What changed in this filing

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Item 1. Financial Statements

2023-09-07 compared with 2023-06-06 · 157 added, 111 removed, 456 unchanged (37% of the section changed)

6 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 18.8 million, $ 16.9 million and $ 18.3 million, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 18,491 , $ 18,067 and $ 18,297 , respectively

Prepaid income taxes

40 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended April 30,

Three Months Ended July 31,

Six Months Ended July 31,

(In thousands, except per share amounts)

3 unchanged sentences

Operating profit

Other income (loss)

Interest and financing charges, net

8 unchanged sentences

Weighted average number of shares outstanding

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation adjustments

11 unchanged sentences

(In thousands)

Balance as of January 31, 2023

Equity awards exercised/vested, net

Balance as of April 30, 2023

Equity awards vested, net

Share-based compensation expense

3 unchanged sentences

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

Balance as of July 31, 2023

Balance as of April 30, 2022

Equity awards vested, net

Share-based compensation expense

Taxes paid for net share settlements

Other comprehensive income, net

Repurchases of common stock

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

Balance as of July 31, 2022

Balance as of January 31, 2023

Equity awards exercised/vested, net

Equity awards vested, net

Share-based compensation expense

Taxes paid for net share settlements

Other comprehensive income, net

Repurchases of common stock

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

Balance as of July 31, 2023

Balance as of January 31, 2022

Equity awards vested, net

Share-based compensation expense

Taxes paid for net share settlements

Other comprehensive loss, net

Repurchases of common stock

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

Balance as of April 30, 2022

Balance as of July 31, 2022

The accompanying notes are an integral part of these statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended April 30,

Six Months Ended July 31,

(Unaudited, in thousands)

1 unchanged sentence

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

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

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

Depreciation and amortization

1 unchanged sentence

Non-cash operating lease costs

Equity loss (gain) in unconsolidated affiliates

Equity gain (loss) 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 provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities

2 unchanged sentences

Investment in equity interest of private company

Investment in equity securities

Capital expenditures

Acquisition of KLH, net of cash acquired

Net cash used in investing activities

2 unchanged sentences

Proceeds from borrowings - revolving facility

Repayment of borrowings - LVMH Note

Repayment of borrowings - foreign facilities

2 unchanged sentences

Taxes paid for net share settlements

Net cash used in financing activities

Net cash (used in) provided by financing activities

Foreign currency translation adjustments

18 unchanged sentences

(“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.

Sonia Rykiel is a wholly-owned operating subsidiary.

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 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 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.

KLH, Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, 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 KLH, Vilebrequin, 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 six-month period ended July 31, 2023, the results of KLH, Vilebrequin, Fabco and Sonia Rykiel are included for the six-month period ended June 30, 2023.

For the year ended January 31, 2023, 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 January 1, 2022 through May 30, 2022.

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

The Company’s three-month periods ended April 30, 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.

For fiscal 2024 and 2023, the three and six-month periods for the retail operations segment were each 13-week and 26-week periods, respectively, and ended on July 29, 2023 and July 30, 2022, respectively.

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

8 unchanged sentences

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

wholesale and retail trade receivables.

wholesale and retail trade

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

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

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

April 30, 2023

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

July 31, 2023

(In thousands)

2 unchanged sentences

Accounts receivable, net

April 30, 2022

July 31, 2022

(In thousands)

18 unchanged sentences

Accounts written off as uncollectible

Balance as of April 30, 2023

Balance as of July 31, 2023

Balance as of January 31, 2022

1 unchanged sentence

Accounts written off as uncollectible

Balance as of April 30, 2022

Balance as of July 31, 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 $ 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, which consists of the amount of goods that are anticipated to be returned by customers, was $ 8.5 million, $ 9.3 million and $ 19.2 million as of July 31, 2023, July 31, 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 $ 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.

Inventory held on consignment by the Company’s customers totaled $ 7.9 million, $ 5.7 million and $ 6.6 million at July 31, 2023, July 31, 2022 and January 31, 2023, respectively.

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

20 unchanged sentences

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

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

The fair value of the Company’s secured notes is based on their current market price as of July 31, 2023.

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

Furthermore, the carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash, accounts receivable and accounts payable) also approximates fair value due to the short-term nature of these accounts.

The 2 % note in the principal amount of $ 125 million (the “LVMH Note”) issued to LVMH Moet Hennessy Louis Vuitton Inc.

(“LVMH”) in connection with the acquisition of DKNY and Donna Karan was recorded on the balance sheet at a discount of $ 40.0 million in accordance with ASC 820 – Fair Value Measurements .

The 2 % note in the original principal amount of $ 125 million (the “LVMH Note”) issued to LVMH Moet Hennessy Louis Vuitton Inc.

(“LVMH”) in connection with the acquisition of DKNY and Donna Karan was recorded on the balance sheet at a discount of $ 40.0 million in accordance with ASC 820 – Fair Value Measurements (“ASC 820”).

For purposes of this fair value disclosure, the Company based its fair value estimate for the LVMH Note on the initial fair value as determined at the date of the acquisition of DKNY and Donna Karan and records the amortization using the effective interest method over the term of the LVMH Note.

The Company repaid $ 75.0 million of the principal amount of the LVMH Note on June 1, 2023.

The fair value of the LVMH Note was considered a Level 3 valuation in the fair value hierarchy.

17 unchanged sentences

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

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

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

Classification

April 30, 2023

April 30, 2022

July 31, 2023

July 31, 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 $ 18.6 million and $ 14.1 million during the three months ended April 30, 2023 and 2022, respectively.

The Company recorded lease costs of $ 18.3 million and $ 36.9 million during the three and six months ended July 31, 2023.

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

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

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

The Company recorded variable lease costs and short-term lease costs of $ 5.5 million and $ 11.5 million for the three and six months ended July 31, 2023.

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

Short-term lease costs are immaterial.

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:

As of July 31, 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 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.

As of July 31, 2023, there are no material leases that are legally binding but have not yet commenced.

As of July 31, 2023, the weighted average remaining lease term related to operating leases is 5.1 years.

The weighted average discount rate related to operating leases is 8.4 %.

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.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 39.3 million and $ 30.0 million during the six months ended July 31, 2023 and 2022, respectively.

Right-of-use assets obtained in exchange for lease obligations were $ 18.1 million and $ 69.9 million during the six months ended July 31, 2023 and 2022, respectively.

NOTE 6 – KARL LAGERFELD ACQUISITION

On April 29, 2022, the Company entered into a share purchase agreement (the “Purchase Agreement”) with a group of investors pursuant to which the Company agreed to acquire, on the terms set forth and subject to the conditions set forth in the Purchase Agreement, the remaining 81 % interest in KLH that it did not already own, for an aggregate consideration

of € 193.4 million (approximately $ 207.6 million) in cash, after taking into account certain adjustments.

On April 29, 2022, the Company entered into a share purchase agreement (the “Purchase Agreement”) pursuant to which the Company agreed to acquire the remaining 81 % interest in KLH that it did not already own, for an aggregate

consideration of € 193.4 million (approximately $ 207.6 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.

and a discount for lack of control related to the Company’s previously held minority investment in KLH.

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.

The addition of Karl Lagerfeld 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.

The Company believes that Karl Lagerfeld’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

31 unchanged sentences

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 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.

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 Company made 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.

7 unchanged sentences

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.

The fair value of assets acquired and liabilities assumed have been finalized as of May 31, 2023.

NOTE 7 – NET INCOME PER COMMON SHARE

1 unchanged sentence

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

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.

Approximately 106,000 and 312,500 shares of common stock have been excluded from the diluted net income per share calculation for the three and six months ended July 31, 2023.

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

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

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

Three Months Ended April 30,

Three Months Ended July 31,

Six Months Ended July 31,

(In thousands, except share and per share amounts)

10 unchanged sentences

Long-term debt consists of the following:

April 30, 2023

April 30, 2022

July 31, 2023

July 31, 2022

January 31, 2023

8 unchanged sentences

Current portion of long-term debt

(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.

(1) Does not include debt issuance costs, net of amortization, totaling $ 3.2 million, $ 4.8 million and $ 4.0 million as of July 31, 2023, July 31, 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.

5 unchanged sentences

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

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

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.

19 unchanged sentences

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

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

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

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

The 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.

In addition to paying interest on any outstanding borrowings under the ABL Credit Agreement, the Company is required to pay a commitment fee to the lenders under the credit agreement with respect to the unutilized commitments.

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 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.

In April 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.

Borrowings under the amended ABL Credit Agreement now 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 ABL Credit Agreement is secured by specified assets of the Borrowers and the Guarantors.

The commitment fee accrues at

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

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

6 unchanged sentences

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

As of April 30, 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.

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

As of July 31, 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 April 30, 2023, there were outstanding trade and standby letters of credit amounting to $ 7.8 million and $ 2.9 million, respectively.

As of July 31, 2023, there were outstanding trade and standby letters of credit amounting to $ 3.7 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 of debt issuance costs related to the ABL Credit Agreement.

The Company has recorded $ 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 $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.

$ 75.0 million of the principal amount of the LVMH Note was repaid 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 sheets as of July 31, 2023 and January 31, 2023.

$ 75.0 million of the LVMH Note is classified in current portion of notes payable in the Company’s condensed consolidated balance sheet as of July 31, 2022.

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

3 unchanged sentences

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.

In the aggregate, the Company is currently required to make quarterly installment payments of principal in the amount of € 0.6 million under these unsecured 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 April 30, 2023, the Company had an aggregate outstanding balance of € 10.3 million ($ 11.2 million) under these unsecured loans.

As of July 31, 2023, the Company had an aggregate outstanding balance of € 9.1 million ($ 9.9 million) under these unsecured loans.

Overdraft Facilities

1 unchanged sentence

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

Interest on drawn balances accrues at a rate equal to the Euro Interbank Offered Rate plus a margin of 1.75 % per annum, payable quarterly.

Interest on drawn balances accrues at a rate equal to the Euro Interbank Offered Rate (“EURIBOR”) plus a margin of 1.75 % per annum, payable quarterly.

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

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

varying interest rates of 0 % to 0.5 %.

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

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

million at varying interest rates of 0 % to 0.5 %.

As of July 31, 2023, TRB had an aggregate of € 2.0 million ($ 2.2 million) drawn under these facilities.

Foreign Credit Facility

1 unchanged sentence

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

Borrowings bear interest at the EURIBOR plus a margin of 1.7 %.

As of July 31, 2023, KLH had € 7.5 million ($ 8.2 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 product under the Karl Lagerfeld Paris brand from our 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, including from retail stores operated by Vilebrequin and Karl Lagerfeld, other than sales of product under the Karl Lagerfeld Paris brand from the Company’s retail stores and digital outlets.

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

3 unchanged sentences

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.

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

Retail Operations Segment.

Retail store revenues are generated by direct sales to consumers through company-operated stores and product sales through the Company’s digital channels for the DKNY, Donna Karan, G.H.

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

Retail store revenues are generated by direct sales to consumers through Company-operated stores and product sales through the Company’s digital channels for the DKNY, Donna Karan, Karl Lagerfeld Paris, G.H.

Bass and Wilsons Leather businesses.

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

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

Total contract liabilities were $ 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.

Total contract liabilities were $ 4.6 million, $ 4.0 million and $ 5.1 million at July 31, 2023, July 31, 2022 and January 31, 2023, respectively.

The Company recognized $ 2.8 million in revenue for the three months ended July 31, 2023 related to contract liabilities that existed at April 30, 2023.

The Company recognized $ 4.2 million in revenue for the six months ended July 31, 2023 related to contract liabilities that existed at January 31, 2023.

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

Substantially all of the advance payments from licensees as of July 31, 2023 are expected to be recognized as revenue within the next twelve months.

NOTE 10 – SEGMENTS

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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 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, Andrew Marc and Sonia Rykiel.

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

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

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

The retail operations segment consists primarily of direct sales to consumers through Company-operated stores, which consists primarily of DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, G.H.

Bass, Andrew Marc and Wilsons Leather.

Bass and Wilsons Leather.

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

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

Three Months Ended April 30, 2023

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

Three Months Ended July 31, 2023

Elimination (1)

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Operating profit (loss)

Three Months Ended April 30, 2022

Three Months Ended July 31, 2022

Elimination (1)

4 unchanged sentences

Operating profit (loss)

Six Months Ended July 31, 2023

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Operating profit (loss)

Six Months Ended July 31, 2022

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Operating profit (loss)

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

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Three Months Ended

April 30, 2023

April 30, 2022

Six Months Ended

July 31, 2023

July 31, 2022

July 31, 2023

July 31, 2022

(In thousands)

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(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.

Net sales of Karl Lagerfeld product were included in licensed brands 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 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.

For the three months ended July 31, 2023, the Company issued no shares of common stock and utilized 601,970 shares of treasury stock in connection with the vesting of equity awards.

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

For the six months ended July 31, 2023, the Company issued no shares of common stock and utilized 603,971 shares of treasury stock in connection with the vesting of equity awards.

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

NOTE 12 – CANADIAN CUSTOMS DUTY EXAMINATION

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

NOTE 13 – RELATED PARTY TRANSACTION

In June 2023, the Company entered into a stock sale and purchase agreement (the “Agreement”) with Sammy Aaron, the Company’s Vice Chairman and President and a Director of the Company.

Pursuant to the Agreement, the Company purchased from Mr.

Aaron 208,943 shares of its common stock for $ 4.1 million at a price equal to the closing price of the Company’s shares on the date of the Agreement.

NOTE 14 – RECENT ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

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

There was no accounting guidance adopted during the three months ended July 31, 2023.

Issued Accounting Guidance Being Evaluated for Adoption

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NOTE 15 – 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.

On August 9, 2023, the Company entered into a new employment agreement with Morris Goldfarb, its Chairman and Chief Executive Officer.

The employment agreement included provisions, among others, that (i) changed the structure of Mr.

Goldfarb’s annual cash incentive that are designed to align with current market practice and reduce the size of the annual cash incentive, (ii) changed the mix of annual cash compensation and annual equity grants in a manner that increases the weighting of equity compared to cash and encourages long-term performance and shareholder value creation, and (iii) in recognition of the significant reduction in the annual cash incentive agreed to by Mr.

Goldfarb, provide for a grant of 700,000 performance share units (PSUs) that may be earned over three years if certain stock price and relative total shareholder return targets are achieved.

On August 29, 2023, the Company entered into a new employment agreement with Sammy Aaron, its Vice Chairman and President.

The employment agreement included provisions, among others, that (i) changed to the structure of Mr.

Aaron’s annual cash incentive that are designed to align with current market practice and to reduce the size of the annual cash incentive, (ii) changed the mix of annual cash compensation and annual equity grants in a manner that increases the weighting of equity compared to cash and encourages long-term performance and shareholder value creation and (iii) in recognition of the significant reduction in the annual cash incentive agreed to by Mr.

Aaron, provides for a special bonus of $ 2,000,000 and a retention bonus of $ 1,000,000 .

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