What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-09-06 compared with 2024-06-06 · 142 added, 119 removed, 203 unchanged (56% of the section changed)

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Accordingly, the results of KLH, Vilebrequin, Sonia Rykiel and Fabco are included in the financial statements for the quarter ended or ending closest to G-III’s fiscal quarter end.

For example, with respect to our 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.

For example, with respect to our results for the six-month period ended July 31, 2024, the results of KLH, Vilebrequin, Sonia Rykiel and Fabco are included for the six-month period ended June 30, 2024.

Our retail operations segment uses a 52/53-week fiscal year.

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.

For fiscal 2025 and 2024, the three and six-month periods for the retail operations segment were each 13-week and 26-week periods and ended on August 3, 2024 and July 29, 2023, respectively.

Various statements contained in this Form 10-Q, in future filings by us with the SEC, in our press releases and in oral statements made from time to time by us or on our behalf constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

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● dependence on existing management;

● our ability to make strategic acquisitions and possible disruptions from acquisitions, including our ownership of the entire Karl Lagerfeld business;

● our ability to make strategic acquisitions and possible disruptions from acquisitions, including our ownership of the entire Karl Lagerfeld business, and the risks associated with such acquisitions on our ability to maintain an effective internal control environment;

● need for additional financing;

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Although our portfolio of brands is aimed at diversifying our risks in this regard, misjudging shifts in consumer preferences could have a negative effect on our business.

Our continued success depends on our ability to design products that are accepted in the marketplace, source the manufacture of our products on a competitive basis and continue to diversify our product portfolio and the markets we serve.

Our continued success depends on our ability to design products

that are accepted in the marketplace, source the manufacture of our products on a competitive basis and continue to diversify our product portfolio and the markets we serve.

We believe that consumers prefer to buy brands they know, and we have continually sought to increase the portfolio of name brands we can offer through different tiers of retail distribution, for a wide array of products at a variety of price points.

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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.

AWWG owns a portfolio of brands including Hackett, Pepe Jeans and Façonnable.

In July 2024, we acquired an additional 6.6% minority interest in AWWG for €27.1 million ($29.1 million), increasing our total ownership interest to approximately 18.7%.

We intend 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 our priorities including expanding our international business and identifying opportunities for growth of our owned brands.

License Agreement for Nautica Brand

In March 2023, we entered into a long-term license with Authentic Brands Group for women’s apparel under the Nautica brand in North America.

We currently produce a full women’s jeanswear line under the Nautica brand and plan to expand in a phased approach into additional categories including sportswear, suit separates and dresses.

This five-year license agreement, effective as of January 2024, includes three extensions for five years each.

First deliveries began in January 2024.

Our Nautica product is distributed in North America through our diversified distribution network, including better department stores, digital channels and Nautica’s stores and website, as well as in franchised stores globally.

We believe that significant opportunity exists for Nautica in the better women’s apparel space in categories where we have significant expertise.

License Agreements

In fiscal 2025, we entered into license agreements for (i) men’s and women’s apparel under the Converse brand and (ii) women’s apparel under the BCBG brand.

In fiscal 2024, we entered into license agreements (i) for women’s apparel under the Nautica brand, (ii) to design and produce all categories of men’s and women’s product for the Halston brand and (iii) to design and produce men’s and women’s outerwear collections for the Champion brand.

Each of these license agreements include an initial term of five-years with certain renewal options.

The products produced under these license agreements is distributed, or expected to be distributed, in North America through our diversified distribution network, including better department stores, digital channels, as well as other channels.

Additionally, our Halston and Converse product is expected to be distributed globally.

First deliveries of our Converse and BCBG products are expected to begin in Fall 2025.

First deliveries of our Nautica product began in Spring 2024, and Halston and Champion product began in Fall 2024.

We believe that significant opportunity exists in the categories subject to these license agreements where we have strong expertise, and the products produced, or expected to be produced, under these license agreements align with G-III’s core competencies.

Third Amended and Restated ABL Credit Agreement

On June 4, 2024, our subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., AM Retail Group, Inc.

In June 2024, our 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.

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

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 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.

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

Senior Secured Notes Redemption

In August 2024, we used cash on hand and borrowings from our revolving credit facility to make a $400.7 million voluntary payment to redeem the entire $400 million principal amount of our Senior Secured Notes due August 2025 at a redemption price equal to 100% of the principal amount of the Notes plus accrued interest.

We report based on two segments:

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Significant trends that affect the apparel industry include retail chains closing unprofitable stores, an increased focus by retail chains and others on expanding digital sales and providing convenience-driven fulfillment options, the continued consolidation of retail chains and the desire on the part of retailers to consolidate vendors supplying them.

In addition, we sell our products online through retail partners such as macys.com, nordstrom.com and dillards.com, each of which has a substantial online business.

We distribute our products through multiple channels, including online through retail partners such as macys.com, nordstrom.com and dillards.com, each of which has a substantial online business.

As sales of apparel through digital channels continue to increase, we are developing additional digital marketing initiatives on both our web sites and third party web sites and through social media.

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We attempt to mitigate credit risk from our customers by closely monitoring accounts receivable balances and shipping levels, as well as the ongoing financial performance and credit standing of customers.

Retailers are seeking to differentiate their offerings by devoting more resources to the development of exclusive products, whether by focusing on their own private label products or on products produced exclusively for a retailer by a national

brand manufacturer.

Exclusive brands are only made available to a specific retailer.

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While we do not expect these rules to have a material impact on our effective tax rate or financial results, we will continue to monitor evolving tax legislation in the jurisdictions in which we operate.

In August 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law which contains several tax-related provisions.

Among other effects, the IRA created an excise tax of 1% on stock repurchases by publicly traded U.S.

corporations effective after December 31, 2022.

The excise tax on common stock repurchases is classified as an additional cost of the stock acquired included in treasury stock in shareholders' equity.

The excise tax did not have a material impact on our results of operations and cash flows as of and for the six months ended July 31, 2024.

Inflation and Interest Rates

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Ongoing inflation may lead to further challenges to increase our sales and may also negatively impact our cost structure and labor costs in the future.

The Federal Reserve raised interest rates several times in fiscal 2024 in response to concerns about inflation.

It is unclear whether the Federal Reserve will reduce interest rates, maintain the current high rates or even raise interest rates in fiscal 2025.

Higher interest rates increase the cost of our borrowing under our revolving credit facility, may increase economic uncertainty and may negatively affect consumer spending.

The Federal Reserve raised interest rates several times in fiscal 2024 in response to concerns about inflation and has maintained the current high rates thus far in fiscal 2025.

Higher interest rates increase the cost of our borrowing under our

revolving credit facility, may increase economic uncertainty and may negatively affect consumer spending.

Volatility in interest rates may adversely affect our business or our customers.

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In addition, conflicts in the Middle East have caused major disruptions to global supply chains by impacting critical shipping routes through the Suez Canal and Red Sea for cargo, adding time and cost to shipments.

While the conditions at the Panama Canal are improving, port congestion and capacity shortages in Asia are beginning to disrupt container shipping and impact our supply chain in fiscal 2025.

Transit times have increased to destinations on the east coast of the United States and Europe.

These delays have not as yet resulted in a significant loss of customer sales.

We have not yet experienced significant increases in transportation costs to North America, but have experienced increased transportation costs for shipments to Europe.

We anticipate moderate increases in our shipping costs in North America and Europe in fiscal 2025.

While limits to the number of daily vessel transits at the Panama Canal have continued to ease in fiscal 2025, our supply chain is impacted by the port congestion and capacity shortages in Asia.

Transit times and transportation costs have increased to destinations on the east coast of the United States and Europe.

These delays have not yet resulted in a significant loss of customer sales and the increase in transportation costs to North America has not yet been significant.

We anticipate increases in our shipping costs in North America and Europe in the second half of fiscal 2025.

We continue to monitor supply chain challenges and coordinate with our partners to divert or adjust routes accordingly to ensure delivery of our product.

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Results of Operations

Three months ended April 30, 2024 compared to three months ended April 30, 2023

Net sales for the three months ended April 30, 2024 increased to $609.7 million from $606.6 million in the same period last year.

Three months ended July 31, 2024 compared to three months ended July 31, 2023

Net sales for the three months ended July 31, 2024 decreased to $644.8 million from $659.8 million in the same period last year.

Net sales of our segments are reported before intercompany eliminations.

Net sales of our wholesale operations segment increased to $597.8 million for the three months ended April 30, 2024 from $586.9 million in the comparable period last year.

This increase was primarily the result of an increase in net sales of our Karl Lagerfeld and DKNY products.

In addition, the relaunched Donna Karan products started shipping during the current year period which contributed to the increase in net sales.

The increase in sales of Karl Lagerfeld products was primarily related to sportswear and handbags and the increase in sales of DKNY products was primarily related to sportswear.

These increases were partially offset by a decrease in net sales of Calvin Klein and Tommy Hilfiger licensed products.

Net sales of our retail operations segment were $30.5 million for the three months ended April 30, 2024 compared to $30.2 million in the same period last year.

The number of retail stores operated by us decreased from 61 at April 30, 2023 to 52 at April 30, 2024.

Net sales of our wholesale operations segment decreased to $620.3 million for the three months ended July 31, 2024 from $639.2 million in the comparable period last year.

This decrease was primarily the result of a decrease in net sales of Calvin Klein and Tommy Hilfiger licensed products.

These decreases were partially offset by the relaunched Donna Karan products that started shipping during the current year.

These decreases were also offset by increases in net sales of our DKNY and Karl Lagerfeld products.

The increase in sales of DKNY products was primarily related to performance wear and denim.

The increase in sales of Karl Lagerfeld products was primarily related to women’s suits, shoes and handbags.

Additionally, the decreases were also partially offset by the recently launched Nautica denim licensed products that primarily started shipping during the current year.

Net sales of our retail operations segment were $37.2 million for the three months ended July 31, 2024 compared to $34.3 million in the same period last year.

The number of retail stores operated by us decreased from 59 at July 31, 2023 to 50 at July 31, 2024.

The increase in sales in our retail operations segment was the result of increased sales at our Karl Lagerfeld Paris stores, partially offset by decreased sales at our DKNY stores.

Gross profit was $258.9 million, or 42.5% of net sales, for the three months ended April 30, 2024, compared to $249.8 million, or 41.2% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 40.9% in the three months ended April 30, 2024 compared to 39.9% in the same period last year.

Gross profit was $275.9 million, or 42.8% of net sales, for the three months ended July 31, 2024, compared to $276.7 million, or 41.9% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 41.2% in the three months ended July 31, 2024 compared to 40.6% in the same period last year.

The gross profit percentage in the current year period was positively impacted by a shift in sales to product related to our owned brands which have no royalty costs, as well as a more favorable product mix.

The gross profit percentage in our retail operations segment was 47.0% for the three months ended April 30, 2024 compared to 50.9% for the same period last year.

The gross profit percentage in the current year period was negatively impacted by an increase in promotional activity.

Selling, general and administrative expenses increased to $236.6 million in the three months ended April 30, 2024 from $228.0 million in the same period last year.

The increase in expenses was primarily due to an increase of $10.6 million in advertising expenses, primarily related to the relaunch of the Donna Karan brand and higher spending on the DKNY brand, as well as an increase of $2.8 million in compensation expenses, primarily due to an increase in salaries.

These increases were partially offset by a decrease of $5.5 million in third-party warehouse and facility expenses associated with carrying lower levels of inventory.

Depreciation and amortization was $8.8 million for the three months ended April 30, 2024 compared to $6.6 million in the same period last year.

This increase primarily results from higher depreciation and amortization related to information technology expenditures and fixturing costs at department stores.

Other loss was $0.2 million in the three months ended April 30, 2024 compared to other income of $1.0 million in the same period last year.

The gross profit percentage in our retail operations segment was 54.4% for the three months ended July 31, 2024 compared to 50.5% for the same period last year.

The gross profit percentage in the current year period was positively impacted by a decrease in promotional activity.

Selling, general and administrative expenses decreased to $229.0 million in the three months ended July 31, 2024 from $239.2 million in the same period last year.

The decrease in expenses was primarily due to decreases of $4.4 million in third-party warehouse and facility expenses associated with carrying lower levels of inventory and $4.1 million in advertising expenses due to reduced royalty advertising expenses resulting from lower net sales of licensed product as well as additional advertising expenses in last year’s quarter related to the Met Gala.

The decrease in expenses was also due to a $2.1 million decrease in compensation expenses, primarily due to lower bonus expense accruals.

Depreciation and amortization was $5.4 million for the three months ended July 31, 2024 compared to $6.0 million in the same period last year.

Other loss was $3.0 million in the three months ended July 31, 2024 compared to other income of $0.2 million in the same period last year.

Other loss in the current period was impacted by $2.2 million of losses from unconsolidated affiliates during the current year period compared to $0.5 million of such losses in the same period last year.

Additionally, other loss in the current period was impacted by $0.6 million of foreign currency income during the current year period compared to $0.4 million of such income in the same period last year.

Interest and financing charges, net, for the three months ended April 30, 2024 were $5.4 million compared to $12.2 million in the same period last year.

Additionally, other loss in the current period was impacted by $1.3 million of foreign currency loss during the current year period compared to $0.7 million of foreign currency income in the same period last year.

Other loss in the current period also included a $0.6 million gain on the forgiveness of certain liabilities related to the acquisition of the minority interest of Fabco.

Interest and financing charges, net, for the three months ended July 31, 2024 were $4.9 million compared to $9.5 million in the same period last year.

The decrease in interest and financing charges was primarily due to a $3.0 million increase in investment income from having a larger cash position in fiscal 2025 compared to fiscal 2024 and a decrease of $1.1 million in interest charges related to the LVMH Note as a result of the repayment of $125 million in principal of this Note in fiscal 2024.

Income tax expense was $2.3 million for the three months ended April 30, 2024 compared to $0.9 million for the same period last year.

Income tax expense was $9.4 million for the three months ended July 31, 2024 compared to $6.0 million for the same period last year.

Our effective tax rate increased to 28.1% in the current year’s quarter from 26.8% in last year’s comparable quarter.

The lower effective tax rate in the prior year period was due to discrete items in the quarter.

Six months ended July 31, 2024 compared to six months ended July 31, 2023

Net sales for the six months ended July 31, 2024 decreased to $1.25 billion from $1.27 billion in the same period last year.

Net sales of our segments are reported before intercompany eliminations.

Net sales of our wholesale operations segment decreased to $1.22 billion for the six months ended July 31, 2024 from $1.23 billion in the comparable period last year.

This decrease was primarily the result of a decrease in net sales of Calvin Klein and Tommy Hilfiger licensed products.

These decreases were partially offset by the relaunched Donna Karan products that started shipping during the current year period.

These decreases were also offset by increases in net sales of our DKNY and Karl Lagerfeld products.

The increase in sales of DKNY products was primarily related to performance wear and sportswear.

The increase in sales of Karl Lagerfeld products was primarily related to women’s sportswear,

handbags, suits, dresses and shoes.

Additionally, the decreases were also partially offset by the recently launched Nautica denim licensed products that primarily started shipping during the current year period.

Net sales of our retail operations segment were $67.7 million for the six months ended July 31, 2024 compared to $64.6 million in the same period last year.

The number of retail stores operated by us decreased from 59 at July 31, 2023 to 50 at July 31, 2024.

The increase in sales in our retail operations segment was the result of increased sales at our Karl Lagerfeld Paris stores, partially offset by decreased sales at our DKNY stores.

Gross profit was $534.8 million, or 42.6% of net sales, for the six months ended July 31, 2024, compared to $526.5 million, or 41.6% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 41.1% in the six months ended July 31, 2024 compared to 40.3% in the same period last year.

The gross profit percentage in our retail operations segment was 51.1% for the six months ended July 31, 2024 compared to 50.7% for the same period last year.

Selling, general and administrative expenses decreased to $465.7 million in the six months ended July 31, 2024 from $467.2 million in the same period last year.

The decrease in expenses was primarily due to a decrease of $9.9 million in third-party warehouse and facility expenses associated with carrying lower levels of inventory.

This decrease was partially offset by increases of $6.5 million in advertising expenses, primarily related to the relaunch of the Donna Karan brand and higher spending on the DKNY brand and $1.3 million in compensation expenses, primarily due to an increase in salaries.

Depreciation and amortization was $14.1 million for the six months ended July 31, 2024 compared to $12.5 million in the same period last year.

This increase primarily results from higher depreciation and amortization related to information technology expenditures and fixturing costs at department stores.

Other loss was $3.2 million in the six months ended July 31, 2024 compared to other income of $1.2 million in the same period last year.

Other loss in the current period was impacted by $3.1 million of losses from unconsolidated affiliates during the current year period compared to $1.0 million of such losses in the same period last year.

Additionally, other loss in the current period was impacted by $0.7 million of foreign currency loss during the current year period compared to $1.1 million of foreign currency income in the same period last year.

Interest and financing charges, net, for the six months ended July 31, 2024 were $10.3 million compared to $21.6 million in the same period last year.

The decrease in interest and financing charges was primarily due to a $7.3 million increase in investment income from having a larger cash position in fiscal 2025 compared to fiscal 2024 and a decrease of $2.9 million in interest charges related to the LVMH Note as a result of the repayment of $125 million in principal of this Note in fiscal 2024.

Income tax expense was $11.8 million for the six months ended July 31, 2024 compared to $6.9 million for the same period last year.

Our effective tax rate increased to 28.3% in the current year’s period from 26.2% in last year’s comparable period.

The lower effective tax rate in the prior year period was due to discrete items in the period.

Liquidity and Capital Resources

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The cash requirements of our business are primarily related to the seasonal buildup in inventories, compensation paid to employees, occupancy, payments to vendors in the normal course of business, capital expenditures, interest payments on debt obligations and income tax payments.

We have also used cash to repurchase our shares and make minority investments.

As of April 30, 2024, we had cash and cash equivalents of $508.4 million and availability under our revolving credit facility in excess of $480 million.

As of April 30, 2024, we were in compliance with all covenants under our senior secured notes and revolving credit facility.

In May 2024, we used $53.6 million of our cash to acquire the minority interest in AWWG.

We have also used cash to repurchase our shares, make minority investments and redeem our Senior Secured Notes.

As of July 31, 2024, we had cash and cash equivalents of $414.8 million and availability under our revolving credit facility of approximately $530 million.

As of July 31, 2024, we were in compliance with all covenants under our senior secured notes and revolving credit facility.

In August 2024, we used our cash and borrowings from our revolving credit facility to

make a $400.7 million voluntary payment to redeem the entire principal amount of our Senior Secured Notes plus accrued interest.

Senior Secured Notes

In August 2020, we completed a private debt offering of $400 million aggregate principal amount of our 7.875% Senior Secured Notes due August 2025 (the “Notes”).

The terms of the Notes are governed by an indenture, dated as of August 7, 2020 (the “Indenture”), among us, the guarantors party thereto and U.S.

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

The net proceeds of the Notes were used (i) to repay the $300 million that was outstanding under our prior term loan facility that was due in 2022 (the “Term Loan”), (ii) to pay related fees and expenses and (iii) for general corporate purposes.

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

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

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

In connection with the issuance of the Notes and execution of the Indenture, we and the Guarantors entered into a pledge and security agreement (the “Pledge and Security Agreement”), among us, the Guarantors and the Collateral Agent.

The Notes are subject to the terms of the intercreditor agreement which governs the relative rights of the secured parties in respect of the ABL Facility and the Notes (the “Intercreditor Agreement”).

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

We may redeem some or all of the Notes at any time and from time to time at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

If we experience a Change of Control (as defined in the Indenture), we are required to offer to repurchase the Notes at 101% of the principal amount of such Notes plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.

The Indenture contains covenants that, among other things, limit our ability and the ability of our restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other restricted payments, make certain investments, incur restrictions on the ability of our restricted subsidiaries that are not guarantors to pay dividends or make certain other payments, create or incur certain liens, sell assets and subsidiary stock, impair the security interests, transfer all or substantially all of our assets or enter into merger or consolidation transactions, and enter into transactions with affiliates.

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

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

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

Second Amended and Restated ABL Credit Agreement

In August 2020, our 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 “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.

We and certain of our 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 Second ABL Credit Agreement.

In April 2023, we amended the Second ABL Credit Agreement to replace LIBOR with 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 amended 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 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.

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

There was not a material change to our interest expense or results of operations as a result of transitioning the reference rate used in our Second ABL Credit Agreement from LIBOR to SOFR.

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, we are required to pay a commitment fee to the lenders under the credit agreement with respect to the unutilized commitments.

The net proceeds of the Notes were used (i) to repay the $300 million that was outstanding under our prior term loan facility that was due in 2022, (ii) to pay related fees and expenses and (iii) for general corporate purposes.

In August 2024, we used cash on hand and borrowings from our revolving credit facility to make a $400.7 million voluntary payment to redeem the entire $400 million principal amount of the Notes at a redemption price equal to 100% of the principal amount of the Notes plus accrued interest.

Third Amended and Restated ABL Credit Agreement

On June 4, 2024, our subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., AM Retail Group, Inc.

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.

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

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.

In addition to paying interest on any outstanding borrowings under the Third ABL Credit Agreement, we are 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 0.375% 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 0.25% 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 Second ABL Credit Agreement contains covenants that, among other things, restrict our ability to, subject to specified exceptions, incur additional debt;

The Third ABL Credit Agreement contains covenants that, among other things, restricts our ability to, subject to specified exceptions, incur additional debt;

sell or dispose of certain assets;

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In certain circumstances, the revolving credit facility also requires us 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.

As of April 30, 2024, we were in compliance with these covenants.

As of April 30, 2024, we 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.

We have incurred a total of $8.0 million of debt issuance costs related to our 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, we 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 “Recent Developments – Third Amended and Restated Credit Agreement” for more information.

As of July 31, 2024, we were in compliance with these covenants.

As of July 31, 2024, we had no borrowings outstanding under the Third ABL Credit Agreement.

The Third ABL Credit Agreement also includes amounts available for letters of credit.

As of July 31, 2024, there were outstanding trade and standby letters of credit amounting to $6.3 million and $2.9 million, respectively.

At the date of the refinancing of the Second ABL Credit Agreement, we had $1.9 million of unamortized debt issuance costs remaining from the Second ABL Credit Agreement.

There was no extinguishment of any amount of the unamortized debt issuance costs remaining from the Second ABL Credit Agreement.

We incurred new debt issuance costs totaling $3.8 million related to the Third ABL Credit Agreement.

We have a total of $5.6 million debt issuance costs related to our Third 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 Third ABL Credit Agreement.

We issued to LVMH, as a portion of the consideration for the acquisition of DKI, a junior lien secured promissory note in favor of LVMH in the principal amount of $125 million (the “LVMH Note”) that bore interest at the rate of 2% per year.

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

As of July 31, 2024, the Company had an aggregate outstanding balance of €7.2 million ($7.8 million) under these various unsecured loans.

Overdraft Facilities

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

As of July 31, 2024, the Company had an aggregate of €7.4 million ($7.9 million) drawn under these various facilities.

Foreign Credit Facility

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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.

As of July 31, 2024, KLH had no borrowings outstanding under this credit facility.

Outstanding Borrowings

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The primary sources to meet our operating cash requirements have been borrowings under this credit facility and cash generated from operations.

We had no borrowings outstanding under our Second ABL Credit Agreement at April 30, 2024 and 2023, respectively.

We had $400 million in borrowings outstanding under the Notes at April 30, 2024 and 2023, respectively.

Our contingent liability under open letters of credit was approximately $7.6 million and $10.7 million at April 30, 2024 and 2023, respectively.

At April 30, 2023, we had $125.0 million of face value principal amount outstanding under the LVMH Note.

We had no borrowings outstanding under our Third ABL Credit Agreement at July 31, 2024 and 2023, respectively.

We had $400 million in borrowings outstanding under the Notes at July 31, 2024 and 2023, respectively.

Our contingent liability under open letters of credit was approximately $9.1 million and $6.7 million at July 31, 2024 and 2023, respectively.

At July 31, 2023, we had $50 million of face value principal amount outstanding under the LVMH Note.

The amount outstanding under the LVMH Note was repaid during fiscal 2024.

We had an aggregate of €7.9 million ($8.5 million) and €10.3 million ($11.2 million) outstanding under the Company’s various unsecured loans as of April 30, 2024 and 2023, respectively.

We had €6.4 million ($6.9 million) and €3.8 million ($4.1 million) outstanding under our various overdraft facilities as of April 30, 2024 and 2023, respectively.

We had €12.1 million ($13.0 million) and €7.8 million ($8.5 million) outstanding under KLH’s foreign credit facility as of April 30, 2024 and 2023, respectively.

We had an aggregate of €7.2 million ($7.8 million) and €9.1 million ($9.9 million) outstanding under the Company’s various unsecured loans as of July 31, 2024 and 2023, respectively.

We had €7.4 million ($7.9 million) and €2.0 million ($2.2 million) outstanding under our various overdraft facilities as of July 31, 2024 and 2023, respectively.

We had no borrowings outstanding under KLH’s foreign credit facility as of July 31, 2024.

We had €7.5 million ($8.2 million) outstanding under KLH’s foreign credit facility as of July 31, 2023.

Share Repurchase Program

In August 2023, our Board of Directors authorized an increase in the number of shares covered by our share repurchase program to an aggregate amount of 10,000,000 shares.

Pursuant to this program, during the three months ended April 30, 2024, we acquired 1,029,504 of our shares of common stock for an aggregate purchase price of $28.4 million.

Pursuant to this program, during the six months ended July 2024, we acquired 2,209,832 of our shares of common stock for an aggregate purchase price of $60.0 million, excluding excise tax.

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

Share repurchases may take place on the open market, in privately negotiated transactions or by other means, and would be made in accordance with applicable securities laws.

As of April 30, 2024, we had remaining 8,970,496 shares that are authorized for purchase under this program.

As of June 3, 2024, we had 44,987,939 shares of common stock outstanding.

As of July 31, 2024, we had remaining 7,790,168 shares that are authorized for purchase under this program.

As of September 3, 2024, we had 43,884,544 shares of common stock outstanding.

Cash from Operating Activities

We generated $45.5 million in cash from operating activities during the three months ended April 30, 2024, primarily as a result of our net income of $5.8 million and decreases of $89.2 million in accounts receivable and $40.8 million in inventories.

We generated $94.8 million in cash from operating activities during the six months ended July 31, 2024, primarily as a result of our net income of $30.0 million, an increase of $106.1 million in accounts payable and accrued expenses and a decrease of $84.9 million in accounts receivable.

We also generated cash from operating activities as a result of non-cash charges relating primarily to depreciation and amortization of $14.1 million and share-based compensation of $12.1 million.

These items were offset, in part, by decreases of $54.2 million in accounts payable and accrued expenses and $24.2 million in customer refund liabilities.

The changes in operating cash flow items are consistent with our seasonal pattern.

Our accounts receivable, inventory and customer refund liabilities decreased because we experience lower sales levels in our first and second quarters than in our third and fourth quarters.

The decrease in accounts payable and accrued expenses is primarily attributable to vendor payments related to inventory purchases and the payment of year-end bonuses in our first fiscal quarter.

These items were offset, in part, by increases of $90.1 million in inventories and $20.6 million in income taxes, as well as a decrease of $31.6 million in customer refund liabilities.

The changes in operating cash flow items are consistent with our seasonal pattern of building up inventory for the fall shipping season resulting in the increase in inventory and accounts payable.

Our accounts receivable and customer refund liabilities decreased because we experience lower sales in our first and second quarters than in our third and fourth quarters.

Cash from Investing Activities

We used $14.8 million of cash in investing activities during the three months ended April 30, 2024.

We had $12.7 million in capital expenditures primarily related to information technology expenditures and fixturing costs at department stores.

We used $108.7 million of cash in investing activities during the six months ended July 31, 2024, primarily as a result of our $82.7 million investment in AWWG.

We also had $23.3 million in capital expenditures primarily related to information technology expenditures and fixturing costs at department stores.

Cash from Financing Activities

Net cash used by financing activities was $27.3 million during three months ended April 30, 2024 primarily as a result of $28.4 million of cash used to repurchase 1,029,504 shares of our common stock under our share repurchase program and $7.5 million for taxes paid in connection with net share settlements of stock grants that vested.

These items were offset, in part, by net borrowings of $8.6 million under our various foreign facilities.

Net cash used by financing activities was $75.4 million during six months ended July 31, 2024 primarily as a result of $60.0 million of cash used to repurchase 2,209,832 shares of our common stock under our share repurchase program, excluding excise tax, $7.5 million for taxes paid in connection with net share settlements of stock grants that vested and $4.2 million in net borrowings under our various foreign facilities.

Critical Accounting Policies

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The accounting policies and related estimates described in our Annual Report on Form 10-K for the year ended January 31, 2024 are those that depend most heavily on these judgments and estimates.

As of April 30, 2024, there have been no material changes to our critical accounting policies.

As of July 31, 2024, there have been no material changes to our critical accounting policies.

Quantitative and Qualitative Disclosures About Market Risk.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis