What changed in this filing

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Item 9A. Controls and Procedures

2023-03-27 compared with 2022-03-28 · 382 added, 295 removed, 1155 unchanged (37% of the section changed)

CONTROLS AND PROCEDURES.

As of January 31, 2022, our management, including the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act).

As of January 31, 2023, our management, including the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15I under the Exchange Act).

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure, and thus, are effective in making known to them material information relating to G-III required to be included in this Report.

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Based on its assessment, management has concluded that we maintained effective internal control over financial reporting as of January 31, 2023, based on criteria in Internal Control — Integrated Framework (2013) , issued by the COSO.

On May 31, 2022, we completed our acquisition of KLH.

See Note 15 – Karl Lagerfeld Acquisition in the accompanying notes to our consolidated financial statements in this Annual Report for further information on our acquisition of KLH.

We have excluded the internal control over financial reporting of KLH for fiscal 2023 from our assessment of, and

conclusion on the effectiveness of, our internal control over financial reporting.

KLH’s assets, consisting primarily of trademark value, constituted approximately 13.7% of our consolidated assets at January 31, 2023 and net sales of KLH constituted approximately 4.0% of our net sales for the fiscal year ended January 31, 2023.

Our independent auditors, Ernst & Young LLP, a registered public accounting firm, have audited and reported on our consolidated financial statements and the effectiveness of our internal control over financial reporting.

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OTHER INFORMATION.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

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Equity compensation plans not approved by security holders

(1) Includes outstanding awards of 2,033,257 shares of Common Stock issuable upon vesting of restricted stock units (‘‘RSUs’’) and stock options for 10,000 shares of common stock.

Outstanding stock options have a weighted average exercise price of $18.11 and a weighted average remaining term of 0.97 years.

(2) RSUs are excluded when determining the weighted average exercise price of outstanding stock options.

(1) Includes outstanding awards of 2,402,774 shares of Common Stock issuable upon vesting of restricted stock units.

(2) Under our 2015 Long-Term Incentive Plan.

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The following exhibits filed as part of this report or incorporated herein by reference are management contracts or compensatory plans or arrangements:

Exhibits 10.1, 10.1(a), 10.1(b), 10.1(c), 10.1(d), 10.6, 10.6(a), 10.6(b), 10.7, 10.7(a), 10.7(b), 10.7(c), 10.7(d), 10.8, 10.9, 10.9(a), 10.9(b), 10.9(c), 10.9(d), 10.12, 10.13, 10.14, and 10.15.

Exhibits 10.1, 10.1(a), 10.1(b), 10.1(c), 10.1(d), 10.1(e), 10.5, 10.5(a), 10.5(b), 10.6, 10.6(a), 10.6(b), 10.6(c), 10.6(d), 10.7, 10.8, 10.8(a), 10.8(b), 10.8(c), 10.8(d), 10.8(e), 10.11, 10.12, 10.13 and 10.14.

Incorporated by Reference

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Letter Amendment, dated April 28, 2014, to Employment Agreement, dated February 1, 1994, between G-III and Morris Goldfarb.

Letter Amendment, dated March 29, 2022, to Employment Agreement, dated February 1, 1994, between G-III and Morris Goldfarb.

Second Amended and Restated ABL Credit Agreement, dated as of August 7, 2020, among G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc.

17 unchanged sentences

10-Q (Q3 2011)

Incorporated by Reference

Sixth Amendment of Lease, dated May 23, 2013, by and between G-III Leather Fashions, Inc.

1 unchanged sentence

10-Q (Q1 2014)

Incorporated by Reference

Seventh Amendment of Lease dated April 25, 2014, by and between G-III Leather Fashions, Inc.

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10-Q (Q1 2019)

Lease, dated February 10, 2009, between IRET Properties and AM Retail Group, Inc.

10-Q (Q3 2011)

G-III 2005 Amended and Restated Stock Incentive Plan, (the “2005 Plan”).

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

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

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

Form of Executive Transition Agreement, as amended.

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Letter Amendment, dated April 28, 2014, to Employment Agreement, dated as of July 11, 2005, by and between Sammy Aaron and G-III.

Letter Amendment, dated March 29, 2022, to Employment Agreement, dated as of July 11, 2005, by and between Sammy Aaron and G-III.

Lease agreement dated June 29, 2006 between The Realty Associates Fund VI, LP and G-III.

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

Incorporated by Reference

Amendment to Executive Transition Agreement, dated as of December 9, 2016, between G-III and Jeffrey D.

Severance Agreement, dated as of December 9, 2016, between G-III and Neal Nackman.

Lease, dated August 1, 2006, between 240 West 40th LLC.

and G-III Leather Fashions, Inc.

Incorporated by Reference

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

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March 27, 2023

/s/ Jeanette Nostra

March 27, 2023

Jeanette Nostra

/s/ Laura Pomerantz

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Laura Pomerantz

/s/ Willem van Bokhorst

March 28, 2022

Willem van Bokhorst

/s/ Cheryl Vitali

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Cheryl Vitali

/s/ Lisa Warner Wardell

March 27, 2023

Lisa Warner Wardell

/s/ Richard White

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Consolidated Balance Sheets

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

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We have audited the accompanying consolidated balance sheets of G-III Apparel Group, Ltd.

and subsidiaries (the Company) as of January 31, 2022 and 2021, the related consolidated statements of income and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended January 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

and subsidiaries (the Company) as of January 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended January 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2023, in conformity with U.S.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

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

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Description of the Matter

As described in Note 1 and Note 2 to the consolidated financial statements, revenue is adjusted by variable consideration arising from implicit or explicit obligations.

As described in Note 1 and Note 2 to the consolidated financial statements, wholesale revenue is adjusted by variable consideration arising from implicit or explicit obligations.

The reserves for variable consideration are recorded as customer refund liabilities and totaled $89.8 million as of January 31, 2023.

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and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of January 31, 2023, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2022 and 2021, the related consolidated statements of income and comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended January 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated March 28, 2022 expressed an unqualified opinion thereon.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of KLH, which is included in the 2023 consolidated financial statements of the Company and constituted 13.7% of total assets, as of January 31, 2023 and 4.0% of revenues, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of KLH.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of January 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended January 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated March 27, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Year Ended January 31,

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Depreciation and amortization

Asset impairments, net of gain on lease terminations

Operating profit

Other income (loss)

Asset impairments and gain on lease terminations

Operating profit (loss)

Interest and financing charges, net

Income before income taxes

Income tax expense

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Loss attributable to noncontrolling interests

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

NET INCOME PER COMMON SHARE ATTRIBUTABLE TO G-III APPAREL GROUP, LTD.:

Net income per common share

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

NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO G-III APPAREL GROUP, LTD.:

Net income (loss) per common share

Weighted average number of shares outstanding

Net income per common share

Net income (loss) per common share

Weighted average number of shares outstanding

Other comprehensive loss:

Net income (loss)

Other comprehensive income (loss):

Foreign currency translation adjustments

Other comprehensive loss

Comprehensive income

Comprehensive income attributable to noncontrolling interests:

Other comprehensive income (loss):

Comprehensive income (loss)

Comprehensive loss attributable to noncontrolling interests:

Foreign currency translation adjustments

Comprehensive income attributable to noncontrolling interests

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

Comprehensive loss attributable to noncontrolling interests

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

The accompanying notes are an integral part of these statements.

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Taxes paid for net share settlements

Other comprehensive loss, net

Repurchases of common stock

Cumulative effect of adoption of ASC 842

Other comprehensive gain, net

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

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Taxes paid for net share settlements

Other comprehensive gain, net

Other comprehensive loss, net

Repurchases of common stock

Cumulative effect of change in accounting principle

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

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Repurchases of common stock

Cumulative effect of change in accounting principle

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

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

Balance as of January 31, 2023

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Cash flows from operating activities

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

Adjustments to reconcile net income to net cash provided by operating activities, net of assets and liabilities acquired:

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

Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of assets and liabilities acquired:

Depreciation and amortization

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Non-cash operating lease costs

Gain on lease terminations

Asset impairments

Asset impairments and gain on lease terminations

Dividend received from unconsolidated affiliate

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Deferred income taxes

Non-cash gains recorded in conjunction with Fabco acquisition

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

Non-cash gain on fair value of prior minority ownership of Fabco

Changes in operating assets and liabilities:

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Accounts payable, accrued expenses and other liabilities

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities

Operating lease assets initial direct costs

Minority investment in e-commerce retailer

Investment in e-commerce retailer

Investment in equity securities

Sale of equity securities

Sale of portion of investment in e-commerce retailer

Capital expenditures

Acquisition of KLH, net of cash acquired

Acquisition of other foreign business, net of cash acquired

Investment in brand acquisition

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( 1,291,424 )

( 2,388,766 )

Proceeds from borrowings - revolving credit facility

Repayment of borrowings - foreign facilities

Proceeds from borrowings - foreign facilities

Repayment of borrowings - unsecured term loan

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Payment of financing costs

Repayment of loan from acquired brand

Proceeds from exercise of equity awards

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Foreign currency translation adjustments

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

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Fabco Holding B.V.

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

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

KL North America B.V.

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

(“Fabco”) is a Dutch joint venture limited liability company that is 75 % owned by the Company and is treated as a consolidated majority-owned subsidiary.

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

The results of Sonia Rykiel are included in our consolidated financial statements beginning in the fourth quarter of fiscal 2022.

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.

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

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

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

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

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

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

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

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 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 included in the financial statements for the year ended or ending closest to the Company’s fiscal year end.

For example, with respect to the Company’s results for the year ended January 31, 2023, the results of Vilebrequin, Fabco and Sonia Rykiel are included for the year ended December 31, 2022.

For the year ended December 31, 2022, the results of KLH, which includes KLNA, are included for the period from July 1, 2022 through December 31, 2022.

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 retail operations segment reported based on a 52-week fiscal year.

Cash Equivalents

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The Company considers control to have been transferred when the Company has transferred physical possession of the product, the Company has a right to payment for the product, the customer has legal title to the product and the customer has the significant risks and rewards of the product.

Wholesale revenues are adjusted by variable considerations arising from implicit or explicit obligations.

Variable consideration includes trade discounts, end of season markdowns, sales allowances, cooperative advertising, return liabilities and other customer allowances.

The Company estimates the anticipated variable consideration and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

G-III Apparel Group, Ltd.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Wholesale revenues are adjusted by variable considerations arising from implicit or explicit obligations.

Variable consideration includes trade discounts, end of season markdowns, sales allowances, cooperative advertising, return liabilities and other customer allowances.

The Company estimates the anticipated variable consideration and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

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

The reserves for variable consideration are recorded as customer refund liabilities.

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In addition, the change in inventory valuation better aligns with the way the Company manages its business with a focus on the actual margin realized.

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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The change in accounting principle did not have a material effect on the Company’s consolidated financial statements as of and for the year ended January 31, 2023.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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Impairment charges, if any, on intangible assets with finite lives are recorded when indicators of impairment are present and the discounted cash flows estimated to be derived from those assets are less than the carrying amounts of the assets.

On February 1, 2019, the Company adopted ASC Topic 842 – Leases (“ASC 842”) using the optional transition method to apply the standard as of the effective date.

During fiscal 2023, the Company recorded a $ 347.2 million non-cash impairment charge to fully impair the carrying value of its goodwill.

See Note 7 – Intangible Assets.

The Company accounts for its leases in accordance with ASC Topic 842 – Leases (“ASC 842”).

The Company determines if an arrangement is, or contains, a lease at contract inception.

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Leasehold improvements are amortized using the straight-line method over the life of the lease or the useful life of the improvement, whichever is shorter.

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Impairment of Long-Lived Assets

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In fiscal 2023, the Company recorded a $ 2.7 million impairment charge related to leasehold improvements, furniture and fixtures and operating lease assets at certain DKNY, Karl Lagerfeld Paris and Vilebrequin stores as a result of the performance at these stores.

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

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Bass stores, primarily due to the retail restructuring, as well as at certain DKNY and Vilebrequin stores as a result of the performance at these stores.

In fiscal 2020, the Company recorded a $ 21.8 million impairment charge primarily related to leasehold improvements, furniture and fixtures and operating lease assets at certain of its Wilsons Leather, G.H.

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

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

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The Company has elected to take 100 % bonus depreciation for all qualified improvement property.

Net Income Per Common Share

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

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

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

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

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

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

G-III Apparel Group, Ltd.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Net Income (Loss) Per Common Share

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

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

The Company issued no shares of common stock in connection with the exercise or vesting of equity awards during the years ended January 31, 2023, 2022 and 2021, respectively.

Instead, the Company re-issued 387,792 , 194,965 and 367,290 treasury shares in connection with the vesting of equity awards in fiscal 2023, 2022 and 2021, respectively.

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

Year Ended January 31,

(In thousands, except share and per share amounts)

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

Basic net income per share:

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

Basic net income (loss) per share:

Basic common shares

Basic net income per share

Diluted net income per share:

Basic net income (loss) per share

Diluted net income (loss) per share:

Basic common shares

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Diluted common shares

Diluted net income per share

Diluted net income (loss) per share

Equity Award Compensation

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

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

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

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

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

It is the Company’s policy to grant stock options at prices not less than the fair market value on the date of the grant.

Option terms, vesting and exercise periods vary, except that the term of an option may not exceed ten year s.

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

The assumed proceeds from applying the treasury stock method when computing net income per share is amended to exclude the amount of excess tax benefits that would be recognized in additional paid-in capital.

Cost of Goods Sold

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

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

G-III Apparel Group, Ltd.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

statement classifications of certain expenses may vary by company.

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

The assumed proceeds from applying the treasury stock method when computing net income (loss) per share is amended to exclude the amount of excess tax benefits that would be recognized in additional paid-in capital.

Cost of Goods Sold

Gross margins may not be directly comparable to those of the Company’s competitors, as income statement classifications of certain expenses may vary by company.

Additionally, costs expected to be incurred when products are returned should be accrued for upon the sale of the product as a component of cost of goods sold.

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GAAP establishes a three-level valuation hierarchy for disclosure of fair value measurements.

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

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(unobservable).

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

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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Overdraft facilities

Foreign credit facility

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

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

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

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

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

During fiscal 2021, the Company recorded a $ 20.1 million impairment charge primarily related to operating lease assets, leasehold improvements and furniture and fixtures at certain Wilsons Leather and G.H.

Bass stores, primarily due to the retail restructuring, as well as at certain DKNY and Vilebrequin stores as a result of the performance at these stores.

During fiscal 2020, the Company recorded a $ 21.8 million impairment charge primarily related to leasehold improvements, furniture and fixtures and operating lease assets at certain Wilsons Leather, G.H.

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

In addition, during fiscal 2020, the Company recorded an impairment of $ 9.6 million, net of tax, in connection with the adoption of ASC 842 – Leases (“ASC 842”) that was recognized through retained earnings.

For operating lease assets, the Company determines the fair value

G-III Apparel Group, Ltd.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of the assets by discounting the estimated market rental rates over the remaining term of the lease.

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

During fiscal 2023, the Company recorded a $ 2.7 million impairment charge related to leasehold improvements, furniture and fixtures and operating lease assets at certain DKNY, Karl Lagerfeld Paris and Vilebrequin stores as a result of the performance at these stores.

Bass stores, primarily due to the Company’s retail restructuring, as well as at certain DKNY and Vilebrequin stores as a result of the performance at these stores.

Foreign Currency Translation

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The Company estimates the anticipated variable consideration and records this estimate as a reduction of revenue in the period the related product revenue is recognized.

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

The Company classifies cooperative advertising as a reduction of net sales in the Consolidated Statements of Income and Comprehensive Income.

The liability recorded in connection with variable consideration, except for cooperative advertising, has been classified as a current liability under “customer refund liabilities” on the consolidated balance sheets.

The Company classifies cooperative advertising as a reduction of net sales in the consolidated statements of operations and comprehensive income (loss).

Costs expected to be incurred when products are returned should be accrued for upon the sale of the product as a component of cost of goods sold.

2 unchanged sentences

Each segment presents its own characteristics with respect to the timing of revenue recognition and the type of customer.

In addition, disaggregating revenues using a segment basis is consistent with how the Company’s Chief Operating Decision Maker manages the Company.

In addition, disaggregating revenues using a segment basis is consistent with how the Company’s Chief Operating Decision Maker manages the

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company identified the wholesale operations segment and the retail operations segment as distinct sources of revenue.

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 product under the Karl Lagerfeld Paris brand from our retail stores and digital outlets.

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

1 unchanged sentence

Wholesale revenues are adjusted by variable considerations arising from implicit or explicit obligations.

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

Bass, Andrew Marc and Vilebrequin

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

trademarks owned by the Company.

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

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

As of January 31, 2023, revenues from license agreements represented an insignificant portion of wholesale revenues.

2 unchanged sentences

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

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

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

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

26 unchanged sentences

General allowances consist of price reductions granted to a wholesale customer and may relate to the Company’s participation in costs incurred by the customer during the sales process, as well as price differences, shortages and charges for operational non-compliance.

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Return of Merchandise .

6 unchanged sentences

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Contract Liabilities

1 unchanged sentence

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

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

Total contract liabilities were $ 5.1 million at both January 31, 2023 and 2022.

The Company recognized $ 4.0 million in revenue for the year ended January 31, 2023 which related to contract liabilities that existed at January 31, 2022.

2 unchanged sentences

NOTE 3 — ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

Measurement of Credit Losses on Financial Instruments” which had no material impact on the Company’s financial statements.

The Company’s financial instruments consist of trade receivables arising from revenue transactions in the ordinary course of business.

15 unchanged sentences

The allowance for doubtful accounts for wholesale trade receivables is estimated based on several factors.

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

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

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

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

credit rating agencies), a specific reserve for bad debts is recorded against amounts due from that customer to reduce the net recognized receivable to the amount reasonably expected to be collected.

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

The allowance for doubtful accounts for retail trade receivables is estimated at the credit card chargeback rate applied to the previous 90 days of credit card sales.

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

During the year ended January 31, 2021, the Company recorded a $16.7 million increase in its allowance for doubtful accounts primarily due to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or possible bankruptcy filings.

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

13 unchanged sentences

Wholesale inventories, which comprise a significant portion of the Company’s inventory, are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value.

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

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

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

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

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

Substantially all of the Company’s inventories consist of finished goods.

16 unchanged sentences

accumulated depreciation

The Company wrote off fixed assets of $ 0.2 million and $ 0.4 million, net of accumulated depreciation, for the years ended January 31, 2022 and 2021.

Depreciation expense was $ 23.5 million, $ 23.6 million and $ 34.0 million for the years ended January 31, 2023, 2022 and 2021, respectively.

For the year ended January 31, 2023, the Company recorded a $ 1.8 million impairment charge related to leasehold improvements and furniture and fixtures at certain DKNY and Karl Lagerfeld Paris stores as a result of the performance of these stores.

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

1 unchanged sentence

Bass stores, primarily due to the retail restructuring, as well as at certain DKNY stores as a result of the performance of these stores.

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

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

The Company evaluates long-lived assets, which consist primarily of property and equipment and operating lease assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

8 unchanged sentences

NOTE 6 — LEASES

On February 1, 2019, the Company adopted ASC 842 using the optional transition method to apply the standard as of the effective date and, therefore, the standard has not been applied retroactively to the comparative periods presented in its financial statements.

The Company has elected the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs.

Further, the Company elected the short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to short-term leases (i.e.

The Company accounts for its leases in accordance with ASC 842.

The Company elected the short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to short-term leases (i.e.

leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company determines whether an arrangement is, or contains, a lease at contract inception.

2 unchanged sentences

The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Total rent payable is recorded during the lease term, including rent escalations in which the amount of future rent is certain or fixed on the straight-line basis over the term of the lease (including any rent holiday periods beginning upon control of the premises and any fixed payments stated in the lease).

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the premises and any fixed payments stated in the lease).

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

26 unchanged sentences

Total lease liabilities

During fiscal 2023, the Company recorded a $ 0.7 million impairment charge related to the operating lease assets at certain DKNY stores as a result of the performance at these stores.

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

During fiscal 2021, the Company recorded a $ 19.4 million impairment charge related to the operating lease assets at certain Wilsons Leather and G.H.

Bass stores, primarily due to the retail restructuring, as well as at certain DKNY and Vilebrequin stores as a result of the performance

Bass stores, primarily due to the retail restructuring, as well as at certain DKNY and Vilebrequin stores as a result of the performance at these stores The Company determines the fair value of operating lease assets by discounting the estimated market rental rates over the remaining term of the lease.

The Company’s leases do not provide the rate of interest implicit in the lease.

Therefore, the Company uses its incremental borrowing rate based on the information available at commencement date of each lease in determining the present value of lease payments.

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

at these stores.

During fiscal 2020, the Company recorded a $9.9 million impairment charge related to the operating lease assets at certain of our Wilsons Leather, G.H.

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

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

The Company’s leases do not provide the rate of interest implicit in the lease.

Therefore, the Company uses its incremental borrowing rate based on the information available at commencement date of each lease in determining the present value of lease payments.

For transition purposes, the incremental borrowing rate on February 1, 2019 was used for operating leases that commenced prior to that date.

The Company recorded lease costs of $ 64.9 million, $ 55.7 million and $ 92.4 million during the years ended January 31, 2023, 2022 and 2021, respectively.

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

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

The Company recorded variable lease costs and short-term lease costs of $ 17.1 million, $ 10.5 million and $ 6.7 million for the years ended January 31, 2023, 2022 and 2021, respectively.

10 unchanged sentences

Right-of-use assets obtained in exchange for lease obligations were $ 126.8 million and $ 30.8 million during the years ended January 31, 2023 and 2022, respectively.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 7 — INTANGIBLE ASSETS

13 unchanged sentences

Total intangible assets, net

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

January 31, 2022

17 unchanged sentences

(In thousands)

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

2 unchanged sentences

January 31, 2021

Acquisition of Sonia Rykiel

Currency translation

January 31, 2022

Acquisition of Sonia Rykiel

Acquisition of Karl Lagerfeld

Acquisition of other foreign business

Currency translation

January 31, 2023

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

4 unchanged sentences

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, 2021 and 2020 and determined that no impairment existed at those dates.

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

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

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

Fiscal 2023 Annual Goodwill Impairment Test

The Company performed its annual test of its wholesale reporting unit as of January 31, 2023 by electing to bypass the qualitative assessment and proceed directly to the quantitative impairment test using a discounted cash flows method to estimate the fair value of its wholesale reporting unit.

The Company made this election due to its decline in market capitalization.

The fair value of the wholesale reporting unit for goodwill impairment testing was determined using an income approach and validated using a market approach.

The income approach was based on discounted projected future (debt-free) cash flows for the reporting unit.

The discount rate applied to these cash flows was based on the weighted average cost of capital for the wholesale reporting unit, which takes market participant assumptions into consideration, inclusive of a Company-specific 7.5 % risk premium to account for the additional risk of uncertainly perceived by market participants related to the Company’s overall cash flows.

Estimated future operating cash flows were discounted at a rate of 17.5 % to account for the relative risks of the estimated future cash flows.

For the market approach, used to validate the results of the income approach method, the Company used the guideline company method, which analyzes market multiples of adjusted earnings before interest, taxes, depreciation and amortization for a group of comparable public companies.

As a result of the Company’s fiscal 2023 annual impairment test, the Company recorded a $ 347.2 million non-cash impairment charge during its fourth quarter of fiscal 2023 to fully impair the carrying value of its goodwill, which was included in assets impairments and gain on lease terminations in the Company’s consolidated statements of operations and comprehensive income (loss).

This impairment charge was recorded to the Company’s wholesale operations segment.

Fiscal 2022 and Fiscal 2021 Annual Goodwill Impairment Test

The Company performed its annual tests of its wholesale reporting unit using a qualitative review as of January 31, 2022 and 2021 and determined that no impairment existed at those dates.

The results of the Company’s annual tests determined that the estimated fair values of its wholesale reporting unit were substantially in excess of its carrying value.

Fiscal 2023 Annual Indefinite-Lived Intangible Assets Impairment Test

The Company performed its annual test of its indefinite-lived trademarks as of January 31, 2023 using a qualitative evaluation or a quantitative impairment 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 determined that the fair values of each of its indefinite-lived intangible assets substantially exceeded its carrying value and, therefore, there were no impairments identified as of January 31, 2023 as a result of these tests.

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Fiscal 2022 and Fiscal 2021 Annual Indefinite-Lived Intangible Assets Impairment Test

The Company performed its annual test of its indefinite-lived trademarks using a qualitative review as of January 31, 2022 and 2021 and determined that no impairment existed at those dates.

The results of the Company’s annual tests determined that the estimated fair values of its 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 trademarks that were 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 — NOTES PAYABLE AND OTHER LIABILITIES

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Overdraft facilities

Foreign credit facility

Net debt issuance costs (1)

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

The Notes are unconditionally guaranteed on a senior-priority secured basis by the Company’s current and future wholly-owned domestic subsidiaries that guarantee any of the Company’s credit facilities, including the Company’s ABL facility (the “ABL Facility”) pursuant to the ABL Credit Agreement, or certain future capital markets indebtedness of the Company or guarantors.

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 (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 .

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(the “ABL Facility”) pursuant to the ABL Credit Agreement, or certain future capital markets indebtedness of the Company or guarantors.

The Notes and the related guarantees are secured by (i) first priority liens on the Company’s Cash Flow Priority Collateral (as defined in the Indenture), and (ii) a second-priority lien on the Company’s ABL Priority Collateral (as defined in the Indenture), in each case subject to permitted liens described in the Indenture.

2 unchanged sentences

The Intercreditor Agreement restricts the actions permitted to be taken by the Collateral Agent with respect to the Collateral on behalf of the holders of the Notes.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

1 unchanged sentence

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

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

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

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

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

3 unchanged sentences

The ABL Credit Agreement provides for borrowings in the aggregate principal amount of up to $ 650 million.

The Company and its subsidiaries, G-III Apparel Canada ULC, Gabrielle Studio, Inc., Donna Karan International Inc.

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

The Company and certain of its subsidiaries (the “Guarantors”), are Loan Guarantors under the ABL Credit Agreement.

G-III Apparel Group, Ltd.

10 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 December 31, 2022, interest under the ABL Credit Agreement was being paid at an average rate of 5.31 % per annum.

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

7 unchanged sentences

As of January 31, 2023, the Company was in compliance with these covenants .

As of January 31, 2022, the Company had no borrowings outstanding under the ABL Credit Agreement.

As of January 31, 2023, the Company had $ 80.1 million borrowings outstanding under the ABL Credit Agreement.

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

6 unchanged sentences

$ 75.0 million of the principal amount of the LVMH Note is due and payable on June 1, 2023 and $ 50.0 million of such principal amount is due and payable on December 1, 2023 .

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

The LVMH Note is classified in current portion of notes payable in the Company’s consolidated balance sheet as of January 31, 2023.

G-III Apparel Group, Ltd.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

3 unchanged sentences

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

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.

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 € 0.6 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 January 31, 2022, the Company had an aggregate outstanding balance of € 7.4 million ($ 8.4 million) under these various unsecured loans.

As of January 31, 2023, the Company had an aggregate outstanding balance of € 10.1 million ($ 10.9 million) under these unsecured loans.

Overdraft Facilities

5 unchanged sentences

As of January 31, 2023, TRB had an aggregate of € 3.4 million ($ 3.7 million) drawn under these various 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 January 31, 2023, KLH had € 7.3 million ($ 7.8 million) of borrowings outstanding under this credit facility.

Future Debt Maturities

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State and city

Income tax expense

Income before income taxes

Income tax expense (benefit)

Income (loss) before income taxes

United States

2 unchanged sentences

One of those provisions allows any loss generated in fiscal 2021 to be carried back to each of the 5 taxable years preceding the taxable year of such a loss.

The Company has elected to use this relief and carried back the fiscal 2021 tax loss to a tax year with a 35% federal rate.

The Company elected to use this relief and carried back the fiscal 2021 tax loss to a tax year with a 35% federal rate.

Additionally, the CARES Act permits Qualified Improvement Property to qualify for 15-year depreciation and therefore be also eligible for 100 percent first-year bonus depreciation.

The Company has elected to take 100 % bonus depreciation for all qualified improvement property.

Effective January 1, 2018, TCJA subjects a U.S.

Effective January 1, 2018, the Tax Cuts and Jobs Act (“TCJA”) subjects a U.S.

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

11 unchanged sentences

Foreign tax credit carryforward

Section 174 R&D amortization

Gross deferred income tax assets

14 unchanged sentences

federal income tax as a result of the one-time transition tax under the TCJA regime, the Company does not expect to change its indefinite reinvestment categorization with respect to those earnings.

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a reconciliation of the statutory federal income tax rate to the effective rate reported in the financial statements for the years ended January 31:

1 unchanged sentence

State and local income taxes, net of Federal tax benefit

Permanent differences resulting in Federal taxable income

Permanent differences

tax on foreign earnings (1)

Foreign tax rate differential

3 unchanged sentences

Net operating loss carryback

Goodwill Impairment

Non-taxable capital gain

Actual provision for income taxes

(1) Prior year U.S.

tax on foreign earnings has been reclassed for presentation purposes.

The Company’s effective tax rate decreased 23.5 % percent in fiscal 2023 compared to fiscal 2022.

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to its tax expense.

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

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

This decrease in the Company’s effective tax rate is primarily the result of the Company’s charges related to goodwill impairment of $ 347.2 million which significantly decreased pretax book income in relation to its tax expense.

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

The decrease in the Company’s fiscal 2022 effective tax rate compared to the fiscal 2021 effective tax rate is primarily the result of the Company’s significant increase in pretax book income in relation to its tax expense.

At January 31, 2023, the Company had state net operating loss carryforwards of $ 4.7 million that expire at various times beginning in 2023.

In addition, the Company had foreign net operating loss carryforwards of $ 28.9 million, some jurisdictions having indefinite expirations.

The Company also has federal foreign tax credit carryforwards of $ 3.9 million, which expire beginning in 2030.

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

During the year ended January 31, 2022, the Company recorded an additional valuation allowance of $ 1.2 million against its deferred tax assets for its standalone state tax losses and foreign retail losses.

During the year ended January 31, 2023, the Company recorded an additional valuation allowance of $ 18.6 million against its deferred tax assets, of which $ 14 million relates to opening balance sheet adjustments on the Karl Lagerfeld acquisition and $ 4.6 million relates to standalone state tax losses and foreign retail losses.

Unrecognized Tax Benefits

2 unchanged sentences

Balance at February 1,

Additions based on tax positions related to the current year

Additions for tax positions of prior years

1 unchanged sentence

Balance at January 31,

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company accounts for uncertain income tax positions in accordance with ASC 740 — Income Taxes .

1 unchanged sentence

federal jurisdiction and various state and foreign jurisdictions.

As of January 31, 2022, there was an increase in the unrecognized tax position reserve of $ 0.2 million related to recent state and local tax return filings.

The Company’s policy on classification is to include interest in interest and financing charges, net and penalties in selling, general and administrative expenses in the accompanying Consolidated Statements of Income and Comprehensive Income.

As of January 31, 2023, there was an increase in the unrecognized tax position reserve of $ 1.1 million related to state and local income tax return filings.

The Company’s policy on classification is to include interest in interest and financing charges, net and penalties in selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive income (loss).

The Company and certain of its subsidiaries are subject to U.S.

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Of the major jurisdictions, the Company and its subsidiaries are subject to examination in the United States and various foreign jurisdictions for fiscal year 2014 and forward.

The Company is currently under audit examination by New York, New Jersey and Canada for fiscal years 2016 through 2019.

The Company is currently under audit examination by New York, New Jersey and France for fiscal years 2016 through 2019.

The Company believes that it is reasonably possible there will be no change to its unrecognized income tax position reserves during the next twelve months due to the applicable statues of limitations.

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The Company incurred royalty expense (included in cost of goods sold) of $ 162.9 million, $ 145.1 million and $ 116.8 million for the years ended January 31, 2023, 2022 and 2021, respectively.

Contractual advertising expense, which is included in selling, general and administrative expenses and is normally based on a percentage of net sales associated with certain license agreements, was $ 41.2 million, $ 29.5 million and $ 48.3 million for the years ended January 31, 2022,

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2021 and 2020, respectively.

Contractual advertising expense, which is included in selling, general and administrative expenses and is normally based on a percentage of net sales associated with certain license agreements, was $ 45.2 million, $ 41.2 million and $ 29.5 million for the years ended January 31, 2023, 2022 and 2021, respectively.

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

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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 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.

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 under the new valuation method.

This amount was paid 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 during the year ended January 31, 2022 related to the higher dutiable values, however, the Company paid interest in the amount of CAD$ 1.0 million ($ 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 January 31, 2022, related to the higher dutiable values, were CAD$ 14.7 million ($ 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.

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

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

G-III Apparel Group, Ltd.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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.

Cumulative amounts paid and deferred through January 31, 2023, related to the higher dutiable values, were CAD$ 15.5 million ($ 11.5 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 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”).

In accordance with the Tribunal ruling, G-III Canada has received a refund from the CBSA of CAD $ 1.5 million ( $ 1.1 million), 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 has filed 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 $ 13.2 million ( $ 9.8 million) after deductions for the design assist and related interest.

The bond issued by G-III Canada in March 2018 has been released back to the Company.

NOTE 11 — STOCKHOLDERS’ EQUITY

Share Repurchase Program

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

In March 2022, our Board of Directors authorized an increase in the number of shares covered by our share repurchase program to an aggregate amount of 10,000,000 shares.

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

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During fiscal 2023, pursuant to this program, the Company acquired 1,587,581 shares of its common stock for an aggregate purchase price of $ 26.9 million.

No shares of common stock were acquired pursuant to this program during fiscal 2021.

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

No shares of common stock were acquired pursuant to this program during fiscal 2021.

As of January 31, 2023, we had 8,412,419 authorized shares remaining under this program.

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

Long-Term Incentive Plan

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The plan provides for the grant of equity and cash awards, including restricted stock awards, stock options and other stock unit awards to directors, officers and employees.

RSU’s generally (i) cliff vest after three years or (ii) vest over a three year period.

PRSU’s granted to executives prior to fiscal 2020 include (i) market price performance conditions that provide for the award to vest only after the average closing price of the Company’s stock trades above a predetermined market level and (ii) another performance condition that requires the achievement of an operating performance target.

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

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

It is the Company’s policy to grant stock options at prices not less than the fair market value on the date of the grant.

Option terms, vesting and exercise periods vary, except that the term of an option may not exceed ten year s.

Restricted stock units (“RSU’s”) generally (i) cliff vest after three years or (ii) vest over a three year period.

Performance based restricted stock units (“PRSU’s”) granted to executives prior to fiscal 2020 include (i) market price performance conditions that provide for the award to vest only after the average closing price of the Company’s stock trades above a predetermined market level and (ii) another performance condition that requires the achievement of an operating performance target.

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

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

G-III Apparel Group, Ltd.

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Restricted Stock Units

Restricted stock units (“RSU’s”) are time based awards that do not have market or performance conditions and (i) cliff vest after three year s or (ii) vest over a three year period.

RSU’s are time based awards that do not have market or performance conditions and (i) cliff vest after three year s or (ii) vest over a three year period.

The grant date fair value for RSU’s are based on the quoted market price on the date of grant.

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Performance Based Restricted Stock Units

Performance based restricted stock units consist of both performance based restricted stock units (“PRSU’s”) and performance stock units (“PSU’s”).

Performance based restricted stock units consist of both PRSU’s and PSU’s.

PRSU’s were granted to executives prior to fiscal 2020 and included (i) market price performance conditions that provide for the award to vest only after the average closing price of the Company’s stock trades above a predetermined market level and (ii) another performance condition that requires the achievement of an operating performance target.

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

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

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

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Stock options outstanding at end of year

The following table summarizes information about stock options outstanding:

Outstanding as of

Exercisable as of

Range of Exercise Prices

Contractual Life

Stock Options

Compensation expense for employee stock options is recognized in the consolidated financial statements over the service period (generally the vesting period) based on their fair value.

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These assumptions reflect management’s best estimates.

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

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

No stock options were granted during the years ended January 31, 2023, January 31, 2022 and January 31, 2021.

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Ultimately, the actual expense recognized over the vesting period will be for those shares that vest.

The weighted average remaining term for stock options outstanding was 1.0 years at January 31, 2022.

The aggregate intrinsic value at January 31, 2022 was $ 0.1 million for stock options outstanding and $ 0.1 million for stock options exercisable.

The intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the market price of the Company’s common stock as of January 31, 2022, the reporting date.

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

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

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

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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

There were no stock options outstanding at January 31, 2023.

There were no stock options exercised during the years ended January 31, 2023 and January 31, 2022.

The Company did no t recognize compensation expense for year ended January 31, 2023 and January 31, 2022 related to stock options.

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

NOTE 12 — CONCENTRATION

Two customers in the wholesale operations segment accounted for approximately 21.6 % and 15.4 %, respectively, of the Company’s net sales for the year ended January 31, 2023.

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

Two customers in the wholesale operations segment accounted for approximately 20.9 % and 12.9 % , respectively, of the Company’s net sales for the year ended January 31, 2021.

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

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

Four customers in the wholesale operations segment accounted for approximately 22.9 %, 13.2 %, 12.3 % and 11.5 %, respectively, of the Company’s net accounts receivable as of January 31, 2023.

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

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 13 — EMPLOYEE BENEFIT PLANS

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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.

Bass and Andrew Marc.

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, Karl Lagerfeld, Vilebrequin, G.H.

Bass and Andrew Marc and Sonia Rykiel.

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

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After completion of the restructuring, the Company’s retail operations segment consists of DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, G.H Bass, Andrew Marc and Wilsons Leather.

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following segment information, in thousands, is presented for the fiscal years ended:

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Depreciation and amortization

Asset impairments, net of gain on lease terminations

Asset impairments and gain on lease terminations

Operating profit (loss)

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Depreciation and amortization

Asset impairments

Asset impairments and gain on lease terminations

Operating profit (loss)

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

January 31, 2021

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Depreciation and amortization

Asset impairments

Asset impairments and gain on lease terminations

Operating profit (loss)

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

G-III Apparel Group, Ltd.

and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

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Capital expenditures for locations outside of the United States totaled $ 10.5 million, $ 4.3 million and $ 3.0 million for the years ended January 31, 2023, 2022 and 2021, respectively.

NOTE 15 — SONIA RYKIEL

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

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

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

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

The Sonia Rykiel acquisition, which was immaterial, was accounted for under the acquisition method of accounting.

Accordingly, the purchase price was allocated to the acquired assets based on their estimated fair values.

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

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 15 — 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, after taking into account certain adjustments.

The acquisition closed on May 31, 2022.

The Company funded the purchase price from cash on hand.

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 $ 27.1 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

The purchase price of $ 207.6 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 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

cash acquired

aggregate adjustments to purchase price

Initial purchase price

fair value of prior minority ownership

Total consideration

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

Deferred income taxes

Other long-term assets

Total assets acquired

Notes payable

Accounts payable

Accrued expenses

Operating lease liabilities

Income taxes payable

Deferred income taxes

Other long-term liabilities

Total liabilities assumed

Total fair value of acquisition consideration

During the year ended January 31, 2023, 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 $ 36.9 million in both total assets and total liabilities , primarily related to goodwill, deferred tax assets and liabilities, operating lease assets, inventories, accounts receivable, net, accounts payable, customer relationships and operating lease liabilities.

The Company recognized goodwill for tax purposes of approximately $ 84.3 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 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.

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

G-III Apparel Group, Ltd.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company recognized approximately $ 5.6 million of acquisition related costs that were expensed in fiscal 2023 and fiscal 2022.

The fiscal 2023 and fiscal 2022 acquisition and integration costs are recorded within selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive income (loss) for the fiscal years ended January 31, 2023 and January 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 loss of KLH since the acquisition date included in the consolidated statements of operations and comprehensive income (loss) for the year ended January 31, 2023 were $ 129.4 million and ($ 75.6 ) million, respectively.

The operating loss of KLH includes a $ 83.2 million non-cash impairment charge related to goodwill recognized during the fourth quarter of fiscal 2023.

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.

Year Ended January 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) 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 $ 27.1 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 16 — EQUITY INVESTMENTS

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This investment was intended to expand the partnership between the Company and the owners of Karl Lagerfeld brand and extend their business development opportunities on a global scale.

The investment in KLH, which is being accounted for under the equity method of accounting, is reflected in Investment in Unconsolidated Affiliates on the Consolidated Balance Sheets at January 31, 2022 and 2021.

Investment in KL North America

In June 2015, the Company entered into a joint venture agreement with Karl Lagerfeld Group BV (“KLBV”).

The Company paid KLBV $ 25.0 million for a 49 % ownership interest in KLNA.

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

In May 2022, the Company

G-III Apparel Group, Ltd.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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

The investment in KLNA, which is being accounted for under the equity method of accounting, is reflected in Investment in Unconsolidated Affiliates on the Consolidated Balance Sheets at January 31, 2022 and 2021.

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.

Prior to May 2022, the investment in KLH was accounted for under the equity method of accounting and was reflected in Investment in Unconsolidated Affiliates on the consolidated balance sheets at January 31, 2022.

Investment in KL North America

In June 2015, the Company entered into a joint venture agreement with Karl Lagerfeld Group BV (“KLBV”).

The Company paid KLBV $ 25.0 million for a 49 % ownership interest in KLNA.

KLNA holds brand rights to all Karl Lagerfeld trademarks, including the Karl Lagerfeld Paris brand the Company currently uses, for all consumer products (except eyewear, fragrance, cosmetics, watches, jewelry, and hospitality services) and apparel in the United States, Canada and Mexico.

In May 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.

Prior to May 2022, the investment in KLNA was accounted for under the equity method of accounting and was reflected in Investment in Unconsolidated Affiliates on the consolidated balance sheets at January 31, 2022.

NOTE 17 — RELATED PARTY TRANSACTIONS

Transactions with E-Commerce Retailer

In fiscal 2023, the Company made a $ 25.0 million investment in an e-commerce retailer.

The Company’s Chief Executive Officer and Executive Vice President indirectly own 1.4 % of the e-commerce retailer through their ownership in a private investment partnership.

The Company had no material transactions with the e-commerce retailer during the year ended January 31, 2023.

Transactions with Fabco

1 unchanged sentence

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

In fiscal 2021 and 2020, the Company sold $ 2.7 million and $ 4.4 million in inventory to Fabco, respectively.

In fiscal 2021, the Company sold $ 2.7 million in inventory to Fabco.

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

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

Transactions with KL North America

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

Prior to May 30, 2022, G-III owned a 49 % ownership interest in KLNA and was considered a related party of KLNA (see Note 16).

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

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

The Company incurred royalty and advertising expense of $ 3.6 million during the period of February 1, 2022 through May 30, 2022 prior to KLNA becoming a consolidated indirect wholly-owned subsidiary of the Company.

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

NOTE 18 — SUBSEQUENT EVENTS

In March 2023, the Company announced the signing of a long-term license with Authentic Brands Group for the Nautica brand in North America.

The Company will produce across a number of categories starting with a full women’s jeanswear collection and then expanding in a phased approach into additional categories including sportswear, suit separates and dresses.

The new five-year license agreement, effective beginning in January 2024, includes three extensions, for five years each.

First deliveries are expected to hit the floor in January 2024.

The product is expected to be distributed in better department stores, digital channels and Nautica’s stores and website in North America and franchised stores globally.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

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

What changed 10-K

Item 9A. Controls and Procedures