What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-06-06 compared with 2022-12-07 · 106 added, 242 removed, 461 unchanged (43% of the section changed)

49 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended October 31,

Nine Months Ended October 31,

Three Months Ended April 30,

(In thousands, except per share amounts)

2 unchanged sentences

Depreciation and amortization

Asset impairment, net of gain on lease terminations

Operating profit

Other (loss) income

Other income (loss)

Interest and financing charges, net

10 unchanged sentences

Foreign currency translation adjustments

Other comprehensive loss:

Other comprehensive income (loss):

Comprehensive income

9 unchanged sentences

(In thousands)

Balance as of July 31, 2022

Equity awards exercised/vested, net

Share-based compensation expense

Other comprehensive loss, net

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

Balance as of October 31, 2022

Balance as of July 31, 2021

Equity awards exercised/vested, net

Share-based compensation expense

Taxes paid for net share settlements

Other comprehensive loss, net

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

Balance as of October 31, 2021

Balance as of January 31, 2023

2 unchanged sentences

Taxes paid for net share settlements

Other comprehensive loss, net

Other comprehensive income, net

Repurchases of common stock

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

Balance as of October 31, 2022

Balance as of April 30, 2023

Balance as of January 31, 2022

2 unchanged sentences

Taxes paid for net share settlements

Cumulative effect of change in accounting principle

Other comprehensive loss, net

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

Balance as of October 31, 2021

Balance as of April 30, 2022

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended October 31,

Three Months Ended April 30,

(Unaudited, in thousands)

5 unchanged sentences

Non-cash operating lease costs

Gain on lease terminations

Asset impairment

Dividend received from unconsolidated affiliate

Equity gain in unconsolidated affiliates

Equity loss (gain) in unconsolidated affiliates

Change in fair value of equity securities

2 unchanged sentences

Deferred income taxes

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

Changes in operating assets and liabilities:

6 unchanged sentences

Accounts payable, accrued expenses and other liabilities

Net cash used in operating activities

Net cash provided by operating activities

Cash flows from investing activities

1 unchanged sentence

Investment in e-commerce retailer

Investment in equity securities

Sale of equity securities

Investment in equity interest of private company

Capital expenditures

Acquisition of KLH, net of cash acquired

Acquisition of other foreign business, net of cash acquired

Investment in brand acquisition

Net cash used in investing activities

6 unchanged sentences

Taxes paid for net share settlements

Net cash provided by (used in) financing activities

Net cash used in financing activities

Foreign currency translation adjustments

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

4 unchanged sentences

Income tax payments, net

Stock received from licensing agreement

The accompanying notes are an integral part of these statements .

6 unchanged sentences

The Company designs, sources and markets an extensive range of apparel, including outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear, as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage.

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

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

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

Fabco Holding B.V.

(“Fabco”) is a Dutch joint venture limited liability company that 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 the Company’s consolidated financial statements beginning in the fourth quarter of fiscal 2022.

Karl Lagerfeld Holding B.V.

6 unchanged sentences

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

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

(“Fabco”) and Sonia Rykiel, which the Company purchased in October 2021, report results on a calendar year basis rather than on the January 31 fiscal year basis used by the Company.

Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, KLH, 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, Fabco and Sonia Rykiel are included in the financial statements for the quarter ended or ending closest to the Company’s fiscal quarter end.

For example, with respect to the Company’s results for the nine-month period ended October 31, 2022, the results of Vilebrequin, Fabco and Sonia Rykiel are included for the nine-month period ended September 30, 2022.

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

For example, with respect to the Company’s results for the three-month period ended April 30, 2023, the results of Vilebrequin, Fabco, KLH and Sonia Rykiel are included for the three-month period ended March 31, 2023.

For the year ended December 31, 2022, the results of KLH, which includes KLNA, are included for the period from June 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 three and nine-month periods for the retail operations segment were each 13-week and 39-week periods, respectively, and ended on October 29, 2022 and October 30, 2021, respectively.

The results for the three and nine months ended October 31, 2022 are not necessarily indicative of the results expected for the entire fiscal year, given the seasonal nature of the Company’s business and the effects of the COVID-19 pandemic on the Company’s business.

The Company’s three-month periods ended April 30, 2023 and 2022 were each 13-week periods for the retail operations segment.

For fiscal 2024 and 2023, the three-month periods for the retail operations segment ended on April 29, 2023 and April 30, 2022, respectively.

The results for the three months ended April 30, 2023 are not necessarily indicative of the results expected for the entire fiscal year, given the seasonal nature of the Company’s business.

The accompanying financial statements included herein are unaudited.

11 unchanged sentences

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

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

October 31, 2022

The Company’s accounts receivable and allowance for doubtful accounts as of April 30, 2023, April 30, 2022 and January 31, 2023 were:

April 30, 2023

(In thousands)

2 unchanged sentences

Accounts receivable, net

October 31, 2021

April 30, 2022

(In thousands)

18 unchanged sentences

Accounts written off as uncollectible

Balance as of October 31, 2022

Balance as of April 30, 2023

Balance as of January 31, 2022

1 unchanged sentence

Accounts written off as uncollectible

Balance as of October 31, 2021

Balance as of April 30, 2022

Balance as of January 31, 2022

6 unchanged sentences

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

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, was $ 17.1 million, $ 13.9 million and $ 18.9 million as of October 31, 2022, October 31, 2021 and January 31, 2022, respectively.

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, was $ 12.9 million, $ 16.4 million and $ 19.2 million as of April 30, 2023, April 30, 2022 and January 31, 2023, respectively.

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

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

Inventory held on consignment by the Company’s customers totaled $ 7.6 million, $ 5.9 million and $ 6.6 million at April 30, 2023, April 30, 2022 and January 31, 2023, respectively.

Consignment inventory is held by the Company’s customers.

21 unchanged sentences

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

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

The fair value of the Company’s secured notes is based on their current market price as of April 30, 2023.

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

10 unchanged sentences

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

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

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 of these stores.

NOTE 5 – LEASES

9 unchanged sentences

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

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

The Company’s lease assets and liabilities as of April 30, 2023, April 30, 2022 and January 31, 2023 consist of the following:

Classification

October 31, 2022

October 31, 2021

April 30, 2023

April 30, 2022

January 31, 2023

7 unchanged sentences

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

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

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

The Company recorded lease costs of $ 18.6 million and $ 14.1 million during the three months ended April 30, 2023 and 2022, respectively.

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

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

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

The Company recorded variable lease costs and short-term lease costs of $ 5.9 million and $ 5.1 million for the three months ended April 30, 2023 and 2022, respectively.

Short-term lease costs are immaterial.

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

As of April 30, 2023, the Company’s maturity of operating lease liabilities in the years ending up to January 31, 2028 and thereafter are as follows:

Year Ending January 31,

2 unchanged sentences

Present value of lease liabilities

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

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

As of April 30, 2023, there are no material leases that are legally binding but have not yet commenced.

As of April 30, 2023, the weighted average remaining lease term related to operating leases is 5.4 years.

The weighted average discount rate related to operating leases is 8.0 %.

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

Right-of-use assets obtained in exchange for lease obligations were $ 96.7 million and $ 24.6 million during the nine months ended October 31, 2022 and October 31, 2021, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities is $ 21.2 million and $ 15.0 million during the three months ended April 30, 2023 and 2022, respectively.

Right-of-use assets obtained in exchange for lease obligations were $ 10.5 million and $ 8.6 million during the three months ended April 30, 2023 and 2022, respectively.

NOTE 6 – KARL LAGERFELD ACQUISITION

3 unchanged sentences

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.

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.

22 unchanged sentences

Customer relationships

Investments in unconsolidated affiliates

Deferred income taxes

6 unchanged sentences

Income taxes payable

Deferred income taxes

Other long-term liabilities

1 unchanged sentence

Total fair value of acquisition consideration

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

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

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 of approximately $ 84.3 million in connection with the acquisition of KLH.

9 unchanged sentences

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

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

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

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

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

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

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

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

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

Three Months Ended October 31,

Nine Months Ended October 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 $ 30.9 million gain recorded to remeasure to fair value the previously held investments in KLH and KLNA as though the gain was recorded on February 1, 2021 and (vii) adjustments for accounting policy changes to conform to G-III’s presentation.

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

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

Note 7 – Intangible Assets

Intangible assets consist of:

October 31, 2022

Estimated Life

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

(In thousands)

Finite-lived intangible assets

Customer relationships

15 - 17 years

Total finite-lived intangible assets

Indefinite-lived intangible assets

Total indefinite-lived intangible assets

Total intangible assets, net

October 31, 2021

Estimated Life

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

(In thousands)

Finite-lived intangible assets

Customer relationships

15 - 17 years

Total finite-lived intangible assets

Indefinite-lived intangible assets

Total indefinite-lived intangible assets

Total intangible assets, net

January 31, 2022

Estimated Life

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

(In thousands)

Finite-lived intangible assets

Customer relationships

15 - 17 years

Total finite-lived intangible assets

Indefinite-lived intangible assets

Total indefinite-lived intangible assets

Total intangible assets, net

Amortization expense

Amortization expense with respect to finite-lived intangibles amounted to $ 1.0 million and $ 2.7 million for the three and nine months ended October 31, 2022, respectively.

Amortization expense with respect to finite-lived intangibles amounted to $ 0.9 million and $ 2.8 million for the three and nine months ended October 31, 2021, respectively.

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

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

Year Ending January 31,

Amortization Expense

(In thousands)

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

Change in Goodwill

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

January 31, 2021

Acquisition of Sonia Rykiel

Currency translation

January 31, 2022

Acquisition of Karl Lagerfeld

Acquisition of other foreign business

Currency translation

October 31, 2022

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

The Company reviews and tests its goodwill and intangible assets with indefinite lives for impairment at least annually, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may be impaired.

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

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

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

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

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

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

The Company’s indefinite-lived trademark balance is primarily composed of the Donna Karan/DKNY trademark that was acquired in fiscal 2017 and the Karl Lagerfeld trademark that was acquired in fiscal 2023.

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

NOTE 7 – 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 310,600 and 258,600 shares of common stock have been excluded from the diluted net income per share calculation for the three and nine months ended October 31, 2022, respectively.

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

Approximately 302,200 and 113,300 shares of common stock have been excluded from the diluted net income per share calculation for the three months ended April 30, 2023 and 2022, 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 following table reconciles the numerators and denominators used in the calculation of basic and diluted net income per share:

Three Months Ended October 31,

Nine Months Ended October 31,

Three Months Ended April 30,

(In thousands, except share and per share amounts)

10 unchanged sentences

Long-term debt consists of the following:

October 31, 2022

October 31, 2021

April 30, 2023

April 30, 2022

January 31, 2023

8 unchanged sentences

Current portion of long-term debt

(1) Does not include debt issuance costs, net of amortization, totaling $ 4.4 million, $ 6.0 million and $ 5.6 million as of October 31, 2022, October 31, 2021 and January 31, 2022, respectively, related to the revolving credit facility.

(1) Does not include debt issuance costs, net of amortization, totaling $ 3.6 million, $ 5.2 million and $ 4.0 million as of April 30, 2023, April 30, 2022 and January 31, 2023, respectively, related to the revolving credit facility.

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

22 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.

The ABL Credit Agreement refinanced, amended and restated the Amended Credit Agreement, dated as of December 1, 2016 (as amended, supplemented or otherwise modified from time to time prior to August 7, 2020, the “Prior Credit Agreement”).

4 unchanged sentences

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

The calculation of the interest rate under the ABL Credit Agreement has been revised as set forth in the next paragraph.

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

1 unchanged sentence

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

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

As of April 30, 2023, interest under the ABL Credit Agreement was being paid at an average rate of 6.62 % per annum.

On April 20, 2023, the Company amended the ABL Credit Agreement to replace LIBOR with the Adjusted Term Secured Overnight Financing Rate (“SOFR”) as a successor rate.

All other material terms and conditions of the ABL Credit Agreement were unchanged.

Borrowings under the amended ABL Credit Agreement will bear interest, at the Borrower’s

option, at the alternate base rate (defined as, for a given day, the greatest of (i) the “prime rate” in effect on such day, (ii) the NYFRB Rate (as defined in the amendment) in effect on such day plus 0.5 % and (iii) the Adjusted Term SOFR (defined as an interest rate per annum equal to the Term SOFR for such interest period plus 0.10 %) for a one-month interest period as published two business days prior to such day plus 1 %) plus an applicable spread or the Adjusted Term SOFR Rate plus an applicable spread.

The Company applied certain provisions and practical expedients of ASC 848 – Reference Rate Reform related to the transition from LIBOR to SOFR.

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

6 unchanged sentences

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

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

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

As of April 30, 2023, the Company was in compliance with these covenants.

As of April 30, 2023, the Company had no borrowings outstanding under the ABL Credit Agreement.

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

As of October 31, 2022, there were outstanding trade and standby letters of credit amounting to $ 6.5 million and $ 3.4 million, respectively.

As of April 30, 2023, there were outstanding trade and standby letters of credit amounting to $ 7.8 million and $ 2.9 million, respectively.

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

The Company extinguished and charged to interest expense $ 0.4 million of the prior debt issuance costs and incurred new debt issuance costs totaling $ 5.1 million related to the ABL Credit Agreement.

The Company has a total of $ 8.0 million debt issuance costs related to the ABL Credit Agreement.

The Company has a total of $ 8.0 million of debt issuance costs related to the ABL Credit Agreement.

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

As a portion of the consideration for the acquisition of Donna Karan International (“DKI”), the Company issued to LVMH a junior lien secured promissory note in the principal amount of $ 125.0 million that bears interest at the rate of 2 % per year.

$ 75.0 million of the principal amount of the LVMH Note is due and payable on June 1, 2023 and therefore has been recorded within the current portion of notes payable on the condensed consolidated balance sheets and $ 50.0 million of such principal amount is due and payable on December 1, 2023 .

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

$ 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.

The LVMH Note is classified in current portion of notes payable in the Company’s condensed consolidated balance sheet as of April 30, 2023.

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

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

4 unchanged sentences

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

As of April 30, 2023, the Company had an aggregate outstanding balance of € 10.3 million ($ 11.2 million) under these unsecured loans.

Overdraft Facilities

3 unchanged sentences

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

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

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

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

varying interest rates of 0 % to 0.5 %.

As of April 30, 2023, TRB had an aggregate of € 3.8 million ($ 4.1 million) drawn under these facilities.

Foreign Credit Facility

2 unchanged sentences

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

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

As of April 30, 2023, KLH had € 7.8 million ($ 8.5 million) of borrowings outstanding under this credit facility.

NOTE 9 – REVENUE RECOGNITION

5 unchanged sentences

Wholesale Operations Segment.

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

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 consideration 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, Karl Lagerfeld, Vilebrequin and Sonia Rykiel trademarks owned by the Company.

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

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

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

As of April 30, 2023, revenues from license agreements represented an insignificant portion of wholesale revenues.

Retail Operations Segment.

9 unchanged sentences

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

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

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

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

that existed at January 31, 2022.

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

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

Total contract liabilities were $ 4.1 million, $ 3.6 million and $ 5.1 million at April 30, 2023, April 30, 2022 and January 31, 2023, respectively.

The Company recognized $ 3.6 million in revenue for the three months ended April 30, 2023 related to contract liabilities that existed at January 31, 2023.

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

There were no contract assets recorded as of April 30, 2023, April 30, 2022 and January 31, 2023.

Substantially all of the advance payments from licensees as of April 30, 2023 are expected to be recognized as revenue within the next twelve months.

NOTE 10 – SEGMENTS

3 unchanged sentences

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

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

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

Bass, Andrew Marc and Sonia Rykiel.

2 unchanged sentences

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

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

Three Months Ended October 31, 2022

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Asset impairment

Operating profit (loss)

Three Months Ended October 31, 2021

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Operating profit (loss)

Nine Months Ended October 31, 2022

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

Three Months Ended April 30, 2023

Elimination (1)

3 unchanged sentences

Depreciation and amortization

Asset impairment, net of gain on lease terminations

Operating profit (loss)

Nine Months Ended October 31, 2021

Three Months Ended April 30, 2022

Elimination (1)

7 unchanged sentences

Three Months Ended

Nine Months Ended

October 31, 2022

October 31, 2021

October 31, 2022

October 31, 2021

April 30, 2023

April 30, 2022

(In thousands)

5 unchanged sentences

Retail net sales

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

October 31, 2022

October 31, 2021

January 31, 2022

(In thousands)

(1) The Company acquired the remaining interests in KLH (the Karl Lagerfeld branded product) that it did not already own as of May 31, 2022.

Net sales of Karl Lagerfeld product were included in licensed brand net sales of the wholesale operations segment through May 31, 2022.

Subsequent to May 31, 2022, net sales of Karl Lagerfeld product are included in proprietary brands net sales of the wholesale operations segment .

NOTE 11 – STOCKHOLDERS’ EQUITY

For the three months ended October 31, 2022, the Company issued no shares of common stock and utilized 2,366 shares of treasury stock in connection with the vesting of equity awards.

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

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

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

For the three months ended April 30, 2023, the Company issued no shares of common stock and utilized 2,001 shares of treasury stock in connection with the vesting of equity awards.

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

NOTE 12 – CANADIAN CUSTOMS DUTY EXAMINATION

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

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

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

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

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

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

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

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

The decision was not appealed by the CBSA.

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

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

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

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

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

In accordance with a favorable ruling by the Canadian International Trade Tribunal, in fiscal 2023, G-III Canada received a refund from the Canada Border Service Agency (“CBSA”) of CAD $ 1.5 million ( $ 1.1 million), including interest and net of a dutiable design assist, for amounts paid by G-III Canada to the CBSA 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 from the CBSA of approximately CAD $ 13.3 million ( $ 9.8 million) plus related interest.

These amounts are recorded within other assets, net on the condensed consolidated balance sheets.

NOTE 13 – RECENT ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

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

There was no accounting guidance adopted during the three months ended April 30, 2023.

Issued Accounting Guidance Being Evaluated for Adoption

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

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

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

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

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

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

The interest rate under this facility is indexed to LIBOR.

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

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

The Company has reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the consolidated financial statements.

NOTE 14 – SUBSEQUENT EVENTS

In May 2023, the Company entered into a global twenty-five year master license agreement with Xcel Brands to design and produce all categories of men’s and women’s product for the Halston brand.

The agreement provides for an initial term of five years , followed by a twenty-year period, as well as a purchase option at the end of the twenty-five year term.

First deliveries of Halston product are expected to begin in the fall of 2024.

The product will be distributed globally through better department stores and digital channels.

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

What changed 10-Q

Item 1. Financial Statements