What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-12-10 compared with 2024-09-06 · 113 added, 109 removed, 236 unchanged (48% of the section changed)

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For example, our fiscal year ending January 31, 2025 is referred to as “fiscal 2025.”

KLH, Vilebrequin, Sonia Rykiel and Fabco report results on a calendar year basis rather than on the January 31 fiscal year basis used by G-III.

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 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.

KLH, Vilebrequin, Sonia Rykiel, Fabco and AWWG report results on a calendar year basis rather than on the January 31 fiscal year basis used by G-III.

Accordingly, the results of KLH, Vilebrequin, Sonia Rykiel, Fabco and AWWG 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 nine-month period ended October 31, 2024, the results of KLH, Vilebrequin, Sonia Rykiel, Fabco and AWWG are included for the nine-month period ended September 30, 2024.

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

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.

For fiscal 2025 and 2024, the three and nine-month periods for the retail operations segment were each 13-week and 39-week periods and ended on November 2, 2024 and October 28, 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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Bass, Eliza J, Jessica Howard, Andrew Marc, Marc New York, Wilsons Leather and Sonia Rykiel.

We have an extensive portfolio of well-known licensed brands, including Calvin Klein, Tommy Hilfiger, Nautica, Halston, Levi’s, Kenneth Cole, Cole Haan, Vince Camuto, Dockers and Champion.

We have an extensive portfolio of well-known licensed brands, including Calvin Klein, Tommy Hilfiger, Nautica, Halston, Levi’s, Kenneth Cole, Cole Haan, Vince Camuto, Dockers, Champion, Converse and BCBG.

Through our team sports business, we have licenses with the National Football League, National Basketball Association, Major League Baseball, National Hockey League and over 150 U.S.

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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.

This investment is intended to leverage AWWG’s expertise and provide for synergies to support our international expansion priority through the development of our operational platform in Europe.

License Agreements

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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.

In August 2024, we used cash on hand and borrowings from our revolving credit facility to make a $400.7 million payment to voluntarily redeem the entire $400 million principal amount of our 7.875% Senior Secured Notes due August 2025 (the “Notes”) at a redemption price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest.

We report based on two segments:

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We have attempted to respond to general trends in our industry by continuing to focus on selling products with recognized brand equity, by attention to design, quality and value and by improving our sourcing capabilities.

We have also responded with the strategic acquisitions made by us, such as our purchase of the interests not previously owned by us that resulted in Karl Lagerfeld becoming our wholly-owned subsidiary, and new license agreements entered into by us, such as our recent license agreements for the Nautica, Halston and Champion brands.

We have also responded with the strategic acquisitions made by us, such as our purchase of the interests not previously owned by us that resulted in Karl Lagerfeld becoming our wholly-owned subsidiary, new license agreements entered into by us, such as our recent license agreements for the Nautica, Halston, Champion and Converse brands and investments to accelerate our strategic priorities, such as our investment in AWWG.

Our actions added to our portfolio of licensed and proprietary brands and helped diversify our business by adding new product lines and expanding distribution channels.

We believe that our broad distribution capabilities help us to respond to the various shifts by consumers between distribution channels and that our operational capabilities will enable us to continue to be a vendor of choice for our retail partners.

Political Environment

In November 2024, the U.S.

presidential election resulted in the election of a new president and administration that will take effect in January 2025.

The potential impact of new policies that may be implemented as a result of the new administration is currently uncertain.

Any resulting changes in international trade relations, legislation and regulations (including those related to taxation and importation), economic and monetary policies, heightened diplomatic tensions or political and civil unrest, among other potential impacts, could adversely impact the global economy and our operating results.

Tax Laws and Regulations

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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.

The excise tax did not have a material impact on our results of operations and cash flows as of and for the nine months ended October 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 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.

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

The Federal Reserve recently decreased interest rates in the third quarter of fiscal 2025, however it is unclear whether the Federal Reserve will further reduce interest rates, maintain the current rates or raise interest rates in the future.

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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Volatility in the global foreign currency exchange rates may have a negative impact on the reported results of certain of our non-United States subsidiaries in the future, when translated to the U.S.

In fiscal 2024, the Panama Canal experienced severe drought conditions which forced the canal to reduce the number of vessels transiting through it on a daily basis by approximately one-third.

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 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.

The global supply chain continues to be negatively impacted by various factors, including the ongoing disruptions in the Red Sea, port congestion and capacity shortages in Asia and recent and threatened port strikes on the U.S.

East and Gulf coasts and in Canada .

Although our business has not been significantly impacted by such disruptions, we have experienced some shipping delays impacting the timing of inventory receipts.

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.

We have incurred and will continue to incur increased shipping costs to 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 and destinations accordingly to ensure timely delivery of our product.

International Conflicts

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Results of Operations

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.

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

Net sales for the three months ended October 31, 2024 increased to $1.09 billion from $1.07 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 $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 $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 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 $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 $9.4 million for the three months ended July 31, 2024 compared to $6.0 million for the same period last year.

Net sales of our wholesale operations segment increased to $1.07 billion for the three months ended October 31, 2024 from $1.05 billion in the comparable period last year.

This increase was primarily the result of an increase in net sales of our DKNY and Karl Lagerfeld products, as well as our Donna Karan products and Nautica denim licensed products that primarily started shipping during the current year.

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

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

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

Net sales of our retail operations segment were $42.3 million for the three months ended October 31, 2024 compared to $32.7 million in the same period last year.

The number of retail stores operated by us decreased from 62 at October 31, 2023 to 51 at October 31, 2024.

The increase in sales in our retail operations segment was the result of increased sales at our Karl Lagerfeld Paris and DKNY stores.

Comparable store sales, which include both stores and digital channels, increased by high double digits at our Karl Lagerfeld Paris and DKNY stores compared to the same period in the prior year.

Gross profit was $432.1 million, or 39.8% of net sales, for the three months ended October 31, 2024, compared to $433.4 million, or 40.6% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 38.4% in the three months ended October 31, 2024 compared to 39.6% in the same period last year.

The gross profit percentage in the current year period decreased due to product mix, partially offset by an increased proportion of sales of product related to our owned brands which have no royalty costs and thus result in a higher gross profit percentage .

The gross profit percentage in our retail operations segment was 52.3% for the three months ended October 31, 2024 compared to 49.1% for the same period last year.

The gross profit percentage in the current year period was positively impacted by product mix with a higher gross profit percentage.

Selling, general and administrative expenses increased to $259.2 million in the three months ended October 31, 2024 from $236.3 million in the same period last year.

The increase in expenses was primarily due to increases of $12.0 million in compensation expenses, primarily due to an increase in salaries and bonus expense accruals, $9.0 million in advertising expenses, primarily due to the relaunch of the Donna Karan brand and higher spending on the DKNY brand which was partially offset by reduced royalty advertising expenses resulting from lower net sales of licensed product, and $1.6 million in third-party warehouse and facility expenses

Depreciation and amortization was $6.6 million for both the three months ended October 31, 2024 and 2023.

Other income was $0.9 million in the three months ended October 31, 2024 compared to other loss of $3.1 million in the same period last year.

Other income in the current period was impacted by $0.3 million of income from unconsolidated affiliates during the current year period compared to $2.7 million of losses from unconsolidated affiliates in the same period last year.

Additionally, other income in the current period was impacted by $0.5 million of foreign currency income during the current year period compared to $0.4 million of foreign currency losses in the same period last year.

Interest and financing charges, net, for the three months ended October 31, 2024 were $6.4 million compared to $11.0 million in the same period last year.

The decrease in interest and financing charges was primarily due to a $4.3 million decrease in interest charges resulting from the redemption of the entire $400 million principal amount of the Notes in August 2024 that was partially offset by increased interest charges from higher average borrowings under our revolving credit facility in the current year period.

Additionally, there was a decrease of $0.7 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.

These decreases were partially offset by a $1.6 million charge to interest expense from extinguished debt issuance costs upon the redemption of the Notes.

Income tax expense was $46.2 million for the three months ended October 31, 2024 compared to $48.8 million for the same period last year.

Our effective tax rate increased to 28.7% in the current year’s quarter from 27.7% 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.

The higher effective tax rate in the current year period is primarily due to the impact of permanent tax adjustments on the annual effective tax rate.

Nine months ended October 31, 2024 compared to nine months ended October 31, 2023

Net sales for the nine months ended October 31, 2024 increased to $2.34 billion from $2.33 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.

Net sales of our wholesale operations segment was $2.28 billion for both the nine months ended October 31, 2024 and 2023.

There was increases in net sales of our DKNY and Karl Lagerfeld products, as well as our Donna Karan products and Nautica denim licensed products that primarily started shipping during the current year.

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

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

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

Net sales of our retail operations segment were $110.1 million for the nine months ended October 31, 2024 compared to $97.3 million in the same period last year.

The number of retail stores operated by us decreased from 62 at October 31, 2023 to 51 at October 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.

Comparable store sales, which include both stores and digital channels, increased by low double digits at our Karl Lagerfeld Paris and DKNY stores compared to the same period in the prior year.

Gross profit was $966.9 million, or 41.3% of net sales, for the nine months ended October 31, 2024, compared to $959.9 million, or 41.1% of net sales, in the same period last year.

The gross profit percentage in our wholesale operations segment was 39.8% in the nine months ended October 31, 2024 compared to 40.0% in the same period last year.

The gross profit percentage in our retail operations segment was 51.5% for the nine months ended October 31, 2024 compared to 50.2% for the same period last year.

The gross profit percentage in the current year period was positively impacted by product mix with a higher gross profit percentage.

Selling, general and administrative expenses increased to $724.9 million in the nine months ended October 31, 2024 from $703.5 million in the same period last year.

The increase in expenses was primarily due increases of $15.5 million in advertising expenses, primarily due to the relaunch of the Donna Karan brand and higher spending on the DKNY brand that was partially offset by reduced royalty advertising expenses resulting from lower net sales of licensed product, and $13.2 million in compensation expenses, primarily due to an increase in salaries.

These increases were partially offset by a decrease of $8.3 million in third-party warehouse and facility expenses associated with carrying lower levels of inventory.

Depreciation and amortization was $20.7 million for the nine months ended October 31, 2024 compared to $19.1 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.

Other loss was $2.2 million in the nine months ended October 31, 2024 compared to $2.0 million in the same period last year.

Interest and financing charges, net, for the nine months ended October 31, 2024 were $16.7 million compared to $32.7 million in the same period last year.

The decrease in interest and financing charges was primarily due to a $7.9 million increase in investment income from having a larger average cash position in fiscal 2025 compared to fiscal 2024.

Additionally, there was a $4.5 million decrease in interest charges resulting from the redemption of the entire $400 million principal amount of the Notes in August 2024 that was partially offset by increased interest charges from higher average borrowings under our revolving credit facility in the current year as well as a decrease of $3.6 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.

These decreases were partially offset by a $1.6 million charge to interest expense from extinguished debt issuance costs upon the redemption of the Notes.

Income tax expense was $57.9 million for the nine months ended October 31, 2024 compared to $55.7 million for the same period last year.

Our effective tax rate increased to 28.6% in the current year’s period from 27.5% in last year’s comparable period.

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

The higher effective tax rate in the current year period is due to the impact of permanent tax adjustments on the annual effective tax rate.

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, 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.

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

As of October 31, 2024, we had cash and cash equivalents of $104.7 million and availability under our revolving credit facility of approximately $480 million.

As of October 31, 2024, we were in compliance with covenants under our revolving credit facility.

In August 2024, we used our cash and borrowings from our revolving credit facility to make a $400.7 million payment to voluntarily redeem the entire principal amount of the Notes plus accrued and unpaid 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 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.

We had previously completed a private debt offering of $400 million aggregate principal amount of the Notes.

In August 2024, we used cash on hand and borrowings from our revolving credit facility to make a $400.7 million payment to voluntarily 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 and unpaid interest.

At the date of redemption, we had unamortized debt issuance costs of $1.6 million associated with the Notes.

These debt issuance costs were fully extinguished and charged to interest expense in our results of operations.

Third Amended and Restated ABL Credit Agreement

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

As of October 31, 2024, interest under the Third ABL Credit Agreement was being paid at an average rate of 6.57% per annum.

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

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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 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.

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

As of October 31, 2024, we had $210.1 million in 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.

As of October 31, 2024, there were outstanding trade and standby letters of credit amounting to $6.2 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.

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

As of October 31, 2024, the Company had an aggregate outstanding balance of €6.0 million ($7.3 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 July 31, 2024, the Company had an aggregate of €7.4 million ($7.9 million) drawn under these various facilities.

As of October 31, 2024, the Company had an aggregate of €4.1 million ($4.6 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 July 31, 2024, KLH had no borrowings outstanding under this credit facility.

As of October 31, 2024, KLH had an aggregate balance of €2.0 million ($2.2 million) in 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 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.

We had $210.1 million in borrowings outstanding under our Third ABL Credit Agreement at October 31, 2024 and no borrowings outstanding under our Third ABL Credit Agreement at October 31, 2023.

We redeemed the entire $400 million principal amount of the Notes in August 2024.

We had $400 million in borrowings outstanding under the Notes at October 31, 2023.

Our contingent liability under open letters of credit was approximately $9.0 million and $4.9 million at October 31, 2024 and 2023, respectively.

At October 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 €7.2 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.

We had an aggregate of €6.0 million ($7.3 million) and €8.6 million ($9.1 million) outstanding under the Company’s various unsecured loans as of October 31, 2024 and 2023, respectively.

We had €4.1 million ($4.6 million) and €1.8 million ($1.9 million) outstanding under our various overdraft facilities as of October 31, 2024 and 2023, respectively.

We had €2.0 million ($2.2 million) and €3.9 million ($4.2 million) outstanding under our foreign credit facility as of October 31, 2024 and 2023, respectively.

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 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.

Pursuant to this program, during the nine months ended October 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 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.

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

As of December 5, 2024, we had 43,886,707 shares of common stock outstanding.

Cash from Operating Activities

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 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.

We used $17.0 million in cash from operating activities during the nine months ended October 31, 2024, primarily as a result of increases of $317.3 million in accounts receivable and $12.0 million in inventories.

These items were offset, in part, by our net income of $144.8 million, an increase of $80.6 million in accounts payable and accrued expenses, a decrease of $23.2 million in income taxes and non-cash charges relating primarily to depreciation and amortization of $20.7 million and share-based compensation of $17.9 million.

The changes in operating cash flow items are generally consistent with our seasonal pattern of higher sales and building up inventory for the fall shipping season resulting in the increases in accounts receivable, inventory and accounts payable.

The fall shipping season begins during the latter half of our second fiscal quarter.

Our fiscal year ending January 31, 2023 experienced inventory levels that were unusually high due to supply chain challenges throughout the industry during fiscal 2023.

This resulted in a reduction to our inventories as of October 31, 2023 as reflected in our condensed consolidated statement of cash flows.

Cash from Investing Activities

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 used $117.6 million of cash in investing activities during the nine months ended October 31, 2024, primarily as a result of our $84.8 million investment in AWWG.

We also had $31.8 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 $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.

Net cash used by financing activities was $267.5 million during nine months ended October 31, 2024 primarily as a result of $400 million of cash used to redeem the entire principal amount of the Notes, $60.0 million of cash used to repurchase 2,209,832 shares of our common stock under our share repurchase program, excluding excise tax, 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 proceeds of $210.1 million under our revolving credit facility.

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

As of October 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