What changed in this filing

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Item 1. Financial Statements

2022-09-09 compared with 2022-06-07 · 292 added, 105 removed, 411 unchanged (49% of the section changed)

49 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended April 30,

Three Months Ended July 31,

Six Months Ended July 31,

(In thousands, except per share amounts)

2 unchanged sentences

Depreciation and amortization

Gain on lease terminations

Operating profit

Other (loss) income

Interest and financing charges, net

1 unchanged sentence

Income tax expense

(Loss) income attributable to noncontrolling interests

Loss attributable to noncontrolling interests

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

4 unchanged sentences

Weighted average number of shares outstanding

Other comprehensive loss:

Other comprehensive income (loss):

Foreign currency translation adjustments

Other comprehensive loss:

Other comprehensive income (loss):

Comprehensive income

Comprehensive (loss) income attributable to noncontrolling interests:

Net (loss) income

Foreign currency translation adjustments

7 unchanged sentences

(In thousands)

Balance as of January 31, 2022

Balance as of April 30, 2022

Equity awards exercised/vested, net

2 unchanged sentences

Other comprehensive income, net

Repurchases of common stock

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

Balance as of July 31, 2022

Balance as of April 30, 2021

Balance as of January 31, 2021

Equity awards exercised/vested, net

Share-based compensation expense

Taxes paid for net share settlements

Other comprehensive loss, net

1 unchanged sentence

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

Balance as of April 30, 2021

Balance as of July 31, 2021

Balance as of January 31, 2022

Equity awards exercised/vested, net

Share-based compensation expense

Taxes paid for net share settlements

Other comprehensive income, net

Repurchases of common stock

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

Balance as of July 31, 2022

Balance as of January 31, 2021

Equity awards exercised/vested, net

Share-based compensation expense

Taxes paid for net share settlements

Cumulative effect of change in accounting principle

Other comprehensive loss, net

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

Balance as of July 31, 2021

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended April 30,

Six Months Ended July 31,

(In thousands)

1 unchanged sentence

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

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Non-cash operating lease costs

Gain on lease modifications

Dividend received from unconsolidated affiliate

Equity gain in unconsolidated affiliates

Change in fair value of equity investment

Change in fair value of equity securities

Share-based compensation

1 unchanged sentence

Deferred income taxes

Non-cash gain on fair value of prior minority ownership of Karl Lagerfeld

Changes in operating assets and liabilities:

6 unchanged sentences

Accounts payable, accrued expenses and other liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities

Operating lease assets initial direct costs

Investment in e-commerce retailer

Investment in equity securities

Capital expenditures

Acquisition of KLH, net of cash acquired

Net cash used in investing activities

4 unchanged sentences

Proceeds from borrowings - foreign facilities

Purchase of treasury shares

Taxes paid for net share settlements

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Foreign currency translation adjustments

16 unchanged sentences

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

KL North America B.V.

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

Karl Lagerfeld Holding B.V.

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

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

(“KLH”) is a Dutch limited liability company that was 19 % owned by the Company through May 30, 2022 and was accounted for during that time using the equity method of accounting.

Effective May 31, 2022, the Company acquired the remaining 81 % interest in KLH that it did not previously own and, as a result, KLH began being treated as a consolidated wholly-owned subsidiary.

KL North America B.V.

(“KLNA”) is a Dutch joint venture limited liability company that was 49 % owned by the Company and 51 % indirectly owned by KLH through May 30, 2022 and was accounted for during that time using the equity method of accounting.

Effective May 31, 2022, KLNA became an indirect wholly-owned subsidiary of the Company as a result of the Company’s acquisition of the remaining 81 % interest in KLH it did not previously own.

All material intercompany balances and transactions have been eliminated.

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.

The results of KLH are included in the Company’s consolidated financial statements beginning May 31, 2022.

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

Accordingly, the results of Vilebrequin, KLH, 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 six-month period ended July 31, 2022, the results of Vilebrequin, Fabco and Sonia Rykiel are included for the six-month period ended June 30, 2022.

For the three and six month periods ended June 30, 2022, the results of KLH, which includes KLNA, are included for the one month period ended June 30, 2022 and the results of the Company’s previous 49 % ownership interest in KLNA and 19 % ownership interest in KLH are included for the period from February 1, 2022 through May 30, 2022.

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

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.

For fiscal 2023 and 2022, the three and six-month periods for the retail operations segment were each 13-week and 26-week periods, respectively, and ended on July 30, 2022 and August 1, 2021, respectively.

The results for the three and six months ended July 31, 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.

2 unchanged sentences

Assets and liabilities of the Company’s foreign operations, where the functional currency is not the U.S.

dollar (reporting currency), are translated from foreign currency into U.S.

dollar (reporting currency), are translated from the foreign currency into U.S.

dollars at period-end rates, while income and expenses are translated at the weighted-average exchange rates for the period.

3 unchanged sentences

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

wholesale and retail trade receivables.

wholesale and retail trade

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 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 April 30, 2022, April 30, 2021 and January 31, 2022 were:

April 30, 2022

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

July 31, 2022

(In thousands)

2 unchanged sentences

Accounts receivable, net

April 30, 2021

July 31, 2021

(In thousands)

18 unchanged sentences

Accounts written off as uncollectible

Balance as of April 30, 2022

Balance as of July 31, 2022

Balance as of January 31, 2021

1 unchanged sentence

Accounts written off as uncollectible

Balance as of April 30, 2021

Balance as of July 31, 2021

Balance as of January 31, 2021

6 unchanged sentences

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, 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, which consists of the amount of goods that are anticipated to be returned by customers, was $ 9.3 million, $ 11.2 million and $ 18.9 million as of July 31, 2022, July 31, 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 $ 5.9 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.

Inventory held on consignment by the Company’s customers totaled $ 5.7 million, $ 4.7 million and $ 4.5 million at July 31, 2022, July 31, 2021 and January 31, 2022, respectively.

Consignment inventory is held by the Company’s customers.

The Company reflects this inventory on its condensed consolidated balance sheets.

18 unchanged sentences

Overdraft facilities

Foreign credit facility

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

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

2 unchanged sentences

(“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.

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.

17 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 April 30, 2022, April 30, 2021 and January 31, 2022 consist of the following:

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

Classification

April 30, 2022

April 30, 2021

July 31, 2022

July 31, 2021

January 31, 2022

6 unchanged sentences

Total lease liabilities

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

The Company’s operating lease assets and operating lease liabilities increased during fiscal 2023 primarily due to the acquisition of KLH.

The Company recorded lease costs of $ 14.9 million and $ 29.0 million during the three and six months ended July 31, 2022.

The Company recorded lease costs of $ 13.5 and $ 27.1 million during the three and six months ended July 31, 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 $ 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:

The Company recorded variable lease costs and short-term lease costs of $ 5.5 million and $ 10.6 million for the three and six months ended July 31, 2022, respectively.

The Company recorded variable lease coasts and short-term lease costs of $ 1.9 million and $ 3.3 million for the three and six months ended July 31, 2021, respectively.

Short-term lease costs are immaterial.

As of July 31, 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 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.

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

As of July 31, 2022, the weighted average remaining lease term related to operating leases is 5.5 years.

The weighted average discount rate related to operating leases is 8.5 %.

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.

Cash paid for amounts included in the measurement of operating lease liabilities is $ 30.0 million and $ 29.4 million during the six months ended July 31, 2022 and July 31, 2021, respectively.

Right-of-use assets obtained in exchange for lease obligations were $ 69.9 million and $ 8.6 million during the six months ended July 31, 2022 and July 31, 2021, respectively.

Note 6 – Karl Lagerfeld Acquisition

On April 29, 2022, the Company entered into a share purchase agreement (the “Purchase Agreement”) with a group of 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 % interest in KLH that it did not already own, for an aggregate consideration of € 202.0 million (approximately $ 216.8 million) in cash, subject to certain adjustments.

The acquisition closed on May 31, 2022.

The Company funded the purchase price from cash on hand.

On the effective date of the acquisition, the Company’s previously held 19 % investment in KLH and 49 % investment in KLNA were remeasured at fair value using a market approach based on the purchase price of the acquisition and a discount for lack of control related to the Company’s previously held minority investment in KLH.

As a result of this remeasurement, a $ 30.9 million gain was recorded as of the effective date of the acquisition.

The addition of KLH to the Company’s portfolio advances several of its key priorities, including increasing its direct ownership of brands and their licensing opportunities and further diversifying its global presence.

This acquisition offers additional opportunities to expand the Company’s international growth by further developing its European-based brands, which already include Vilebrequin and Sonia Rykiel.

KLH’s existing digital channel presence also provides an opportunity for the Company to enhance its omni-channel business and further accelerate its digital priorities.

Purchase price consideration

The purchase price of $ 216.8 million, after taking into account certain adjustments, was paid from cash on hand.

The purchase price has been revised to include adjustments in accordance with the Purchase Agreement.

The total consideration paid for the acquisition of KLH is as follows (in thousands):

Cash disbursed for the acquisition of KLH

cash acquired

aggregate adjustments to purchase price

Initial purchase price

fair value of prior minority ownership

Total consideration

Allocation of the purchase price consideration

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:

(In thousands)

Cash and cash equivalents

Accounts receivable, net

Prepaid income taxes

Prepaid expenses and other current assets

Property, plant and equipment, net

Operating lease assets

Customer relationships

Investments in unconsolidated affiliates

Deferred income taxes

Other long-term assets

Total assets acquired

Notes payable

Accounts payable

Accrued expenses

Operating lease liabilities

Income taxes payable

Other long-term liabilities

Total liabilities assumed

Total fair value of acquisition consideration

The Company recognized goodwill of approximately $ 46.1 million in connection with the acquisition of KLH.

The goodwill was assigned to the Company’s wholesale operations reporting unit.

The Company intends to make an election under Internal Revenue Code Section 338(g) to amortize the total goodwill and intangible assets over a 15 year period.

The fair values assigned to identifiable intangible assets acquired were based on assumptions and estimates made by management using unobservable inputs reflecting the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability based on the best information available.

The fair values of the trademarks were determined using the relief from royalty method and the fair value of the customer relationships were determined using an income approach.

The Company classifies these intangibles as Level 3 fair value measurements.

Identifiable intangible assets acquired include the following (in thousands):

Weighted Average

Amortization Period

Customer relationships

The Company recognized approximately $ 5.4 million of acquisition related costs that were expensed in fiscal 2022 and fiscal 2023.

The fiscal 2022 and fiscal 2023 acquisition and integration costs are recorded within selling, general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income for the fiscal year ended January 31, 2022 and for the six months ended July 31, 2022, respectively.

The estimates of fair value of assets acquired and liabilities assumed are preliminary and subject to change based on completion of certain working capital adjustments and the tax implications of the Company’s purchase price allocation.

The purchase price allocation for acquired companies can be modified for up to one year from the date of acquisition.

Net Sales, Operating Income and Pro Forma Impact of the Transaction

The amount of net sales and operating income of KLH since the acquisition date included in the condensed consolidated statements of operations for the three and six months ended July 31, 2022 were $ 18.2 million and $ 0.2 million, respectively.

The following table reflects the unaudited pro forma consolidated results of operations of the Company for the periods presented, as though the acquisition of KLH had occurred on February 1, 2021.

Three Months Ended July 31,

Six Months Ended July 31,

(unaudited, in thousands, except per share amounts)

Earnings per share:

The pro forma adjustments are based upon available information and certain assumptions that the Company considers reasonable.

The unaudited pro forma condensed combined financial data is based on preliminary estimates and assumptions set forth in the accompanying notes.

Pro forma adjustments are necessary to reflect (i) the changes in depreciation and amortization expense resulting from fair value adjustments to intangible assets, (ii) amortization of the inventory fair value adjustment, (iii) incentive compensation arrangements expenses acquired as part of the acquisition agreements, (iv) elimination of royalty expenses related to the Company’s license agreement with KLNA, (v) the taxation of G-III’s and KLH’s combined income as a result of the acquisition, as well as the tax effects related to such pro forma adjustments, (vi) the $ 30.9 million gain recorded to remeasure to fair value the previously held investments in KLH and KLNA as though the gain was recorded on February 1, 2021 and (vii) adjustments for accounting policy changes to conform to G-III’s presentation.

The pro forma results do not include any realized or anticipated cost synergies or other effects of the integration of KLH.

Accordingly, such pro forma amounts are not indicative of the results that actually would have occurred had the acquisition been completed on February 1, 2021, nor are they indicative of the future operating results of the combined company.

Note 7 – Intangible Assets

Intangible assets consist of:

July 31, 2022

Estimated Life

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

(In thousands)

Finite-lived intangible assets

Customer relationships

15 - 17 years

Total finite-lived intangible assets

Indefinite-lived intangible assets

Total indefinite-lived intangible assets

Total intangible assets, net

July 31, 2021

Estimated Life

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

(In thousands)

Finite-lived intangible assets

Customer relationships

15 - 17 years

Total finite-lived intangible assets

Indefinite-lived intangible assets

Total indefinite-lived intangible assets

Total intangible assets, net

January 31, 2022

Estimated Life

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

(In thousands)

Finite-lived intangible assets

Customer relationships

15 - 17 years

Total finite-lived intangible assets

Indefinite-lived intangible assets

Total indefinite-lived intangible assets

Total intangible assets, net

Amortization expense

Amortization expense with respect to finite-lived intangibles amounted to $ 0.9 million and $ 1.8 million for the three and six months ended July 31, 2022, respectively.

Amortization expense with respect to finite-lived intangibles amounted to $ 1.0 million and $ 1.9 million for the three and six months ended July 31, 2021, respectively.

Amortization expense with respect to finite-lived intangibles amounted to $ 3.7 million for the year ended January 31, 2022.

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

Year Ending January 31,

Amortization Expense

(In thousands)

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.

Change in Goodwill

Changes in the amounts of goodwill for the six months ended July 31, 2022 and the year ended January 31, 2022 are summarized by reportable segment as follows (in thousands):

January 31, 2021

Acquisition of Sonia Rykiel

Currency translation

January 31, 2022

Acquisition of Karl Lagerfeld

Currency translation

July 31, 2022

Goodwill represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method.

The Company reviews and tests its goodwill and intangible assets with indefinite lives for impairment at least annually, or more frequently if

events or changes in circumstances indicate that the carrying amount of such assets may be impaired.

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

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

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

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

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

The result of the Company’s annual test determined that the estimated fair value 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 and the Karl Lagerfeld trademark that was acquired in fiscal 2023.

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

Note 8 – 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 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.

Approximately 301,300 and 205,400 shares of common stock have been excluded from the diluted net income per share calculation for the three and six months ended July 31, 2022, respectively.

Approximately 15,100 and 8,200 shares of common stock have been excluded from the diluted net income per share calculation for the three and six months ended July 31, 2021.

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 April 30,

Three Months Ended July 31,

Six Months Ended July 31,

(In thousands, except share and per share amounts)

10 unchanged sentences

Long-term debt consists of the following:

April 30, 2022

April 30, 2021

July 31, 2022

July 31, 2021

January 31, 2022

4 unchanged sentences

Overdraft facilities

Foreign credit facility

Net debt issuance costs (1)

1 unchanged sentence

Current portion of long-term debt

(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.

(1) Does not include debt issuance costs, net of amortization, totaling $ 4.8 million, $ 6.4 million and $ 5.6 million as of July 31, 2022, July 31, 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.

11 unchanged sentences

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.

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

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

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

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

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.

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

17 unchanged sentences

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

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

the ABL Credit Agreement.

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

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.

As of July 31, 2022, interest under the ABL Credit Agreement was being paid at an average rate of 6.05 % per annum.

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

6 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 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.

As of July 31, 2022, the Company was in compliance with these covenants.

As of July 31, 2022, the Company had $ 51.6 million of borrowings outstanding under the ABL Credit Agreement.

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

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

As of July 31, 2022, there were outstanding trade and standby letters of credit amounting to $ 7.9 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.

2 unchanged sentences

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 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 .

As a portion of the consideration for the acquisition of Donna Karan International (“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 therefore has been recorded within current portion of notes payable on the condensed consolidated balance sheets and $ 50.0 million of such principal amount is due and payable on December 1, 2023 .

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

4 unchanged sentences

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.

Additionally, Sonia Rykiel and KLH 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 principal in the amount 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 3.0 % per annum, payable on either a quarterly or monthly basis.

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

As of July 31, 2022, the Company had an aggregate outstanding balance of € 7.6 million ($ 8.0 million) under these unsecured loans.

Overdraft Facilities

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

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

As of July 31, 2022, TRB had an aggregate of € 3.1 million ($ 3.2 million) drawn under these facilities.

Foreign Credit Facility

KLH has a credit agreement with ABN AMRO Bank N.V.

with a credit limit of € 15.0 million which is secured by specified assets of KLH.

Borrowings bear interest at the Euro Interbank Offered Rate (“EURIBOR”) plus a margin of 1.7 %.

As of July 31, 2022, KLH had € 0.4 million ($ 0.4 million) of borrowings outstanding under this credit facility.

Note 10 – Revenue Recognition

5 unchanged sentences

Wholesale Operations Segment.

Wholesale revenues include sales of products to retailers under owned, licensed and private label brands, as well as sales related to the Vilebrequin business.

Wholesale revenues include sales of products to retailers under owned, licensed and private label brands, as well as sales related to the Vilebrequin and Karl Lagerfeld businesses, other than sales of the Karl Lagerfeld Paris brand from retail stores and digital outlets.

Wholesale revenues from sales of products are recognized when control transfers to the customer.

2 unchanged sentences

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.

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

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

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

Retail Operations Segment.

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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 $ 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.

Total contract liabilities were $ 4.0 million, $ 4.3 million and $ 5.1 million at July 31, 2022, July 31, 2021 and January 31, 2022, respectively.

The Company recognized $ 2.7 million in revenue for the three months ended July 31, 2022 related to contract liabilities that existed at April 30, 2022.

The Company recognized $ 4.8 million in revenue for the six months ended July 31, 2022 related to contract liabilities that existed at January 31, 2022.

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

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

Note 11 – Segments

2 unchanged sentences

wholesale operations and retail operations.

The wholesale operations segment includes sales of products under the Company’s owned, licensed and private label brands, as well as sales related to the Vilebrequin business.

Wholesale revenues also include revenues from license agreements related to our owned trademarks including DKNY, Donna Karan, Vilebrequin, G.H.

The wholesale operations segment includes sales of products under the Company’s owned, licensed and private label brands, as well as sales related to the Vilebrequin and Karl Lagerfeld businesses, other than sales of the Karl Lagerfeld Paris brand from retail stores and digital outlets.

Wholesale revenues also include revenues from license agreements related to our owned trademarks including DKNY, Donna Karan, Vilebrequin, Karl Lagerfeld, G.H.

Bass and Andrew Marc.

3 unchanged sentences

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

Three Months Ended April 30, 2022

Three Months Ended July 31, 2022

Elimination (1)

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Depreciation and amortization

Gain on lease terminations

Operating profit (loss)

Three Months Ended April 30, 2021

Three Months Ended July 31, 2021

Elimination (1)

4 unchanged sentences

Operating profit (loss)

Six Months Ended July 31, 2022

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Gain on lease terminations

Operating profit (loss)

Six Months Ended July 31, 2021

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Operating profit (loss)

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

1 unchanged sentence

Three Months Ended

April 30, 2022

April 30, 2021

January 31, 2022

Six Months Ended

July 31, 2022

July 31, 2021

July 31, 2022

July 31, 2021

(In thousands)

5 unchanged sentences

Retail net sales

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

July 31, 2022

July 31, 2021

January 31, 2022

(In thousands)

Note 12 – Stockholders’ Equity

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.

For the three months ended July 31, 2022, the Company issued no shares of common stock and utilized 111,583 shares of treasury stock in connection with the vesting of equity awards.

For the three months ended July 31, 2021, the Company issued no shares of common stock and utilized 189,313 shares of treasury stock in connection with the vesting of equity awards.

For the six months ended July 31, 2022, the Company issued no shares of common stock and utilized 383,119 shares of treasury stock in connection with the vesting of equity awards.

For the six months ended July 31, 2021, the Company issued no shares of common stock and utilized 189,471 shares of treasury stock in connection with the vesting of equity awards.

Note 13 – Canadian Customs Duty Examination

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The period covered by the examination is February 1, 2014 through October 27, 2017, the date of the final report.

The CBSA has requested G-III Canada to reassess its customs entries for that period using the price paid or payable by the Canadian retail customers for certain imported goods rather than the price paid by G-III Canada to the vendor.

The CBSA has also requested that G-III Canada change the valuation method used to pay duties with respect to goods imported in the future.

The CBSA requested that G-III Canada reassess its customs entries for that period using the price paid or payable by the Canadian retail customers for certain imported goods rather than the price paid by G-III Canada to the vendor.

The CBSA also requested that G-III Canada change the valuation method used to pay duties with respect to goods imported in the future.

In March 2018, G-III Canada provided a bond to guarantee payment to the CBSA for additional duties payable as a result of the reassessment required by the final audit report.

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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 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).

There were no amounts paid and deferred for the three and six months ended July 31, 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 July 31, 2022, related to the higher dutiable values, were CAD$ 14.8 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.

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

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

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

The CBSA issued its final decision denying the appeal filed by G-III Canada with the President’s Office of the CBSA and G-III Canada filed a Notice of Appeal with the Canadian International Trade Tribunal (the “Tribunal”) further appealing the CBSA decision.

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.

On August 22, 2022, the Tribunal ruled in favor of G-III Canada and G-III Canada’s appeal has been allowed by the Tribunal.

The CBSA has until November 21, 2022 to appeal the decision.

Note 14 – Recent Adopted and Issued Accounting Pronouncements

Recently Adopted Accounting Guidance

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

There was no accounting guidance adopted during the three months ended July 31, 2022.

Issued Accounting Guidance Being Evaluated for Adoption

4 unchanged sentences

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.

As of July 31, 2022, the Company had availability of approximately $ 580 million under its revolving credit facility.

The interest rate under this facility is indexed to LIBOR.

1 unchanged sentence

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