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 October 31, ~~2019~~2020


☐	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 December ~~5, 2019,~~4, 2020, there were ~~47,825,398~~48,358,688 shares of issuer’s common stock, par value $0.01 per share, outstanding.

Table of Contents

TABLE OF CONTENTS

		Page No.
Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets – October 31, ~~2019,~~2020, October 31, ~~2018~~2019 and January 31, ~~2019~~2020	3
	Condensed Consolidated Statements of Income and Comprehensive Income - For the Three and Nine Months Ended October 31, ~~2019~~2020 and ~~2018~~2019 (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity – October 31, 2020 and October 31, 2019 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows - For the Nine Months Ended October 31, ~~2019~~2020 and ~~2018~~2019 (Unaudited)	56
	Notes to Condensed Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1821
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2734
Item 4.	Controls and Procedures	2734

Part II	OTHER INFORMATION
Item 1A.	Risk Factors	28
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	2935
Item 6.	Exhibits	3037

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	October 31,		October 31,		January 31,		October 31,		October 31,		January 31,
	2019		2018		2019		2020		2019		2020
	(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)
	(In thousands, except per share amounts)						(In thousands, except per share amounts)
ASSETS
Current assets
Cash and cash equivalents	$	55,801	$	66,080	$	70,138	$	149,745	$	55,801	$	197,372
Accounts receivable, net of allowance for doubtful accounts		899,029		819,636		502,133
Accounts receivable, net of allowance for doubtful accounts of $15.5 million, $0.9 million and $0.7 million, respectively								720,975		899,029		530,137
Inventories		650,633		616,162		576,383		461,769		650,633		551,918
Prepaid income taxes		2,942		—		8,308		2,043		2,942		8,566
Prepaid expenses and other current assets		77,328		82,933		96,933		37,274		77,328		80,695
Total current assets		1,685,733		1,584,811		1,253,895		1,371,806		1,685,733		1,368,688
Investments in unconsolidated affiliates		62,231		67,874		66,587		62,177		62,231		61,987
Property and equipment, net		90,830		89,658		86,407		60,973		90,830		76,023
Operating lease assets		293,819		—		—		181,187		293,819		270,032
Other assets, net		34,389		35,109		35,459		36,722		34,389		32,629
Other intangibles, net		39,297		43,409		42,404		35,669		39,297		38,363
Deferred income tax assets, net		25,135		28,336		22,427		18,136		25,135		18,135
Trademarks		437,247		440,505		439,742		441,062		437,247		438,658
Goodwill		259,926		261,366		261,137		261,684		259,926		260,622
Total assets	$	2,928,607	$	2,551,068	$	2,208,058	$	2,469,416	$	2,928,607	$	2,565,137
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Income tax payable	$	32,029	$	25,194	$	8,859
Current portion of notes payable							$	4,083	$	655	$	673
Accounts payable		215,217		224,826		225,499		157,654		215,217		204,786
Accrued expenses		137,402		137,878		102,841		125,675		137,402		101,838
Customer refund liabilities		260,040		235,400		243,589		120,395		260,040		233,418
Current operating lease liabilities		66,850		—		—		65,554		66,850		63,166
Current portion of notes payable		655		—		—
Income tax payable								8,702		32,029		8,468
Other current liabilities		1,056		—		—		21		1,056		1,611
Total current liabilities		713,249		623,298		580,788		482,084		713,249		613,960
Notes payable, net of discount and unamortized issuance costs		674,741		694,277		386,604		504,328		674,741		396,794
Deferred income tax liabilities, net		14,300		15,276		15,128		8,313		14,300		7,952
Noncurrent operating lease liabilities		260,010		—		—		157,983		260,010		249,040
Other noncurrent liabilities		6,005		37,262		36,529		6,441		6,005		6,719
Total liabilities		1,668,305		1,370,113		1,019,049		1,159,149		1,668,305		1,274,465

Stockholders' Equity
Preferred stock; 1,000 shares authorized; 0 shares issued		—		—		—		—		—		—
Common stock - $0.01 par value; 120,000 shares authorized; 49,395, 49,356 and, 49,387 shares issued, respectively		264		264		264
Common stock - $0.01 par value; 120,000 shares authorized; 49,396, 49,395 and, 49,396 shares issued, respectively								264		264		264
Additional paid-in capital		457,278		461,457		464,112		446,662		457,278		452,142
Accumulated other comprehensive loss		(23,060)		(15,566)		(15,194)		(11,194)		(23,060)		(18,008)
Retained earnings		867,850		734,800		758,881		902,041		867,850		893,138
Common stock held in treasury, at cost - 1,570, 0 and 678 shares, respectively		(42,030)		—		(19,054)
Common stock held in treasury, at cost - 1,037, 1,570 and 1,386 shares, respectively								(27,506)		(42,030)		(36,864)
Total stockholders' equity		1,260,302		1,180,955		1,189,009		1,310,267		1,260,302		1,290,672
Total liabilities and stockholders' equity	$	2,928,607	$	2,551,068	$	2,208,058	$	2,469,416	$	2,928,607	$	2,565,137

The accompanying notes are an integral part of these ~~statements.~~statements.

Table of Contents

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


	Three Months Ended October 31,				Nine Months Ended October 31,				Three Months Ended October 31,				Nine Months Ended October 31,
	2019		2018		2019		2018		2020		2019		2020		2019

	(Unaudited)								(Unaudited)
	(In thousands, except per share amounts)								(In thousands, except per share amounts)
Net sales	$	1,128,403	$	1,072,982	$	2,405,847	$	2,309,423	$	826,561	$	1,128,403	$	1,528,904	$	2,405,847
Cost of goods sold		729,384		690,882		1,538,995		1,461,252		528,806		729,384		972,055		1,538,995
Gross profit		399,019		382,100		866,852		848,171		297,755		399,019		556,849		866,852
Selling, general and administrative expenses		246,580		232,052		644,887		632,983		177,625		246,580		454,347		644,887
Depreciation and amortization		9,701		10,033		28,963		28,868		10,187		9,701		29,745		28,963
Gain on lease terminations		(124)		—		(2,346)		—
Asset impairments, net of loss (gain) on lease modifications										(117)		(124)		17,372		(2,346)
Operating profit		142,862		140,015		195,348		186,320		110,060		142,862		55,385		195,348
Other income (loss)		677		176		(722)		(303)		225		677		112		(722)
Interest and financing charges, net		(12,518)		(12,323)		(33,623)		(32,153)		(18,681)		(12,518)		(38,237)		(33,623)
Income before income taxes		131,021		127,868		161,003		153,864		91,604		131,021		17,260		161,003
Income tax expense		35,634		33,843		42,454		39,877		28,430		35,634		8,357		42,454
Net income	$	95,387	$	94,025	$	118,549	$	113,987	$	63,174	$	95,387	$	8,903	$	118,549

NET INCOME PER COMMON SHARE:
Basic:
Net income per common share	$	2.00	$	1.91	$	2.45	$	2.32	$	1.31	$	2.00	$	0.18	$	2.45
Weighted average number of shares outstanding		47,768		49,231		48,333		49,176		48,359		47,768		48,201		48,333

Diluted:
Net income per common share	$	1.97	$	1.86	$	2.42	$	2.26	$	1.29	$	1.97	$	0.18	$	2.42
Weighted average number of shares outstanding		48,356		50,494		49,056		50,345		48,809		48,356		48,589		49,056

Net income	$	95,387	$	94,025	$	118,549	$	113,987	$	63,174	$	95,387	$	8,903	$	118,549
Other comprehensive income:
Foreign currency translation adjustments		(6,212)		(1,979)		(7,866)		(10,044)		7,066		(6,212)		6,814		(7,866)
Other comprehensive loss		(6,212)		(1,979)		(7,866)		(10,044)
Other comprehensive income (loss)										7,066		(6,212)		6,814		(7,866)
Comprehensive income	$	89,175	$	92,046	$	110,683	$	103,943	$	70,240	$	89,175	$	15,717	$	110,683

The accompanying notes are an integral part of these statements.

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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 July 31, 2020	$	264	$	444,384	$	(18,260)	$	838,867	$	(27,506)	$	1,237,749
Share-based compensation expense		—		2,278		—		—		—		2,278
Other comprehensive income, net		—		—		7,066		—		—		7,066
Net income		—		—		—		63,174		—		63,174
Balance as of October 31, 2020	$	264	$	446,662	$	(11,194)	$	902,041	$	(27,506)	$	1,310,267

Balance as of July 31, 2019	$	264	$	456,195	$	(16,848)	$	772,463	$	(44,254)	$	1,167,820
Equity awards exercised/vested, net		—		(2,224)		—		—		2,224		—
Share-based compensation expense		—		4,308		—		—		—		4,308
Taxes paid for net share settlements		—		(1,001)		—		—		—		(1,001)
Other comprehensive income, net		—		—		(6,212)		—		—		(6,212)
Net income		—		—		—		95,387		—		95,387
Balance as of October 31, 2019	$	264	$	457,278	$	(23,060)	$	867,850	$	(42,030)	$	1,260,302

Balance as of January 31, 2020	$	264	$	452,142	$	(18,008)	$	893,138	$	(36,864)	$	1,290,672
Equity awards exercised/vested, net		—		(9,178)		—		—		9,358		180
Share-based compensation expense		—		4,015		—		—		—		4,015
Taxes paid for net share settlements		—		(317)		—		—		—		(317)
Other comprehensive income, net		—		—		6,814		—		—		6,814
Net income		—		—		—		8,903		—		8,903
Balance as of October 31, 2020	$	264	$	446,662	$	(11,194)	$	902,041	$	(27,506)	$	1,310,267

Balance as of January 31, 2019	$	264	$	464,112	$	(15,194)	$	758,881	$	(19,054)	$	1,189,009
Equity awards exercised/vested, net		—		(12,124)		—		—		12,240		116
Share-based compensation expense		—		13,657		—		—		—		13,657
Taxes paid for net share settlements		—		(8,367)		—		—		—		(8,367)
Other comprehensive loss, net		—		—		(7,866)		—		—		(7,866)
Repurchases of common stock		—		—		—		—		(35,216)		(35,216)
Cumulative effect of adoption of ASC 842		—		—		—		(9,580)		—		(9,580)
Net income		—		—		—		118,549		—		118,549
Balance as of October 31, 2019	$	264	$	457,278	$	(23,060)	$	867,850	$	(42,030)	$	1,260,302

The accompanying notes are an integral part of these statements.

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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended October 31,

2019

2018

(Unaudited)

(In thousands)
Cash flows from operating activities

Net income

$
118,549

$
113,987
Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization

28,963

28,868
Loss on disposal of fixed assets

1,343

154
Non-cash operating lease costs

55,048

—
Gain on lease terminations

(2,346)

—
Dividend received from unconsolidated affiliate

1,960

1,470
Equity (gain)/loss in unconsolidated affiliates

(2,248)

1,421
Share-based compensation

13,657

14,876
Deferred financing charges and debt discount amortization

6,586

7,481
Changes in operating assets and liabilities:

Accounts receivable, net

(396,895)

(525,331)
Inventories

(74,250)

(63,312)
Income taxes, net

28,614

20,507
Prepaid expenses and other current assets

19,278

(33,958)
Other assets, net

(382)

(4,569)
Customer refund liabilities

16,450

168,954
Operating lease liabilities

(61,063)

—
Accounts payable, accrued expenses and other liabilities

26,567

33,345
Net cash used in operating activities

(220,169)

(236,107)

Cash flows from investing activities

Operating lease assets initial direct costs

(2,014)

—
Capital expenditures

(31,903)

(19,516)
Investment in unconsolidated affiliate

—

(9,951)
Net cash used in investing activities

(33,917)

(29,467)

Cash flows from financing activities

Repayment of borrowings - revolving facility

(1,536,448)

(1,454,510)
Proceeds from borrowings - revolving facility

1,816,328

1,752,106
Repayment of borrowings - unsecured term loan

(338)

—
Proceeds from borrowings - unsecured term loan

3,380

—
Proceeds from exercise of equity awards

116

56
Purchase of treasury shares

(35,216)

—
Taxes paid for net share settlements

(8,367)

(4,843)
Net cash provided by financing activities

239,455

292,809

Foreign currency translation adjustments

294

(6,931)
Net (decrease)/increase in cash and cash equivalents

(14,337)

20,304
Cash and cash equivalents at beginning of period

70,138

45,776
Cash and cash equivalents at end of period

$
55,801

$
66,080

Supplemental disclosures of cash flow information

Cash payments:

Interest, net

$
25,822

$
26,071
Income tax payments, net

$
13,975

$
20,041


	Nine Months Ended October 31,
	2020		2019

	(Unaudited)
	(In thousands)
Cash flows from operating activities
Net income	$	8,903	$	118,549
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		29,745		28,963
Loss on disposal of fixed assets		474		1,343
Non-cash operating lease costs		59,643		55,048
Gain on lease modifications		(2,539)		(2,346)
Asset impairments		19,911		—
Dividend received from unconsolidated affiliate		2,695		1,960
Equity gain in unconsolidated affiliates		(340)		(2,248)
Share-based compensation		4,015		13,657
Deferred financing charges and debt discount amortization		7,712		6,586
Extinguishment of deferred financing costs		6,503		—
Deferred income taxes		2		—
Changes in operating assets and liabilities:
Accounts receivable, net		(190,838)		(396,895)
Inventories		90,148		(74,250)
Income taxes, net		6,587		28,614
Prepaid expenses and other current assets		42,704		19,278
Other assets, net		(342)		(382)
Customer refund liabilities		(113,023)		16,450
Operating lease liabilities		(61,822)		(61,063)
Accounts payable, accrued expenses and other liabilities		(37,709)		26,567
Net cash used in operating activities		(127,571)		(220,169)

Cash flows from investing activities
Operating lease assets initial direct costs		(4,041)		(2,014)
Capital expenditures		(12,392)		(31,903)
Net cash used in investing activities		(16,433)		(33,917)

Cash flows from financing activities
Repayment of borrowings - revolving facility		(878,083)		(1,536,448)
Proceeds from borrowings - revolving facility		878,083		1,816,328
Repayment of borrowings - unsecured term loan		(300,262)		(338)
Proceeds from borrowings - unsecured term loan		7,103		3,380
Proceeds from borrowings - senior secured notes		400,000		—
Payment of financing costs		(13,276)		—
Proceeds from exercise of equity awards		180		116
Purchase of treasury shares		—		(35,216)
Taxes paid for net share settlements		(317)		(8,367)
Net cash provided by financing activities		93,428		239,455

Foreign currency translation adjustments		2,949		294
Net decrease in cash and cash equivalents		(47,627)		(14,337)
Cash and cash equivalents at beginning of period		197,372		70,138
Cash and cash equivalents at end of period	$	149,745	$	55,801

Supplemental disclosures of cash flow information
Cash payments:
Interest, net	$	14,864	$	25,822
Income tax payments, net	$	1,628	$	13,975

The accompanying notes are an integral part of these statements.

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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~~for several product categories.

The Company consolidates the accounts of its wholly-owned and majority-owned subsidiaries. KL North America B.V. (“KLNA”) and Fabco Holding B.V. (“Fabco”) are Dutch joint venture limited liability companies, ~~that are~~each of which is 49% owned by the Company. See Note 16 – Subsequent Events with respect to an increase in the ownership of Fabco by the Company. Karl Lagerfeld Holding B.V. (“KLH”) is a Dutch limited liability company that is 19% owned by the Company. These investments are accounted for using the equity method of accounting. All material intercompany balances and transactions have been eliminated.

Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, KLH, KLNA 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 Vilebrequin, KLH, KLNA and Fabco are, and will be, included in the financial statements for the quarter ended or ending closest to the Company’s fiscal quarter end. For example, with respect to the Company’s results for the nine-month period ended October 31, ~~2019,~~2020, the results of Vilebrequin, KLH, KLNA and Fabco are included for the nine-month period ended September 30, ~~2019.~~2020. The Company’s retail operations segment reports on a 52/53-week fiscal year. The Company’s three and nine-month periods ended October 31, ~~2019~~2020 and ~~2018~~2019 were each a 13-week ~~fiscal quarter~~ and 39-week ~~period,~~periods, respectively, for the retail operations segment. For fiscal ~~2020~~2021 and ~~2019,~~2020, the three and nine-month periods for the retail operations segment ended on October 31, 2020 and November 2, 2019, ~~and November 3, 2018,~~ respectively.

The results for the three and nine months ended October 31, ~~2019~~2020 are not necessarily indicative of the results expected for the entire fiscal year, given the seasonal nature of the Company’s business and the significant effects of the COVID-19 pandemic on 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, ~~2019~~2020 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 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.

Accounting Policies

On April 10, 2020, the Financial Accounting Standards Board (“FASB”) issued a Staff Q&A to respond to frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 outbreak. Consequently, for lease concessions related to the effects of the COVID-19 outbreak, an entity will not have to analyze each lease to determine whether the enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance to those leases. Entities may make the elections for any lessor-provided concessions related to the effects of the outbreak (e.g., deferrals of lease payments, lease payment forgiveness, cash payments made to the lessee or reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. The Company has elected to not apply the lease modification guidance for contracts with COVID-19 related rent concessions. As of October 31, 2020, the Company has $11.0 million of deferred lease payments recorded within accounts payable on its condensed consolidated balance sheets.

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Liquidity and Impact of COVID-19

The Company relies on its cash flows generated from operations and the borrowing capacity under its credit facilities to meet the cash requirements of its business. The primary cash requirements of its business are the seasonal buildup in inventory, compensation paid to employees, payments to suppliers in the normal course of business, capital expenditures, maturities of debt and related interest payments and income tax payments. The rapid expansion of the COVID-19 pandemic resulted in a sharp decline in net sales in the first, second and, to a lesser extent, third quarters of fiscal 2021. It also resulted in the Company recognizing a net loss in the first and second quarters and a significant reduction in net income in the third quarter. The Company is focused on preserving its liquidity and managing its cash flow during these unprecedented conditions. The Company had taken preemptive actions to enhance its ability to meet its short-term liquidity needs, including, but not limited to, reducing payroll costs through employee furloughs, job eliminations, salary reductions, reductions in marketing and other discretionary spending, deferring certain lease payments and deferral of capital projects. During the quarter ended October 31, 2020, certain furloughed employees were reinstated and salaries that had been reduced were increased to their pre-pandemic levels. The Company has received royalty relief from certain licensors and continues to negotiate with licensors for additional relief.

As of October 31, 2020, the Company had cash and cash equivalents of $149.7 million and availability under its revolving credit facility in excess of $600.0 million. The Company believes it has adequate cash flows to meet the cash requirements of its business. As of October 31, 2020, the Company was in compliance with all covenants under its senior secured notes and revolving credit facility. On August 7, 2020, the Company refinanced its term loan and revolving credit facility. See Note 9 – Notes Payable.

Note 2 – Retail Restructuring

In June 2020, the Company announced the restructuring of its retail operations segment including the closing of all Wilsons Leather and G.H. Bass stores. Additionally, the Company is also closing its Calvin Klein Performance stores. In connection with the restructuring of the retail operations segment, the Company expects to incur an aggregate charge of approximately $100 million related to store operating costs, landlord termination fees, severance costs, store liquidation and closing costs, write-offs related to right-of-use assets and legal and professional fees. The Company expects the net cash outflow from the retail restructuring to be approximately $65 million.

As a result of the restructuring of the Company’s retail operations, the Company recorded an aggregate charge of $2.2 million during the nine months ended October 31, 2020. The charge consisted primarily of severance payments, benefit continuation costs and store closing costs. Restructuring charges are recorded within selling, general and administrative expenses in the Company’s condensed consolidated statements of income and comprehensive income. The following is a reconciliation of the accrual for the quarter ended October 31, 2020:



	Severance and Benefit Costs		Store Closing Costs		Total

	(In thousands)
Balance at April 30, 2020	$	—	$	—	$	—
Amounts charged to expense		480		792		1,272
Cash payments		(26)		—		(26)
Balance at July 31, 2020	$	454	$	792	$	1,246
Amounts charged to expense		892		—		892
Cash payments		(328)		(277)		(605)
Balance at October 31, 2020	$	1,018	$	515	$	1,533

The Company has accounted for the remaining rent and termination payments under Accounting Standards Codification (“ASC”) 842 – Leases. As of October 31, 2020, the total operating lease liability related to Wilsons Leather, G.H Bass, and Calvin Klein Performance stores is $28.0 million and will be paid during the fiscal quarter ending January 31, 2021.

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Note 3 – Allowance for Doubtful Accounts

On February 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” which had no material impact on the Company’s financial statements. 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.

The Company’s accounts receivable and allowance for doubtful accounts as of October 31, 2020 were:


	October 31, 2020
	Wholesale		Retail		Total

	(In thousands)
Accounts receivable, gross	$	734,481	$	1,968	$	736,449
Allowance for doubtful accounts		(15,437)		(37)		(15,474)
Accounts receivable, net	$	719,044	$	1,931	$	720,975

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 debts 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.

During the three and nine months ended October 31, 2020, the Company recorded a $4.3 million and $14.9 million increase in its allowance for doubtful accounts primarily due to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or possible bankruptcy filings. The Company had the following activity in its allowance for credit losses for the nine months ended October 31, 2020:


	October 31, 2020
	Wholesale		Retail		Total

	(In thousands)
Balance as of January 31, 2020	$	(628)	$	(82)	$	(710)
Provision for credit losses		(14,919)		45		(14,874)
Accounts written off as uncollectible		110		—		110
Balance as of October 31, 2020	$	(15,437)	$	(37)	$	(15,474)

Note 4 – Inventories

Wholesale inventories, which comprise a significant portion of the Company’s inventory, are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Retail inventories are valued at the lower of cost or market as determined by the retail inventory method. 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.

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The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, represented $20.6 million, $41.9 million ~~$37.5 million~~ and ~~$42.4~~$31.0 million as of October 31, ~~2019,~~2020, October 31, ~~2018~~2019 and January 31, ~~2019~~2020, respectively. The inventory return asset is recorded within prepaid expenses and other current ~~assets.~~assets on the condensed consolidated balance sheets.

Inventory held on consignment by the Company’s customers totaled $4.8 million, $11.0 million ~~$7.3 million~~ and ~~$4.9~~$9.1 million at October 31, ~~2019,~~2020, October 31, ~~2018~~2019 and January 31, ~~2019,~~2020, respectively. Consignment inventory is stored at the facilities of the Company’s customers. The Company reflects this inventory on its condensed consolidated balance sheets.

Note 35 – 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.

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


		Carrying Value						Fair Value							Carrying Value						Fair Value
		October 31,		October 31,		January 31,		October 31,		October 31,		January 31,			October 31,		October 31,		January 31,		October 31,		October 31,		January 31,
Financial Instrument	Level	2019		2018		2019		2019		2018		2019		Level	2020		2019		2020		2020		2019		2020

		(In thousands)													(In thousands)
Secured notes														2	$	400,000	$	—	$	—	$	400,000	$	—	$	—
Term loan	2	$	300,000	$	300,000	$	300,000	$	300,000	$	300,000	$	300,000	2		—		300,000		300,000		—		300,000		300,000
Revolving credit facility	2		279,880		309,599		—		279,880		309,599		—	2		—		279,880		—		—		279,880		—
Note issued to LVMH	3		100,623		95,345		96,618		100,825		95,345		88,608	3		106,361		100,623		102,009		99,832		100,825		95,126
Unsecured loan	2		2,948		—		—		2,948		—		—
Unsecured loans														2		7,232		2,948		2,860		7,232		2,948		2,860
Overdraft facilities														2		2,885		—		—		2,885		—		—

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 carrying amount of the Company’s variable rate debt approximates the fair value, as interest rates change with the market rates. Furthermore, the carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash, accounts receivable and accounts payable) also approximates fair value due to the short-term nature of these accounts. On August 7, 2020, the Company refinanced its term loan and revolving credit facility. See Note 9 – Notes Payable.

The 2% note in the principal amount of $125 million (the “LVMH Note”) issued to LVMH Moet Hennessy Louis Vuitton Inc. (“LVMH”) in connection with the acquisition of Donna Karan International (“DKI”) was ~~issued~~recorded on the balance sheet at a discount of $40.0 million in accordance with ~~Accounting Standards Codification (“ASC”)~~ASC 820 – Fair Value Measurements. For purposes of this fair value disclosure, the Company based its fair value estimate for the ~~note issued to~~ LVMH Note on the initial fair value as determined at the date of the acquisition of DKI and records the amortization using the effective interest method over the term of the ~~note.~~LVMH Note.

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

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Non-Financial Assets and Liabilities

The Company’s non-financial assets ~~which primarily consist of operating lease assets, goodwill, other intangible assets and property and equipment,~~that are ~~not required to be~~ measured at fair value on a ~~recurring~~nonrecurring basis include long-lived assets, which consist primarily of property and ~~are reported at carrying value. However,~~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 (and at least annually for goodwill~~recoverable. For impaired assets, an impairment loss is recognized equal to the difference between the carrying amount of the asset or asset group and ~~indefinite-lived intangible assets), non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at~~its estimated fair value. For operating lease assets, the Company determines the fair value ~~considering external~~of the assets by discounting the estimated market ~~participant assumptions.~~rental rates over the remaining term of the lease. These fair value measurements are considered level 3 measurements in the fair value hierarchy. During the second quarter of fiscal 2021, the Company recorded a $20 million impairment charge primarily related to operating lease assets, leasehold improvements and furniture and fixtures at certain Wilsons Leather, G.H. Bass, DKNY and Vilebrequin stores as a result of the performance at these stores. During the first quarter of fiscal 2020, the Company recorded an impairment of $9.6 million, net of tax, in connection with the adoption of ASC 842 – Leases (“ASC 842”) that was recognized through retained earnings.

Note 46 – Leases

On February 1, 2019, the Company adopted ASC 842 using the optional transition method to apply the standard as of the effective date and, therefore, the standard has not been applied retroactively to the comparative periods presented in its financial statements. The Company has elected the transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs. The hindsight practical expedient, which permits the use of hindsight when determining lease term and impairment of right-of-use assets, has not been elected. Further, the Company elected the short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component.

~~The Company determines whether an arrangement is, or contains, a lease at contract inception.~~ The Company leases ~~certain~~ 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.

Total rent payable is recorded during the lease term, including rent escalations in which the amount of future rent is certain or fixed on the straight-line basis over the term of the lease (including any rent holiday periods beginning upon control of the premises and any fixed payments stated in the lease). For leases with an initial term greater than 12 months, a lease liability is recorded on the balance sheet at the present value of future payments discounted at the incremental borrowing rate (discount rate) corresponding with the lease term. An operating lease asset is recorded based on the initial amount of the lease liability, plus any lease payments made to the lessor before or at the lease commencement date and any initial direct costs incurred, less any tenant improvement allowance incentives received. The difference between the minimum rents paid and the straight-line rent (deferred rent) is reflected within the associated operating lease asset.

The lease classification evaluation begins at the commencement date. The lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain or the failure to exercise such option would result in an economic penalty. All retail store, warehouse, distribution center and office leases are classified as operating leases. The Company does not have any finance leases. Operating lease expense is generally recognized on a straight-line basis over the lease term.

~~Certain leases contain provisions that require contingent rent payments based upon sales volume (variable lease cost). Contingent rent is accrued each period as the liabilities are incurred.~~

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.

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.

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The Company’s lease assets and liabilities as of October 31, 2020, October 31, 2019 and January 31, 2020 consist of the following:



Leases	Classification	October 31, 2019		Classification	October 31, 2020		October 31, 2019		January 31, 2020

		(In thousands)			(In thousands)
Assets
Operating	Operating lease assets	$	293,819	Operating lease assets	$	181,187	$	293,819	$	270,032
Total lease assets		$	293,819		$	181,187	$	293,819	$	270,032

Liabilities
Current operating	Current operating lease liabilities	$	66,850	Current operating lease liabilities	$	65,554	$	66,850	$	63,166
Noncurrent operating	Noncurrent operating lease liabilities		260,010	Noncurrent operating lease liabilities		157,983		260,010		249,040
Total lease liabilities		$	326,860		$	223,537	$	326,860	$	312,206

The Company’s ~~leases do not provide~~operating lease assets and operating lease liabilities significantly declined during fiscal 2021 due to the ~~rate~~restructuring of ~~interest implicit~~the retail operations segment, partially offset by other leasing activity. As a result of this restructuring, the Company expects to close all of its Wilsons Leather, G.H. Bass and Calvin Klein Performance stores by the end of fiscal 2021. In addition, primarily due to the restructuring, in the ~~lease. Therefore,~~second quarter of fiscal 2021 the Company ~~uses its incremental borrowing rate based on~~recorded a $19.4 million impairment charge related to the ~~information available~~operating lease assets at ~~commencement date in determining~~certain Wilsons Leather, G.H. Bass, DKNY and Vilebrequin stores as a result of the ~~present value of lease payments. For transition purposes, the incremental borrowing rate on February 1, 2019 was used for operating leases that commenced prior to that date.~~performance at these stores.

The Company recorded lease costs of $18.7 million and $77.1 million during the three and nine months ended October 31, 2020, respectively. The Company recorded lease costs of $24.4 million and $74.3 million during the three and nine months ended October 31, 2019, respectively. Lease costs are recorded within selling, general and administrative expenses in the Company’s condensed consolidated statements of income and comprehensive income. The Company recorded variable

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lease costs and short-term lease costs of $6.2 million and $5.3 million for the three and nine months ended October 31, 2020, respectively. The Company recorded variable leases costs and short-term lease costs of $4.4 million and $11.9 million for the three and nine months ended October 31, 2019, respectively. Short-term lease costs are immaterial.

As of October 31, ~~2019,~~2020, the Company’s maturity of operating lease liabilities in the years ending up to January 31, ~~2024~~2025 and thereafter are as follows:


Year Ending January 31,	Amount		Amount
	(In thousands)		(In thousands)
2020	$	20,031
2021		89,483	$	38,100
2022		75,858		55,033
2023		66,550		48,113
2024		53,197		35,856
After 2024		97,891
2025				28,896
After 2025				68,838
Total lease payments	$	403,010	$	274,836
Less: Interest		76,150		51,299
Present value of lease liabilities	$	326,860	$	223,537

As of October 31, ~~2019,~~2020, there are no material leases that are legally binding but have not yet commenced.

As of October 31, ~~2019,~~2020, the weighted average remaining lease term related to operating leases is ~~5.3~~4.9 years. The weighted average discount rate related to operating leases is ~~7.8%~~8.2%.

Cash paid for amounts included in the measurement of operating lease liabilities is $79.7 million and $75.9 million ~~as of~~during the nine months ended October 31, ~~2019.~~2020 and October 31, 2019, respectively. Right-of-use assets obtained in exchange for lease obligations were $41.3 million and $21.3 million as of October 31, ~~2019.~~2020 and October 31, 2019, respectively.

Note 7 – Goodwill and Intangible Assets

As of October 31, 2020, there is $261.7 million of goodwill and $441.1 million of indefinite-lived trademarks recorded on the Company’s condensed consolidated balance sheet. The Company reviews and tests its goodwill and intangible assets with indefinite lives for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may be impaired. Due to the impact of the COVID-19 pandemic on the Company’s operations, the Company performed a quantitative test of its goodwill as of April 30, 2020 using an income approach through a discounted cash flow analysis methodology. The discounted cash flow approach requires that certain assumptions and estimates be made regarding industry economic factors and future profitability. The Company also performed quantitative tests of each of its indefinite-lived intangible assets using a relief from royalty method, another form of the income approach. The relief from royalty method requires assumptions regarding industry economic factors and future profitability. There were 0 impairments identified as of April 30, 2020 as a result of these tests.

While 0 impairment was identified as of April 30, 2020, $370.0 million of the Company’s indefinite-lived trademarks could be deemed to have a risk of future impairment as there is limited excess fair value over the carrying value of these assets at October 31, 2020.

During the third quarter of 2020, the Company conducted a review to assess whether indicators of impairment existed. As a result of this review, the Company concluded that no indicators existed that would make management believe it is more likely than not that the fair value of its goodwill or indefinite-lived trademarks is less than its carrying value. The continued impact of the COVID-19 pandemic could give rise to global and regional macroeconomic factors that could impact the Company’s assumptions relating to future net sales, discount rates, tax rates or royalty rates and may result in future impairment charges for indefinite-lived intangible assets.

The fair value of the Company’s goodwill and indefinite-lived intangible assets are considered a Level 3 valuation in the fair value hierarchy.

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Note 58 – 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 is computed using the weighted average number of common shares and potential dilutive common shares, consisting of unvested restricted stock unit awards and ~~unexercised~~ stock options outstanding during the period. Approximately ~~846,200~~262,100 and ~~344,000 unvested~~215,600 shares of common stock have been excluded from the diluted net income per share calculation for the three and nine months ended October 31, ~~2019 and 2018,~~2020, respectively. Approximately ~~680,700~~846,200 and ~~330,000 unvested~~680,700 shares of common stock ~~have been~~were excluded from the diluted net income per share calculation for the three and nine months ended October 31, 2019, ~~and 2018,~~ respectively. All share-based payments outstanding that vest based on the achievement of performance and/or market price conditions, and for which the respective performance and/or market price conditions have not been achieved, have been excluded from the diluted per share calculation.

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


	Three Months Ended October 31,				Nine Months Ended October 31,				Three Months Ended October 31,				Nine Months Ended October 31,
	2019		2018		2019		2018		2020		2019		2020		2019

	(In thousands, except per share amounts)								(In thousands, except per share amounts)
Net income	$	95,387	$	94,025	$	118,549	$	113,987	$	63,174	$	95,387	$	8,903	$	118,549
Basic net income per share:
Basic common shares		47,768		49,231		48,333		49,176		48,359		47,768		48,201		48,333
Basic net income per share	$	2.00	$	1.91	$	2.45	$	2.32	$	1.31	$	2.00	$	0.18	$	2.45

Diluted net income per share:
Basic common shares		47,768		49,231		48,333		49,176		48,359		47,768		48,201		48,333
Diluted restricted stock unit awards and stock options		588		1,263		723		1,169
Dilutive restricted stock unit awards and stock options										450		588		388		723
Diluted common shares		48,356		50,494		49,056		50,345		48,809		48,356		48,589		49,056
Diluted net income per share	$	1.97	$	1.86	$	2.42	$	2.26	$	1.29	$	1.97	$	0.18	$	2.42

Note 69 – Notes Payable

Long-term debt consists of the following:


	October 31, 2019		October 31, 2018		January 31, 2019		October 31, 2020		October 31, 2019		January 31, 2020

	(In thousands)						(In thousands)
Term loan	$	300,000	$	300,000	$	300,000
Secured Notes							$	400,000	$	—	$	—
Term Loan								—		300,000		300,000
Revolving credit facility		279,880		309,599		—		—		279,880		—
Note issued to LVMH		125,000		125,000		125,000
Unsecured loan		2,948		—		—
LVMH Note								125,000		125,000		125,000
Unsecured loans								7,232		2,948		2,860
Overdraft facilities								2,885		—		—
Subtotal		707,828		734,599		425,000		535,117		707,828		427,860
Less: Net debt issuance costs ⁽¹⁾		(8,055)		(10,667)		(10,014)		(8,067)		(8,055)		(7,402)
Debt discount		(24,377)		(29,655)		(28,382)		(18,639)		(24,377)		(22,991)
Current portion of long-term debt		(655)		—		—		(4,083)		(655)		(673)
Total	$	674,741	$	694,277	$	386,604	$	504,328	$	674,741	$	396,794

(1)

Does not include debt issuance costs, net of amortization, totaling $7.3 million, $5.2 million ~~$7.7 million~~ and ~~$7.1~~$4.6 million as of October 31, ~~2019,~~2020, October 31, ~~2018~~2019 and January 31, ~~2019,~~2020, respectively, related to the revolving credit facility. These debt issuance costs have been deferred and are classified in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets in accordance with ~~Accounting Standards Update (“ASU”)~~ASU 2015-15.

Senior Secured Notes

On August 7, 2020, the Company completed a private debt offering of $400 million aggregate principal amount of its 7.875% Senior Secured Notes due 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

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~~Term Loan~~collateral agent (the “Collateral Agent”). The net proceeds of the Notes have been used (i) to repay the Company’s prior term loan facility due 2022, (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, commencing on February 15, 2021.

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

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

In connection with the ~~acquisition~~issuance of ~~DKI,~~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 Notes are also subject to the terms of the seller note subordination agreement which governs the relative rights of the secured parties in respect of the Seller Note (as defined therein), the ABL Facility and the Notes.

At any time prior to August 15, 2022, the Company may redeem some or all of the Notes at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date plus a “make-whole” premium, as described in the Indenture. On or after August 15, 2022, 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. In addition, at any time prior to August 15, 2022, the Company may redeem up to 40% of the aggregate principal amount of the Notes with the proceeds of certain equity offerings at the redemption price set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, at any time prior to August 15, 2022, during any twelve month period, the Company may redeem up to 10% of the aggregate principal amount of the Notes at a redemption price equal to 103% of the principal amount of the Notes redeemed 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 that will be amortized over the term of the Notes. In accordance with ASU 2015-15, the debt issuance costs have been deferred and are presented as a contra-liability, offsetting the outstanding balance of the Notes, and are amortized using the effective interest method over the remaining life of the Notes.

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Term Loan

The Company had previously borrowed $350.0 million under a senior secured term loan facility (the “Term Loan”)~~. On~~ that was scheduled to mature in December ~~1, 2016, the~~2022. The Company prepaid $50.0 million in principal amount of the Term ~~Loan. The Term~~ Loan, ~~will mature in December 2022.~~

~~Interest on~~reducing the ~~outstanding~~ principal ~~amount~~balance of the Term Loan ~~accrues at~~to $300.0 million.

On August 7, 2020, the Company used a ~~rate equal~~portion of the proceeds from the issuance of the Notes to repay the ~~London Interbank Offered Rate (“LIBOR”), subject to a 1% floor, plus an applicable margin~~outstanding principal balance of 5.25% or an alternate base rate (defined as the greatest of (i) the “prime rate” as published by the Wall Street Journal from time to time, (ii) the federal funds rate plus 0.5% or (iii) the LIBOR rate for a borrowing with an interest period of one month) plus 4.25%, per annum, payable in cash. As of October 31, 2019, interest$300.0 million under the Term Loan ~~was being paid at an average rate~~facility. At the date of ~~7.62% per annum.~~

~~The Term Loan is secured by certain assets of~~repayment, the Company ~~and certain~~had unamortized debt issuance costs of ~~its subsidiaries. The Term Loan is required to be prepaid~~$6.1 million associated with the ~~proceeds of certain asset sales if such proceeds are not applied as required by the~~ Term ~~Loan within specified deadlines. The Term Loan contains covenants that, among other things, restrict~~Loan. These debt issuance costs were fully extinguished and charged to interest expense in the Company’s ~~ability, subject to certain exceptions, to incur additional debt; incur liens; sell or dispose~~results of certain assets; merge with other companies; liquidate or dissolve the Company; acquire other companies; make loans, advances, or guarantees; and make certain investments. This loan also includes a mandatory prepayment provision based on excess cash flow as defined in the term loan agreement. A first lien leverage covenant requires the Company to maintain a level of debt to EBITDA at a ratio as defined in the term loan agreement. As of October 31, 2019, the Company was in compliance with these covenants.operations.

~~Revolving~~Second Amended and Restated ABL Credit ~~Facility~~Agreement

~~Upon closing of the acquisition of DKI,~~On August 7, 2020, the Company’s ~~prior credit agreement was refinanced~~subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc., CK Outerwear, LLC, AM Retail Group, Inc. and ~~replaced by a $650 million~~The Donna Karan Company Store LLC (collectively, the “Borrowers”), entered into the second amended and restated credit agreement (the ~~“revolving~~“ABL Credit Agreement”) with the Lenders named therein and with JPMorgan Chase Bank, N.A., as Administrative Agent. The ABL Credit Agreement is a five year senior secured credit ~~facility”~~facility subject to a springing maturity date if, subject to certain conditions, certain material indebtedness is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder. The ABL Credit Agreement provides for borrowings in the aggregate principal amount of up to $650 million. The Company and its subsidiaries, G-III Apparel Canada ULC, Gabrielle Studio, Inc., Donna Karan International Inc. and Donna Karan Studio LLC (the “Guarantors”). , are Loan Guarantors under the ABL Credit Agreement

The ABL Credit Agreement refinances, amends and restates 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”), by and among the Borrowers and the Loan Guarantors (each as defined therein) party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., in its capacity as the administrative agent thereunder. The Prior Credit Agreement provided for borrowings of up to $650 million and was due to expire in December 2021. The ABL Credit Agreement extends the maturity date to August 2025, subject to a springing maturity date if, subject to certain conditions, certain material indebtedness is 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 ~~revolving credit facility~~ABL Credit Agreement are subject to borrowing base formulas and ~~over advances~~overadvances as specified in the ~~revolving credit facility agreement.~~ABL Credit Agreement. Borrowings bear interest, at the ~~Company’s~~Borrowers’ option, at LIBOR plus a margin of ~~1.25%~~1.75% to ~~1.75%~~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% orand (iii) the LIBOR rate for a borrowing with an interest period of one month) plus ~~a margin of 0.25% to 0.75%~~1.00%, with the applicable margin determined based on ~~the~~Borrowers’ availability under the ~~revolving credit facility agreement. As~~ABL Credit Agreement. The ABL Credit Agreement is secured by specified assets of ~~October 31, 2019, interest under~~ the ~~revolving credit agreement was being paid at an average rate of 3.30% per annum. The revolving credit facility has a five-year term ending December 1, 2021.~~Borrowers and the Guarantors. In addition to paying interest on any outstanding borrowings under the ~~revolving credit facility,~~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 ~~0.25%~~0.50% per annum on the average daily amount of the available ~~commitments.~~

Ascommitments when the average usage is less than 50% of ~~October 31, 2019,~~ the ~~Company had $279.9 million~~total available commitments and decreases to 0.35% per annum on the average daily amount of ~~borrowings outstanding under~~ the ~~revolving credit facility, all~~available commitments when the average usage is greater than or equal to 50% of ~~which are classified as long-term liabilities. As of October 31, 2019, there were outstanding trade and standby letters of credit amounting to $3.6 million and $3.4 million, respectively.~~the total available commitments.

The revolving credit facility contains covenants that, among other things, restrict the Company’s ability, subject to specified exceptions, to 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 October 31, ~~2019,~~2020, the Company was in compliance with these covenants.

As of October 31, 2020, the Company had 0 borrowings outstanding under the ABL Credit Agreement. As of October 31, 2020, interest under the ABL Credit Agreement was being paid at an average rate of 2.05% per annum. The ABL credit agreement also includes amounts available for letters of credit. As of October 31, 2020, there were outstanding trade and standby letters of credit amounting to $5.8 million and $3.9 million, respectively.

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At the date of the refinancing of the Prior Credit Agreement, the Company had $3.3 million of unamortized debt issuance costs remaining from the Prior Credit Agreement. The Company extinguished and charged to interest expense $0.4 million of the prior debt issuance costs and incurred new debt issuance costs totaling $4.8 million related to the ABL Credit Agreement. The Company has a total of $7.7 million debt issuance costs related to its ABL Credit Agreement. As permitted under ASC 2015-15, the debt issuance costs have been deferred and are presented as an asset which is to be subsequently amortized ratably over the term of the ABL Credit Agreement.

LVMH Note

As ~~part~~a portion of the consideration for the acquisition of DKI, the Company issued to LVMH a junior lien secured promissory note in the principal amount of $125.0 million ~~(the “LVMH Note”)~~ that bears interest at the rate of 2% per year. $75.0 million of the principal amount of the LVMH Note is due and payable on June 1, 2023 and $50.0 million of such principal amount is due and payable on December 1, 2023. ~~Accounting Standards Codification (“ASC”)~~

ASC 820 - ~~Fair Value Measurements~~ requires the note to be recorded at fair value at issuance. As a result, the Company recorded a $40.0 million debt discount. This discount is being amortized as interest expense using the effective interest method over the term of the LVMH Note.

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Unsecured ~~Loan~~Loans

~~On April 15, 2019, T.R.B.~~During fiscal 2020 and fiscal 2021, T.R.B International SA (“TRB”), a subsidiary of Vilebrequin, borrowed ~~€3.0 million~~funds under anseveral unsecured ~~loan with Banque du Leman S.A (the “Unsecured Loan”). The Unsecured Loan matures on April 15, 2024. During the term~~loans. A portion of the ~~Unsecured Loan,~~unsecured loans were to provide funding for operations in the normal course of business, while other unsecured loans were various European state backed loans as part of COVID-19 relief programs. In the aggregate, TRB is currently required to make quarterly installment payments of €0.2 ~~million.~~million under these loans. Interest on the outstanding principal amount of the ~~Unsecured Loan~~unsecured loans accrues at a fixed rate equal to ~~1.50%~~0% to 2.0% per annum, payable on either a quarterly or monthly basis. Certain unsecured loans will require monthly installment payments beginning in ~~cash.~~fiscal 2022. The unsecured loans have maturity dates ranging from September 15, 2024 through August 30, 2025. As of October 31, 2020, TRB had an aggregate outstanding balance of €6.2 million under these various unsecured loans.

Overdraft Facilities

During the second quarter of fiscal 2021, TRB entered into several overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft. TRB entered into an uncommitted overdraft facility with HSBC Bank allowing for a maximum overdraft of €5 million. Interest on drawn balances accrues at a rate equal to the Euro Interbank Offered Rate plus a margin of 1.75% per annum, payable quarterly. The facility may be cancelled at any time by TRB or HSBC Bank. As part of a COVID-19 relief program, TRB and its subsidiaries have also entered into several state backed overdraft facilities with UBS Bank in Switzerland for an aggregate of CHF 4.7 million at varying interest rates of 0% to 0.5%. As of October 31, 2020, TRB had an aggregate of €2.5 million drawn under these various facilities.

Note 710 – Revenue Recognition

Disaggregation of Revenue

In accordance with ASC 606 – Revenue from Contracts with Customers, the Company ~~has elected to disclose~~discloses its revenues by segment. Each segment ~~has~~presents its own characteristics with respect to the timing of revenue recognition and the type of customer. In addition, disaggregating revenues using a segment basis is consistent with how the Company’s Chief Operating Decision Maker manages the Company. The Company has identified the wholesale operations segment and the retail operations segment as distinct sources of revenue.

Wholesale Operations Segment. Wholesale revenues include sales of products to retailers under owned, licensed and private label brands, as well as sales related to the Vilebrequin business. Wholesale revenues from sales of products are recognized when control transfers to the customer. The Company considers control to have been transferred when the Company has transferred physical possession of the product, the Company has a right to payment for the product, the customer has legal title to the product and the customer has the significant risks and rewards of the product. Wholesale revenues are adjusted by variable ~~considerations~~consideration arising from implicit or explicit obligations. Wholesale revenues also include ~~royalty~~ revenues from license agreements related to ~~our owned trademarks including~~the DKNY, Donna Karan, ~~Vilebrequin,~~ G.H. Bass, Andrew Marc and ~~Andrew Marc.~~Vilebrequin

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trademarks owned by the Company. As of October 31, ~~2019,~~2020, revenues from license agreements represented an insignificant portion of wholesale revenues.

Retail Operations Segment. Retail store revenues are generated by direct sales to consumers through company-operated stores and product sales through the Company’s owned websites for the DKNY, Donna Karan, Wilsons, G.H. Bass, Andrew Marc and Karl Lagerfeld Paris businesses. Retail stores primarily consist of Wilsons Leather, G.H. Bass and DKNY retail stores, substantially all of which are operated as outlet ~~stores, as well as a small number of Karl Lagerfeld Paris and Calvin Klein Performance~~ stores. Retail operations segment revenues are recognized at the point of sale when the customer takes possession of the goods and tenders payment. ~~E-commerce~~Digital-based revenues primarily consist of sales to consumers through the Company’s ~~e-commerce~~digital platforms. ~~E-commerce~~Digital-based revenue is recognized when a customer takes possession of the goods. Retail sales are recorded net of applicable sales tax. As a result of the restructuring of the Company’s retail operations, the Company is in the process of closing all of its Wilsons Leather and G.H. Bass retail stores which is expected to be completed by the end of fiscal 2021. After completion of the restructuring, the Company’s retail operations segment will consist of DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and G.H. Bass.

Contract Liabilities

The Company’s contract liabilities, which are recorded within accrued expenses in the accompanying condensed consolidated balance sheets, primarily consist of gift card liabilities and advance payments from licensees. In some of its retail concepts, the Company also offers a limited loyalty program where customers accumulate points redeemable for cash discount certificates that expire 90 days after issuance. Total contract liabilities were $4.1 million, $5.4 million ~~$4.2 million~~ and ~~$6.4~~$5.9 million at October 31, ~~2019,~~2020, October 31, ~~2018~~2019 and January 31, ~~2019,~~2020, respectively. The Company recognized ~~$4.5~~$2.1 million in revenue for the three months ended October 31, ~~2019~~2020 related to contract liabilities that existed at July 31, ~~2019.~~2020. The Company recognized ~~$5.5~~$4.3 million in revenue for the nine months ended October 31, ~~2019~~2020 related to contract liabilities that existed at January 31, ~~2019.~~2020. There were 0 contract assets recorded as of October 31, ~~2019,~~2020, October 31, ~~2018~~2019 and January 31, ~~2019.~~2020. Substantially all of the advance payments from licensees as of October 31, ~~2019~~2020 are expected to be recognized as revenue within the next twelve months.

Note 11 – Segments

The Company’s reportable segments are business units that offer products through different channels of distribution. The Company has 2 reportable segments: wholesale operations and retail operations. The wholesale operations segment includes sales of products under the Company’s owned, licensed and private label brands, as well as sales related to the Vilebrequin business. Wholesale revenues also include revenues from license agreements related to our owned trademarks including DKNY, Donna Karan, Vilebrequin, G.H. Bass and Andrew Marc. The retail operations segment consists primarily of direct sales to consumers through Company-operated stores, consisting primarily of Wilsons Leather, G.H. Bass and DKNY stores, substantially all of which are operated as outlet stores. Sales through Company-owned channels, with the exception of Vilebrequin, are also included in the retail operations segment. As a result of the restructuring of the Company’s retail operations, the Company is in the process of closing all of its Wilsons Leather and G.H. Bass retail stores which is expected to be completed by the end of fiscal 2021. After completion of the restructuring, the Company’s retail operations segment will consist of DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and G.H. Bass.

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


	Three Months Ended October 31, 2020
	Wholesale		Retail		Elimination ⁽¹⁾		Total

	(In thousands)
Net sales	$	783,030	$	57,982	$	(14,451)	$	826,561
Cost of goods sold		504,919		38,338		(14,451)		528,806
Gross profit		278,111		19,644		—		297,755
Selling, general and administrative expenses		134,050		43,575		—		177,625
Depreciation and amortization		8,472		1,715		—		10,187
Asset impairments, net of gain on lease modifications		(102)		(15)		—		(117)
Operating profit (loss)	$	135,691	$	(25,631)	$	—	$	110,060

1217

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~~Note 8 – Segments~~


	Three Months Ended October 31, 2019
	Wholesale		Retail		Elimination ⁽¹⁾		Total

	(In thousands)
Net sales	$	1,067,858	$	89,671	$	(29,126)	$	1,128,403
Cost of goods sold		713,063		45,447		(29,126)		729,384
Gross profit		354,795		44,224		—		399,019
Selling, general and administrative expenses		190,166		56,414		—		246,580
Depreciation and amortization		7,748		1,953		—		9,701
Gain on lease modifications		—		(124)		—		(124)
Operating profit (loss)	$	156,881	$	(14,019)	$	—	$	142,862

The Company has 2 reportable segments: wholesale operations and retail operations. The wholesale operations segment includes sales of products under the Company’s owned, licensed and private label brands, as well as sales related to the Vilebrequin business. Wholesale revenues also include royalty revenues from license agreements related to our owned trademarks including DKNY, Donna Karan, Vilebrequin, G.H. Bass and Andrew Marc. The retail operations segment consists primarily of direct sales to consumers through Company-operated stores, consisting primarily of Wilsons Leather, G.H. Bass and DKNY stores, substantially all of which are operated as outlet stores, as well as a smaller number of Karl Lagerfeld Paris and Calvin Klein Performance stores. This segment also includes sales through Company-owned websites for the DKNY, Donna Karan, Wilsons, G.H. Bass, Andrew Marc and Karl Lagerfeld Paris businesses.


	Nine Months Ended October 31, 2020
	Wholesale		Retail		Elimination ⁽¹⁾		Total

	(In thousands)
Net sales	$	1,428,711	$	126,397	$	(26,204)	$	1,528,904
Cost of goods sold		914,900		83,359		(26,204)		972,055
Gross profit		513,811		43,038		—		556,849
Selling, general and administrative expenses		323,377		130,970		—		454,347
Depreciation and amortization		25,155		4,590		—		29,745
Asset impairments, net of gain on lease modifications		505		16,867		—		17,372
Operating profit (loss)	$	164,774	$	(109,389)	$	—	$	55,385

~~The following segment information is presented for the three and nine-month periods indicated below:~~

Three Months Ended October 31, 2019


Wholesale

Retail

Elimination ⁽¹⁾

Total

(In thousands)
Net sales

$
1,067,858

$
89,671

$
(29,126)

$
1,128,403
Cost of goods sold

713,063

45,447

(29,126)

729,384
Gross profit

354,795

44,224

—

399,019
Selling, general and administrative expenses

190,166

56,414

—

246,580
Depreciation and amortization

7,748

1,953

—

9,701
Gain on lease terminations

—

(124)

—

(124)
Operating profit (loss)

$
156,881

$
(14,019)

$
—

$
142,862

Three Months Ended October 31, 2018


Wholesale

Retail

Elimination ⁽¹⁾

Total

(In thousands)
Net sales

$
1,005,358

$
110,934

$
(43,310)

$
1,072,982
Cost of goods sold

677,011

57,181

(43,310)

690,882
Gross profit

328,347

53,753

—

382,100
Selling, general and administrative expenses

166,423

65,629

—

232,052
Depreciation and amortization

7,709

2,324

—

10,033
Operating profit (loss)

$
154,215

$
(14,200)

$
—

$
140,015

Nine Months Ended October 31, 2019


Wholesale

Retail

Elimination ⁽¹⁾

Total

(In thousands)
Net sales

$
2,227,404

$
255,282

$
(76,839)

$
2,405,847
Cost of goods sold

1,480,678

135,156

(76,839)

1,538,995
Gross profit

746,726

120,126

—

866,852
Selling, general and administrative expenses

478,964

165,923

644,887
Depreciation and amortization

23,033

5,930

28,963
Gain on lease terminations

—

(2,346)

(2,346)
Operating profit (loss)

$
244,729

$
(49,381)

$
—

$
195,348


	Nine Months Ended October 31, 2018								Nine Months Ended October 31, 2019
	Wholesale		Retail		Elimination ⁽¹⁾		Total		Wholesale		Retail		Elimination ⁽¹⁾		Total

	(In thousands)								(In thousands)
Net sales	$	2,077,628	$	322,115	$	(90,320)	$	2,309,423	$	2,227,404	$	255,282	$	(76,839)	$	2,405,847
Cost of goods sold		1,381,342		170,230		(90,320)		1,461,252		1,480,678		135,156		(76,839)		1,538,995
Gross profit		696,286		151,885		—		848,171		746,726		120,126		—		866,852
Selling, general and administrative expenses		439,014		193,969		—		632,983		478,964		165,923		—		644,887
Depreciation and amortization		22,192		6,676		—		28,868		23,033		5,930		—		28,963
Gain on lease modifications										—		(2,346)		—		(2,346)
Operating profit (loss)	$	235,080	$	(48,760)	$	—	$	186,320	$	244,729	$	(49,381)	$	—	$	195,348

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

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The total assets for each of the Company’s reportable segments, as well as assets not allocated to a segment, are as follows:


	October 31, 2019		October 31, 2018		January 31, 2019		October 31, 2020		October 31, 2019		January 31, 2020

	(In thousands)						(In thousands)
Wholesale	$	2,342,209	$	2,155,840	$	1,834,610	$	2,028,798	$	2,342,209	$	1,912,175
Retail		348,898		224,593		190,996		105,702		348,898		272,832
Corporate		237,500		170,635		182,452		334,916		237,500		380,130
Total assets	$	2,928,607	$	2,551,068	$	2,208,058	$	2,469,416	$	2,928,607	$	2,565,137

Note 912 – Stockholders’ Equity

~~The changes in stockholders’ equity for~~For the three ~~and nine~~ months ended October 31, ~~2019~~2020, the Company issued 0 shares of common stock and ~~2018 are as follows (in thousands):~~

Accumulated

Common

Additional

Other

Stock

Common

Paid-In

Comprehensive

Retained

Held In


Stock

Capital

Loss

Earnings

Treasury

Total
Balance as of July 31, 2019

$
264

$
456,195

$
(16,848)

$
772,463

$
(44,254)

$
1,167,820
Equity awards exercised/vested, net

—

(2,224)

—

—

2,224

—
Share-based compensation expense

—

4,308

—

—

—

4,308
Taxes paid for net share settlements

—

(1,001)

—

—

—

(1,001)
Other comprehensive gain, net

—

—

(6,212)

—

—

(6,212)
Net income

—

—

—

95,387

—

95,387
Balance as of October 31, 2019

$
264

$
457,278

$
(23,060)

$
867,850

$
(42,030)

$
1,260,302

Accumulated

Common

Additional

Other

Stock

Common

Paid-In

Comprehensive

Retained

Held In


Stock

Capital

Loss

Earnings

Treasury

Total
Balance as of July 31, 2018

$
263

$
460,000

$
(13,587)

$
640,774

$
(233)

$
1,087,217
Equity awards exercised/vested, net

1

(234)

—

—

233

—
Share-based compensation expense

—

5,436

—

—

—

5,436
Taxes paid for net share settlements

—

(3,745)

—

—

—

(3,745)
Other comprehensive loss, net

—

—

(1,979)

1

—

(1,978)
Net income

—

—

—

94,025

—

94,025
Balance as of October 31, 2018

$
264

$
461,457

$
(15,566)

$
734,800

$
—

$
1,180,955

Accumulated

Common

Additional

Other

Stock

Common

Paid-In

Comprehensive

Retained

Held In


Stock

Capital

Loss

Earnings

Treasury

Total
Balance as of January 31, 2019

$
264

$
464,112

$
(15,194)

$
758,881

$
(19,054)

$
1,189,009
Equity awards exercised/vested, net

—

(12,124)

—

—

12,240

116
Share-based compensation expense

—

13,657

—

—

—

13,657
Taxes paid for net share settlements

—

(8,367)

—

—

—

(8,367)
Other comprehensive loss, net

—

—

(7,866)

—

—

(7,866)
Repurchases of common stock

—

—

—

—

(35,216)

(35,216)
Cumulative effect of adoption of ASC 842

—

—

—

(9,580)

—

(9,580)
Net income

—

—

—

118,549

—

118,549
Balance as of October 31, 2019

$
264

$
457,278

$
(23,060)

$
867,850

$
(42,030)

$
1,260,302

~~Table~~utilized no shares of ~~Contents~~

Accumulated

Common

Additional

Other

Stock

Common

Paid-In

Comprehensive

Retained

Held In


Stock

Capital

Loss

Earnings

Treasury

Total
Balance as of January 31, 2018

$
245

$
451,844

$
(5,522)

$
674,542

$
(420)

$
1,120,689
Equity awards exercised/vested, net

19

(383)

—

—

420

56
Share-based compensation expense

—

14,876

—

—

—

14,876
Taxes paid for net share settlements

—

(4,843)

—

—

—

(4,843)
Other comprehensive loss, net

—

(37)

(10,044)

(1)

—

(10,082)
Cumulative effect of adoption of ASC 606

—

—

—

(53,728)

—

(53,728)
Net income

—

—

—

113,987

—

113,987
Balance as of October 31, 2018

$
264

$
461,457

$
(15,566)

$
734,800

$
—

$
1,180,955

treasury stock in connection with the vesting of equity awards. For the three months ended October 31, 2019, the Company issued 0 shares of common stock and utilized 80,353 shares of treasury stock in connection with the ~~exercise or~~ vesting of equity awards. For the ~~three~~nine months ended October 31, ~~2018,~~2020, the Company issued ~~117,774~~0 shares of common stock and utilized ~~58,790~~349,342 shares of treasury stock in connection with the vesting of equity awards. For the nine months ended October 31, 2019, the Company issued 8,851 shares of common stock and utilized 435,703 shares of treasury stock in connection with the exercise or vesting of equity awards. For the nine months ended October 31, 2018, the Company issued 137,050 shares of common stock and utilized 106,043 shares of treasury stock in connection with the exercise or vesting of equity awards.

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Note 13 – Income Taxes

The Company recorded income tax expense of $28.4 million and $8.4 million for the three and nine months ended October 31, 2020, respectively. The Company recorded income tax expense of $35.6 million and $42.5 million for the three and nine months ended October 31, 2019, respectively. The Company’s effective tax rate increased this quarter compared to the prior year’s comparable quarter primarily due to a substantial decrease in the Company’s worldwide income and an increase in the valuation allowance related to the stand-alone net operating losses of the Company’s retail operations. In addition, the effective tax rate increased due to a discrete income tax charge in connection with the vesting of equity awards. Historically, the Company calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for income for the entire year, excluding unusual or discrete items, to the reporting period. Due to the uncertainty related to the impact of the COVID-19 pandemic on the Company’s operations, the Company used a discrete effective tax rate method to calculate income taxes for the first and second quarters of fiscal 2021. However, due to the change in pre-tax income in the third quarter of fiscal 2021, the Company has an equitable projection of the full year income and returned to the historical practice of using an annual effective tax rate based on full year fiscal year income.

Note 1014 – Canadian Customs Duty Examination

In October 2017, the Canada Border Service Agency (“CBSA”) issued a final audit report to G-III Apparel Canada ULC (“G-III Canada”), a wholly-owned subsidiary of the Company. The report challenged the valuation used by G-III Canada for certain goods imported into Canada. The period covered by the examination is February 1, 2014 through October 27, 2017, the date of the final report. The CBSA has requested G-III Canada to reassess its customs entries for that period using the price paid or payable by the Canadian retail customers for certain imported goods rather than the price paid by G-III Canada to the vendor. The CBSA has also requested that G-III Canada change the valuation method used to pay duties with respect to goods imported in the future.

In March 2018, G-III Canada provided a bond to guarantee payment to the CBSA for additional duties payable as a result of the reassessment required by the final audit report. The Company secured a bond in the amount of CAD$26.9 million ($20.9 million) representing customs duty and interest through December 31, 2017 that is claimed to be owed to the CBSA. In March 2018, the Company amended the duties filed for the month of January 2018 based on the new valuation method. This amount was paid to the CBSA. Beginning February 1, 2018, the Company began paying duties based on the new valuation method. ~~Amounts~~There were 0 amounts paid and deferred for the three and nine months ended October 31, ~~2019,~~2020, related to the higher dutiable values. Cumulative amounts paid and deferred through October 31, 2020, related to the higher dutiable values, were CAD$~~2.2 million ($1.7 million). Cumulative amounts paid and deferred through October 31, 2019, related to the higher dutiable values, were CAD$12.7~~12.9 million ($9.7 million).

G-III Canada, based on the advice of counsel, believes it has positions that support its ability to receive a refund of amounts claimed to be owed to the CBSA on appeal and intends to vigorously contest the findings of the CBSA. G-III Canada filed its appeal with the CBSA in May 2018.

Effective June 1, 2019, G-III commenced paying based on the dutiable value of G-III Canada’s imports based on the pre-audit levels. G-III continued to defer the additional duty paid through the month of May 2019 pending the final outcome of the appeal.

~~Table~~The CBSA has issued its preliminary decision expressing its intention to deny the appeal filed by G-III Canada. G-III Canada has responded to the CBSA’s preliminary decision letter to correct facts in the letter that G-III Canada believes to be inaccurate. G-III Canada is awaiting the final decision of ~~Contents~~the CBSA and is evaluating prospects for a further appeal should the final decision remain unfavorable.

G-III Canada, based on the advice of counsel, believes it has positions that support its valuations for duty as declared and therefore its ability to receive a refund of amounts claimed to be owed to the CBSA on appeal and intends to vigorously contest the findings of the CBSA.

Note 1115 – Recent Adopted and Issued Accounting Pronouncements

Recently Adopted Accounting Guidance

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to certain adjustments. The Company adopted ASU 2016-02 during the first quarter of fiscal 2020 using the optional transition method to apply the standard as of the effective date. As a result of adopting this standard, as of February 1, 2019, the Company recognized operating lease liabilities of $384.5 million and corresponding operating lease assets of $341.2 million. In addition, the Company recorded a $9.6 million impairment of the operating lease assets, net of tax, at adoption. The impairment was recorded as a reduction to retained earnings.

In June 2018, the FASB issued ASU 2018-07, “FASB Simplifies Guidance on Nonemployee Share-Based Payments,” which supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees. As a result, most of the guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements. The Company adopted ASU 2018-07 during the first quarter of fiscal 2020. The adoption did not have an impact on the Company’s condensed consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, “Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which provides financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate (or portion thereof) in the Tax Cut and Jobs Act is recorded. The Company adopted ASU 2018-02 during the first quarter of fiscal 2020. The adoption did not have an impact on the Company’s condensed consolidated financial statements.

~~Issued Accounting Guidance Being Evaluated for Adoption~~

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ~~Subsequently, the FASB issued amendments to clarify the codification, in addition to also clarifying the implementation dates and the items that fall within the scope of the pronouncement.~~ This pronouncement ~~will change~~changed how entities account for credit impairment for trade and other receivables, as well as for certain financial assets and other instruments. ASU 2016-13 ~~will replace~~replaced the ~~current~~ “incurred loss” model with an “expected loss” model. Under the “incurred loss” model, a loss (or allowance) iswas recognized only when

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an event ~~has~~had occurred (such as a payment delinquency) that ~~causes~~caused the entity to believe that a loss iswas probable (i.e., that it ~~has~~had been “incurred”). Under the “expected loss” model, an entity ~~will recognize~~recognizes a loss (or allowance) upon initial recognition of the asset that reflects all future events that may lead to a loss being realized, regardless of whether it is probable that the future event will occur. The “incurred loss” model ~~considers~~considered past events and current conditions, while the “expected loss” model includes expectations for the future which have yet to occur. The ~~new~~Company adopted ASU 2016-16 as of February 1, 2020. The adoption of this standard ~~will require entities to record~~did not result in a ~~cumulative-effect adjustment~~material change to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. ASU 2016-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the potential impact of ASU 2016-13 on itsCompany’s condensed consolidated financial statements.

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In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which ~~makes~~made a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement among or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. The amendments in ASU 2018-13 ~~modify~~modified the disclosure requirements with respect to fair value measurements based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. The amendments to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty ~~should be~~have been applied prospectively ~~for only the most recent interim or annual period presented~~ in the initial fiscal year of adoption. All other amendments ~~should be~~have been applied retrospectively to all periods presented upon their effective date. The amendments are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted.in the initial year of adoption. The Company ~~is currently evaluating~~adopted the ~~potential impact~~standard effective February 1, 2020. The adoption of ~~ASU 2018-13 on its~~this standard did not result in a material change to the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Customers Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is A Service Contract, which addresses the accounting for implementation costs incurred in a cloud computing arrangement (“CCA”) that is a service contract. ASU 2018-15 aligned the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, ASU 2018-15 amended ASC 350 to include in its scope implementation costs of a CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized in a CCA that is considered a service contract. The Company adopted the standard effective February 1, 2020. The adoption of this standard did not result in a material change to the Company’s condensed consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (“ASC 848”): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard is intended to provide optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria that reference LIBOR or another rate that is expected to be discontinued. The guidance was effective upon issuance, and may be applied prospectively through December 31, 2022. The adoption of this standard did not result in a material change to the Company’s condensed consolidated financial statements.

Issued Accounting Guidance Being Evaluated for Adoption

The Company has reviewed all recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

Note 16 – Subsequent Events

Fabco

Fabco was 49% owned by the Company through November 30, 2020. Effective December 1, 2020, the Company acquired an additional ownership interest in Fabco for nominal consideration, resulting in an increase of its ownership interest in Fabco to 75%. Effective December 1, 2020, Fabco is a consolidated majority-owned subsidiary of the Company. Prior to December 1, 2020, the Company accounted for its investment in Fabco using the equity method of accounting. Fabco operates the Company’s DKNY business in China.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Unless the context otherwise requires, “G-III,” “us,” “we” and “our” refer to G-III Apparel Group, Ltd. and its subsidiaries. References to fiscal years refer to the year ended or ending on January 31 of that year. For example, our fiscal year ending January 31, ~~2020~~2021 is referred to as “fiscal ~~2020.~~2021.” Vilebrequin, KLH, KLNA 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 Vilebrequin, KLH, KLNA and Fabco are, and will be, included in our 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, ~~2019,~~2020, the results of Vilebrequin, KLH, KLNA and Fabco are included for the nine-month period ended September 30, ~~2019.~~2020. We account for our investment in each of KLH, KLNA and Fabco using the equity method of accounting. The Company’s retail operations segment uses a 52/53-week fiscal year. The Company’s three and nine-month periods ended October 31, ~~2019~~2020 and ~~2018~~2019 were each a 13-week ~~fiscal quarter~~ and 39-week ~~period,~~periods, respectively, for the retail operations segment. For fiscal 2021 and 2020, the three and ~~2019,~~nine month periods for the retail operations segment ~~three and nine-month periods~~ ended on October 31, 2020 and November 2, 2019 ~~and November 3, 2018,~~ 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. Forward-looking statements are based on current expectations and are indicated by words or phrases such as “anticipate,” “estimate,” “expect,” “will,” “project,” “we believe,” “is or remains optimistic,” “currently envisions,” “forecasts,” “goal” and similar words or phrases and involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from the future results, performance or achievements expressed in or implied by such forward-looking statements. Forward-looking statements also include representations of our expectations or beliefs concerning future events that involve risks and uncertainties, including, but not limited to, the following:

●

the outbreak of COVID-19 and its numerous adverse effects, including the temporary closing of stores and shopping malls and subsequent restrictions on the operation of stores and malls, the reduction of consumer purchases of the types of products we sell, the impact on our supply chain, restrictions on travel and group gatherings and the general material adverse effect on the economy in the U.S. and around the world caused by the COVID-19 pandemic, all of which negatively impact our business, sales and results of operations;

●

our dependence on licensed products;

●

our dependence on the strategies and reputation of our licensors;

●

costs and uncertainties with respect to expansion of our product offerings;

●

the performance of our products at retail and customer acceptance of new products;

●

retail customer concentration;

●

risks of doing business abroad;

●

risks related to the recent adoption of a national security law in Hong Kong;

●

price, availability and quality of materials used in our products;

●

the need to protect our trademarks and other intellectual property;

●

risks relating to our retail operations segment;

●

our ability to achieve operating enhancements and cost reductions from the ~~potential significant changes to~~restructuring of our retail operations, as well as the impact on our business and financial statements resulting from any related costs and charges ~~to our financial statements,~~ which may be dilutive to our ~~earnings in the short-term;~~earnings;

●

the impact on our business ~~resulting from potential costs, obligations~~ and ~~charges~~financial statements related to the early closure of stores or the termination of long-term ~~non-cancellable~~ leases;

●

dependence on existing management;

●

our ability to make strategic acquisitions and possible disruptions from acquisitions;

●

risks related to our indebtedness;

●

need for additional financing;

●

seasonal nature of our business;

●

our reliance on foreign manufacturers;

●

the need to successfully upgrade, maintain and secure our information systems;

●

~~data security or~~increased exposure to consumer privacy, ~~breaches;~~cybersecurity and fraud concerns, including as a result of the remote working environment;

●

the impact of the current economic and credit environment on us, our customers, suppliers and vendors;

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●

the effects of competition in the markets in which we operate, including from ~~e-commerce~~online retailers;

●

the redefinition of the retail store landscape in light of widespread retail store closings, the bankruptcy of a number of prominent retailers and the impact of online apparel purchases and innovations by ~~e-commerce~~online retailers;

●

consolidation of our retail customers;

●

the impact on our business of the imposition of tariffs by the United States government and the escalation of trade tensions between countries;

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●

additional legislation and/or regulation in the United States or around the world;

●

our ability to import products in a timely and cost effective manner;

●

our ability to continue to maintain our reputation;

●

fluctuations in the price of our common stock;

●

potential effect on the price of our common stock if actual results are worse than financial forecasts; and

●

the effect of regulations applicable to us as a U.S. public ~~company; and~~

●

~~our ability to successfully implement our business strategies to realize the anticipated benefits of the acquisition of Donna Karan International Inc. (“DKI”).~~company.

Any forward-looking statements are based largely on our expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control. A detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations is described ~~under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, 2019 and~~ in Part ~~II-Other~~II—Other Information ~~Item 1A. Risk Factors~~ in ~~this~~(i) our Quarterly Report on Form ~~10-Q.~~10-Q for the period ended July 31, 2020 under the heading “Item 1A. Risk Factors” and (ii) this Quarterly Report under the heading “Item 1A. Risk Factors.” We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Recent Developments

Refinancing of our Term Loan and Revolving Credit Facility

On August 7, 2020, we completed a private debt offering of $400 million aggregate principal amount of our 7.875% Senior Secured Notes due 2025 (the “Notes). The net proceeds of the Notes have been used (i) to repay our prior term loan facility due 2022, (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, commencing on February 15, 2021.

Also on August 7, 2020, we entered into the second amended and restated credit agreement (the “ABL Credit Agreement”) The ABL Credit Agreement is a five year senior secured credit facility and provides for borrowings in the aggregate principal amount of up to $650 million. The ABL Credit Agreement refinances, amends and restates our prior Amended Credit Agreement which provided for borrowings of up to $650 million and was due to expire in December 2021.

For a description of the Notes, the ABL Credit Agreement and our other debt instruments, see “Liquidity and Capital Resources” under this Item 2.

Restructuring of Our Retail Operations Segment

In June 2020, we announced a restructuring of our retail operations segment, including the closing of all Wilsons Leather and G.H. Bass stores. Additionally, we are closing our Calvin Klein Performance stores. We hired Hilco Global to assist in the liquidation of these stores. We anticipate that the store closings will be completed by the end of fiscal 2021.

After completion of the restructuring, our retail operations segment will consist of DKNY and Karl Lagerfeld Paris stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather and G.H. Bass. Part of our restructuring plan includes making significant changes to our DKNY and Karl Lagerfeld retail operations. In addition to the stores operated as part of our retail operations segment, as of October 31, 2020, Vilebrequin products were distributed through 101 company-operated stores and owned digital channels in Europe and the United States, as well as through 69 franchised locations.

In connection with the restructuring of our retail operations, we expect to incur an aggregate charge of approximately $100 million related to store operating costs, landlord termination fees, severance costs, store liquidation and closing costs, write-offs related to right-of-use assets and legal and professional fees. We recorded $2.2 million of this charge during the nine months ended October 31, 2020, consisting primarily of severance payments, benefit continuation costs and store

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closing costs. We expect the net cash outflow as a result of the retail restructuring to be approximately $65 million. We believe that this restructuring plan will enable us to greatly reduce our retail losses and to ultimately position this segment to become profitable.

Impact of COVID-19 Pandemic

Outbreaks of COVID-19 were detected beginning in December 2019 and, in March 2020, the World Health Organization declared COVID-19 a pandemic. The President of the United States has declared a national emergency as a result of the COVID-19 pandemic. Federal, state and local governments and private entities mandated various restrictions, including closing of retail stores and restaurants, travel restrictions, restrictions on public gatherings, stay at home orders and advisories, and quarantining of people who may have been exposed to the virus. The response to the COVID-19 pandemic has negatively affected the global economy, disrupted global supply chains, and created significant disruption of the financial and retail markets, including a disruption in consumer demand for apparel and accessories.

The COVID-19 pandemic has had multiple impacts on our business, including, but not limited to, the temporary closure of our customers’ stores and closures of our own stores in North America, disruption to both international and domestic tourism and disruption to consumer shopping habits. The COVID-19 pandemic has impacted our business operations and results of operations throughout fiscal 2021 resulting in lower sales and profitability. COVID-19 could continue to have an adverse impact on our results of operations and liquidity, the operations of our suppliers, vendors and customers, and on our employees as a result of quarantines, facility closures, and travel and logistics restrictions. Even as businesses began to reopen as governmental restrictions were loosened with respect to stay at home orders and previously closed businesses, the ultimate economic impact of the COVID-19 pandemic is highly uncertain. We expect that our business operations and results of operations, including our net sales, earnings and cash flows, will be materially adversely impacted for at least the balance of fiscal 2021.

During this crisis we are focused on protecting the health and safety of our employees, our customers, and our communities. We have taken precautionary measures intended to help minimize the risk of COVID-19 to our employees, including temporarily requiring employees to work remotely. Requiring our employees to work remotely may disrupt our operations or increase the risk of a cybersecurity incident.

Certain of our retail partners have publicized actual or potential bankruptcy filings or other liquidity issues that could impact our anticipated income and cash flows, as well as require us to record additional accounts receivable reserves. In addition, we could be required to record increased excess and obsolete inventory reserves due to decreased sales or noncash impairment charges related to our intangible assets or goodwill due to reduced market values and cash flows. Further, a more promotional retail environment may cause us to lower our prices or sell existing inventory at larger discounts than in the past, negatively impacting our margins.

There is significant uncertainty around the breadth and duration of business disruptions related to the COVID-19 pandemic, as well as its impact on the U.S. and global economies and on consumer willingness to visit stores as they re-open. Consumer businesses have re-opened in most areas of the United States under governmental social distancing and other restrictions that are expected to limit the scope of operations for an unknown period of time compared to pre-COVID-19 business operations. These restrictions are expected to adversely impact sales even as retail stores are open again. The extent to which COVID-19 impacts our results will depend on continued developments in the public and private responses to the pandemic. The continued impact of COVID-19 remains highly uncertain and cannot be predicted. New information may emerge concerning the severity of the outbreak and the actions taken to contain COVID-19 or treat its impact may change or become more restrictive as additional waves of infections occur, or continue to occur, as a result of the loosening of governmental restrictions.

We are focused on preserving liquidity and managing cash flow during these unprecedented conditions. We have taken preemptive actions to enhance our ability to meet our short-term liquidity needs, including, but not limited to, reducing payroll costs through employee furloughs, job eliminations, salary reductions, reductions in marketing and other discretionary spending, deferring certain lease payments and deferral of capital projects. During the quarter ended October 31, 2020, certain furloughed employees were reinstated and salaries that had been reduced were increased to their pre-pandemic levels. We have received royalty relief from certain licensors and we continues to negotiate with licensors for additional relief.

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Due to the impact of the COVID-19 pandemic on our operations, we performed a quantitative test of our goodwill as of April 30, 2020 using an income approach through a discounted cash flow analysis methodology. The discounted cash flow approach requires that certain assumptions and estimates be made regarding industry economic factors and future profitability. We also performed quantitative tests of each of our indefinite-lived intangible assets using a relief from royalty method, another form of the income approach. The relief from royalty method requires assumptions regarding industry economic factors and future profitability. While no impairment was identified as of April 30, 2020 as a result of these tests, $370.0 million of our indefinite-lived trademarks could be deemed to have a risk of future impairment as there is limited excess fair value over the carrying value of the assets at October 31, 2020. During the third quarter of 2020, we conducted a review to assess whether indicators of impairment existed. As a result of this review, we concluded that no indicators existed that would make management believe it is more likely than not that the fair value of its goodwill or indefinite-lived trademarks is less than its carrying value. The continued impact of the COVID-19 pandemic could give rise to global and regional macroeconomic factors that could impact our assumptions relating to net sales growth rates, discount rates, tax rates or royalty rates and may result in future impairment charges for indefinite-lived intangible assets.

We believe that we have sufficient cash and availability under our ABL Credit Agreement to meet our liquidity needs. As of October 31, 2020, we had cash of approximately $149.7 million and availability of over $600.0 million under our ABL Credit Agreement.

Fabco

Fabco Holding B.V (“Fabco”) is a Dutch joint venture limited liability company that was 49% owned by us through November 30, 2020. Effective December 1, 2020, we acquired an additional ownership interest in Fabco for nominal consideration, resulting in an increase of our ownership interest in Fabco to 75%. Effective December 1, 2020, Fabco is a consolidated majority-owned subsidiary of ours. Prior to December 1, 2020, we accounted for our investment in Fabco using the equity method of accounting. Fabco operates our DKNY business in China.

Overview

G-III 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. G-III has a substantial portfolio of more than 30 licensed and proprietary brands, anchored by five global power brands: DKNY, Donna Karan, Calvin Klein, Tommy Hilfiger and Karl Lagerfeld Paris. We are not only licensees, but also brand owners, and we distribute our products through multiple brick and mortar and online channels.

Our own proprietary brands include DKNY, Donna Karan, Vilebrequin, G.H. Bass, Eliza J, Jessica Howard, Andrew Marc and Marc New York. We sell products under an extensive portfolio of well-known licensed brands, including Calvin Klein, Tommy Hilfiger, Karl Lagerfeld Paris, Kenneth Cole, Cole Haan, Guess?, Vince Camuto, Levi’s and Dockers. 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. colleges and universities. We also source and sell products to major retailers under their private retail labels.

We believe that the international sales and profit opportunity is quite significant for our DKNY and Donna Karan businesses. We are also expanding our DKNY business globally through our distribution partners in key regions. The key international markets in which our DKNY merchandise is currently distributed include the Middle East, Russia, Indonesia, the Philippines, South East Asia and South Korea, as well as in China where we operate through a joint venture. Continued growth, brand development and marketing in these key markets is critical to driving global brand recognition. ~~DKNY is currently being distributed in the Middle East, Russia, Indonesia, Philippines, South East Asia and Korea, as well as in China, where we operate through a joint venture.~~

We operate in fashion markets that are intensely competitive. Our ability to continuously evaluate and respond to changing consumer demands and tastes, across multiple market segments, distribution channels and geographic areas is critical to our success. 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 success in the future will depend 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.

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Segments

We report based on two segments: wholesale operations and retail operations.

Our wholesale operations segment includes sales of products to retailers under owned, licensed and private label brands, as well as sales related to the Vilebrequin business. Wholesale revenues also include royalty revenues from license agreements related to our owned trademarks including DKNY, Donna Karan, Vilebrequin, G.H. Bass and Andrew Marc.

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Our retail operations segment ~~consists~~historically consisted primarily of direct sales to consumers through our company-operated ~~stores, consisting~~stores. Prior to our restructuring of this segment, it was composed primarily of Wilsons Leather, G.H. Bass and DKNY stores, substantially all of which are operated as outlet stores, as well as a smaller number of Karl Lagerfeld Paris and Calvin Klein Performance stores. ~~This~~After completion of the restructuring which is expected to occur by the end of fiscal 2021, our retail operations segment ~~also includes sales through our owned websites for the~~will consist of DKNY ~~Donna Karan, Wilsons, G.H. Bass, Andrew Marc~~ and Karl Lagerfeld Paris ~~businesses. As of October 31, 2019, we operated 127~~stores, as well as the digital channels for DKNY, Donna Karan, Karl Lagerfeld Paris, Andrew Marc, Wilsons Leather ~~stores, 104~~and G.H. ~~Bass stores, 40~~Bass. Our ongoing plan for our retail business focuses on the operations and growth of our DKNY ~~stores, 13~~and Karl Lagerfeld Paris stores, ~~and 4 Calvin Klein Performance stores. In addition,~~ as ~~of October 31, 2019, we operated for~~well as our digital business. Our plan is based on the ~~holiday season 5 short-term temporary Wilsons Leather stores, 6 short-term temporary G.H. Bass stores and 1 short-term temporary DKNY store.~~

~~Licensed Products~~

~~For more than 25 years, the sale~~assumed continued strength of licensed products has been a key element of our strategy. We have continually sought to increase our portfolio of name brands, product offerings and tiers of distribution because we believe that consumers prefer to buy brands that they know and brand owners prefer to engage licensees who have a successful track record of developing brands.

Our most significant licensor is Calvin Klein with whom we have eleven different license agreements in the United States and Canada. We also have distribution agreements with respect to Calvin Klein luggage in a number of foreign countries. In June 2019, we expanded our relationship with Calvin Klein by entering into a license agreement with an initial term of five years for the design, production and wholesale distribution of ~~Calvin Klein Jeans~~ ~~women’s jeanswear in the United States and Canada. This was our eleventh license agreement with Calvin Klein. Shipments of our first~~ ~~Calvin Klein Jeans~~ ~~women’s jeanswear line began during our third fiscal quarter.~~

We also have a significant relationship with Tommy Hilfiger, with whom we have a multi-category womenswear license in the United States and Canada. This license for women’s sportswear, dresses, suit separates, performance and denim is in addition to our Tommy Hilfiger men’s and women’s outerwear license and Tommy Hilfiger luggage license, both also in the United States and Canada.

We own a 49% interest in a joint venture that owns the trademarks for the Karl Lagerfeld brand in North America. As part of that relationship, we have a long-term license agreement with the joint venture for the Karl Lagerfeld Paris brand in North America, pursuant to which we produce and distribute women’s apparel, women’s footwear, women’s handbags, men’s apparel, men’s footwear and luggage under the Karl Lagerfeld Paris brand.

~~Licensing of Proprietary Brands~~

~~We currently license our proprietary brands in a variety of categories and continue to seek new licensing opportunities for these brands to broaden the reach of these brands.~~

We have strong relationships with category leading license partners, including, but not limited to, Estee Lauder, Fossil, Marchon and Komar. The DKNY and Donna Karan brands have worldwide license agreements for a broad array of products including fragrance, hosiery, intimates, eyewear, jewelry, bedding and bath products and women’s sleepwear and loungewear. Additionally, we license the DKNY brand in the United States and internationally for children’s clothing, children’s footwear, men’s and women’s watches, men’s tailored clothing, men’s sportswear, men’s dress shirts, men’s neckwear, men’s underwear, men’s loungewear, men’s swimwear, men’s belts and small leather goods, women’s belts and cold weather accessories and men’s and women’s socks. We have also licensed the DKNY and Donna Karan brands for men’s and women’s apparel and accessories in China pursuant to a long-term license agreement with a joint venture of which we are a 49% owner. In July 2019, we signed a new license for DKNY furniture in the United States, Canada, Mexico and China.

We intend to continue to focus on expanding licensing opportunities for the DKNY and Donna Karan brands. We believe that we can capitalize on significant, untapped global licensing potential for these brands in a number of categories and we intend to grow royalty streams by expanding existing licenses, as well as through new categories with new licensees.

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We license the G.H. Bass brand in the United States and internationally for men’s, women’s and children’s footwear, men’s sportswear, men’s socks, women’s hosiery and men’s accessories, men’s belts and small leather goods, men’s underwear and loungewear and bedding and bath products.

~~We license the Vilebrequin brand internationally for a denim line and the Andrew Marc brand in North America for men’s and boy’s tailored clothing.~~

~~Retail Operations~~

Given the current retail environment and the losses being incurred in our retail operations segment, we intend to move more broadly with respect to store closures while remaining committed to mitigating losses from our retail operations as swiftly and efficiently as possible. In July 2019, we engaged outside advisors to assist us with this process. We are working diligently with our landlords and outside advisors to reshape and right-size our retail operations. Our strategy also includes continued execution of cost-cutting initiatives, revising our merchandising strategy to drive additional sales and repurposing certain Wilsons and G.H. Bass stores for the Karl Lagerfeld ~~Paris or DKNY brands.~~brands, improved store productivity, changes in planning and allocation and improvements in gross margin and payroll leverage.

Trends

Industry Trends

Significant trends that affect the apparel industry include retail chains closing unprofitable stores, an increased focus by retail chains and others on expanding ~~e-commerce~~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, consumer shopping preferences have continued to shift from physical stores to online shopping and retail traffic remains under pressure. All of these factors have led to a more promotional retail environment that includes aggressive markdowns in an attempt to offset declines caused by a reduction in physical store traffic. The effects of the COVID-19 pandemic have accelerated these trends.

We sell our products over the web through retail partners such as macys.com and nordstrom.com, each of which has a substantial online business. As ~~e-commerce~~digital sales of apparel continue to increase, we are developing additional digital marketing initiatives on our web sites and through social media. We are investing in digital personnel, marketing, logistics, planning and distribution to help us expand our online opportunities going forward. Our ~~e-commerce~~digital business consists of our own web platforms at www.dkny.com, www.donnakaran.com, www.wilsonsleather.com, www.ghbass.com, www.vilebrequin.com and www.andrewmarc.com. We also sell Karl Lagerfeld Paris products on our website, www.karllagerfeldparis.com. In addition, we sell to pure play online retail partners such as Amazon and Fanatics.

A number of retailers are experiencing financial difficulties, which in some cases have resulted in bankruptcies, liquidations and/or store closings, such as the announced store closing plans for Macy’s, the bankruptcy and announced liquidation of Century 21 and Lord & Taylor, the announced bankruptcy filings of JC Penney, Neiman Marcus and ~~last year’s~~other retailers and the potential bankruptcy of ~~Bon-Ton.~~additional retailers. The financial difficulties of a retail customer of ours could result in reduced business with that customer. We may also assume higher credit risk relating to receivables of a retail customer experiencing financial difficulty that could result in higher reserves for doubtful accounts or increased write-offs of accounts receivable. 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, and thus customers loyal to their brands can only find them in the stores of that retailer.

Consumers have shifted their apparel purchases based on their adjusted lifestyle needs resulting from changes to the work environment and leisure activities caused by the COVID-19 pandemic. We have revised our product offerings in response to this shift toward casual and comfortable work-from-home clothing, as well as to activewear and leisure attire. We continue to revise our product lines to satisfy the needs of our retail customers and consumers.

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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 and new license agreements entered into by us that 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.

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Tariffs

The apparel and accessories industry has been impacted by tariffs implemented by the United States government on goods imported from China. Tariffs on handbags and leather outerwear imported from China were effective beginning in September 2018, and were initially in the amount of 10% of the merchandise cost to us. The level of tariffs on these product categories was increased to 25% beginning May 10, 2019.

The initial tariffs imposed on products imported by us from China primarily impacted our handbag and leather outerwear categories. These specific categories represented approximately 7% of our net sales in fiscal 2019. If the incremental 15% increase in tariffs on these categories remain in place for the remainder of fiscal 2020, we estimate that our costs would increase by approximately $6.0 million.

On August 1, 2019, the United States government announced new 10% tariffs that cover the remaining estimated $300 billion of inbound trade from China, including most of our apparel products. On August 23, 2019, the United States government announced that the new tariffs to go into effect would increase from 10% to 15%. The new 15% tariffs went into effect on September 1, 2019, although the additional tariffs on certain categories of products were delayed until December 15, 2019. The announcement ~~follows~~followed an earlier proposal by the United States government that would have imposed 25% tariffs on the balance of inbound trade from China, but that were suspended pending trade negotiations with China. In January 2020, the U.S. and China signed their Phase One Deal that rolled back certain tariffs and postponed certain tariffs that had been scheduled to go into effect on December 15, 2020.

It is difficult to accurately estimate the impact on our business from these tariff actions or similar actions or when additional tariffs may become effective. For fiscal 2019, approximately 61% of the products that we sold were manufactured in China. For fiscal 2020, ~~we estimate that~~ approximately 50% of the products that we ~~sell will have been~~sold were manufactured in China. Assuming no offsets from price increases, sourcing changes or other changes to regulatory rulings, all of which are currently under review, we estimate that the additional 15% tariff effective as of September 1, 2019 will increase our costs in the second half of fiscal 2020 by approximately $12.0 million.

~~The~~Notwithstanding the Phase One Deal, the United States government continues to negotiate with China with respect to a trade deal, which could lead to the removal or postponement of ~~the~~ additional tariffs. If the U.S. and China are not able to resolve their differences, additional tariffs may be put in place and additional products may become subject to tariffs. Tariffs on additional products imported by us from China would increase our costs, could require us to increase prices to our customers and would cause us to seek price concessions from our vendors. If we are unable to increase prices to offset an increase in tariffs, this would result in our realizing lower gross margins on the products sold by us and will negatively impact our operating results. We have engaged in a number of efforts to mitigate the effect on our results of operations of increases in tariffs on products imported by us from China, including ~~accelerating the receipt of inventory,~~ diversifying our sourcing network by arranging to move production out of China, negotiating with our vendors in China to receive vendor support to lessen the impact of increased tariffs on our cost of goods sold, and discussing with our customers the implementation of price increases that we believe our products can absorb because of the strength of our portfolio of brands.

Results of Operations

Three months ended October 31, ~~2019~~2020 compared to three months ended October 31, ~~2018~~2019

Net sales for the three months ended October 31, ~~2019 increased~~2020 decreased to ~~$1.13 billion~~$826.6 million from ~~$1.07~~$1.13 billion in the same period last year. Net sales of our segments are reported before intercompany eliminations.

Net sales of our wholesale operations segment ~~increased~~decreased to ~~$1.07 billion~~$783.0 million for the three months ended October 31, ~~2019~~2020 from ~~$1.01~~$1.07 billion in the comparable period last year. ~~This increase is primarily the result of~~We experienced a ~~$37.8 million increase~~significant decrease in net sales ~~of Calvin Klein licensed products, a $28.5 million increase in net sales of Tommy Hilfiger licensed products and a $24.8 million increase in net sales~~across substantially all of our ~~DKNY~~brands due to the effects of restrictions on business and Donna Karan products. The increase in sales of Tommy Hilfiger products was primarily related to outerwear and sportswear, the increase in sales of Calvin Klein products was primarily related to performancewear, outerwear and dresses, as well as the introduction of jeanswear, and the increase in sales of DKNY/Donna Karan products was primarily related to sportswear, handbags and performancewear. These increases were offset, in part,personal activities imposed by ~~a $12.2 million decrease in sales of Ivanka Trump product~~governments in connection with the ~~expiration~~COVID-19 pandemic. Most of ~~that license.~~our retail partners began to reopen a majority of their stores in North America beginning in June 2020, including our largest customer, Macy’s. However, a majority of these stores continue to operate under government mandated social distancing restrictions as the COVID-19 pandemic continues to affect large portions of North America. The governmental restrictions imposed in connection with the COVID-19 pandemic have resulted in significant increases in unemployment, a reduction in business activity and a reduction in consumer spending on apparel and accessories, all of which contributed to the reduction of our net sales which occurred throughout the three month period.

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Net sales of our retail operations segment were ~~$89.7~~$58.0 million for the three months ended October 31, ~~2019~~2020 compared to ~~$110.9~~$89.7 million in the same period last year. ~~Net sales decreased $11.3 million at our G.H. Bass store chain, $7.9 million at our Wilsons retail stores and $2.1 million at our DKNY retail stores.~~This decrease primarily reflected reduced demand as a result of disruptions related to COVID-19. Same store sales decreased ~~by 8.4% at Wilsons stores and 14.5% at G.H. Bass stores compared~~across all store brands due to the ~~same period~~COVID-19 related store closures. In addition, the decrease in domestic and international tourism resulting from COVID-19 travel restrictions also had a negative impact on net sales of our retail operations segment. As we proceeded to liquidate inventory and close stores in connection with the ~~prior year. Same store~~restructuring of our retail operations segment, net sales ~~increased~~were also negatively impacted by ~~0.3% at DKNY stores compared to the same period in the prior year.~~significant promotional activity from liquidation sales. Net sales of our retail operations segment were also negatively affected by the decrease in the number of stores operated by us from ~~343 at October 31, 2018 to~~ 288 at October 31, ~~2019. In addition, as of~~2019 to 202 at October 31, ~~2019, we~~2020. The number of retail stores operated ~~12 short-term, temporary stores for~~by us and, as a result, the ~~holiday season.~~net sales of our retail operations segment will be reduced significantly as a result of the restructuring of our retail operations segment.

Gross profit was ~~$399.0~~$297.8 million, or ~~35.4%~~36.0% of net sales, for the three months ended October 31, ~~2019,~~2020, compared to ~~$382.1~~$399.0 million, or ~~35.6%~~35.4% of net sales, in the same period last year. The gross profit percentage in our wholesale operations segment was ~~33.2%~~35.5% in the three months ended October 31, ~~2019~~2020 compared to ~~32.7%~~33.2% in the same period last year. The gross profit percentage for our wholesale segment was positively impacted by the reversal of previously anticipated markdown accruals that are no longer necessary due to the reduction in sales to our retail customers. The gross profit percentage in our retail operations segment was ~~49.3%~~33.9% for the three months ended October 31, ~~2019~~2020 compared to ~~48.5%~~49.3% for the same period last year. The gross profit percentage for our retail segment was negatively impacted by the liquidation of inventory in our Wilsons Leather and G.H. Bass stores as we exit these businesses.

Selling, general and administrative expenses ~~increased~~decreased to ~~$246.6~~$177.6 million in the three months ended October 31, ~~2019~~2020 from ~~$232.1~~$246.6 million in the same period last year. The ~~increase~~decrease in expenses was primarily due to ~~increases~~a decrease of ~~$8.8~~$38.3 million in personnel costs including salaries, bonuses, share-based compensation and other incentives and benefits as a result of employee furloughs, job eliminations and decreased profitability, as well as temporary salary reductions implemented by us in response to the impact of the COVID-19 pandemic on our operations. Salaries were reinstated to pre-pandemic levels towards the end of our third fiscal quarter. In addition, there were decreases of $16.3 million in advertising, $5.8 million in facility expenses and $4.8 million in third-party warehouse expenses. These decreases were partially offset by a $4.2 million increase in bad debt expense related to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or potential bankruptcy filings and $3.1 million of professional fees incurred in connection with the restructuring of our retail operations segment. Selling, general and administrative expenses ~~and $6.3 million in advertising expenses~~was further reduced as a result of ~~increased spending related to~~ the ~~marketing~~restructuring of our ~~DKNY brand and, to a lesser extent, an increase in contractual advertising under our license agreements. The increase~~retail operations segment. This reduction was offset, in part, ~~by a $3.0 million decrease in rent, personnel costs and other benefits primarily~~ as a result of ~~store closures.~~bringing back certain furloughed employees in our wholesale operations segment during the three months ended October 31, 2020 as we responded to the re-opening of the U.S. economy.

Depreciation and amortization was ~~$9.7~~$10.2 million for the three months ended October 31, ~~2019~~2020 compared to ~~$10.0~~$9.7 million in the same period last year.

Other income was ~~$0.7~~$0.2 million in the three months ended October 31, ~~2019~~2020 compared to ~~$0.2~~other income of $0.7 million for the same period last year. This ~~increase~~change is ~~primarily~~ the result of recording ~~$0.2~~$0.3 million of foreign currency losses during the three months ended October 31, ~~2019~~2020 compared to ~~$0.5~~foreign currency losses of $0.2 million during the three months ended October 31, ~~2018. In addition, we recorded $0.8~~2019 and $0.5 million in income from unconsolidated affiliates during the three months ended October 31, ~~2019~~2020 compared to ~~$0.7~~$0.8 million of income from unconsolidated affiliates in the same period last year.

Interest and financing charges, net, for the three months ended October 31, ~~2019~~2020 were ~~$12.5~~$18.7 million compared to ~~$12.3~~$12.5 million for the same period last year. ~~Interest rates~~The increase is primarily due to a $6.5 million charge to interest expense to extinguish debt issuance costs upon the repayment of our term loan facility and ~~borrowings were similar in both periods.~~amendment of our revolving credit facility.

Income tax expense was ~~$35.6~~$28.4 million for the three months ended October 31, ~~2019~~2020 compared to ~~$33.8~~$35.6 million for the same period last ~~year primarily as a result of recording additional pre-tax book income.~~year. Our effective tax rate increased to ~~27.2%~~31.0% in the current year’s quarter from ~~26.5%~~27.2% in last year’s comparable ~~quarter. Our effective~~quarter because the impact of tax ~~rate includes~~adjustments related to executive compensation, foreign tax expense and disallowed state tax benefits on losses incurred had a greater impact on the ~~effect~~lower amount of anpre-tax income ~~tax charge of $0.3 million~~ in the ~~three months ended October 31, 2019 and an income tax benefit of $0.7 million in the three months ended October 31, 2018 in connection with the vesting of equity awards.~~current quarter compared to last year’s quarter.

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Nine months ended October 31, ~~2019~~2020 compared to nine months endedOctober 31, ~~2018~~2019

Net sales for the nine months ended October 31, ~~2019 increased~~2020 decreased to ~~$2.41~~$1.53 billion from ~~$2.31~~$2.41 billion in the same period last year. Net sales of our segments are reported before intercompany eliminations.

Net sales of our wholesale operations segment ~~increased~~decreased to ~~$2.23~~$1.43 billion for the nine months ended October 31, ~~2019~~2020 from ~~$2.08~~$2.23 billion in the comparable period last year. ~~This increase is primarily the result of~~We experienced a ~~$95.9 million increase~~significant decrease in net sales ~~of Tommy Hilfiger licensed products, a $57.4 million increase in net sales~~across substantially all of our ~~DKNY~~brands primarily due to the effects of restrictions that began in March 2020 on business and Donna Karan products and a $52.4 million increase in net sales of Calvin Klein licensed products. The increase in sales of Tommy Hilfiger products was primarily related to sportswear, dress, performancewear and outerwear, the increase in sales of DKNY/Donna Karan products was primarily related to handbags, sportswear, performancewear and footwear and the increase in sales of Calvin Klein products was primarily related to performancewear and outerwear, as well as the introduction of jeanswear. These increases were offset, in part,personal activities imposed by ~~a $32.9 million decrease in sales of Ivanka Trump product~~governments in connection with the ~~expiration~~COVID-19 pandemic. As a result, most of ~~that license.~~our retail partners closed their stores in North America beginning in mid-March, 2020, including our largest customer, Macy’s. Most of our retail partners began to reopen a majority of their stores in North America beginning in June 2020. However, a majority of these stores continue to operate under governmental mandated social distancing restrictions as the COVID-19 pandemic continues to affect large portions of North America. The governmental restrictions imposed in connection with the COVID-19 pandemic have resulted in significant increases in unemployment, a reduction in business activity and a reduction in consumer spending on apparel and accessories, all of which contributed to the reduction of our net sales which occurred during the majority of the nine month period.

Net sales of our retail operations segment were ~~$255.3~~$126.4 million for the nine months ended October 31, ~~2019~~2020 compared to ~~$322.1~~$255.3. million in the same period last year. ~~Net sales decreased $31.9 million at our G.H. Bass store chain, $28.4 million~~

~~Table~~This decrease primarily reflected reduced demand as a result of ~~Contents~~disruptions related to COVID-19.

~~at our Wilsons retail stores and $6.3 million at our DKNY retail stores.~~ Same store sales decreased ~~by 17.5% at Wilsons stores and 13.9% at G.H. Bass stores compared~~across all store brands due to the ~~same period~~COVID-19 related store closures and reduced store traffic. In addition, the decrease in domestic and international tourism resulting from COVID-19 travel restrictions also had a negative impact on net sales of our retail operations segment. As we proceeded to liquidate inventory and close stores in connection with the ~~prior year. Same store~~restructuring of our retail operations segment during the second quarter of the current fiscal year, net sales ~~increased~~were also negatively impacted by ~~0.8% at DKNY stores compared to the same period in the prior year.~~significant promotional activity from liquidation sales. Net sales of our retail operations segment were also negatively affected by the decrease in the number of stores operated by us from ~~343 at October 31, 2018 to~~ 288 at October 31, ~~2019. In addition, as of~~2019 to 202 at October 31, ~~2019, we~~2020. The number of retail stores operated ~~12 short-term, temporary stores for~~by us and, as a result, the ~~holiday season.~~net sales of our retail operations segment will be reduced significantly as a result of the restructuring of our retail operations segment.

Gross profit was ~~$866.9~~$556.8 million, or ~~36.0%~~36.4% of net sales, for the nine months ended October 31, ~~2019,~~2020, compared to ~~$848.2~~$866.9 million, or ~~36.7%~~36.0% of net sales, in the same period last year. Retail sales generally have a higher gross profit percentage than wholesale sales. Accordingly, there is a negative impact on the gross profit percentage of our business as a whole as retail sales constitute a reduced percentage of our total sales. The gross profit percentage in our wholesale operations segment was ~~33.5% for each of~~36.0% in the nine months ended October 31, ~~2019 and 2018.~~2020 compared to 33.5% in the same period last year. The gross profit percentage for our wholesale segment was positively impacted by the reversal of previously anticipated markdown accruals that are no longer necessary due to the reduction in sales to our retail customers. This positive impact was partially offset by the impact of the COVID-19 pandemic resulting in the recognition of certain fixed costs, primarily higher effective royalty rates, over a reduced sales base. The gross profit percentage in our retail operations segment was ~~47.1%~~34.0% for the nine months ended October 31, ~~2019~~2020 compared to ~~47.2%~~47.1% for the same period last year. The gross profit percentage for our retail segment was negatively impacted by the reduction of our net sales caused by COVID-19 related closures of our retail stores, increased promotional activity due to the COVID-19 pandemic and the restructuring of our retail operations segment.

Selling, general and administrative expenses ~~increased~~decreased to ~~$644.9~~$454.3 million in the nine months ended October 31, ~~2019~~2020 from ~~$633.0~~$644.9 million in the same period last year. The decrease in expenses was primarily due to a decrease of $130.8 million in personnel costs including salaries, bonuses, share-based compensation and other incentives and benefits as a result of employee furloughs, job eliminations and decreased profitability. In addition, there were decreases of $36.1 million in advertising, $8.8 million in rent and facility costs and $14.3 million in third-party warehouse expenses. These decreases were offset, in part, by a $14.6 million increase in bad debt expense primarily related to allowances recorded against the outstanding receivables of certain department store customers that have publicly announced bankruptcy filings or potential bankruptcy filings and $4.3 million of professional fees incurred in connection with the restructuring of our retail operations segment. Selling, general and administrative expenses were further reduced as a result of the restructuring of our retail operations segment. This reduction was offset, in part, as a result of bringing back certain furloughed employees in our wholesale operations segment as we responded to the re-opening of the U.S. economy.

Depreciation and amortization was $29.7 million for the nine months ended October 31, 2020 compared to $29.0 million in the same period last year. The increase in ~~expenses was~~expense is primarily due to increases of $14.1 million for third-party warehouse expenses and $8.5 million of advertising expenses. The increase was offset, in part, by a $12.6 million decrease in rent, personnel costs and other benefits primarily as a result of store closures.capital expenditures during the last twelve months.

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Other income was ~~$29.0 million for the nine months ended October 31, 2019 compared to $28.9 million in the same period last year.~~

~~Other loss was $0.7~~$0.1 million in the nine months ended October 31, ~~2019~~2020 compared to ~~$0.3~~other loss of $0.7 million infor the same period last year. This increase is primarily the result of recording $0.2 million of foreign currency losses during the nine months ended October 31, 2020 compared to $1.1 million of foreign currency losses during the nine months ended October 31, ~~2019 compared to $0.8~~2019. In addition, we recorded $0.3 million ~~of foreign currency gains recorded during the nine months ended October 31, 2018, while also recording $0.4 million of income~~in losses from unconsolidated affiliates during the nine months ended October 31, ~~2019~~2020 compared to ~~$1.1~~$0.4 million of losses from unconsolidated affiliates in the same period last year.

Interest and financing charges, net, for the nine months ended October 31, ~~2019~~2020 were ~~$33.6~~$38.2 million compared to ~~$32.2~~$33.6 million for the same period last year. ~~Interest rates~~The increase is primarily due to a $6.5 million charge to interest expense to extinguish debt issuance costs upon the repayment of our term loan facility and ~~borrowings were similar in both periods.~~amendment of our revolving credit facility.

Income tax expense was ~~$42.5~~$8.4 million for the nine months ended October 31, ~~2019~~2020 compared to ~~$39.9~~$42.5 million for the same period last year. Our effective tax rate increased to 48.4% in the current year’s period from 26.4% in last year’s comparable period because the impact of tax adjustments related to executive compensation, foreign tax expense and disallowed state tax benefits on losses incurred had a greater impact on the lower amount of pre-tax income in the current period ~~from 25.9% in the same period~~compared to last ~~year.~~year’s period. Our effective tax rate includes the effect of an income tax charge of $1.4 million in the nine months ended October 31, 2020 and an income tax benefit of $1.0 million in the nine months ended October 31, 2019 ~~and $1.1 million in the nine months ended October 31, 2018~~ in connection with the vesting of equity awards.

Historically, we calculated our provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period. Due to the uncertainty related to the impact of the COVID-19 pandemic on our operations, we have used a discrete effective tax rate method to calculate taxes first and second quarters of fiscal 2021. However, during the third quarter of fiscal 2021, we returned to the historical practice of using an annual effective tax rate based on full year fiscal income.

Liquidity and Capital Resources

~~Term Loan~~Cash Requirements and Trends and Uncertainties Affecting Liquidity

We rely on our cash flows generated from operations and the borrowing capacity under our revolving credit facility to meet the cash requirements of our business. The primary cash requirements of our business usually are the seasonal buildup in inventories, compensation paid to employees, payments to vendors in the normal course of business, capital expenditures, maturities of debt and related interest payments and income tax payments. The rapid expansion of the COVID-19 pandemic resulted in a sharp decline in net sales and net income in the nine months ended October 31, 2020, which has a corresponding impact on our liquidity. We are focused on preserving our liquidity and managing our cash flow during these unprecedented conditions. We had taken preemptive actions to enhance our ability to meet our short-term liquidity needs including, but not limited to, reducing payroll costs through employee furloughs, job eliminations, reductions in discretionary expenses, deferring certain lease payments and deferral of capital projects. During the quarter ended October 31, 2020, certain furloughed employees were reinstated and salaries that had been reduced where increased to their pre-pandemic levels. We have received royalty relief from certain licensors and we continue to negotiate with licensors for additional relief.

As of October 31, 2020, we had cash and cash equivalents of $149.7 million and availability under our revolving credit facility in excess of $600.0 million. As of October 31, 2020, we were in compliance with all covenants under our senior secured notes and revolving credit facility.

We cannot be sure that our assumptions used to estimate our liquidity requirements will remain accurate due to the unprecedented nature of the disruption to our operations and the unpredictability of the COVID-19 outbreak. As a result, the impact of COVID-19 on our future earnings and cash flows could continue to have a material impact on our results of operations and financial condition depending on the duration and scope of the COVID-19 pandemic. We believe we have sufficient cash and available borrowings for our foreseeable liquidity needs.

Senior Secured Notes

On ~~December 1, 2016,~~August 7, 2020, we ~~borrowed $350.0~~completed a private debt offering of $400 million ~~under a senior secured term loan facility (the “Term Loan”). Additionally, on December 1, 2016, we prepaid $50.0 million in~~aggregate principal amount of ~~the Term Loan, reducing the principal balance~~our 7.875% Senior Secured Notes due 2025 (the “Notes). The terms of the ~~Term Loan to $300.0 million. The Term Loan will mature in December 2022.~~

~~Interest on~~Notes are governed by an indenture, dated as of August 7, 2020 (the “Indenture”), among us, the outstanding principal amount of the Term Loan accrues at a rate equal to the London Interbank Offered Rate (“LIBOR”), subject to a 1% floor, plus an applicable margin of 5.25% or an alternate base rate (definedguarantors party thereto and U.S. Bank, National Association, as ~~the greatest of (i) the “prime rate” as published by the Wall Street Journal from time to time, (ii) the federal funds rate plus 0.5%~~trustee and (iii) the LIBOR rate for a borrowing with an interest period of one month) plus 4.25%, per annum, payable in cash. As of October 31, 2019, interest under the Term Loan was being paid at the average rate of 7.62% per annum.

The Term Loan is secured (i) on a first-priority basis by a lien on, among other things, our real estate assets, equipment and fixtures, equity interests and intellectual property and certain related rights owned by us and by certain of our subsidiaries and (ii) by a second-priority security interest in our and certain of our subsidiaries other assets, which will secure on a first-priority basis our asset-based loan facility described below under the caption “Revolving Credit Facility.”

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agent (the “Collateral Agent”). The ~~Term Loan is required~~net proceeds of the Notes have been used (i) to repay our prior term loan facility due 2022, (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, commencing on February 15, 2021.

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 ~~prepaid~~taken by the Collateral Agent with respect to the Collateral on behalf of the holders of the Notes. The Notes are also subject to the terms of the seller note subordination agreement which governs the relative rights of the secured parties in respect of the Seller Note (as defined therein), the ABL Facility and the Notes.

At any time prior to August 15, 2022, we may redeem some or all of the Notes at a price equal to 100% of the principal amount of the Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date plus a “make-whole” premium, as described in the Indenture. On or after August 15, 2022, 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. In addition, at any time prior to August 15, 2022, we may redeem up to 40% of the aggregate principal amount of the Notes with the proceeds of certain ~~asset sales~~equity offerings at the redemption price set forth in the Indenture, plus accrued and unpaid interest, if ~~such proceeds are not applied as required by~~any, to, but excluding, the ~~agreement within specified deadlines. The Term Loan is also required~~applicable redemption date. In addition, at any time prior to ~~be prepaid in an~~August 15, 2022, during any twelve month period, we may redeem up to 10% of the aggregate principal amount of the Notes at a redemption price equal to ~~75%~~103% of ~~our Excess Cash Flow~~the principal amount of the Notes redeemed 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 ~~agreement) with respect~~Indenture), we are required to ~~each fiscal year ending on or after January 31, 2018. The percentage~~offer to repurchase the Notes at 101% of ~~Excess Cash Flow that must be so applied is reduced~~the principal amount of such Notes plus accrued and unpaid interest, if any, to, 50% if our senior secured leverage ratio is less than 3.00 to 1.00, to 25% if our senior secured leverage ratio is less than 2.75 to 1.00 and to 0% if our senior secured leverage ratio is less than 2.25 to 1.00.but excluding, the date of repurchase.

The ~~Term Loan~~Indenture contains covenants that, among other things, ~~restrict~~limit our ability ~~subject to certain exceptions,~~and the ability of our restricted subsidiaries to incur or guarantee additional ~~debt;~~indebtedness, pay dividends or make other restricted payments, make certain investments, incur ~~liens;~~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 ~~dispose~~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 ~~assets; merge with other companies; liquidate~~guarantees to be enforceable, failure to perfect certain collateral securing the Notes failure to pay certain final judgments, and certain events of bankruptcy or dissolve G-III; acquire other companies; make loans, advances, or guarantees; and make certain investments. As described above, the Term Loan also includes a mandatory prepayment provision with respect to Excess Cash Flow. A first lien leverage covenant requires the Company to maintain a level of debt to EBITDA at a ratio as defined in the term loan agreement. As of October 31, 2019, we were in compliance with these covenants.insolvency.

~~Revolving~~We incurred debt issuance costs totaling $8.5 million related to the Notes that will be amortized over the term of the Notes. In accordance with ASU 2015-15, the debt issuance costs have been deferred and are presented as a contra-liability, offsetting the outstanding balance of the Notes, and are amortized using the effective interest method over the remaining life of the Notes.

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Second Amended and Restated ABL Credit ~~Facility~~Agreement

On ~~December 1, 2016,~~August 7, our ~~previous~~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 ~~was refinanced~~(the “ABL Credit Agreement”) with the Lenders named therein and ~~replaced by~~with JPMorgan Chase Bank, N.A., as Administrative Agent. The ABL Credit Agreement is a ~~five-year~~five year senior secured ~~revolving~~ credit facility ~~providing~~subject to a springing maturity date if, subject to certain conditions, certain material indebtedness is not refinanced or repaid prior to the date that is 91 days prior to the date of any relevant payment thereunder. The ABL Credit Agreement provides for borrowings in the aggregate principal amount of up to $650 million. We and our subsidiaries, G-III Apparel Canada ULC, Gabrielle Studio, Inc., Donna Karan International Inc. and Donna Karan Studio LLC (the “Guarantors”), are Loan Guarantors under the ABL Credit Agreement.

The ABL Credit Agreement refinances, amends and restates 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”), by and among the Borrowers and the Loan Guarantors (each as defined therein) party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., in its capacity as the administrative agent thereunder. The Prior Credit Agreement provided for borrowings of up to $650 million ~~(the “revolving credit facility”).~~ and was due to expire in December 2021. The ABL Credit Agreement extends the maturity date to August 2025, subject to a springing maturity date if, subject to certain conditions, certain material indebtedness is 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 ~~revolving credit facility~~ABL Credit Agreement are subject to borrowing base formulas and ~~over advances~~overadvances as specified in the ~~revolving credit facility agreement.~~ABL Credit Agreement. Borrowings bear interest, at ~~our~~the Borrowers’ option, at LIBOR plus a margin of ~~1.25%~~1.75% to ~~1.75%~~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 ~~a margin of 0.25% to 0.75%~~1.00%, with the applicable margin determined based on ~~the~~Borrowers’ availability under the ~~revolving credit facility agreement. As of October 31, 2019, interest under the revolving credit agreement was being paid at the average rate of 3.30% per annum.~~ABL Credit Agreement. The ~~revolving credit facility~~ABL Credit Agreement is secured by specified assets of usthe Borrowers and ~~certain of our subsidiaries.~~the Guarantors. In addition to paying interest on any outstanding borrowings under the ~~revolving credit facility,~~ABL Credit Agreement, we are required to pay a commitment fee to the lenders under the ~~revolving~~ credit ~~facility~~ agreement with respect to the unutilized commitments. The commitment fee accrues at a tiered rate equal to ~~0.25%~~0.50% per annum on the average daily amount of the available ~~commitment.~~commitments when the average usage is less than 50% of the total available commitments and decreases to 0.35% per annum on the average daily amount of the available commitments when the average usage is greater than or equal to 50% of the total available commitments.

The revolving credit facility contains covenants that, among other things, restrict our ability, subject to specified exceptions, to incur additional debt; incur liens; sell or dispose of certain assets; merge with other companies; liquidate or dissolve ~~G-III;~~the Company; acquire other companies; make loans, advances, or guarantees; and make certain investments. In certain circumstances, the revolving credit facility also requires us to maintain a fixed charge coverage ratio, as defined in the agreement, ~~that may~~ not be less than 1.00 to 1.00 for each period of twelve consecutive fiscal ~~months.~~months of the Company. As of October 31, ~~2019, we were~~2020, the Company was in compliance with these covenants.

~~LVMH Note~~As of October 31, 2020, we had no borrowings outstanding under the ABL credit agreement. As of October 31, 2020, interest under the ABL credit agreement was being paid at an average rate of 2.05% per annum. The ABL credit agreement also includes amounts available for letters of credit. As of October 31, 2020, there were outstanding trade and standby letters of credit amounting to $5.8 million and $3.9 million, respectively.

At the date of the refinancing of the Prior Credit Agreement, we had $3.3 million of unamortized debt issuance costs remaining from the Prior Credit Agreement. We extinguished and charged to interest expense $0.4 million of the prior debt issuance costs and incurred new debt issuance costs totaling $4.8 million related to the ABL Credit Agreement. We have a total of $7.7 million debt issuance costs related to our ABL Credit Agreement. As permitted under ASC 2015-15, the debt issuance costs have been deferred and are presented as an asset which is to be subsequently amortized ratably over the term of the ABL Credit Agreement.

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Term Loan

We had previously borrowed $350.0 million under a senior secured term loan facility (the “Term Loan”) that was scheduled to mature in December 2022. We prepaid $50.0 million in principal amount of the Term Loan, reducing the principal balance of the Term Loan to $300.0 million.

On ~~December 1, 2016,~~August 7, 2020, we used a portion of the proceeds from the issuance of the Notes to repay the outstanding principal balance of $300.0 million under the Term Loan. At the date of repayment, we had unamortized debt issuance costs of $6.1 million associated with the Term Loan. These debt issuance costs were fully extinguished and charged to interest expense in our results of operations.

LVMH Note

We issued to LVMH, ~~Moet Hennessy Louis Vuitton Inc. (“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 ~~$125.0~~$125 million (the “LVMH Note”) that bears interest at the rate of 2% per year. ~~$75.0~~$75 million of the principal amount of the LVMH Note is due and payable on June 1, 2023 and ~~$50.0~~$50 million of such principal amount is due and payable on December 1, 2023.

Based on an independent valuation, it was determined that the LVMH Note should be treated as having been issued at a discount of ~~$40.0~~$40 million in accordance with ASC 820 –— Fair Value Measurements. This discount is being amortized as interest expense using the effective interest method over the term of the LVMH Note.

In connection with the issuance of the LVMH Note, LVMH entered into (i) a subordination agreement providing that our obligations under the LVMH Note are subordinate and junior to our obligations under the revolving credit facility and ~~the~~ Term Loan and (ii) a pledge and security agreement with us and our subsidiary, G-III Leather, ~~Fashions, Inc. (“G-III Leather”),~~ pursuant to which we and G-III Leather granted to LVMH a security interest in specified collateral to secure our payment and performance of our obligations under the LVMH Note that is subordinate and junior to the security interest granted by us with respect to our obligations under the revolving credit facility and ~~the~~ Term Loan.

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Unsecured ~~Loan~~Loans

~~On April 15, 2019, T.R.B.~~During fiscal 2020 and fiscal 2021, T.R.B International SA (“TRB”), a subsidiary of Vilebrequin, borrowed ~~€3.0 million~~funds under anseveral unsecured ~~loan with Banque du Leman S.A (the “Unsecured Loan”). The Unsecured Loan matures on April 15, 2024. During the term~~loans. A portion of the ~~Unsecured Loan,~~unsecured loans were to provide funding for operations in the normal course of business, while other unsecured loans were various European state backed loans as part of COVID-19 relief programs. In the aggregate, TRB is currently required to make quarterly installment payments of €0.2 million. Interest on the outstanding principal amount of the ~~Unsecured Loan~~unsecured loans accrues at a fixed rate equal to ~~1.50%~~0% to 2.0% per annum, payable on either a quarterly or monthly basis. Certain unsecured loans will require monthly installment payments beginning in ~~cash.~~fiscal 2022. The unsecured loans have maturity dates ranging from September 15, 2024 through August 30, 2025. As of October 31, 2020, TRB had an aggregate outstanding balance of €6.2 million under these various unsecured loans.

Overdraft Facilities

During the second quarter of fiscal 2021, TRB entered into several overdraft facilities that allow for applicable bank accounts to be in a negative position up to a certain maximum overdraft. TRB entered into an uncommitted overdraft facility with HSBC Bank allowing for a maximum overdraft of €5 million. Interest on drawn balances accrues at a fixed 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 TRB or HSBC Bank. As part of a COVID-19 relief program, TRB and its subsidiaries have also entered into several state backed overdraft facilities with UBS Bank in Switzerland for an aggregate of CHF 4.7 million at varying interest rates of 0% to 0.5%. As of October 31, 2020, TRB had an aggregate €2.5 million drawn under these various facilities.

Outstanding Borrowings

Our primary operating cash requirements usually are to fund our seasonal buildup in inventories and accounts receivable, primarily during the second and third fiscal quarters each year. Due to the seasonality of our business, we generally reach our peak borrowings under our revolving credit facility during our third fiscal quarter. The primary sources to meet our

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operating cash requirements have been borrowings under ~~our revolving~~this credit facility and cash generated from operations. The reduction in net sales in the current year resulted in reductions in our seasonal inventory needs in the current year, and as a result, there were no borrowings outstanding under the ABL Credit Agreement as of October 31, 2020.

We ~~incurred significant additional debt in connection with our acquisition of DKI. We~~ had no borrowings outstanding under ~~the~~our revolving credit facility ~~of $279.9 million and $309.6 million~~ at October 31, ~~2019~~2020 and ~~2018, respectively. In addition, we~~ had ~~$300.0~~$279.9 million of borrowings outstanding at October 31, 2019. We had $400 million in borrowings outstanding under the ~~Term Loan~~Notes at ~~both~~ October 31, ~~2019 and 2018.~~2020. Our contingent liability under open letters of credit was approximately ~~$7.0~~$9.7 million and ~~$12.0~~$7.0 million at October 31, ~~2019~~2020 and ~~2018,~~2019, respectively. In addition to the amounts outstanding under these two loan agreements, at October 31, ~~2019~~2020 and ~~2018,~~2019, we had $125.0 million of face value principal amount outstanding under the LVMH Note. As of ~~September 30, 2019,~~October 31, 2020, we also had ~~€2.7~~an aggregate of €6.2 million ($7.2 million) outstanding under Vilebrequin’s various Unsecured Loans and €2.5 million ($2.9 million) outstanding under the ~~Unsecured Loan.~~Overdraft Facilities.

We had cash and cash equivalents of $149.7 million on October 31, 2020 and $55.8 million on October 31, ~~2019 and $66.1 million on October 31, 2018.~~2019.

Share Repurchase Program

Our Board of Directors has authorized a share repurchase program of 5,000,000 shares. 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. WeNo shares were repurchased ~~1,327,566 shares of our common stock in~~during the ~~nine~~three months ended October 31, ~~2019 for an aggregate purchase price of $35.2 million.~~2020. We have 2,949,362 authorized shares remaining under this program. As of December ~~5, 2019,~~4, 2020, we had ~~47,825,398~~48,358,688 shares of common stock outstanding.

Cash from Operating Activities

We used ~~$220.2~~$127.6 million ofin cash infrom operating activities during ~~the~~ nine months ended October 31, ~~2019,~~2020, primarily due to ~~increases~~an increase of ~~$397.0~~$190.8 million in accounts receivable and ~~$74.3~~decreases of $113.0 million in ~~inventories~~customer refund liabilities and ~~a decrease of $61.1~~$61.8 million in operating lease liabilities. These items were offset, in part, by our net income of ~~$118.5~~$8.9 million, and decreases of $90.1 million in inventories and $42.7 million in prepaid expenses and other current assets. In addition, we had non-cash charges ~~in the aggregate amount~~ of ~~$103.0~~$29.7 million ~~relating primarily to operating lease costs ($55.0 million),~~in depreciation and amortization ~~($29.0 million)~~ and ~~share-based compensation ($13.7 million). These items were further offset by increases of $28.6~~$59.6 million in ~~our income tax liability and $26.6 million in accounts payable and accrued expenses.~~operating lease costs.

~~The changes in operating cash flow items are consistent with our seasonal pattern~~Inventory normally increases for the build-up of ~~building up~~ inventory for the fall shipping ~~season~~and holiday shopping seasons. Due to the COVID-19 pandemic, inventory purchasing was at a lower volume than in prior years. As a result, accounts payable and inventory decreased due to the lower volume of inventory purchases resulting infrom the ~~increases in inventory and accounts receivable and payable. The fall shipping season begins during the latter half of our second quarter.~~COVID-19 pandemic. In addition, our customer refund liabilities decreased because we ~~accelerated inventory receipts in anticipation of expected increases in tariffs on apparel products imported from China.~~experienced lower sales levels and were able to reverse previously accrued amounts that are no longer needed.

Cash from Investing Activities

We used ~~$34.0~~$16.4 million of cash in investing activities during ~~the~~ nine months ended October 31, ~~2019~~2020 for capital expenditures and initial direct costs of operating lease assets. Capital expenditures in the period primarily related to infrastructure and information technology expenditures and additional fixturing costs at department ~~stores.~~stores prior to the onset of the COVID-19 pandemic. Operating lease assets initial direct costs in the period primarily related to payments of key money and broker fees.

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Cash from Financing Activities

Net cash provided by financing activities was ~~$239.5~~$93.4 million during nine months ended October 31, ~~2019~~2020 primarily as a result of ~~the net~~ proceeds of ~~$280.0~~$400 million from the issuance of our Notes partially offset by the $300 million repayment of our term loan facility from the proceeds of the Notes. We also made payments of $13.3 million in ~~borrowings under~~financing costs related to the issuance of our ~~revolving credit facility offset, in part, by $35.2 million of cash used to repurchase shares under our share repurchase program~~Notes and ~~$8.4 million for taxes paid in connection with net share settlements.~~entering into the ABL Credit Agreement.

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We believe that our cash on hand and cash generated from operations over the full fiscal year, together with funds available under our revolving credit facility, are sufficient to meet our expected operating and capital expenditure requirements. We may seek to acquire other businesses in order to expand our business. We may need additional financing in order to complete one or more acquisitions. We cannot be certain that we will be able to obtain additional financing, if required, on acceptable terms or at all.

Critical Accounting Policies

Our discussion of results of operations and financial condition relies on our consolidated financial statements that are prepared based on certain critical accounting policies that require management to make judgments and estimates that are subject to varying degrees of uncertainty. We believe that investors need to be aware of these policies and how they impact our financial statements as a whole, as well as our related discussion and analysis presented herein. While we believe that these accounting policies are based on sound measurement criteria, actual future events can, and often do, result in outcomes that can be materially different from these estimates or forecasts.

The accounting policies and related estimates described in our Annual Report on Form 10-K for the year ended January 31, ~~2019~~2020 are those that depend most heavily on these judgments and estimates. As of October 31, ~~2019,~~2020, there have been no material changes to our critical accounting policies, other than the adoption ~~of new lease accounting standards~~ASU 2016-13 as discussed in Note 43 to the condensed consolidated financial ~~statements.~~statements included in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There are no material changes to the disclosure made with respect to these matters in our Annual Report on Form 10-K for the year ended January 31, ~~2019.~~2020.

Item 4. Controls and Procedures.

As of the end of the period covered by this report, our management, including our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure, and thus, are effective in making known to them material information relating to G-III required to be included in this report.

Changes in Internal Control over Financial Reporting

During our last fiscal quarter, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1A. Risk Factors.

In addition to the other information set forth in this ~~report,~~Quarterly Report, you should carefully consider the risk factors ~~discussed~~contained in “Item ~~1A. Risk~~1A.-Risk Factors” in our ~~Annual~~Quarterly Report on Form ~~10-K~~10-Q for the ~~year~~quarter ended ~~January~~July 31, ~~2019~~2020 (the ~~“Annual~~“Q2 Quarterly Report”), which could materially affect our business, financial condition and/or future results. There have been no material changes in our risk factors from those ~~disclosed~~set forth in ~~our Annual~~the Q2 Quarterly Report, except for the risk ~~factors~~factor set forth below, which ~~serve~~serves as an update to ~~these two~~our risk factors ~~that were~~ contained in ~~our Annual~~the Q2 Quarterly Report. The risks described in ~~our Annual~~the Q2 Quarterly Report and in this Quarterly Report ~~on Form 10-Q~~ are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or future results.

~~Our retail operations segment may continue~~Risks Related to ~~incur losses if~~ the ~~potential significant revisions to our retail operations do not significantly improve our results of operations~~.COVID-19 Pandemic

The global health crisis caused by the COVID-19 pandemic has had, and the current and uncertain future outlook of the outbreak will likely continue to have, a significant adverse effect on our business, financial condition and results of operations.

A novel strain of coronavirus, commonly referred to as COVID-19, has spread rapidly across the globe beginning in December 2019, including throughout all major geographies in which we operate (North America, Europe and Asia), resulting in adverse economic conditions and business and global supply chain disruptions, as well as significant volatility in global financial markets. Governments worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures and stay-at-home orders, all in an effort to reduce the spread of the virus. Such actions, among others, have resulted in a significant decline in retail traffic, tourism and consumer spending on discretionary items. Additionally, during this period of uncertainty, companies across a wide array of industries have implemented various initiatives to reduce operating expenses and preserve cash balances, including work furloughs and reduced pay, which could lower consumers’ disposable income levels or willingness to purchase discretionary items such as apparel. Further, even if such government restrictions and company initiatives are completely lifted, consumer behavior, spending levels and/or shopping preferences, such as willingness to congregate in shopping centers or other populated locations, could be adversely affected.

In connection with the COVID-19 pandemic, we have experienced varying degrees of business disruptions and periods of closure of our stores, distribution centers and corporate facilities, as have our wholesale customers, suppliers and vendors. Our wholesale business has been adversely affected as a result of department store closures and lower traffic and consumer demand. During the first half of fiscal 2021, the majority of our stores were closed for an average of 8 to 10 weeks, resulting in significant adverse impacts to our operating results. Although nearly all of our stores were reopened by the end of the second quarter of fiscal 2021, the majority are still operating at limited hours and customer capacity levels in accordance with local health guidelines, with traffic remaining challenged. Additionally, there has recently been a resurgence in the number of cases of COVID-19 in the U.S. and certain other parts of the world, which could result in further shutdowns and business disruptions for us and/or our wholesale customers, suppliers and vendors.

The COVID-19 pandemic has had, and will likely continue to have, a significant adverse effect on our business, financial condition, and results of operations. The effects of COVID-19 could affect our ability to successfully operate in many ways, including, but not limited to, the following factors:

● the impact of the pandemic on the economies and financial markets of the countries and regions in which we operate, including a potential global recession, a decline in consumer confidence and spending, or a further increase in unemployment levels, has resulted, and could continue to result, in consumers having less disposable income and, in turn, decreased sales of our products;
● “shelter in place” and other similar mandated or suggested isolation protocols, which have disrupted, and could continue to disrupt, brick-and-mortar retailers, including stores operated by us, as a result of store closures or reduced operating hours and decreased retail traffic;
● significant increases in online shopping and by other digital means, or other changes in consumer behavior, have been accelerated by COVID-19 and could adversely affect our sales;

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●	difficulty accessing debt and equity on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our ability to access capital necessary to operate our business

●

a prolonged disruption of our business may impact our ability to satisfy the terms of our Amended ABL Facility, including the covenants contained in that agreement, which could constitute an event of default under the terms of the Amended ABL Facility, which may result in an acceleration of payment under that agreement or other debt agreements;

●	our success in attempting to reduce operating costs and conserve cash;

●	the failure of our wholesale customers to whom we extend credit to pay amounts owed to us on time, or at all, particularly if such customers are significantly impacted by COVID-19;

●

a more promotional retail environment or our ability to move existing inventory, which may cause us to lower our prices, sell existing inventory at larger discounts than in the past, or write-down the value of inventory, and increase the costs and expenses of updating and replacing inventory, negatively impacting our margins;

●

the risk that continued social distancing measures and general consumer behaviors due to the COVID-19 pandemic may continue to impact mall and store traffic and that the re-occurrence of COVID-19 outbreaks or the fear of additional outbreaks could cause governments to impose additional restrictions and customers to avoid public places, such as malls and outlets, where the retail stores of our wholesale customers and our stores are located;

●	the increase in the number of personnel working offsite may make our business more vulnerable to cybersecurity breach attempts, and, this period of uncertainty could result in an increase in phishing and other scams, fraud, money laundering, theft and other criminal activity; and

●

we may be required to revise certain accounting estimates and judgments such as, but not limited to, those related to the valuation of goodwill, indefinite-lived intangible assets, long-lived assets and deferred tax assets, which could have a material adverse effect on our financial position and results of operations.

Restrictions on travel and group gatherings, the closing or reduced operation of restaurants, sports leagues and all forms of communal entertainment and the fear of contracting COVID-19 have materially adversely affected store traffic and retail sales. Most retail store chains and shopping malls are operating on a reduced basis as of the third quarter of fiscal 2021 compared to pre-pandemic operations. The onset of additional COVID-19 waves threatens future periods of mandated store closures and additional restrictions on consumers that would limit commercial behavior. Certain states and cities reacted to the COVID-19 pandemic by instituting quarantines, restrictions on travel, “shelter in place” rules and phased reopenings. While some of these restrictions have since expired, others have recently been reinstated in certain states or cities which saw a new spike in COVID-19 cases. Such restrictions could continue to be reinstated in the same or other areas as COVID-19 cases increase which could result in additional retail store restrictions or closures. The restrictions imposed as a result of the COVID-19 outbreak and the closing of retail stores in connection with the outbreak are causing a significant adverse effect on the economy in the United States and around the world. If the retail economy continues to weaken and/or consumers continue to reduce purchases in the near or long-term as a result of the negative effects of on the U.S. and worldwide economies caused by COVID-19, retailers may need to further reduce or limit store operations, ~~segment reported~~close additional stores and be more cautious with orders. A slowing or changing economy as a result of the COVID-19 outbreak and the governmental restrictions imposed in the United States and around the world as a result thereof would adversely affect the financial health of our retail, distributor and joint venture partners, which in turn could have an ~~operating loss~~adverse effect on our business, results of ~~$49.4 million~~operations and financial condition.

The COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the restrictive actions that are being taken by governmental authorities in the United States and around the world to contain the outbreak or to treat its impact makes it difficult to forecast its effects on our fiscal 2021 results. Our results of operations for the nine months ended October 31, ~~2019, $49.0 million in fiscal 2019 and $49.1 million in fiscal 2018. Given~~2020 reflected the ~~overall uncertainty~~impacts of the ~~retail landscape,~~COVID-19 pandemic and we ~~are continuing our efforts~~expect that the balance of fiscal 2021 will likely reflect further impacts. It is difficult, if not impossible, at this time to ~~significantly reduce~~predict the losses in our retail operations. We intend to move more broadly with respect to store closures and have engaged outside advisors to assist us with this process. Our strategy also includes overall cost cutting, revising our merchandising strategies to drive additional sales and re-purposing certain Wilsons and G.H. Bass stores for our Karl Lagerfeld Paris or DKNY brands. We need to successfully implement this strategy in order to significantly reducemagnitude of the ~~losses in our retail operations. There is no assurance that we can do so.~~

~~We may be required to record impairments~~effect of ~~long-lived assets or incur other charges relating to our company-operated retail stores.~~

Impairment testing of our retail stores’ long-lived assets requires us to make estimates about our future performance and cash flows that are inherently uncertain. These estimates can be affected by numerous factors, including changes in economic conditions, our results of operations, and competitive conditions in the industry. Due to the fixed-cost structure associated with our retail operations, negative cash flows or the closure of a store could result in an impairment of leasehold improvements, operating lease assets or other long-lived assets, write-downs of inventory, severance costs, lease termination costs or the loss of working capital, which could adversely impactCOVID-19 outbreak on our business and ~~financial results. We recorded impairments related~~results of operations. However, we expect our results for fiscal 2021 to ~~our retail operations~~be materially adversely affected compared to fiscal 2020 as a result of $2.8 million in fiscal 2019, $6.5 million in fiscal 2018 and $10.5 million in fiscal 2017 and may be required to record additional impairments or other charges relating to our retail operations in our financial statements. These impairment or other charges may increase as we continue to evaluate our retail operations. The recordingthe impact of ~~additional impairments or other charges in the future may have a material adverse impact on our business, financial condition and/or future results.~~COVID-19.

2836

Table of Contents

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~

The following table provides information with respect to the Company’s common stock that the Company repurchased during the three months ended October 31, 2019. Included in this table are shares withheld during October 2019 in connection with the settlement of vested restricted stock units to satisfy tax withholding requirements.

Date Purchased

Total Number of Shares Purchased ^{(1) (2)}

Average Price Paid Per Share ⁽¹⁾

Total Number of Share Purchased as Part of Publicly Announced Program ⁽²⁾

Maximum Number of Shares that may yet be Purchased Under the Program ⁽²⁾
August 1 - August 31, 2019

—

$
—

—

2,949,362
September 1 - September 30, 2019

—

—

—

2,949,362
October 1 - October 31, 2019

40,797

24.55

—

2,949,362

40,797

$
24.55

—

2,949,362

⁽¹⁾
Included are 40,797 shares withheld during October 2019 in connection with the settlement of vested restricted stock units to satisfy tax withholding requirements. The 2015 Long-Term Incentive Plan provides that shares withheld are valued at the closing price per share on the date withheld.
⁽²⁾
In December 2015, our Board of Directors reapproved and increased a previously authorized share repurchase program from the 3,750,000 shares remaining under that plan to 5,000,000 shares. This program has no expiration date. Repurchases under the program may be made from time to time over the period through open market purchases, accelerated share repurchase programs, privately negotiated transactions or other methods, as we deem appropriate.

~~Table of Contents~~

Item 6. Exhibits.
10.1
First Amendment of Lease, dated September 16, 2020, by and between G-III Apparel Group, Ltd. as Tenant and Granite South Brunswick LLC as Landlord.
31.1
Certification by Morris Goldfarb, Chief Executive Officer of G-III Apparel Group, Ltd., pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as amended, in connection with G-III Apparel Group, Ltd.’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, ~~2019.~~2020.
31.2
Certification by Neal S. Nackman, Chief Financial Officer of G-III Apparel Group, Ltd., pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as amended, in connection with G-III Apparel Group, Ltd.’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, ~~2019.~~2020.
32.1
Certification by Morris Goldfarb, Chief Executive Officer of G-III Apparel Group, Ltd., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with G-III Apparel Group, Ltd.’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, ~~2019.~~2020.
32.2
Certification by Neal S. Nackman, Chief Financial Officer of G-III Apparel Group, Ltd., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with G-III Apparel Group, Ltd.’s��s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, ~~2019.~~2020.
101.INS
~~XBRL~~iXBRL Instance Document.
101.SCH
~~XBRL~~iXBRL Schema Document.
101.CAL
~~XBRL~~iXBRL Calculation Linkbase Document.
101.DEF
~~XBRL~~iXBRL Extension Definition.
101.LAB
~~XBRL~~iXBRL Label Linkbase Document.
101.PRE
~~XBRL~~iXBRL Presentation Linkbase Document.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)

3037

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	G-III APPAREL GROUP, LTD. (Registrant)

Date: December ~~6, 2019~~10, 2020	By:	/s/ Morris Goldfarb
		Morris Goldfarb
		Chief Executive Officer

Date: December ~~6, 2019~~10, 2020	By:	/s/ Neal S. Nackman
		Neal S. Nackman
		Chief Financial Officer

3138


	Three Months Ended October 31, 2018
	Wholesale		Retail		Elimination ⁽¹⁾		Total
	(In thousands)
Net sales	$	1,005,358	$	110,934	$	(43,310)	$	1,072,982
Cost of goods sold		677,011		57,181		(43,310)		690,882
Gross profit		328,347		53,753		—		382,100
Selling, general and administrative expenses		166,423		65,629		—		232,052
Depreciation and amortization		7,709		2,324		—		10,033
Operating profit (loss)	$	154,215	$	(14,200)	$	—	$	140,015


Date Purchased	Total Number of Shares Purchased ^{(1) (2)}	Average Price Paid Per Share ⁽¹⁾		Total Number of Share Purchased as Part of Publicly Announced Program ⁽²⁾	Maximum Number of Shares that may yet be Purchased Under the Program ⁽²⁾
August 1 - August 31, 2019	—	$	—	—		2,949,362
September 1 - September 30, 2019	—		—	—		2,949,362
October 1 - October 31, 2019	40,797		24.55	—		2,949,362
	40,797	$	24.55	—		2,949,362


⁽¹⁾	Included are 40,797 shares withheld during October 2019 in connection with the settlement of vested restricted stock units to satisfy tax withholding requirements. The 2015 Long-Term Incentive Plan provides that shares withheld are valued at the closing price per share on the date withheld.
⁽²⁾	In December 2015, our Board of Directors reapproved and increased a previously authorized share repurchase program from the 3,750,000 shares remaining under that plan to 5,000,000 shares. This program has no expiration date. Repurchases under the program may be made from time to time over the period through open market purchases, accelerated share repurchase programs, privately negotiated transactions or other methods, as we deem appropriate.


10.1	First Amendment of Lease, dated September 16, 2020, by and between G-III Apparel Group, Ltd. as Tenant and Granite South Brunswick LLC as Landlord.
31.1	Certification by Morris Goldfarb, Chief Executive Officer of G-III Apparel Group, Ltd., pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as amended, in connection with G-III Apparel Group, Ltd.’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, ~~2019.~~2020.

31.2	Certification by Neal S. Nackman, Chief Financial Officer of G-III Apparel Group, Ltd., pursuant to Rule 13a - 14(a) or Rule 15d - 14(a) of the Securities Exchange Act of 1934, as amended, in connection with G-III Apparel Group, Ltd.’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, ~~2019.~~2020.

32.1	Certification by Morris Goldfarb, Chief Executive Officer of G-III Apparel Group, Ltd., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with G-III Apparel Group, Ltd.’s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, ~~2019.~~2020.

32.2	Certification by Neal S. Nackman, Chief Financial Officer of G-III Apparel Group, Ltd., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with G-III Apparel Group, Ltd.’s��s Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, ~~2019.~~2020.

101.INS	~~XBRL~~iXBRL Instance Document.
101.SCH	~~XBRL~~iXBRL Schema Document.
101.CAL	~~XBRL~~iXBRL Calculation Linkbase Document.
101.DEF	~~XBRL~~iXBRL Extension Definition.
101.LAB	~~XBRL~~iXBRL Label Linkbase Document.
101.PRE	~~XBRL~~iXBRL Presentation Linkbase Document.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)