What changed in this filing

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Item 1. Financial Statements

2024-06-06 compared with 2023-12-06 · 141 added, 247 removed, 369 unchanged (51% of the section changed)

48 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended October 31,

Nine Months Ended October 31,

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended April 30,

(In thousands, except per share amounts)

2 unchanged sentences

Depreciation and amortization

Asset impairments and gain on lease terminations

Operating profit

12 unchanged sentences

Foreign currency translation adjustments

Other comprehensive loss

Comprehensive income

Other comprehensive (loss) income

Comprehensive (loss) income

Comprehensive loss attributable to noncontrolling interests:

1 unchanged sentence

Comprehensive loss attributable to noncontrolling interests

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

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

The accompanying notes are an integral part of these statements.

4 unchanged sentences

(In thousands)

Balance as of July 31, 2023

Equity awards 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, 2023

Balance as of July 31, 2022

Equity awards 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 January 31, 2024

5 unchanged sentences

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

Balance as of October 31, 2023

Balance as of April 30, 2024

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

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)

1 unchanged sentence

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

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

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

Depreciation and amortization

1 unchanged sentence

Non-cash operating lease costs

Gain on lease terminations

Asset impairment

Equity gain (loss) in unconsolidated affiliates

Equity 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 (used in) operating activities

Net cash provided by operating activities

Cash flows from investing activities

Operating lease assets initial direct costs

Investment in e-commerce retailer

Investment in equity interest of private company

Investment in equity securities

Sale of equity securities

Capital expenditures

Acquisition of KLH, net of cash acquired

Acquisition of other foreign business, net of cash required

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) provided by financing activities

Net cash used in financing activities

Foreign currency translation adjustments

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

14 unchanged sentences

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.

Sonia Rykiel is a wholly-owned operating subsidiary.

Karl Lagerfeld Holding B.V.

(“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.

The Company’s DKNY and Donna Karan business in China is operated by Fabco Holding B.V.

(“Fabco”), a Dutch joint venture limited liability company that was 75 % owned by the Company through April 16, 2024 and was treated as a consolidated majority-owned subsidiary.

Effective April 17, 2024, the Company acquired the remaining 25 % interest in Fabco that it did not previously own and, as a result, Fabco began being treated as a wholly-owned subsidiary.

All material intercompany balances and transactions have been eliminated.

The results of KLH are included in the Company’s consolidated financial statements beginning May 31, 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 nine-month period ended October 31, 2023, the results of KLH, Vilebrequin, Fabco and Sonia Rykiel are included for the nine-month period ended September 30, 2023.

For the year ended January 31, 2023, the results of KLH, which includes KLNA, are included for the period from May 31, 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.

Karl Lagerfeld Holding B.V.

(“KLH”), a Dutch limited liability company that is wholly-owned by the Company, Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, Sonia Rykiel, a Swiss corporation that is wholly-owned by the Company, and Fabco 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, Sonia Rykiel and Fabco 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, 2024, the results of KLH, Vilebrequin, Sonia Rykiel and Fabco are included for the three-month period ended March 31, 2024.

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

For fiscal 2024 and 2023, the three and nine-month periods for the retail operations segment were each 13-week and 39-week periods, respectively, and ended on October 28, 2023 and October 29, 2022, respectively.

The results for the three and nine months ended October 31, 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 2025 and 2024, the three-month periods for the retail operations segment were each 13-week periods and ended on May 4, 2024 and April 29, 2023, respectively.

The results for the three months ended April 30, 2024 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, 2023, October 31, 2022 and January 31, 2023 were:

October 31, 2023

The Company’s accounts receivable and allowance for doubtful accounts as of April 30, 2024, April 30, 2023 and January 31, 2024 were:

April 30, 2024

(In thousands)

2 unchanged sentences

Accounts receivable, net

October 31, 2022

April 30, 2023

(In thousands)

13 unchanged sentences

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

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

The Company had the following activity in its allowance for doubtful accounts:

(In thousands)

2 unchanged sentences

Accounts written off as uncollectible

Balance as of October 31, 2023

Balance as of April 30, 2024

Balance as of January 31, 2023

1 unchanged sentence

Accounts written off as uncollectible

Balance as of October 31, 2022

Balance as of April 30, 2023

Balance as of January 31, 2023

3 unchanged sentences

NOTE 3 – INVENTORIES

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.

Wholesale inventories, which comprise a significant portion of the Company’s inventory, and KLH inventories are stated at the lower of cost (determined by the first-in, first-out 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.

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, was $ 15.6 million, $ 17.1 million and $ 19.2 million as of October 31, 2023, October 31, 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 $ 11.3 million, $ 12.9 million and $ 16.5 million as of April 30, 2024, April 30, 2023 and January 31, 2024, 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 $ 7.9 million, $ 6.5 million and $ 6.6 million at October 31, 2023, October 31, 2022 and January 31, 2023, respectively.

Inventory held on consignment by the Company’s customers totaled $ 10.3 million, $ 7.6 million and $ 6.6 million at April 30, 2024, April 30, 2023 and January 31, 2024, respectively.

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

14 unchanged sentences

Secured Notes

Revolving credit facility

Note issued to LVMH

3 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, 2023.

The fair value of the Company’s secured notes is based on their current market price as of April 30, 2024.

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

2 unchanged sentences

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

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 recorded 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 and the remaining $ 50.0 million of such principal amount on December 1, 2023.

6 unchanged sentences

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 of these stores.

During fiscal 2024, the Company recorded a $ 1.3 million impairment charge primarily related to leasehold improvements, furniture and fixtures, computer hardware and operating lease assets at certain DKNY, Karl Lagerfeld 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 operating lease assets and liabilities as of October 31, 2023, October 31, 2022 and January 31, 2023 consist of the following:

The Company’s operating lease assets and liabilities as of April 30, 2024, April 30, 2023 and January 31, 2024 consist of the following:

Classification

October 31, 2023

October 31, 2022

April 30, 2024

April 30, 2023

January 31, 2024

6 unchanged sentences

Total lease liabilities

The Company recorded lease costs of $ 18.1 million and $ 55.1 million during the three and nine months ended October 31, 2023.

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

The Company recorded lease costs of $ 18.2 million and $ 18.6 million during the three months ended April 30, 2024 and 2023, 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 $ 6.7 million and $ 18.1 million for the three and nine months ended October 31, 2023.

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.

The Company recorded variable lease costs and short-term lease costs of $ 5.3 million and $ 5.9 million for the three months ended April 30, 2024 and 2023, respectively.

Short-term lease costs are immaterial.

As of October 31, 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 April 30, 2024, the Company’s maturity of operating lease liabilities in the years ending up to January 31, 2029 and thereafter are as follows:

Year Ending January 31,

2 unchanged sentences

Present value of lease liabilities

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

As of October 31, 2023, the weighted average remaining lease term related to operating leases is 5.0 years.

As of April 30, 2024, there are no material leases that are legally binding but have not yet commenced.

As of April 30, 2024, the weighted average remaining lease term related to operating leases is 4.9 years.

The weighted average discount rate related to operating leases is 6.7 %.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 53.2 million and $ 47.6 million during the nine months ended October 31, 2023 and 2022, respectively.

Right-of-use assets obtained in exchange for lease obligations were $ 26.8 million and $ 96.7 million during the nine months ended October 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”) 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.

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 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 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

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

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

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

In fiscal 2023, as a result of the Company’s annual impairment test, the Company recorded a $ 347.2 million non-cash impairment charge to fully impair the carrying value of its goodwill.

This charge included all of the $ 84.3 million of goodwill previously recognized in connection with the acquisition of KLH.

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.

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

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

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

Weighted Average

Amortization Period

Customer relationships

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

The fiscal 2023 and fiscal 2022 acquisition and integration costs 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 fair value of assets acquired and liabilities assumed were finalized as of May 31, 2023.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 19.4 million and $ 21.2 million during the three months ended April 30, 2024 and 2023, respectively.

Right-of-use assets obtained in exchange for lease obligations were $ 6.8 million and $ 10.5 million during the three months ended April 30, 2024 and 2023, respectively.

NOTE 6 – 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 8,200 and 59,200 shares of common stock have been excluded from the diluted net income per share calculation for the three and nine months ended October 31, 2023.

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.

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.

Approximately 9,500 and 302,200 shares of common stock have been excluded from the diluted net income per share calculation for the three months ended April 30, 2024 and 2023, 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, 2023

October 31, 2022

April 30, 2024

April 30, 2023

January 31, 2024

1 unchanged sentence

Secured Notes

Revolving credit facility

Unsecured loans

4 unchanged sentences

Current portion of long-term debt

(1) Does not include debt issuance costs, net of amortization, totaling $ 2.8 million, $ 4.4 million and $ 4.0 million as of October 31, 2023, October 31, 2022 and January 31, 2023, respectively, related to the revolving credit facility.

(1) Does not include debt issuance costs, net of amortization, totaling $ 2.0 million, $ 3.6 million and $ 2.4 million as of April 30, 2024, April 30, 2023 and January 31, 2024, 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 the guarantors.

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

10 unchanged sentences

In August 2020, the Company’s subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc.

and The Donna Karan Company Store LLC (collectively, the “Borrowers”), entered into the second amended and restated credit agreement (the “ABL Credit Agreement”) with the Lenders named therein and with JPMorgan Chase Bank, N.A., as Administrative Agent.

The ABL Credit Agreement is a five year senior secured credit facility that provides for borrowings in the aggregate principal amount of up to $ 650 million.

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”).

The Prior Credit Agreement provided for borrowings of up to $ 650 million.

The ABL Credit Agreement extended the maturity date of this facility from December 2021 to August 2025.

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

and The Donna Karan Company Store LLC (collectively, the “Borrowers”), entered into the second amended and restated credit agreement (the “Second ABL Credit Agreement”) with the Lenders named therein and with JPMorgan Chase Bank, N.A., as Administrative Agent.

The Second ABL Credit Agreement is a five year senior secured credit facility subject to a springing maturity date if, subject to certain conditions, the Notes are not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

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

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

The Second 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”).

The Prior Credit Agreement provided for borrowings of up to $ 650 million and was due to expire in December 2021.

The Second ABL Credit Agreement extended the maturity date to August 2025, subject to a springing maturity date if, subject to certain conditions, the Notes are not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

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

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.

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 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.

In April 2023, the Company amended the Second 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 Second ABL Credit Agreement were unchanged.

Borrowings under the Second 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 SOFR (defined as an interest rate per annum equal to 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 SOFR 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.

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 Second 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 Second 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.

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

The Second ABL Credit Agreement contains covenants that, among other things, restrict the Company’s ability to, subject to specified exceptions, incur additional debt;

sell or dispose of certain assets;

5 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, 2023, the Company was in compliance with these covenants.

As of October 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 October 31, 2023, there were outstanding trade and standby letters of credit amounting to $ 2.0 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 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 was repaid on June 1, 2023 and the remaining $ 50.0 million of such principal amount was paid 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 October 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 October 31, 2022.

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.

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

As of April 30, 2024, the Company was in compliance with these covenants.

As of April 30, 2024, the Company had no borrowings outstanding under the Second ABL Credit Agreement.

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

As of April 30, 2024, there were outstanding trade and standby letters of credit amounting to $ 4.8 million and $ 2.9 million, respectively.

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

In June 2024, the Company entered into the third amended and restated credit agreement that provides for borrowings in the aggregate principal amount of up to $ 700 million and extends the maturity date to June 2029, subject to certain conditions.

See Note 12 – Subsequent Events for more information.

As a portion of the consideration for the acquisition of DKNY and Donna Karan, the Company issued to LVMH a junior lien secured promissory note in the principal amount of $ 125.0 million that bore interest at the rate of 2 % per year.

$ 75.0 million of the principal amount of the LVMH Note was paid on June 1, 2023 and the remaining $ 50.0 million of such principal amount was paid on December 1, 2023 .

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

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

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

Unsecured 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 unsecured 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 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 October 31, 2023, the Company had an aggregate outstanding balance of € 8.6 million ($ 9.1 million) under these unsecured loans.

As of April 30, 2024, the Company had an aggregate outstanding balance of € 7.9 million ($ 8.5 million) under these unsecured loans.

Overdraft Facilities

During fiscal 2021, T.R.B International SA (“TRB”) entered into several overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft.

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

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 October 31, 2023, TRB had an aggregate of € 1.8 million ($ 1.9 million) drawn under these facilities.

During fiscal 2021 and 2025, certain of the Company’s foreign entities entered into overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft.

These uncommitted overdraft facilities with HSBC Bank allow for an aggregate maximum overdraft of € 10 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.

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

As part of a COVID-19 relief program, certain of the Company’s foreign entities 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, 2024, the Company had an aggregate of € 6.4 million ($ 6.9 million) drawn under these various 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 EURIBOR plus a margin of 1.7 %.

As of October 31, 2023, KLH had € 3.9 million ($ 4.2 million) of borrowings outstanding under this credit facility.

Borrowings bear interest at the Euro Interbank Offered Rate plus a margin of 1.7 %.

As of April 30, 2024, KLH had € 12.1 million ($ 13.0 million) of borrowings outstanding under this credit facility.

NOTE 8 – REVENUE RECOGNITION

22 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, $ 3.3 million and $ 5.1 million at October 31, 2023, October 31, 2022 and January 31, 2023, respectively.

The Company recognized $ 3.1 million in revenue for the three months ended October 31, 2023 related to contract liabilities that existed at July 31, 2023.

The Company recognized $ 4.3 million in revenue for the nine months ended October 31, 2023 related to contract liabilities that existed at January 31, 2023.

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

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

Total contract liabilities were $ 4.8 million, $ 4.1 million and $ 5.2 million at April 30, 2024, April 30, 2023 and January 31, 2024, respectively.

The Company recognized $ 3.6 million in revenue for the three months ended April 30, 2024 related to contract liabilities that existed at January 31, 2024.

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.

There were no contract assets recorded as of April 30, 2024, April 30, 2023 and January 31, 2024.

Substantially all of the advance payments from licensees as of April 30, 2024 are expected to be recognized as revenue within the next twelve months.

NOTE 9 – SEGMENTS

3 unchanged sentences

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 generated by 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.

Wholesale revenues also include royalty 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.

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, 2023

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Asset impairments and gain on lease terminations

Operating profit (loss)

Three Months Ended October 31, 2022

Elimination (1)

(In thousands)

Cost of goods sold

Selling, general and administrative expenses

Depreciation and amortization

Asset impairment, net of gain on lease terminations

Operating profit (loss)

Nine Months Ended October 31, 2023

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

Three Months Ended April 30, 2024

Elimination (1)

3 unchanged sentences

Depreciation and amortization

Asset impairment, net of gain on lease terminations

Operating profit (loss)

Nine Months Ended October 31, 2022

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)

2 unchanged sentences

Three Months Ended

Nine Months Ended

October 31, 2023

October 31, 2022

October 31, 2023

October 31, 2022

April 30, 2024

April 30, 2023

(In thousands)

5 unchanged sentences

Retail net sales

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

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 10 – STOCKHOLDERS’ EQUITY

For the three months ended October 31, 2023, the Company issued no shares of common stock and utilized 4,354 shares of treasury stock in connection with the vesting of equity awards.

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

For the nine months ended October 31, 2023, the Company issued no shares of common stock and utilized 608,325 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.

NOTE 12 – CANADIAN CUSTOMS DUTY EXAMINATION

In accordance with a favorable ruling by the Canadian International Trade Tribunal, in fiscal 2023 and fiscal 2024, G-III Canada received refunds from the Canada Border Service Agency (“CBSA”) in the aggregate amount of CAD $ 2.7 million ( $ 2.0 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 an additional refund of duty and interest, net of refunds already received, from the CBSA of approximately CAD $ 12.4 million ( $ 8.9 million) plus related interest.

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

For the three months ended April 30, 2024, the Company issued no shares of common stock and utilized 267,129 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.

NOTE 11 – RECENT ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Guidance

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

There was no accounting guidance adopted during the three months ended April 30, 2024.

Issued Accounting Guidance Being Evaluated for Adoption

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 – 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 15 – EMPLOYMENT AGREEMENTS

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 that was paid shortly after the new employment agreement was entered into and a retention bonus of $ 1,000,000 payable if, as of January 31, 2025, the Company has not terminated the employment agreement for “cause” or he has not terminated the employment agreement without “cause” or without “Good Reason” (each of the terms as defined in the employment agreement).

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ ASU”) 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

The ASU expands the scope and frequency of segment disclosures and introduces the concept of a “significant expense principle,” which requires entities to disclose significant expense categories and amounts that are regularly provided to the chief operating decision maker (“CODM”) and included within the reported measure of a segment’s profit or loss.

The ASU also changes current disclosure requirements by allowing entities to report multiple measures of a segment’s profit or loss, provided the reported measures are used by the CODM to assess performance and allocate resources and that the measure closest to GAAP is also provided.

Finally, the ASU requires all segment profit or loss and assets disclosures to be provided on both an annual and interim basis and requires entities to disclose the title and position of the individual identified as the CODM.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and shall be applied retrospectively to all periods presented in the financial statements.

The Company is currently evaluating the standard and determining the extent of additional interim and annual segment disclosures that may be required.

In December 2023, the FASB issued ASU 2023-09 , “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

The ASU requires public companies to disclose, on an annual basis, a tabular reconciliation of the effective tax rate to the statutory rate for federal, state and foreign income taxes.

It also requires greater detail about individual reconciling items in the rate reconciliation to the extent the impact of those items exceeds a specified threshold.

In addition, the ASU requires public companies to disclose their income tax payments (net of refunds received), disaggregated between federal, state/local and foreign jurisdictions.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the standard and determining the extent of additional disclosures that may be required.

NOTE 12 – SUBSEQUENT EVENTS

Investment in AWWG

In May 2024, the Company acquired a 12 % minority interest in AWWG Investments B.V.

(“AWWG”) for € 50 million ($ 53.6 million).

AWWG is a global fashion group and premier platform for international brands.

AWWG owns a portfolio of brands including Hackett, Pepe Jeans and Façonnable and manages the Iberian business for PVH Corp.

The Company intends to leverage AWWG’s expertise with AWWG becoming the agent for Karl Lagerfeld, DKNY and Donna Karan in Spain and Portugal.

This investment is intended to accelerate several of the Company’s priorities, including expanding its international business and identifying opportunities for growth of our owned brands.

Third Amended and Restated ABL Credit Agreement

On June 4, 2024, the Company’s subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., AM Retail Group, Inc.

and The Donna Karan Company Store LLC (collectively, the “Borrowers”), entered into the third amended and restated credit agreement (the “Third ABL Credit Agreement”) with the lenders named therein and with JPMorgan Chase Bank, N.A., as administrative agent.

The Third ABL Credit Agreement is a five-year senior secured asset-based revolving credit facility providing for borrowings in an aggregate principal amount of up to $ 700 million.

The Company and certain of its wholly-owned domestic subsidiaries, as well as G-III Apparel Canada ULC (collectively, the “Guarantors”), are guarantors under the Third ABL Credit Agreement.

The Third ABL Credit Agreement amends and restates the Second Amended Credit Agreement, dated as of August 7, 2020 (as amended, supplemented or otherwise modified from time to time prior to June 4, 2024, the “Second Credit Agreement”), by and among the Borrowers and the Guarantors, the lenders from time-to-time party thereto, and JPMorgan Chase Bank, N.A., in its capacity as the administrative agent thereunder.

The Second Credit Agreement provided for borrowings of up to $ 650 million and was due to expire on August 7, 2025 .

The Third ABL Credit Agreement extends the maturity date to June 2029, subject to a springing maturity date as defined within the credit agreement.

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

Borrowings bear interest, at the Borrowers’ option, at Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus a margin of 1.50 % to 2.00 %, or the alternate base rate plus a margin of 0.50 % to 1.00 % (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) SOFR for a borrowing with an interest period of one month plus 1.00 %), with the applicable margin determined based on the Borrowers’ average daily availability under the Third ABL Credit Agreement.

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

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