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Table of Contents

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 July 31, 2020

or

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

For the transition period from          to       

 

Commission File Number: 0-18183

 G-III APPAREL GROUP, LTD.

(Exact name of registrant as specified in its charter) 

 

Delaware

    

41-1590959

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

512 Seventh Avenue, New York, New York

 

10018

(Address of principal executive offices)

 

(Zip Code)

(212) 403-0500

(Registrant’s telephone number, including area code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended July 31, 2020

or

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

For the transition period from          to       

 

Commission File Number: 0-18183

 G-III APPAREL GROUP, LTD.

(Exact name of registrant as specified in its charter) 

 

Delaware

    

41-1590959

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

512 Seventh Avenue, New York, New York

 

10018

(Address of principal executive offices)

 

(Zip Code)

(212) 403-0500

(Registrant’s telephone number, including area code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

GIII

The Nasdaq Stock Market

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

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

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

As of September 4, 2020, there were 48,358,688 shares of issuer’s common stock, par value $0.01 per share, outstanding.

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 September 4, 2020, there were 48,358,688 shares of issuer’s common stock, par value 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Table of Contents

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 July 31, 2020

or

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

For the transition period from          to       

 

Commission File Number: 0-18183

 G-III APPAREL GROUP, LTD.

(Exact name of registrant as specified in its charter) 

 

Delaware

    

41-1590959

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

512 Seventh Avenue, New York, New York

 

10018

(Address of principal executive offices)

 

(Zip Code)

(212) 403-0500

(Registrant’s telephone number, including area code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

GIII

The Nasdaq Stock Market

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

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

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

As of September 4, 2020, there were 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 – July 31, 2020, July 31, 2019 and January 31, 2020

3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - For the Three and Six Months Ended July 31, 2020 and 2019 (Unaudited)

4

Condensed Consolidated Statements of Stockholders’ Equity – July 31, 2020 and July 31, 2019 (Unaudited)

5

Condensed Consolidated Statements of Cash Flows - For the Six Months Ended July 31, 2020 and 2019 (Unaudited)

6

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

Part II

OTHER INFORMATION

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

60

Item 6.

Exhibits

61

2

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.          Financial Statements.

­­G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

July 31,

July 31,

January 31,

2020

2019

2020

    

(Unaudited)

    

(Unaudited)

    

(In thousands, except per share amounts)

ASSETS

Current assets

Cash and cash equivalents

$

252,798

$

39,568

$

197,372

Accounts receivable, net of allowance for doubtful accounts of $11.2 million, $0.9 million and $0.7 million, respectively

276,502

464,663

530,137

Inventories

574,767

842,136

551,918

Prepaid income taxes

13,949

12,500

8,566

Prepaid expenses and other current assets

55,709

93,353

80,695

Total current assets

1,173,725

1,452,220

1,368,688

Investments in unconsolidated affiliates

59,132

63,773

61,987

Property and equipment, net

66,627

85,548

76,023

Operating lease assets

168,071

309,421

270,032

Other assets, net

31,900

35,681

32,629

Other intangibles, net

36,423

40,444

38,363

Deferred income tax assets, net

34,548

25,253

18,135

Trademarks

438,721

439,409

438,658

Goodwill

260,667

260,687

260,622

Total assets

$

2,269,814

$

2,712,436

$

2,565,137

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Current portion of notes payable

$

3,717

$

683

$

673

Accounts payable

192,192

346,642

204,786

Accrued expenses

60,257

89,137

101,838

Customer refund liabilities

115,370

179,078

233,418

Current operating lease liabilities

91,700

74,297

63,166

Income tax payable

9,075

6,966

8,468

Other current liabilities

109

425

1,611

Total current liabilities

472,420

697,228

613,960

Notes payable, net of discount and unamortized issuance costs

405,003

553,118

396,794

Deferred income tax liabilities, net

7,960

15,019

7,952

Noncurrent operating lease liabilities

140,283

272,632

249,040

Other noncurrent liabilities

6,399

6,619

6,719

Total liabilities

1,032,065

1,544,616

1,274,465

Stockholders' Equity

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

Common stock - $0.01 par value; 120,000 shares authorized; 49,396, 49,394 and, 49,396 shares issued, respectively

264

264

264

Additional paid-in capital

444,384

456,195

452,142

Accumulated other comprehensive loss

(18,260)

(16,848)

(18,008)

Retained earnings

838,867

772,463

893,138

Common stock held in treasury, at cost - 1,037, 1,649 and 1,386 shares, respectively

(27,506)

(44,254)

(36,864)

Total stockholders' equity

1,237,749

1,167,820

1,290,672

Total liabilities and stockholders' equity

$

2,269,814

$

2,712,436

$

2,565,137

The accompanying notes are an integral part of these statements.

3

Table of Contents

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended July 31,

Six Months Ended July 31,

    

2020

    

2019

    

2020

    

2019

(Unaudited)

(In thousands, except per share amounts)

Net sales

$

297,212

$

643,892

$

702,343

$

1,277,444

Cost of goods sold

162,519

412,123

443,249

809,611

Gross profit

134,693

231,769

259,094

467,833

Selling, general and administrative expenses

122,102

196,448

276,722

398,307

Depreciation and amortization

9,691

9,789

19,558

19,262

Asset impairments, net of gain on lease modifications

14,302

(1,393)

17,489

(2,222)

Operating profit (loss)

(11,402)

26,925

(54,675)

52,486

Other income (loss)

1,943

(751)

(113)

(1,399)

Interest and financing charges, net

(9,177)

(10,785)

(19,556)

(21,105)

Income (loss) before income taxes

(18,636)

15,389

(74,344)

29,982

Income tax expense (benefit)

(3,660)

4,270

(20,073)

6,820

Net income (loss)

$

(14,976)

$

11,119

$

(54,271)

$

23,162

NET INCOME (LOSS) PER COMMON SHARE:

Basic:

Net income (loss) per common share

$

(0.31)

$

0.23

$

(1.13)

$

0.48

Weighted average number of shares outstanding

48,214

48,450

48,121

48,619

Diluted:

Net income (loss) per common share

$

(0.31)

$

0.23

$

(1.13)

$

0.47

Weighted average number of shares outstanding

48,214

49,116

48,121

49,436

Net income (loss)

$

(14,976)

$

11,119

$

(54,271)

$

23,162

Other comprehensive income:

Foreign currency translation adjustments

3,774

1,573

(252)

(1,654)

Other comprehensive income (loss)

3,774

1,573

(252)

(1,654)

Comprehensive income (loss)

$

(11,202)

$

12,692

$

(54,523)

$

21,508

The accompanying notes are an integral part of these statements.

4

Table of Contents

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 April 30, 2020

$

264

$

449,840

$

(22,034)

$

853,843

$

(35,679)

$

1,246,234

Equity awards exercised/vested, net

(7,993)

8,173

180

Share-based compensation expense

2,548

2,548

Taxes paid for net share settlements

(11)

(11)

Other comprehensive income, net

3,774

3,774

Net loss

(14,976)

(14,976)

Balance as of July 31, 2020

$

264

$

444,384

$

(18,260)

$

838,867

$

(27,506)

$

1,237,749

Balance as of April 30, 2019

$

264

$

456,835

$

(18,421)

$

761,344

$

(13,196)

$

1,186,826

Equity awards exercised/vested, net

(4,082)

4,158

76

Share-based compensation expense

5,122

5,122

Taxes paid for net share settlements

(1,680)

(1,680)

Other comprehensive income, net

1,573

1,573

Repurchases of common stock

(35,216)

(35,216)

Net income

11,119

11,119

Balance as of July 31, 2019

$

264

$

456,195

$

(16,848)

$

772,463

$

(44,254)

$

1,167,820

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

1,737

1,737

Taxes paid for net share settlements

(317)

(317)

Other comprehensive loss, net

(252)

(252)

Net loss

(54,271)

(54,271)

Balance as of July 31, 2020

$

264

$

444,384

$

(18,260)

$

838,867

$

(27,506)

$

1,237,749

Balance as of January 31, 2019

$

264

$

464,112

$

(15,194)

$

758,881

$

(19,054)

$

1,189,009

Equity awards exercised/vested, net

(9,900)

10,016

116

Share-based compensation expense

9,349

9,349

Taxes paid for net share settlements

(7,366)

(7,366)

Other comprehensive loss, net

(1,654)

(1,654)

Repurchases of common stock

(35,216)

(35,216)

Cumulative effect of adoption of ASC 842

(9,580)

(9,580)

Net income

23,162

23,162

Balance as of July 31, 2019

$

264

$

456,195

$

(16,848)

$

772,463

$

(44,254)

$

1,167,820

The accompanying notes are an integral part of these statements.

5

Table of Contents

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended July 31,

    

2020

    

2019

(Unaudited)

(In thousands)

Cash flows from operating activities

Net income (loss)

$

(54,271)

$

23,162

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

19,558

19,262

Loss on disposal of fixed assets

169

1,230

Non-cash operating lease costs

44,732

36,729

Gain on lease modifications

(2,524)

(2,222)

Asset impairments

20,013

Dividend received from unconsolidated affiliate

2,695

1,960

Equity (gain) loss in unconsolidated affiliates

175

(867)

Share-based compensation

1,737

9,349

Deferred financing charges and debt discount amortization

5,425

4,577

Deferred income taxes

(16,414)

Changes in operating assets and liabilities:

Accounts receivable, net

253,634

37,470

Inventories

(22,849)

(265,753)

Income taxes, net

(4,979)

(5,987)

Prepaid expenses and other current assets

25,128

3,321

Other assets, net

(678)

(1,164)

Customer refund liabilities

(118,047)

(64,512)

Operating lease liabilities

(37,785)

(38,300)

Accounts payable, accrued expenses and other liabilities

(55,914)

108,838

Net cash provided by (used in) operating activities

59,805

(132,907)

Cash flows from investing activities

Operating lease assets initial direct costs

(3,968)

(1,940)

Capital expenditures

(9,101)

(17,531)

Net cash used in investing activities

(13,069)

(