restructuring

In fiscal 2021, the Company restructured its retail operations segment, including the closing of the Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores.

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

During the three months ended October 31, 2021, the Company paid the final $ 46,000 related to store closing costs.

As a result, as of October 31, 2021, the Company has paid all remaining restructuring charges.

Note 2 – Allowance for Doubtful Accounts

4 unchanged sentences

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

The Company’s accounts receivable and allowance for doubtful accounts as of October 31, 2021, October 31, 2020 and January 31, 2021 were:

October 31, 2021

The Company’s accounts receivable and allowance for doubtful accounts as of April 30, 2022, April 30, 2021 and January 31, 2022 were:

April 30, 2022

(In thousands)

2 unchanged sentences

Accounts receivable, net

October 31, 2020

April 30, 2021

(In thousands)

9 unchanged sentences

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

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

impact of economic conditions.

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

4 unchanged sentences

Balance as of January 31, 2022

Provision for credit losses

Provision for credit losses, net

Accounts written off as uncollectible

Balance as of October 31, 2021

Balance as of April 30, 2022

Balance as of January 31, 2021

Provision for credit losses

Provision for credit losses, net

Accounts written off as uncollectible

Balance as of October 31, 2020

Balance as of April 30, 2021

Balance as of January 31, 2021

Provision for credit losses

Provision for credit losses, net

Accounts written off as uncollectible

2 unchanged sentences

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.

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 – Basis of Presentation 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.

Retail and 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.

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, represented $ 13.9 million, $ 20.6 million and $ 22.5 million as of October 31, 2021, October 31, 2020 and January 31, 2021, respectively.

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, was $ 16.4 million, $ 16.9 million and $ 18.9 million as of April 30, 2022, April 30, 2021 and January 31, 2022, respectively.

The inventory return asset is recorded within prepaid expenses and other current assets on the condensed consolidated balance sheets.

Inventory held on consignment by the Company’s customers totaled $ 5.6 million, $ 4.8 million and $ 3.5 million at October 31, 2021, October 31, 2020 and January 31, 2021, respectively.

Inventory held on consignment by the Company’s customers totaled $ 5.9 million, $ 4.6 million and $ 4.5 million at April 30, 2022, April 30, 2021 and January 31, 2022, respectively.

Consignment inventory is stored at the facilities of the Company’s customers.

3 unchanged sentences

The determination of the applicable level within the hierarchy for a particular asset or liability depends on the inputs used in its valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally-derived (unobservable).

A financial instrument’s categorization within the valuation hierarchy

is based upon the lowest level of input that is significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels are defined as follows:

9 unchanged sentences

Secured notes

Revolving credit facility

Note issued to LVMH

2 unchanged sentences

The Company’s debt instruments are recorded at their carrying values in its condensed 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 April 30, 2022.

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

1 unchanged sentence

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 Donna Karan International (“DKI”) 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 DKI and records the amortization using the effective interest method over the term of the LVMH Note.

(“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.

5 unchanged sentences

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

During the second quarter of fiscal 2021, the Company recorded a $ 20 million impairment charge primarily related to operating lease assets, leasehold improvements and furniture and fixtures at certain Wilsons Leather, G.H.

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

During the fourth quarter of 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.

Note 5 – Leases

9 unchanged sentences

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

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

The Company’s lease assets and liabilities as of April 30, 2022, April 30, 2021 and January 31, 2022 consist of the following:

Classification

October 31, 2021

October 31, 2020

April 30, 2022

April 30, 2021

January 31, 2022

1 unchanged sentence

Operating lease assets

Total lease assets

Current operating

3 unchanged sentences

Total lease liabilities

The Company’s 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.

The Company recorded lease costs of $ 14.0 million and $ 41.1 million during the three and nine months ended October 31, 2021.

The Company recorded lease costs of $ 18.7 million and $ 77.1 million during the three and nine months ended October 31, 2020, respectively.

The Company recorded lease costs of $ 14.1 million and $ 13.6 million during the three months ended April 30, 2022 and 2021, respectively.

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

The Company recorded variable lease costs and short-term lease costs of $ 2.8 million and $ 6.2 million for the three and nine months ended October 31, 2021, respectively.

The Company recorded variable lease costs and short-term lease costs of $ 6.2 million and $ 5.3 million for the three and nine months ended October 31, 2020, respectively.

Short-term lease costs are immaterial.

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

The Company recorded variable lease costs and short-term lease costs of $ 5.1 million and $ 1.5 million for the three months ended April 30, 2022 and 2021, respectively.

As of April 30, 2022, the Company’s maturity of operating lease liabilities in the years ending up to January 31, 2027 and thereafter are as follows:

Year Ending January 31,

2 unchanged sentences

Present value of lease liabilities

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

As of October 31, 2021, the weighted average remaining lease term related to operating leases is 5.3 years.

As of April 30, 2022, there are no material leases that are legally binding but have not yet commenced.

As of April 30, 2022, the weighted average remaining lease term related to operating leases is 5.4 years.

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

Cash paid for amounts included in the measurement of operating lease liabilities is $ 44.5 million and $ 79.7 million during the nine months ended October 31, 2021 and October 31, 2020, respectively.

Right-of-use assets obtained in exchange for lease obligations were $ 24.6 million and $ 41.3 million during the nine months ended October 31, 2021 and October 31, 2020, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities is $ 15.0 million and $ 14.8 million during the three months ended April 30, 2022 and April 30, 2021, respectively.

Right-of-use assets obtained in exchange for lease obligations were $ 8.6 million and $ 6.5 million during the three months ended April 30, 2022 and April 30, 2021, respectively.

Note 6 – Net Income per Common Share

1 unchanged sentence

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 68,800 and 18,300 shares of common stock have been excluded from the diluted net income per share calculation for the three and nine months ended October 31, 2021, respectively.

Approximately 262,100 and 215,600 shares of common stock have been excluded from the diluted net income per share calculation for the three and nine months ended October 31, 2020, respectively.

Approximately 113,300 and 238,500 shares of common stock have been excluded from the diluted net income per share calculation for the three months ended April 30, 2022 and 2021, respectively, as they are anti-dilutive.

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

Three Months Ended October 31,

Nine Months Ended October 31,

Three Months Ended April 30,

(In thousands, except share and per share amounts)

10 unchanged sentences

Long-term debt consists of the following:

October 31, 2021

October 31, 2020

April 30, 2022

April 30, 2021

January 31, 2022

7 unchanged sentences

Current portion of long-term debt

(1) Does not include debt issuance costs, net of amortization, totaling $ 6.0 million, $ 7.3 million and $ 7.2 million as of October 31, 2021, October 31, 2020 and January 31, 2021, respectively, related to the revolving credit facility.

(1) Does not include debt issuance costs, net of amortization, totaling $ 5.2 million, $ 6.8 million and $ 5.6 million as of April 30, 2022, April 30, 2021 and January 31, 2022, respectively, related to the revolving credit facility.

These debt issuance costs have been deferred and are classified in assets in the accompanying condensed consolidated balance sheets in accordance with ASC 835.

4 unchanged sentences

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

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.

5 unchanged sentences

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

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

On or after August 15, 2022, the Company may redeem some or all of the Notes at any time and from time to time at the redemption prices set forth in the Indenture,

plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

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

2 unchanged sentences

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

failure to perfect certain collateral securing the Notes failure to pay certain final judgments, and certain events of bankruptcy or insolvency.

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

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

The Company incurred debt issuance costs totaling $ 8.5 million related to the Notes.

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.

9 unchanged sentences

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 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.

The Prior Credit Agreement provided for borrowings of up to $ 650 million.

The ABL Credit Agreement extended the maturity date of this facility from December 2021 to August 2025, subject to a springing maturity date if, subject to certain conditions, the LVMH Note is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

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

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

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

the ABL Credit Agreement.

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

1 unchanged sentence

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

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

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

sell or dispose of certain assets;

5 unchanged sentences

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

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

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

As of April 30, 2022, the Company was in compliance with these covenants.

As of April 30, 2022, the Company had no borrowings outstanding under the ABL Credit Agreement.

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

As of October 31, 2021, there were outstanding trade and standby letters of credit amounting to $ 13.1 million and $ 4.0 million, respectively.

As of April 30, 2022, there were outstanding trade and standby letters of credit amounting to $ 18.8 million and $ 3.4 million, respectively.

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

9 unchanged sentences

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

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

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

A portion of the unsecured loans was 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.

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.

As of October 31, 2021, TRB had an aggregate outstanding balance of € 7.3 million ($8.4 million) under these unsecured loans.

As of April 30, 2022, the Company had an aggregate outstanding balance of € 7.1 million ($ 7.8 million) under these unsecured loans.

Overdraft Facilities

3 unchanged sentences

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

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

As of October 31, 2021, TRB had an aggregate of € 2.5 million ($2.8 million) drawn under these facilities.

Note 9 – Sonia Rykiel Acquisition

In October 2021, the Company purchased European luxury fashion brand Sonia Rykiel.

The total purchase price was not material.

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

Sonia Rykiel is a wholly-owned operating subsidiary that reports results on a calendar year basis rather than the January 31 fiscal year basis used by the Company.

Accordingly, the results of Sonia Rykiel will be included in the Company’s consolidated financial statements beginning in the fourth quarter of fiscal 2022.

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

Accordingly, the acquired assets have been recorded at their estimated fair values as of October 31, 2021.

The Company is currently evaluating the fair value of the acquired trademarks and other assets and liabilities, including contingent consideration, and has preliminarily recorded the acquisition to trademarks and goodwill.

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 April 30, 2022, TRB had an aggregate of € 2.8 million ($ 3.1 million) drawn under these facilities.

Note 8 – Revenue Recognition

11 unchanged sentences

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

As of October 31, 2021, revenues from license agreements represented an insignificant portion of wholesale revenues.

As of April 30, 2022, revenues from license agreements represented an insignificant portion of wholesale revenues.

Retail Operations Segment.

1 unchanged sentence

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

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

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

The Company’s Wilsons Leather, G.H.

Bass and Calvin Klein Performance stores were closed in fiscal 2021 as a result of the retail restructuring.

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

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

5 unchanged sentences

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

Total contract liabilities were $ 3.8 million, $ 4.1 million and $ 5.9 million at October 31, 2021, October 31, 2020 and January 31, 2021, respectively.

The Company recognized $ 3.2 million in revenue for the three months ended October 31, 2021 related to contract liabilities that existed at July 31, 2021.

The Company recognized $ 4.4 million in revenue for the nine months ended October 31, 2021 related to contract liabilities that existed at January 31, 2021.

There were no contract assets recorded as of October 31, 2021, October 31, 2020 and January 31, 2021.

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

Total contract liabilities were $ 3.6 million, $ 4.1 million and $ 5.1 million at April 30, 2022, April 30, 2021 and January 31, 2022, respectively.

The Company recognized $ 3.7 million in revenue for the three months ended April 30, 2022 related to contract liabilities that existed at January 31, 2022.

The Company recognized $ 3.2 million in revenue for the three months ended April 30, 2021 related to contract liabilities that existed at January 31, 2021.

There were no contract assets recorded as of April 30, 2022, April 30, 2021 and January 31, 2022.

Substantially all of the advance payments from licensees as of April 30, 2022 are expected to be recognized as revenue within the next twelve months.

Note 9 – Segments

5 unchanged sentences

Bass and Andrew Marc.

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

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

Sales through Company-owned 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

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.

The retail operations segment consists primarily of direct sales to consumers through Company-operated stores, which consists primarily 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.

Substantially all DKNY and Karl Lagerfeld Paris stores are operated as outlet stores.

The following segment information is presented for the three-month periods indicated below:

Three Months Ended October 31, 2021

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Operating profit (loss)

Three Months Ended October 31, 2020

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Gain on lease modifications

Operating profit (loss)

Nine Months Ended October 31, 2021

Three Months Ended April 30, 2022

Elimination (1)

4 unchanged sentences

Operating profit (loss)

Nine Months Ended October 31, 2020

Three Months Ended April 30, 2021

Elimination (1)

3 unchanged sentences

Depreciation and amortization

Gain on lease modifications

Operating profit (loss)

(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:

Three Months Ended

April 30, 2022

April 30, 2021

January 31, 2022

(In thousands)

Licensed brands

Proprietary brands

Wholesale net sales

Licensed brands

Proprietary brands

Retail net sales

Note 10 – Stockholders’ Equity

For the three months ended October 31, 2021, the Company issued no shares of common stock and utilized 2,366 shares of treasury stock in connection with the vesting of equity awards.

For the three months ended October 31, 2020, the Company issued no shares of common stock and utilized no shares of treasury stock in connection with the vesting of equity awards.

For the nine months ended October 31, 2021, the Company issued no shares of common stock and utilized 191,837 shares of treasury stoc k in connection with the vesting of equity awards.

For the nine months ended

October 31, 2020, the Company issued no shares of common stock and utilized 349,342 shares of treasury stock in connection with the vesting of equity awards.

Note 13 – Income Taxes

For the three months ended October 31, 2021 and October 31, 2020, the Company recorded a $ 40.2 million income tax expense and a $ 28.4 million income tax expense, respectively.

For the nine months ended October 31, 2021 and October 31, 2020, the Company recorded a $ 59.7 million income tax expense and an $ 8.4 million income tax expense, respectively.

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

For the three months ended April 30, 2022, the Company issued no shares of common stock and utilized 271,536 shares of treasury stock in connection with the vesting of equity awards.

For the three months ended April 30, 2021, the Company issued no shares of common stock and utilized 158 shares of treasury stock in connection with the vesting of equity awards.

Note 11 – Canadian Customs Duty Examination

9 unchanged sentences

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

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

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

There were no amounts paid and deferred for the three months ended April 30, 2022 related to the higher dutiable values, however, the Company paid interest in the amount of CAD$ 1.0 million (US$ 0.8 million) on the additional duties for the period January 15, 2018 through November 25, 2020, the date of the CBSA’s final decision as discussed below.

Cumulative amounts paid and deferred through April 30, 2022, related to the higher dutiable values, were CAD$ 14.4 million (US$ 11.6 million).

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

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.

G-III Canada filed its case brief and evidence on April 13, 2021.

The CBSA filed its brief on June 14, 2021.

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

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

Note 12 – Recent Adopted and Issued Accounting Pronouncements

Recently Adopted Accounting Guidance

There was no accounting guidance adopted during the three months ended October 31, 2021.

There was no accounting guidance adopted during the three months ended April 30, 2022.

Issued Accounting Guidance 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 condensed consolidated financial statements.

In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and in January 2021, issued ASU 2021-01, “Reference Rate Reform:

Both of these updates aim to ease the potential burden in accounting for reference rate reform.

These updates provide optional expedients and exceptions, if certain criteria are met, for applying accounting principles generally accepted in the United States to contract modifications, hedging relationships and other transactions affected by the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”).

The amendments were effective upon issuance and allow companies to adopt the amendments on a prospective basis through December 31, 2022.

The Company has not applied this ASU to any existing contracts in the current year.

As of April 30, 2022, the Company had availability of approximately $ 560 million under its revolving credit facility.

The interest rate under this facility is indexed to LIBOR.

As such, the revolving credit facility is likely to be impacted when LIBOR quotations cease to be available.

The Company is evaluating the impact that the guidance will have on its condensed consolidated financial statements and related disclosures and currently does not expect that any impact would be material.

Note 13 – Subsequent Events

On April 29, 2022, the Company entered into a share purchase agreement (the “Purchase Agreement”) with a group of private and public investors pursuant to which the Company agreed to acquire, on the terms set forth and subject to the conditions set forth in the Purchase Agreement, the remaining 81 % in interests in KLH that it did not already own, for an aggregate consideration of € 200 million (approximately $ 214 million) in cash, subject to certain adjustments.

The acquisition closed on May 31, 2022.

The Company funded the purchase price from cash on hand.

As of May 31, 2022, KLH is a consolidated wholly-owned subsidiary of the Company.

Prior to May 31, 2022, the Company accounted for its investment in KLH using the equity method of accounting.

Once KLH becomes wholly-owned by the Company, KLNA will become an indirect wholly owned subsidiary of the Company.

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

What changed 10-Q

Item 1. Financial Statements