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, 2021 is referred to as "fiscal 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, 2020, the results of Vilebrequin, KLH, KLNA and Fabco are included
for the nine-month period ended September 30, 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, 2020 and 2019 were each
13-week and 39-week periods, respectively, for the retail operations segment.
For fiscal 2021 and 2020, the three and nine month periods for the retail
operations segment ended on October 31, 2020 and November 2, 2019 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
? restructuring of our retail operations, as well as the impact on our business
and financial statements resulting from any related costs and charges which may
be dilutive to our earnings;
? the impact on our business and financial statements related to the early
closure of stores or the termination of long-term 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;
? increased exposure to consumer privacy, 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;
21
Table of Contents
? the effects of competition in the markets in which we operate, including from
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 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;
? 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.
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 in Part II-Other Information in
(i) our Quarterly Report on Form 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
22
Table of Contents
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.
23
Table of Contents
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.
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.
24
Table of Contents
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.
Our retail operations segment historically consisted primarily of direct sales
to consumers through our company-operated 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.
After completion of the restructuring which is expected to occur by the end of
fiscal 2021, 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. Our ongoing
plan for our retail business focuses on the operations and growth of our DKNY
and Karl Lagerfeld Paris stores, as well as our digital business. Our plan is
based on the assumed continued strength of the DKNY and Karl Lagerfeld 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 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 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 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 other retailers and the potential bankruptcy of
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.
25
Table of Contents
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.
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.
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 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, approximately 50% of the products that
we sold were manufactured in China.
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 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
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, 2020 compared to three months ended October 31,
2019
Net sales for the three months ended October 31, 2020 decreased to $826.6
million from $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 decreased to $783.0 million for
the three months ended October 31, 2020 from $1.07 billion in the comparable
period last year. We experienced a significant decrease in net sales across
substantially all of our brands due to the effects of restrictions on business
and personal activities imposed by governments in connection with the COVID-19
pandemic. Most of 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.
26
Table of Contents
Net sales of our retail operations segment were $58.0 million for the
three months ended October 31, 2020 compared to $89.7 million in the same period
last year. This decrease primarily reflected reduced demand as a result of
disruptions related to COVID-19. Same store sales decreased across all store
brands due to the 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
restructuring of our retail operations segment, net sales were also negatively
impacted by 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 288 at October 31, 2019 to 202 at
October 31, 2020. The number of retail stores operated by us and, as a result,
the 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 $297.8 million, or 36.0% of net sales, for the three months
ended October 31, 2020, compared to $399.0 million, or 35.4% of net sales, in
the same period last year. The gross profit percentage in our wholesale
operations segment was 35.5% in the three months ended October 31, 2020 compared
to 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 33.9% for the three months ended October 31, 2020
compared to 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 decreased to $177.6 million in the
three months ended October 31, 2020 from $246.6 million in the same period last
year. The decrease in expenses was primarily due to a decrease of $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 was 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 during the three months ended
October 31, 2020 as we responded to the re-opening of the U.S. economy.
Depreciation and amortization was $10.2 million for the three months ended
October 31, 2020 compared to $9.7 million in the same period last year.
Other income was $0.2 million in the three months ended October 31, 2020
compared to other income of $0.7 million for the same period last year. This
change is the result of recording $0.3 million of foreign currency losses during
the three months ended October 31, 2020 compared to foreign currency losses of
$0.2 million during the three months ended October 31, 2019 and $0.5 million in
income from unconsolidated affiliates during the three months ended October 31,
2020 compared to $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, 2020
were $18.7 million compared to $12.5 million for the same period last year. 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
amendment of our revolving credit facility.
Income tax expense was $28.4 million for the three months ended October 31, 2020
compared to $35.6 million for the same period last year. Our effective tax rate
increased to 31.0% in the current year's quarter from 27.2% in last year's
comparable quarter 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 quarter compared to last year's quarter.
27
Table of Contents
Nine months ended October 31, 2020 compared to nine months ended October 31,
2019
Net sales for the nine months ended October 31, 2020 decreased to $1.53 billion
from $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 decreased to $1.43 billion for the
nine months ended October 31, 2020 from $2.23 billion in the comparable period
last year. We experienced a significant decrease in net sales across
substantially all of our brands primarily due to the effects of restrictions
that began in March 2020 on business and personal activities imposed by
governments in connection with the COVID-19 pandemic. As a result, most of 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 $126.4 million for the
nine months ended October 31, 2020 compared to $255.3. million in the same
period last year. This decrease primarily reflected reduced demand as a result
of disruptions related to COVID-19. Same store sales decreased across all store
brands due to the 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 restructuring of our retail operations segment
during the second quarter of the current fiscal year, net sales were also
negatively impacted by 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 288 at October 31, 2019 to
202 at October 31, 2020. The number of retail stores operated by us and, as a
result, the 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 $556.8 million, or 36.4% of net sales, for the nine months
ended October 31, 2020, compared to $866.9 million, or 36.0% of net sales, in
the same period last year. The gross profit percentage in our wholesale
operations segment was 36.0% in the nine months ended October 31, 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 34.0% for
the nine months ended October 31, 2020 compared to 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 decreased to $454.3 million in the
nine months ended October 31, 2020 from $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 expense is primarily due to capital expenditures during the last
twelve months.
28
Table of Contents
Other income was $0.1 million in the nine months ended October 31, 2020 compared
to other loss of $0.7 million for 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. In addition, we
recorded $0.3 million in losses from unconsolidated affiliates during the nine
months ended October 31, 2020 compared to $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, 2020
were $38.2 million compared to $33.6 million for the same period last year. 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
amendment of our revolving credit facility.
Income tax expense was $8.4 million for the nine months ended October 31, 2020
compared to $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 compared to last 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 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
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 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 terms of the Notes are governed by an indenture, dated as of August
7, 2020 (the "Indenture"), among us, the guarantors party thereto and U.S. Bank,
National Association, as trustee and collateral
29
Table of Contents
agent (the "Collateral Agent"). 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.
The Notes are unconditionally guaranteed on a senior-priority secured basis by
our current and future wholly-owned domestic subsidiaries that guarantee any of
our credit facilities, including our ABL facility (the "ABL Facility") pursuant
to the ABL Credit Agreement, or certain future capital markets indebtedness of
ours or the guarantors.
The Notes and the related guarantees are secured by (i) first priority liens on
our Cash Flow Priority Collateral (as defined in the Indenture), and (ii) a
second-priority lien on our ABL Priority Collateral (as defined in the
Indenture), in each case subject to permitted liens described in the Indenture.
In connection with the issuance of the Notes and execution of the Indenture, we
and the Guarantors entered into a pledge and security agreement (the "Pledge and
Security Agreement"), among us, the Guarantors and the Collateral Agent.
The Notes are subject to the terms of the intercreditor agreement which governs
the relative rights of the secured parties in respect of the ABL Facility and
the Notes (the "Intercreditor Agreement"). The Intercreditor Agreement restricts
the actions permitted to be taken by the Collateral Agent with respect to the
Collateral on behalf of the holders of the Notes. 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 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,
we 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 we experience a Change of Control (as defined in the Indenture), we are
required to offer to repurchase the Notes at 101% of the principal amount of
such Notes plus accrued and unpaid interest, if any, to, but excluding, the date
of repurchase.
The Indenture contains covenants that, among other things, limit our ability and
the ability of our restricted subsidiaries to incur or guarantee additional
indebtedness, pay dividends or make other restricted payments, make certain
investments, incur restrictions on the ability of our restricted subsidiaries
that are not guarantors to pay dividends or make certain other payments, create
or incur certain liens, sell assets and subsidiary stock, impair the security
interests, transfer all or substantially all of our assets or enter into merger
or consolidation transactions, and enter into transactions with affiliates. The
Indenture provides for customary events of default which include (subject in
certain cases to customary grace and cure periods), among others, nonpayment of
principal or interest, breach of other agreements in the Indenture, failure to
pay certain other indebtedness, failure of certain guarantees to be enforceable,
failure to perfect certain collateral securing the Notes failure to pay certain
final judgments, and certain events of bankruptcy or insolvency.
We incurred debt issuance costs totaling $8.5 million related to the Notes 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.
30
Table of Contents
Second Amended and Restated ABL Credit Agreement
On August 7, our subsidiaries, G-III Leather Fashions, Inc., Riviera Sun, Inc.,
CK Outerwear, LLC, AM Retail Group, Inc. and The Donna Karan Company Store LLC
(collectively, the "Borrowers"), entered into the second amended and restated
credit agreement (the "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 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 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 ABL Credit Agreement are subject to borrowing base
formulas and overadvances as specified in the ABL Credit Agreement. Borrowings
bear interest, at the Borrowers' option, at LIBOR plus a margin of 1.75% to
2.25% or an alternate base rate margin of 0.75% to 1.25% (defined as the
greatest of (i) the "prime rate" of JPMorgan Chase Bank, N.A. from time to time,
(ii) the federal funds rate plus 0.5% and (iii) the LIBOR rate for a borrowing
with an interest period of one month) plus 1.00%, with the applicable margin
determined based on Borrowers' availability under the ABL Credit Agreement. The
ABL Credit Agreement is secured by specified assets of the Borrowers and the
Guarantors. In addition to paying interest on any outstanding borrowings under
the ABL Credit Agreement, we are required to pay a commitment fee to the lenders
under the credit agreement with respect to the unutilized commitments. The
commitment fee accrues at a tiered rate equal to 0.50% per annum on the average
daily amount of the available commitments when the average usage is less than
50% of the total available commitments and decreases to 0.35% per annum on the
average daily amount of the available commitments when the average usage is
greater than or equal to 50% of the total available commitments.
The revolving credit facility contains covenants that, among other things,
restrict 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 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, not less than 1.00 to 1.00 for each
period of twelve consecutive fiscal months of the Company. As of October 31,
2020, the Company was in compliance with these covenants.
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.
31
Table of Contents
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 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, as a portion of the consideration for the acquisition of DKI,
a junior lien secured promissory note in favor of LVMH in the principal amount
of $125 million (the "LVMH Note") that bears interest at the rate of 2%
per year. $75 million of the principal amount of the LVMH Note is due and
payable on June 1, 2023 and $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 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 Term Loan and (ii) a pledge and security agreement with us and our
subsidiary, 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 Term Loan.
Unsecured Loans
During fiscal 2020 and fiscal 2021, T.R.B International SA ("TRB"), a subsidiary
of Vilebrequin, borrowed funds under several unsecured loans. A portion of the
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 loans accrues at a fixed rate
equal to 0% to 2.0% per annum, payable on either a quarterly or monthly basis.
Certain unsecured loans will require monthly installment payments beginning in
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
32
Table of Contents
operating cash requirements have been borrowings under 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 had no borrowings outstanding under our revolving credit facility at October
31, 2020 and had $279.9 million of borrowings outstanding at October 31, 2019.
We had $400 million in borrowings outstanding under the Notes at October 31,
2020. Our contingent liability under open letters of credit was approximately
$9.7 million and $7.0 million at October 31, 2020 and 2019, respectively. In
addition to the amounts outstanding under these two loan agreements, at October
31, 2020 and 2019, we had $125.0 million of face value principal amount
outstanding under the LVMH Note. As of October 31, 2020, we also had 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 Overdraft
Facilities.
We had cash and cash equivalents of $149.7 million on October 31, 2020 and $55.8
million on October 31, 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. No shares were repurchased during the three months
ended October 31, 2020. We have 2,949,362 authorized shares remaining under this
program. As of December 4, 2020, we had 48,358,688 shares of common stock
outstanding.
Cash from Operating Activities
We used $127.6 million in cash from operating activities during nine months
ended October 31, 2020, primarily due to an increase of $190.8 million in
accounts receivable and decreases of $113.0 million in customer refund
liabilities and $61.8 million in operating lease liabilities. These items were
offset, in part, by our net income of $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 of $29.7 million in depreciation
and amortization and $59.6 million in operating lease costs.
Inventory normally increases for the build-up of inventory for the fall shipping
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
from the COVID-19 pandemic. In addition, our customer refund liabilities
decreased because we experienced lower sales levels and were able to reverse
previously accrued amounts that are no longer needed.
Cash from Investing Activities
We used $16.4 million of cash in investing activities during nine months ended
October 31, 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 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.
Cash from Financing Activities
Net cash provided by financing activities was $93.4 million during nine months
ended October 31, 2020 primarily as a result of proceeds of $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 financing costs related to the issuance of our Notes and
entering into the ABL Credit Agreement.
33
Table of Contents
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, 2020 are those that depend most heavily
on these judgments and estimates. As of October 31, 2020, there have been no
material changes to our critical accounting policies, other than the adoption
ASU 2016-13 as discussed in Note 3 to the condensed consolidated financial
statements included in this Quarterly Report on Form 10-Q.
© Edgar Online, source Glimpses
G-III APPAREL GROUP, LTD. 
