What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-12-07 compared with 2022-09-09 · 139 added, 139 removed, 564 unchanged (33% of the section changed)

49 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

(In thousands, except per share amounts)

2 unchanged sentences

Depreciation and amortization

Gain on lease terminations

Asset impairment, net of gain on lease terminations

Operating profit

Other (loss) income

Interest and financing charges, net

8 unchanged sentences

Weighted average number of shares outstanding

Other comprehensive income (loss):

Other comprehensive income:

Foreign currency translation adjustments

Other comprehensive income (loss):

Other comprehensive loss:

Comprehensive income

Comprehensive (loss) income attributable to noncontrolling interests:

Comprehensive loss attributable to noncontrolling interests:

Foreign currency translation adjustments

Comprehensive (loss) income attributable to noncontrolling interests

Comprehensive loss attributable to noncontrolling interests

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

5 unchanged sentences

(In thousands)

Balance as of April 30, 2022

Balance as of July 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

Other comprehensive loss, net

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

Balance as of October 31, 2022

Balance as of July 31, 2021

Balance as of April 30, 2021

Equity awards exercised/vested, net

2 unchanged sentences

Other comprehensive loss, net

Cumulative effect of change in accounting principle

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

Balance as of July 31, 2021

Balance as of October 31, 2021

Balance as of January 31, 2022

2 unchanged sentences

Taxes paid for net share settlements

Other comprehensive income, net

Other comprehensive loss, net

Repurchases of common stock

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

Balance as of July 31, 2022

Balance as of October 31, 2022

Balance as of January 31, 2021

5 unchanged sentences

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

Balance as of July 31, 2021

Balance as of October 31, 2021

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended July 31,

(In thousands)

Nine Months Ended October 31,

(Unaudited, in thousands)

Cash flows from operating activities

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

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

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization

1 unchanged sentence

Non-cash operating lease costs

Gain on lease modifications

Gain on lease terminations

Asset impairment

Dividend received from unconsolidated affiliate

13 unchanged sentences

Accounts payable, accrued expenses and other liabilities

Net cash (used in) provided by operating activities

Net cash used in operating activities

Cash flows from investing activities

2 unchanged sentences

Investment in equity securities

Sale of equity securities

Capital expenditures

Acquisition of KLH, net of cash acquired

Acquisition of other foreign business, net of cash acquired

Investment in brand acquisition

Net cash used in investing activities

8 unchanged sentences

Foreign currency translation adjustments

Net (decrease) increase in cash and cash equivalents

Net decrease 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 .

18 unchanged sentences

(“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, 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.

Accordingly, the results of Vilebrequin, KLH, Fabco and Sonia Rykiel are 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, 2022, the results of Vilebrequin, Fabco and Sonia Rykiel are included for the nine-month period ended September 30, 2022.

For the three and nine month periods ended September 30, 2022, the results of KLH, which includes KLNA, are included for the period from July 1, 2022 through September 30, 2022 and June 1, 2022 through September 30, 2022, respectively.

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.

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.

For fiscal 2023 and 2022, the three and nine-month periods for the retail operations segment were each 13-week and 39-week periods, respectively, and ended on October 29, 2022 and October 30, 2021, respectively.

The results for the three and nine months ended October 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.

8 unchanged sentences

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

wholesale and retail trade

wholesale and retail trade receivables.

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

Retail trade receivables 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 July 31, 2022, July 31, 2021 and January 31, 2022 were:

July 31, 2022

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

October 31, 2022

(In thousands)

2 unchanged sentences

Accounts receivable, net

July 31, 2021

October 31, 2021

(In thousands)

18 unchanged sentences

Accounts written off as uncollectible

Balance as of July 31, 2022

Balance as of October 31, 2022

Balance as of January 31, 2021

1 unchanged sentence

Accounts written off as uncollectible

Balance as of July 31, 2021

Balance as of October 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 $ 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, which consists of the amount of goods that are anticipated to be returned by customers, was $ 17.1 million, $ 13.9 million and $ 18.9 million as of October 31, 2022, October 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 $ 5.7 million, $ 4.7 million and $ 4.5 million at July 31, 2022, July 31, 2021 and January 31, 2022, respectively.

Inventory held on consignment by the Company’s customers totaled $ 6.5 million, $ 5.6 million and $ 4.5 million at October 31, 2022, October 31, 2021 and January 31, 2022, respectively.

Consignment inventory is held by the Company’s customers.

21 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 July 31, 2022.

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

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

22 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 July 31, 2022, July 31, 2021 and January 31, 2022 consist of the following:

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

Classification

July 31, 2022

July 31, 2021

October 31, 2022

October 31, 2021

January 31, 2022

7 unchanged sentences

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.

The Company recorded lease costs of $ 17.1 million and $ 46.1 million during the three and nine months ended October 31, 2022, respectively.

The Company recorded lease costs of $ 14.0 million and $ 41.1 million during the three and nine months ended October 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 $ 5.5 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.

The Company recorded variable lease costs and short-term lease costs of $ 6.1 million and $ 16.7 million for the three and nine months ended October 31, 2022, respectively.

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.

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:

As of October 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 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.

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

As of October 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 7.7 %.

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.

Cash paid for amounts included in the measurement of operating lease liabilities is $ 47.6 million and $ 44.5 million during the nine months ended October 31, 2022 and October 31, 2021, respectively.

Right-of-use assets obtained in exchange for lease obligations were $ 96.7 million and $ 24.6 million during the nine months ended October 31, 2022 and October 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.

of € 202.0 million (approximately $ 216.8 million) in cash, after taking into account 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.

On May 31, 2022, 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 non-cash gain of $ 30.9 million was recorded as of the effective date of the acquisition.

The addition of KLH to the Company’s portfolio of owned brands advances several of its strategic initiatives, 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 also include Vilebrequin and Sonia Rykiel.

The Company believes that KLH’s existing digital channel presence provides an opportunity for the Company to enhance its omni-channel business and further accelerate its digital initiatives.

Purchase Price Consideration

1 unchanged sentence

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):

The initial purchase price and the valuation of the prior minority ownership for the acquisition of KLH is as follows (in thousands):

Cash disbursed for the acquisition of KLH

26 unchanged sentences

Total fair value of acquisition consideration

During the quarter ended October 31, 2022, the Company recorded adjustments to the fair values of assets acquired and liabilities assumed at the date of acquisition based on additional information obtained.

The Company recorded an additional $ 2.8 million in both total assets and total liabilities , primarily related to operating lease assets, inventories, allowance for doubtful accounts, goodwill, customer relationships and operating lease liabilities.

The Company recognized goodwill of approximately $ 45.9 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 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 for income tax purposes in the United States.

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.

6 unchanged sentences

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.

1 unchanged sentence

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 amount of net sales and operating income of KLH since the acquisition date included in the condensed consolidated statements of operations and comprehensive income for the three months ended October 31, 2022 were $ 51.9 million and $ 4.0 million, respectively.

The amount of net sales and operating income of KLH since the acquisition date included in the condensed consolidated statements of operations comprehensive income for the nine months ended October 31, 2022 were $ 69.2 million and $ 5.1 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,

Three Months Ended October 31,

Nine Months Ended October 31,

(unaudited, in thousands, except per share amounts)

2 unchanged sentences

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.

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) expenses for incentive compensation arrangements acquired as part of the acquisition agreement, (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.

2 unchanged sentences

Intangible assets consist of:

July 31, 2022

October 31, 2022

Estimated Life

10 unchanged sentences

Total intangible assets, net

July 31, 2021

October 31, 2021

Estimated Life

24 unchanged sentences

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 $ 1.0 million and $ 2.7 million for the three and nine months ended October 31, 2022, respectively.

Amortization expense with respect to finite-lived intangibles amounted to $ 0.9 million and $ 2.8 million for the three and nine months ended October 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:

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

Year Ending January 31,

3 unchanged sentences

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):

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

January 31, 2021

3 unchanged sentences

Acquisition of Karl Lagerfeld

Acquisition of other foreign business

Currency translation

July 31, 2022

October 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 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.

9 unchanged sentences

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 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.

Approximately 310,600 and 258,600 shares of common stock have been excluded from the diluted net income per share calculation for the three and nine months ended October 31, 2022, respectively.

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.

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 July 31,

Six Months Ended July 31,

Three Months Ended October 31,

Nine Months Ended October 31,

(In thousands, except share and per share amounts)

10 unchanged sentences

Long-term debt consists of the following:

July 31, 2022

July 31, 2021

October 31, 2022

October 31, 2021

January 31, 2022

8 unchanged sentences

Current portion of long-term debt

(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.

(1) Does not include debt issuance costs, net of amortization, totaling $ 4.4 million, $ 6.0 million and $ 5.6 million as of October 31, 2022, October 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.

3 unchanged sentences

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

The net proceeds of the Notes have been used (i) to repay the $ 300 million that was outstanding under 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 net proceeds of the Notes were 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.

11 unchanged sentences

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

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

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

Second Amended and Restated ABL Credit Agreement

5 unchanged sentences

and Donna Karan Studio LLC (the “Guarantors”), are Loan Guarantors under the ABL Credit Agreement.

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.

6 unchanged sentences

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.

As of October 31, 2022, interest under the ABL Credit Agreement was being paid at an average rate of 4.91 % 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 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.

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

As of October 31, 2022, the Company had $ 340.2 million of borrowings outstanding under the ABL Credit Agreement.

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

As of July 31, 2022, there were outstanding trade and standby letters of credit amounting to $ 7.9 million and $ 3.4 million, respectively.

As of October 31, 2022, there were outstanding trade and standby letters of credit amounting to $ 6.5 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.

3 unchanged sentences

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 .

$ 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 the 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.

As a result, the Company recorded a $ 40.0 million debt discount.

As a result, the Company recorded a $ 40.0 million debt discount upon issuance of the LVMH Note.

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

Unsecured Loans

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

A portion of the unsecured loans 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 and KLH borrowed funds pursuant to European state backed loans that were part of COVID-19 relief programs.

Several of the Company’s foreign entities borrow funds under various unsecured loans of which a portion is to provide funding for operations in the normal course of business while other loans are European state backed loans as 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 € 0.4 million under these loans.

Interest on the outstanding principal amount of the unsecured loans accrues at a fixed rate equal to 0 % to 5.0 % per annum, payable on either a quarterly or monthly basis.

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

As of October 31, 2022, the Company had an aggregate outstanding balance of € 10.7 million ($ 10.4 million) under these unsecured loans.

Overdraft Facilities

During fiscal 2022, TRB entered into several overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft.

During fiscal 2022, T.R.B International SA (“TRB”) entered into several overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft.

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

2 unchanged sentences

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

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

As of October 31, 2022, TRB had an aggregate of € 3.7 million ($ 3.7 million) drawn under these facilities.

Foreign Credit Facility

2 unchanged sentences

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.

As of October 31, 2022, KLH had € 10.6 million ($ 10.4 million) of borrowings outstanding under this credit facility.

Note 10 – Revenue Recognition

10 unchanged sentences

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

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.

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

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

Retail Operations Segment.

9 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 $ 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.

Total contract liabilities were $ 3.3 million, $ 3.8 million and $ 5.1 million at October 31, 2022, October 31, 2021 and January 31, 2022, respectively.

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

The Company recognized $ 3.2 million in revenue for the nine months ended October 31, 2022 related to contract liabilities

that existed at January 31, 2022.

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

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

Note 11 – Segments

4 unchanged sentences

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.

Bass, Andrew Marc and Sonia Rykiel.

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.

1 unchanged sentence

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 July 31, 2022

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

Three Months Ended October 31, 2022

Elimination (1)

3 unchanged sentences

Depreciation and amortization

Gain on lease terminations

Asset impairment

Operating profit (loss)

Three Months Ended July 31, 2021

Three Months Ended October 31, 2021

Elimination (1)

4 unchanged sentences

Operating profit (loss)

Six Months Ended July 31, 2022

Nine Months Ended October 31, 2022

Elimination (1)

3 unchanged sentences

Depreciation and amortization

Gain on lease terminations

Asset impairment, net of gain on lease terminations

Operating profit (loss)

Six Months Ended July 31, 2021

Nine Months Ended October 31, 2021

Elimination (1)

7 unchanged sentences

Three Months Ended

Six Months Ended

July 31, 2022

July 31, 2021

July 31, 2022

July 31, 2021

Nine Months Ended

October 31, 2022

October 31, 2021

October 31, 2022

October 31, 2021

(In thousands)

6 unchanged sentences

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

October 31, 2022

October 31, 2021

January 31, 2022

1 unchanged sentence

Note 12 – Stockholders’ Equity

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.

For the three months ended October 31, 2022, 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, 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 nine months ended October 31, 2022, the Company issued no shares of common stock and utilized 385,485 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 stock in connection with the vesting of equity awards.

Note 13 – Canadian Customs Duty Examination

In October 2017, the Canada Border Service Agency (“CBSA”) issued a final audit report to G-III Apparel Canada ULC (“G-III Canada”), a wholly-owned subsidiary of the Company.

The report challenged the valuation used by G-III Canada for certain goods imported into Canada.

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

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.

The Company secured a bond in the amount of CAD$ 26.9 million ($ 20.9 million) representing customs duty and interest through December 31, 2017 that is claimed to be owed to the CBSA.

In March 2018, the Company amended the duties filed for the month of January 2018 based on the new valuation method.

This amount was paid to the CBSA.

In October 2017, the Canada Border Service Agency (“CBSA”) issued an audit report to G-III Apparel Canada ULC (“G-III Canada”), a wholly-owned subsidiary of the Company, challenging the valuation used by G-III Canada for certain goods imported into Canada between February 1, 2014 and October 27, 2017.

The CBSA requested that G-III Canada reassess its customs entries for that period and change the valuation method used to pay duties with respect to goods imported in the future.

As a result of this reassessment, in March 2018, G-III Canada provided a bond to the CBSA in the amount of CAD$ 26.9 million ($ 20.9 million) representing customs duty and interest through December 31, 2017 that was claimed to be owed to the CBSA.

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 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 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.

Cumulative amounts paid and deferred through October 31, 2022, related to the higher dutiable values, were CAD$ 15.8 million ($ 11.6 million).

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

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

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.

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.

The decision was not appealed by the CBSA.

As a result, G-III Canada will continue to declare dutiable values utilizing its pre-audit methodology, with the addition of a dutiable design assist (“design assist”).

The Tribunal ruling requires the CBSA to issue a CAD $ 1.8 million ( $ 1.3 million) refund, including interest and net of the design assist, for amounts paid by G-III Canada between February 1, 2014 and January 31, 2018.

G-III Canada is in the process of filing adjustment requests with the CBSA for the period from February 1, 2018 to January 31, 2022 to amend declared dutiable values.

These amendments are expected to result in a refund of duty and interest of approximately CAD $ 13.0 million ( $ 9.5 million) after deductions for the design assist and related interest.

The bond issued by G-III Canada in March 2018 is in the process of being released back to the Company.

Note 14 – Recent Adopted and Issued Accounting Pronouncements

Recently Adopted Accounting Guidance

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

There was no accounting guidance adopted during the three months ended October 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 July 31, 2022, the Company had availability of approximately $ 580 million under its revolving credit facility.

As of October 31, 2022, the Company had availability of approximately $ 290 million under its revolving credit facility.

The interest rate under this facility is indexed to LIBOR.

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements