10-Q 1 giii-20240430x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to       

 

Commission File Number: 0-18183

 G-III APPAREL GROUP, LTD.

(Exact name of registrant as specified in its charter) 

 

Delaware

    

41-1590959

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

512 Seventh Avenue, New York, New York

 

10018

(Address of principal executive offices)

 

(Zip Code)

(212) 403-0500

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

GIII

The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)  Yes      No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No 

As of June 3, 2024, there were 44,987,939 shares of issuer’s common stock, par value $0.1 per share, outstanding.

TABLE OF CONTENTS

    

Page No.

Part I

FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets – April 30, 2024 (Unaudited), April 30, 2023 (Unaudited) and January 31, 2024

3

Condensed Consolidated Statements of Income and Comprehensive (Loss) Income – For the Three Months Ended April 31, 2024 and 2023 (Unaudited)

4

Condensed Consolidated Statements of Stockholders’ Equity – April 30, 2024 and April 30, 2023 (Unaudited)

5

Condensed Consolidated Statements of Cash Flows – For the Three Months Ended April 30, 2024 and 2023 (Unaudited)

6

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

Part II

OTHER INFORMATION

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 5.

Other Information

30

Item 6.

Exhibits

31

7

2

PART I – FINANCIAL INFORMATION

Item 1.          Financial Statements.

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

April 30,

April 30,

January 31,

2024

2023

2024

    

(Unaudited)

    

(Unaudited)

    

(In thousands, except per share amounts)

ASSETS

Current assets

Cash and cash equivalents

$

508,434

$

289,729

$

507,829

Accounts receivable, net of allowance for doubtful accounts of $1,195, $18,832 and $1,471, respectively

473,186

494,601

562,363

Inventories

479,671

630,308

520,426

Prepaid income taxes

19,080

7,692

1,356

Prepaid expenses and other current assets

68,143

69,432

68,344

Total current assets

1,548,514

1,491,762

1,660,318

Investments in unconsolidated affiliates

22,007

27,585

22,472

Property and equipment, net

60,588

53,157

55,084

Operating lease assets

209,199

237,056

216,886

Other assets, net

44,875

52,183

45,147

Other intangibles, net

29,653

34,131

31,676

Deferred income tax assets, net

25,581

26,389

19,248

Trademarks

624,982

632,220

630,333

Total assets

$

2,565,399

$

2,554,483

$

2,681,164

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Current portion of notes payable

$

23,664

$

139,418

$

15,026

Accounts payable

158,652

140,064

182,531

Accrued expenses

103,854

99,092

140,535

Customer refund liabilities

59,865

69,408

84,054

Current operating lease liabilities

55,990

51,024

56,587

Income tax payable

5,899

8,234

14,676

Other current liabilities

141

863

219

Total current liabilities

408,065

508,103

493,628

Notes payable, net of discount and unamortized issuance costs

402,687

403,586

402,807

Deferred income tax liabilities, net

48,152

45,561

42,736

Noncurrent operating lease liabilities

168,462

202,406

178,247

Other noncurrent liabilities

20,686

15,325

15,764

Total liabilities

1,048,052

1,174,981

1,133,182

Redeemable noncontrolling interests

(2,528)

(945)

(2,278)

Stockholders' Equity

Preferred stock; 1,000 shares authorized; no shares issued

Common stock - $0.01 par value; 120,000 shares authorized; 49,396, 49,396 and 49,396 shares issued, respectively

264

264

264

Additional paid-in capital

450,844

472,474

458,841

Accumulated other comprehensive loss

(10,090)

(6,936)

(3,207)

Retained earnings

1,165,914

987,180

1,160,112

Common stock held in treasury, at cost - 4,430, 3,802 and 3,668 shares, respectively

(87,057)

(72,535)

(65,750)

Total stockholders' equity

1,519,875

1,380,447

1,550,260

Total liabilities, redeemable noncontrolling interests and stockholders' equity

$

2,565,399

$

2,554,483

$

2,681,164

The accompanying notes are an integral part of these statements.

3

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE (LOSS) INCOME

Three Months Ended April 30,

2024

    

2023

(Unaudited)

(In thousands, except per share amounts)

Net sales

$

609,747

$

606,589

Cost of goods sold

350,854

356,788

Gross profit

258,893

249,801

Selling, general and administrative expenses

236,621

227,961

Depreciation and amortization

8,768

6,576

Operating profit

13,504

15,264

Other (loss) income

(223)

973

Interest and financing charges, net

(5,424)

(12,151)

Income before income taxes

7,857

4,086

Income tax expense

2,305

945

Net income

5,552

3,141

Less: Loss attributable to noncontrolling interests

(250)

(95)

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

$

5,802

$

3,236

NET INCOME PER COMMON SHARE ATTRIBUTABLE TO G-III APPAREL GROUP, LTD.:

Basic:

Net income per common share

$

0.13

$

0.07

Weighted average number of shares outstanding

45,484

46,286

Diluted:

Net income per common share

$

0.12

$

0.07

Weighted average number of shares outstanding

46,734

47,442

Net income

$

5,552

$

3,141

Other comprehensive loss:

Foreign currency translation adjustments

(6,883)

4,715

Other comprehensive (loss) income

(6,883)

4,715

Comprehensive (loss) income

$

(1,331)

$

7,856

Comprehensive loss attributable to noncontrolling interests:

Net loss

(250)

(95)

Foreign currency translation adjustments

2

Comprehensive loss attributable to noncontrolling interests

(250)

(93)

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

$

(1,581)

$

7,763

The accompanying notes are an integral part of these statements.

4

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Accumulated

Common

Additional

Other

Stock

Common

Paid-In

Comprehensive

Retained

Held In

    

Stock

    

Capital

    

Loss

    

Earnings

    

Treasury

    

Total

(Unaudited)

(In thousands)

Balance as of January 31, 2024

$

264

$

458,841

$

(3,207)

$

1,160,112

$

(65,750)

$

1,550,260

Equity awards vested, net

(7,043)

7,043

Share-based compensation expense

6,580

6,580

Taxes paid for net share settlements

(7,534)

(7,534)

Other comprehensive loss, net

(6,883)

(6,883)

Repurchases of common stock

(28,350)

(28,350)

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

5,802

5,802

Balance as of April 30, 2024

$

264

$

450,844

$

(10,090)

$

1,165,914

$

(87,057)

$

1,519,875

Balance as of January 31, 2023

$

264

$

468,712

$

(11,653)

$

983,944

$

(55,819)

$

1,385,448

Equity awards vested, net

(53)

53

Share-based compensation expense

3,837

3,837

Taxes paid for net share settlements

(22)

(22)

Other comprehensive income, net

4,717

4,717

Repurchases of common stock

(16,769)

(16,769)

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

3,236

3,236

Balance as of April 30, 2023

$

264

$

472,474

$

(6,936)

$

987,180

$

(72,535)

$

1,380,447

The accompanying notes are an integral part of these statements.

5

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended April 30,

    

2024

    

2023

(Unaudited, in thousands)

Cash flows from operating activities

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

$

5,802

$

3,236

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

Depreciation and amortization

8,768

6,576

Loss on disposal of fixed assets

6

393

Non-cash operating lease costs

13,899

14,902

Equity loss in unconsolidated affiliates

893

482

Change in fair value of equity securities

(1,009)

Share-based compensation

6,580

3,837

Deferred financing charges and debt discount amortization

823

2,640

Deferred income taxes

(917)

778

Changes in operating assets and liabilities:

Accounts receivable, net

89,177

180,362

Inventories

40,755

79,037

Income taxes, net

(26,501)

(8,448)

Prepaid expenses and other current assets

(61)

2,422

Other assets, net

(487)

448

Customer refund liabilities

(24,189)

(20,352)

Operating lease liabilities

(14,892)

(16,724)

Accounts payable, accrued expenses and other liabilities

(54,165)

(46,749)

Net cash provided by operating activities

45,491

201,831

Cash flows from investing activities

Operating lease assets initial direct costs

(1,648)

(52)

Investment in equity interest of private company

(429)

(3,600)

Capital expenditures

(12,720)

(4,978)

Net cash used in investing activities

(14,797)

(8,630)

Cash flows from financing activities

Repayment of borrowings - revolving facility

(23,528)

(85,400)

Proceeds from borrowings - revolving facility

23,528

5,313

Repayment of borrowings - foreign facilities

(30,539)

(36,073)

Proceeds from borrowings - foreign facilities

39,100

37,199

Purchase of treasury shares

(28,350)

(16,769)

Taxes paid for net share settlements

(7,534)

(22)

Net cash used in financing activities

(27,323)

(95,752)

Foreign currency translation adjustments

(2,766)

628

Net increase in cash and cash equivalents

605

98,077

Cash and cash equivalents at beginning of period

507,829

191,652

Cash and cash equivalents at end of period

$

508,434

$

289,729

Supplemental disclosures of cash flow information

Cash payments:

Interest, net

$

11,953

$

16,781

Income tax payments, net

$

24,182

$

9,176

The accompanying notes are an integral part of these statements.

6

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

As used in these financial statements, the term “Company” or “G-III” refers to G-III Apparel Group, Ltd. and its subsidiaries. The Company designs, sources and markets an extensive range of apparel, including outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear, as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage. The Company also operates retail stores and licenses its proprietary brands under several product categories.

The Company consolidates the accounts of its wholly-owned and majority-owned subsidiaries. The Company’s DKNY and Donna Karan business in China is operated by Fabco Holding B.V. (“Fabco”), a Dutch joint venture limited liability company that was 75% owned by the Company through April 16, 2024 and was treated as a consolidated majority-owned subsidiary. Effective April 17, 2024, the Company acquired the remaining 25% interest in Fabco that it did not previously own and, as a result, Fabco began being treated as a wholly-owned subsidiary. All material intercompany balances and transactions have been eliminated.

Karl Lagerfeld Holding B.V. (“KLH”), a Dutch limited liability company that is wholly-owned by the Company, Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, Sonia Rykiel, a Swiss corporation that is wholly-owned by the Company, and Fabco report results on a calendar year basis rather than on the January 31 fiscal year basis used by the Company. Accordingly, the results of KLH, Vilebrequin, Sonia Rykiel and Fabco are included in the financial statements for the quarter ended or ending closest to the Company’s fiscal quarter end. For example, with respect to the Company’s results for the three-month period ended April 30, 2024, the results of KLH, Vilebrequin, Sonia Rykiel and Fabco are included for the three-month period ended March 31, 2024. The Company’s retail operations segment reports on a 52/53 week fiscal year. For fiscal 2025 and 2024, the three-month periods for the retail operations segment were each 13-week periods and ended on May 4, 2024 and April 29, 2023, respectively.

The results for the three months ended April 30, 2024 are not necessarily indicative of the results expected for the entire fiscal year, given the seasonal nature of the Company’s business. The accompanying financial statements included herein are unaudited. All adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim period presented have been reflected.

The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2024 filed with the Securities and Exchange Commission (the “SEC”).

Assets and liabilities of the Company’s foreign operations, where the functional currency is not the U.S. dollar (reporting currency), are translated from the foreign currency into U.S. dollars at period-end rates, while income and expenses are translated at the weighted-average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive loss within stockholders’ equity.

NOTE 2 – ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company’s financial instruments consist of trade receivables arising from revenue transactions in the ordinary course of business. The Company considers its trade receivables to consist of two portfolio segments: wholesale and retail trade receivables. Wholesale trade receivables result from credit the Company has extended to its wholesale customers based on pre-defined criteria and are generally due within 30 to 60 days. Retail trade receivables primarily relate to amounts due from third-party credit card processors for the settlement of debit and credit card transactions and are typically collected within 3 to 5 days.

7

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

April 30, 2024

    

Wholesale

    

Retail

    

Total

(In thousands)

Accounts receivable, gross

$

473,075

$

1,306

$

474,381

Allowance for doubtful accounts

(1,132)

(63)

(1,195)

Accounts receivable, net

$

471,943

$

1,243

$

473,186

April 30, 2023

Wholesale

    

Retail

    

Total

(In thousands)

Accounts receivable, gross

$

512,315

$

1,118

$

513,433

Allowance for doubtful accounts

(18,769)

(63)

(18,832)

Accounts receivable, net

$

493,546

$

1,055

$

494,601

January 31, 2024

Wholesale

    

Retail

    

Total

(In thousands)

Accounts receivable, gross

$

563,130

$

704

$

563,834

Allowance for doubtful accounts

(1,408)

(63)

(1,471)

Accounts receivable, net

$

561,722

$

641

$

562,363

The allowance for doubtful accounts for wholesale trade receivables is estimated based on several factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations (such as in the case of bankruptcy filings (including potential bankruptcy filings), extensive delay in payment or substantial downgrading by credit rating agencies), a specific reserve for bad debt is recorded against amounts due from that customer to reduce the net recognized receivable to the amount reasonably expected to be collected. For all other wholesale customers, an allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the end of the reporting period for financial statements, assessments of collectability based on historical trends and an evaluation of the impact of economic conditions. The Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

The allowance for doubtful accounts for retail trade receivables is estimated at the credit card chargeback rate applied to the previous 90 days of credit card sales. In addition, the Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

8

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

    

Wholesale

    

Retail

    

Total

(In thousands)

Balance as of January 31, 2024

$

(1,408)

$

(63)

$

(1,471)

Provision for credit losses, net

276

276

Accounts written off as uncollectible

Balance as of April 30, 2024

$

(1,132)

$

(63)

$

(1,195)

Balance as of January 31, 2023

$

(18,237)

$

(60)

$

(18,297)

Provision for credit losses, net

(532)

(3)

(535)

Accounts written off as uncollectible

Balance as of April 30, 2023

$

(18,769)

$

(63)

$

(18,832)

Balance as of January 31, 2023

$

(18,237)

$

(60)

$

(18,297)

Provision for credit losses, net

166

(3)

163

Accounts written off as uncollectible

16,663

16,663

Balance as of January 31, 2024

$

(1,408)

$

(63)

$

(1,471)

NOTE 3 – INVENTORIES

Wholesale inventories, which comprise a significant portion of the Company’s inventory, and KLH inventories are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Retail and Vilebrequin inventories are stated at the lower of cost (determined by the weighted average method) or net realizable value. Substantially all of the Company’s inventories consist of finished goods.

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, was $11.3 million, $12.9 million and $16.5 million as of April 30, 2024, April 30, 2023 and January 31, 2024, respectively. The inventory return asset is recorded within prepaid expenses and other current assets on the condensed consolidated balance sheets.

Inventory held on consignment by the Company’s customers totaled $10.3 million, $7.6 million and $6.6 million at April 30, 2024, April 30, 2023 and January 31, 2024, respectively. The Company reflects this inventory on its condensed consolidated balance sheets.

NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Generally Accepted Accounting Principles establish a three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy for a particular asset or liability depends on the inputs used in its valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally-derived (unobservable). A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

Level 1 — inputs to the valuation methodology based on quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — inputs to the valuation methodology based on quoted prices for similar assets or liabilities in active markets for substantially the full term of the financial instrument; quoted prices for identical or similar instruments in markets that are not active for substantially the full term of the financial instrument; and model-derived valuations whose inputs or significant value drivers are observable.

Level 3 — inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value measurement.

9

The following table summarizes the carrying values and the estimated fair values of the Company’s debt instruments:

Carrying Value

Fair Value

    

April 30,

April 30,

January 31,

    

April 30,

April 30,

January 31,

Financial Instrument

Level

2024

2023

2024

2024

2023

2024

(In thousands)

Secured Notes

1

$

400,000

$

400,000

$

400,000

$

401,952

$

376,000

$

401,080

Note issued to LVMH

3

123,019

121,476

Unsecured loans

2

8,517

11,212

8,791

8,517

11,212

8,791

Overdraft facilities

2

6,932

4,132

2,651

6,932

4,132

2,651

Foreign credit facility

2

13,025

8,462

8,939

13,025

8,462

8,939

The Company’s debt instruments are recorded at their carrying values in its condensed consolidated balance sheets, which may differ from their respective fair values. The fair value of the Company’s secured notes is based on their current market price as of April 30, 2024. The carrying amount of the Company’s variable rate debt approximates the fair value, as interest rates change with market rates. Furthermore, the carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash, accounts receivable and accounts payable) also approximates fair value due to the short-term nature of these accounts.

The 2% note in the original principal amount of $125 million (the “LVMH Note”) issued to LVMH Moet Hennessy Louis Vuitton Inc. (“LVMH”) in connection with the acquisition of DKNY and Donna Karan was recorded on the balance sheet at a discount of $40.0 million in accordance with ASC 820 – Fair Value Measurements (“ASC 820”). For purposes of this fair value disclosure, the Company based its fair value estimate for the LVMH Note on the initial fair value as determined at the date of the acquisition of DKNY and Donna Karan and recorded amortization using the effective interest method over the term of the LVMH Note. The Company repaid $75.0 million of the principal amount of the LVMH Note on June 1, 2023 and the remaining $50.0 million of such principal amount on December 1, 2023.

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

Non-Financial Assets and Liabilities

The Company’s non-financial assets that are measured at fair value on a nonrecurring basis include long-lived assets, which consist primarily of property and equipment and operating lease assets. The Company reviews these assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable. For assets that are not recoverable, an impairment loss is recognized equal to the difference between the carrying amount of the asset or asset group and its estimated fair value. For operating lease assets, the Company determines the fair value of the assets by discounting the estimated market rental rates over the remaining term of the lease. These fair value measurements are considered level 3 measurements in the fair value hierarchy. During fiscal 2024, the Company recorded a $1.3 million impairment charge primarily related to leasehold improvements, furniture and fixtures, computer hardware and operating lease assets at certain DKNY, Karl Lagerfeld and Vilebrequin stores as a result of the performance of these stores.

NOTE 5 – LEASES

The Company leases retail stores, warehouses, distribution centers, office space and certain equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

Most leases are for a term of one to ten years.  Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to ten years.  Several of the Company’s retail store leases include an option to terminate the lease based on failure to achieve a specified sales volume. The exercise of lease renewal options is generally at the Company’s sole discretion. The exercise of lease termination options is generally by mutual agreement between the Company and the lessor.

10

Certain of the Company’s lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.

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

Leases

Classification

April 30, 2024

April 30, 2023

January 31, 2024

(In thousands)

Assets

Operating

Operating lease assets

$

209,199

$

237,056

$

216,886

Liabilities

Current operating

Current operating lease liabilities

$

55,990

$

51,024

$

56,587

Noncurrent operating

Noncurrent operating lease liabilities

168,462

202,406

178,247

Total lease liabilities

$

224,452

$

253,430

$

234,834

The Company recorded lease costs of $18.2 million and $18.6 million during the three months ended April 30, 2024 and 2023, respectively. Lease costs are recorded within selling, general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income. The Company recorded variable lease costs and short-term lease costs of $5.3 million and $5.9 million for the three months ended April 30, 2024 and 2023, respectively. Short-term lease costs are immaterial.

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

Year Ending January 31,

Amount

(In thousands)

2025

$

54,456

2026

62,049

2027

49,360

2028

39,594

2029

26,657

After 2029

42,222

Total lease payments

$

274,338

Less: Interest

49,886

Present value of lease liabilities

$

224,452

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

As of April 30, 2024, the weighted average remaining lease term related to operating leases is 4.9 years. The weighted average discount rate related to operating leases is 6.7%.

Cash paid for amounts included in the measurement of operating lease liabilities was $19.4 million and $21.2 million during the three months ended April 30, 2024 and 2023, respectively. Right-of-use assets obtained in exchange for lease obligations were $6.8 million and $10.5 million during the three months ended April 30, 2024 and 2023, respectively.

NOTE 6 – NET INCOME PER COMMON SHARE

Basic net income per common share has been computed using the weighted average number of common shares outstanding during each period. Diluted net income per share, when applicable, is computed using the weighted average number of common shares and potential dilutive common shares, consisting of unvested restricted stock unit awards outstanding during the period. Approximately 9,500 and 302,200 shares of common stock have been excluded from the diluted net income per share calculation for the three months ended April 30, 2024 and 2023, respectively. All share-based payments

11

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

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

Three Months Ended April 30,

    

2024

    

2023

(In thousands, except share and per share amounts)

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

$

5,802

$

3,236

Basic net income per share:

Basic common shares

45,484

46,286

Basic net income per share

$

0.13

$

0.07

Diluted net income per share:

Basic common shares

45,484

46,286

Dilutive restricted stock unit awards and stock options

1,250

1,156

Diluted common shares

46,734

47,442

Diluted net income per share

$

0.12

$

0.07

NOTE 7 – NOTES PAYABLE

Long-term debt consists of the following:

    

April 30, 2024

    

April 30, 2023

    

January 31, 2024

(In thousands)

Secured Notes

$

400,000

$

400,000

$

400,000

LVMH Note

125,000

Unsecured loans

8,517

11,212

8,791

Overdraft facilities

6,932

4,132

2,651

Foreign credit facility

13,025

8,462

8,939

Subtotal

428,474

548,806

420,381

Less: Net debt issuance costs (1)

(2,123)

(3,821)

(2,548)

Debt discount

(1,981)

Current portion of long-term debt

(23,664)

(139,418)

(15,026)

Total

$

402,687

$

403,586

$

402,807

(1)Does not include debt issuance costs, net of amortization, totaling $2.0 million, $3.6 million and $2.4 million as of April 30, 2024, April 30, 2023 and January 31, 2024, respectively, related to the revolving credit facility. These debt issuance costs have been deferred and are classified in assets in the accompanying condensed consolidated balance sheets in accordance with ASC 835.

Senior Secured Notes

In August 2020, the Company completed a private debt offering of $400 million aggregate principal amount of its 7.875% Senior Secured Notes due August 2025 (the “Notes”). The terms of the Notes are governed by an indenture (the “Indenture”), among the Company, 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 the Company’s prior term loan facility due 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 the Company’s current and future wholly-owned domestic subsidiaries that guarantee any of the Company’s credit facilities, including the Company’s ABL facility

12

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

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

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

The Company 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 the Company experiences a Change of Control (as defined in the Indenture), the Company is 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 the Company’s ability and the ability of its restricted subsidiaries to incur or guarantee additional indebtedness, pay dividends or make other restricted payments, make certain investments, incur restrictions on the ability of the Company’s 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 the Company’s 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.

The Company 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, the Company’s subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc. and The Donna Karan Company Store LLC (collectively, the “Borrowers”), entered into the second amended and restated credit agreement (the “Second ABL Credit Agreement”) with the Lenders named therein and with JPMorgan Chase Bank, N.A., as Administrative Agent. The Second ABL Credit Agreement is a five year senior secured credit facility subject to a springing maturity date if, subject to certain conditions, the Notes are not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder. The Second ABL Credit Agreement provides for borrowings in the aggregate principal amount of up to $650 million. The Company and certain of its subsidiaries (the “Guarantors”), are Loan Guarantors under the Second ABL Credit Agreement.

The Second ABL Credit Agreement refinanced, amended and restated the Amended Credit Agreement, dated as of December 1, 2016 (as amended, supplemented or otherwise modified from time to time prior to August 7, 2020, the “Prior Credit Agreement”). The Prior Credit Agreement provided for borrowings of up to $650 million and was due to expire in December 2021. The Second ABL Credit Agreement extended the maturity date to August 2025, subject to a springing maturity date if, subject to certain conditions, the Notes are not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder.

13

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, the Company amended the Second ABL Credit Agreement to replace LIBOR with the Adjusted Term Secured Overnight Financing Rate (“SOFR”) as a successor rate. All other material terms and conditions of the Second ABL Credit Agreement were unchanged. Borrowings under the Second ABL Credit Agreement now bear interest, at the Borrower’s option, at the alternate base rate (defined as, for a given day, the greatest of (i) the “prime rate” in effect on such day, (ii) the NYFRB Rate (as defined in the amendment) in effect on such day plus 0.5% and (iii) the SOFR (defined as an interest rate per annum equal to SOFR for such interest period plus 0.10%) for a one-month interest period as published two business days prior to such day plus 1%) plus an applicable spread or SOFR plus an applicable spread. The Company applied certain provisions and practical expedients of ASC 848 – Reference Rate Reform related to the transition from LIBOR to SOFR.

The Second ABL Credit Agreement is secured by specified assets of the Borrowers and the Guarantors. In addition to paying interest on any outstanding borrowings under the Second ABL Credit Agreement, the Company is required to pay a commitment fee to the lenders under the credit agreement with respect to the unutilized commitments. The commitment fee accrues at a tiered rate equal to 0.50% per annum on the average daily amount of the available commitments when the average usage is less than 50% of the total available commitments and decreases to 0.35% per annum on the average daily amount of the available commitments when the average usage is greater than or equal to 50% of the total available commitments.

The Second ABL Credit Agreement contains covenants that, among other things, restrict the Company’s ability to, subject to specified exceptions, incur additional debt; incur liens; sell or dispose of certain assets; merge with other companies; liquidate or dissolve the Company; acquire other companies; make loans, advances, or guarantees; and make certain investments. In certain circumstances, the revolving credit facility also requires the Company to maintain a fixed charge coverage ratio, as defined in the agreement, not less than 1.00 to 1.00 for each period of twelve consecutive fiscal months of the Company. As of April 30, 2024, the Company was in compliance with these covenants.

As of April 30, 2024, the Company had no borrowings outstanding under the Second ABL Credit Agreement. The Second ABL credit agreement also includes amounts available for letters of credit. As of April 30, 2024, there were outstanding trade and standby letters of credit amounting to $4.8 million and $2.9 million, respectively.

The Company has recorded $8.0 million of debt issuance costs related to the Second ABL Credit Agreement. As permitted under ASC 835, the debt issuance costs have been deferred and are presented as an asset which is amortized ratably over the term of the Second ABL Credit Agreement.

In June 2024, the Company entered into the third amended and restated credit agreement that provides for borrowings in the aggregate principal amount of up to $700 million and extends the maturity date to June 2029, subject to certain conditions. See Note 12 – Subsequent Events for more information.  

LVMH Note

As a portion of the consideration for the acquisition of DKNY and Donna Karan, the Company issued to LVMH a junior lien secured promissory note in the principal amount of $125.0 million that bore interest at the rate of 2% per year. $75.0 million of the principal amount of the LVMH Note was paid on June 1, 2023 and the remaining $50.0 million of such principal amount was paid on December 1, 2023.

ASC 820 required the LVMH Note to be recorded at fair value at issuance. As a result, the Company recorded a $40.0 million debt discount. This discount was amortized as interest expense using the effective interest method over the term of the LVMH Note.

14

Unsecured Loans

Several of the Company’s foreign entities borrow funds under various unsecured loans of which a portion is to provide funding for operations in the normal course of business while other loans are European state backed loans as part of COVID-19 relief programs. In the aggregate, the Company is currently required to make quarterly installment payments of principal in the amount of €0.6 million under these loans. Interest on the outstanding principal amount of the unsecured loans accrues at a fixed rate equal to 0% to 5.0% per annum, payable on either a quarterly or monthly basis. As of April 30, 2024, the Company had an aggregate outstanding balance of €7.9 million ($8.5 million) under these unsecured loans.

Overdraft Facilities

During fiscal 2021 and 2025, certain of the Company’s foreign entities entered into overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft. These uncommitted overdraft facilities with HSBC Bank allow for an aggregate maximum overdraft of €10 million. Interest on drawn balances accrues at a rate equal to the Euro Interbank Offered Rate plus a margin of 1.75% per annum, payable quarterly. The facility may be cancelled at any time by the Company or HSBC Bank. As part of a COVID-19 relief program, certain of the Company’s foreign entities entered into several state backed overdraft facilities with UBS Bank in Switzerland for an aggregate of CHF 4.7 million at varying interest rates of