Unless the context otherwise requires, “G-III,” “us,” “we” and “our” refer to
to the year ended or ending on
fiscal year ending
Vilebrequin, KLH, KLNA, Fabco and
basis rather than on the
Accordingly, the results of Vilebrequin, KLH, KLNA, Fabco and
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 three-month period ended
Vilebrequin, KLH, KLNA, Fabco and
period ended
KLNA using the equity method of accounting. As of
accounted for as consolidated wholly-owned subsidiaries of the Company. The
Company’s retail operations segment uses a 52/53-week fiscal year. For fiscal
2023 and 2022, the three-month period for the retail operations segment were
each 13-week periods and ended on
Various statements contained in this Form 10-Q, in future filings by us with the
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 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, adverse effects on our business, financial condition and results of
operations;
the failure to maintain our material license agreements could cause us to lose
? significant revenues and have a material adverse effect on our results of
operations;
? our dependence on the strategies and reputation of our licensors;
any adverse change in our relationship with PVH and its
? Hilfiger brands would have a material adverse effect on our results of
operations;
risks relating to our wholesale operations including, among others, maintaining
? the image of our proprietary brands, business practices of our customers that
could adversely affect us and retail customer concentration;
? risks relating to our retail operations segment;
? our ability to achieve operating enhancements and cost reductions from our
retail operations;
? dependence on existing management;
? our ability to make strategic acquisitions and possible disruptions from
acquisitions;
? risks of operating through joint ventures;
? need for additional financing;
? seasonal nature of our business and effect of unseasonable or extreme weather
on our business;
? possible adverse effects from disruptions to the worldwide supply chain;
? price, availability and quality of materials used in our products;
? the need to protect our trademarks and other intellectual property;
? risk that our licensees may not generate expected sales or maintain the value
of our brands;
the impact of the current economic environment on us, our customers, suppliers
? and vendors, including without limitation, the effects of inflationary cost
pressures;
? effects of war, acts of terrorism, natural disasters or public health crises
could adversely affect our business and results of operations;
? our dependence on foreign manufacturers;
? risks of expansion into foreign markets, conducting business internationally
and exposures to foreign currencies;
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? risks related to the adoption of a national security law in
? 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;
? possible adverse effects of data security or privacy breaches;
? the impact on our business of the imposition of tariffs by
government and the escalation of trade tensions between countries;
? risks related to the audit by the
? changes in tax legislation or exposure to additional tax liabilities could
impact our business;
? the effect of regulations applicable to us as a
? focus on corporate responsibility issues by stakeholders;
? potential effect on the price of our stock if actual results are worse than
financial forecasts or if we are unable to provide financial forecasts;
? fluctuations in the price of our common stock;
? impairment of our goodwill, trademarks or other intangibles may require us to
record charges against earnings; and
? risks related to our indebtedness.
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
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.
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:
licensees, but also brand owners, and we distribute our products through
multiple channels.
Our own proprietary brands include
Eliza J,
Rykiel
an extensive portfolio of well-known licensed brands, including
as of
Dockers. Through our team sports business, we have licenses with the
Football League
source and sell products to major retailers under their private retail labels.
Our products are sold through a cross section of leading retailers such as
Macy’s, including its
including their
Ross Stores and
through retail partners such as macys.com, nordstrom.com and dillards.com, each
of which has a substantial online business. In addition, we sell to leading
online retail partners such as Amazon, Fanatics, Zalando and
We also distribute apparel and other products directly to consumers through our
own
channels for the
Marc
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
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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.
We believe that consumers prefer to buy brands they know, and we have
continually sought to increase the portfolio of name brands we can offer through
different tiers of retail distribution, for a wide array of products at a
variety of price points. We have increased the portfolio of brands we offer
through licenses, acquisitions and joint ventures. We focus our efforts on the
sale of products under our five power brands. Effective
three of our power brands (
of our power brands (
continue to expand our product offerings and we are continually discussing new
licensing opportunities with brand owners and seeking to acquire established
brands.
Recent Developments
On
Agreement”) with a group of private and public investors pursuant to which we
agreed to acquire, on the terms set forth and subject to the conditions set
forth in the Purchase Agreement, the remaining 81% in interests in KLH that we
did not already own, for an aggregate consideration of €200 million (
million
31, 2022
The addition of the iconic Karl Lagerfeld fashion brand to the G-III portfolio
advances several of our key priorities, including increasing the direct
ownership of brands and their licensing opportunities and further diversifying
our global presence. This acquisition represents a significant opportunity to
expand our international growth by further developing our European-based brands,
which already include Vilebrequin and
Lagerfeld’s existing digital channel presence should enable us to enhance our
omni-channel business and further accelerate our digital priorities. The
influential legacy of the Karl Lagerfeld brand embodies a creative expression
that aligns with our goal to provide innovative products for our customers.
As of
to
of accounting. Once KLH becomes wholly-owned by the Company, KLNA will become an
indirect wholly owned subsidiary of the Company.
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
Vilebrequin,
Our retail operations segment consists primarily of direct sales to consumers
through our company-operated stores and through digital channels. Our
company-operated stores consists primarily of
Paris
Trends Affecting Our Business
Impact of COVID-19
The COVID-19 pandemic has affected businesses around the world since the first
quarter of fiscal 2021. Federal, state and local governments in
States
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 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.
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The COVID-19 pandemic continues to impact the global economy. During the three
months ended
well as other consumer discretionary spending, increased as compared to the
comparable quarter in fiscal 2021. While businesses reopened as stay at home
orders were lifted and various restrictions on the operation of retail
businesses were loosened, the continued economic impact of the COVID-19 pandemic
remains uncertain. The spread of additional variants could result in the
reimposition of restrictions on commercial and social activities that would
adversely impact our business. We have experienced significant improvements in
our results of operations for fiscal 2022 and the first quarter of fiscal 2023
compared to fiscal 2021 which was severly impacted by COVID-19. However, the
COVID-19 pandemic could continue to adversely impact our business operations and
results of operations.
The continued impact of the COVID-19 pandemic on our business operations remains
uncertain and cannot be predicted. The extent to which COVID-19 impacts our
results will depend on continued developments in
the world in the public and private responses to the pandemic. New information
may emerge concerning the severity of the outbreak and the spread of variants,
including the Delta, Omicron or other variants, of the COVID-19 virus in
locations that are important to our business. Actions taken to contain COVID-19
or treat its impact may change or become more restrictive if additional waves of
infections occur.
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.
We sell our products online through retail partners such as macys.com,
nordstrom.com and dillards.com, each of which has a substantial online business.
As sales of apparel through digital channels 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, distribution and other strategic opportunities to expand our digital
footprint. Our digital business consists of our own web platforms at
www.dkny.com, www.donnakaran.com, www.ghbass.com, www.vilebrequin.com,
www.andrewmarc.com, www.wilsonsleather.com and www.soniarykiel.com. We also sell
addition, we sell to leading online retail partners such as Amazon, Fanatics,
Zalando and
e-commerce retailers.
A number of retailers have experienced financial difficulties, which in some
cases have resulted in bankruptcies, liquidations and/or store closings. 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 revised our product offerings in response to
the pandemic-induced 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 changing needs of our retail customers and
consumers as businesses have reopened offices and restrictions on social
gatherings have been loosened. These changes have resulted in an increase in
demand for day and occasion dresses, as well as career wear such as suit
separates. We are working diligently to satisfy this demand from our retail
partners and consumers.
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
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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.
Inflationary pressures have impacted our industry. Beginning in fiscal 2022 and
continuing in the current fiscal year, we have experienced inflationary
pressures, most significantly related to our freight costs as discussed below
under “Supply Chain”. We expect inflationary pressures to continue to impact our
business throughout fiscal 2023. We have implemented selected price increases on
our products. We expect to continue to implement selected price increases in an
effort to mitigate the effect of higher costs, although, the impact of price
increases on consumer demand and on our business and results of operations is
uncertain.
Supply Chain
The effects of the COVID-19 pandemic on the shipping industry have negatively
impacted our ability to ensure that we are able to import our product in a
manner that allows for timely delivery to our customers. Congestion at ports of
loading and ports of entry have caused significant changes to the itineraries of
our steamship carriers and caused us to consider alternate service routes. These
alternate routes would require additional trucking for us and our customers.
Truck driver shortages, shortages of truck equipment such as the chassis that
the containers are transported on, and the inability of ports to provide
reliable pick uptimes, have also negatively impacted our ability to timely
receive goods.
Contractual shipping rates have increased as a result of increased demand for
container space and the logistical delays experienced by the shipping industry.
Our costs have increased as a result of higher contractual shipping rates and
the need to purchase additional container space on the secondary market at
higher spot rates. Terminals are also now imposing additional fees on importers
not picking up containers on time, even when equipment and labor shortages
negatively affect the ability of importers to pick up in a timely manner.
If we are unable to secure container space on a vessel due to limited
availability, we may experience delays in shipping product from our overseas
suppliers to our customers. Furthermore, even when we are able to secure space,
ports around the world are experiencing congestion, slowing transit times of
product through ports of entry which negatively affects our ability to timely
receive and deliver product to our retail partners and customers. Our
longstanding relationships with our steamship carriers have facilitated our
ability to secure space on vessels as demand for apparel increases, although at
rates that are significantly higher than in the past. We have increased prices
on certain of our products to partially offset higher freight and other costs.
We believe that the strength of our portfolio of global power brands will allow
us to selectively raise prices in an effort to mitigate the effect of increased
transportation and other costs.
We have recently executed new contracts with two of our long-term steamship
carrier partners and are continuing to pursue new carrier relationships for
additional capacity. We expect that our existing carriers will manage the demand
in a more efficient manner in fiscal 2023 and, as a result, our reliance on the
secondary market will be reduced. We are actively managing shipments based on
delivery dates to better utilize contracted cargo space and attempt to reduce
our reliance on the secondary market. We have also accelerated production
schedules to allow for longer lead times in anticipation of the aforementioned
delays.
War in
The current war in
security measures and military action in response to acts of terrorism or civil
unrest has, at times, disrupted commerce and intensified concerns regarding
United States
was generated in
in fiscal 2023. However, the war has also led to, and may lead to further,
broader unfavorable macroeconomic implications, including unfavorable foreign
exchange rates, increases in fuel prices, food shortages and volatility in
financial markets. These implications of the war in
material adverse effect on our business and our results of operations.
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Results of Operations
Three months ended
Net sales for the three months ended
from
reported before intercompany eliminations.
Net sales of our wholesale operations segment increased to
the three months ended
period last year. This increase is primarily the result of a
increase in net sales of
increase in net sales of our
increase in net sales of
million
in sales of
suits, handbags and jeanswear. The increase in sales of
products was primarily related to dresses, handbags and swimwear. The increase
in sales of
men’s outerwear and sportswear. The increase in sales of
was primarily related to jeanswear and dresses.
Net sales of our retail operations segment increased to
three months ended
last year. This increase is primarily due to an increase in our store count in
the current year. The number of retail stores operarted by us increased from 50
at
from the COVID-19 pandemic resulted in increased store traffic and comparable
store sales during the three months ended
period last year.
Gross profit was
ended
same period last year. The gross profit percentage in our wholesale operations
segment was 34.1% in the three months ended
the same period last year. The gross profit percentage in the current year
period was negatively impacted by inflationary pressure on product costs and
increased freight costs, partially offset by benefits from less promotional
activity and the implementation of price increases by us. The gross
profit percentage in our retail operations segment was 49.9% for the
three months ended
last year.
Selling, general and administrative expenses increased to
three months ended
year. The increase in expenses was primarily due to an increase of
in compensation expense, primarily from increased salary and bonus expense. The
increase in expenses was also due to a
advertising, a
increase in third-party warehouse expenses related to increased sales. In
addition, professional fees increased
associated with the acquisition of the Karl Lagerfeld business.
Depreciation and amortization was
30, 2022
primarily relates to a reduction in capital expenditures during the COVID-19
pandemic.
Other loss was
other income of
primarily due to
ended
the same period last year. Foreign currency losses during the three months ended
acquisition of the Karl Lagerfeld business and
losses resulting from the strengthening of the
currencies. We recorded other income of
European government-backed grants received by Vilebrequin for COVID-19 relief
compared to other income of
the same period last year. In addition, we recorded
unconsolidated affiliates during the three months ended
to
year.
Interest and financing charges, net, for the three months ended
were
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Income tax expense was
compared to
decreased to 22.7% in the current year’s quarter from 28.0% in last year’s
comparable quarter. This decrease is primarily due to an increase in forecasted
foreign pre-tax income, which is taxed at a lower rate compared to the tax rates
associated with income based in
refund which was recorded in the first quarter of fiscal 2023.
Liquidity and Capital Resources
Cash Availability
We rely on our cash flows generated from operations, cash and cash equivalents
and the borrowing capacity under our revolving credit facility to meet the cash
requirements of our business. The cash requirements of our business are
primarily related to the seasonal buildup in inventories, compensation paid to
employees, payments to vendors in the normal course of business, capital
expenditures, interest payments on debt obligations and income tax payments. We
have also used cash to make minority investments in private companies and will
use cash this year to acquire the remaining portion of the Karl Lagerfeld
business.
As of
availability under our revolving credit facility of approximately
Subsequent to
acquire the Karl Lagerfeld business. As of
with all covenants under our debt agreements.
Senior Secured Notes
In
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
“Indenture”), among us, the guarantors party thereto and
Association
proceeds of the Notes have been used (i) to repay the
outstanding under our prior term loan facility due 2022 (the “Term Loan”), (ii)
to pay related fees and expenses and (iii) for general corporate purposes.
The Notes bear interest at a rate of 7.875% per year payable semi-annually in
arrears on
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 LVMH Note subordination agreement which governs the relative
rights of the secured parties in respect of the LVMH Note, the ABL Facility and
the Notes.
At any time prior to
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
15, 2022
time at the redemption prices set forth in the Indenture, plus accrued and
unpaid
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interest, if any, to, but excluding, the applicable redemption date. In
addition, at any time prior to
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
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
accordance with ASC 835, the debt issuance costs have been deferred and are
presented as a contra-liability, offsetting the outstanding balance of the
Notes, and are amortized over the remaining life of the Notes. In addition, we
had unamortized debt issuance costs of
Loan. Upon repayment of the Term Loan, these debt issuance costs were fully
extinguished and charged to interest expense in our results of operations.
Second Amended and Restated ABL Credit Agreement
In
Inc.
LLC
restated credit agreement (the “ABL Credit Agreement”) with the Lenders named
therein and with
Credit Agreement is a five year senior secured credit facility subject to a
springing maturity date if, subject to certain conditions, the LVMH Note 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
G-III Apparel Canada ULC,
and
Credit Agreement.
The ABL Credit Agreement refinanced, amended and restated the Amended Credit
Agreement, dated as of
modified from time to time prior to
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
thereunder. The Prior Credit Agreement provided for borrowings of up to
million
from
subject to certain conditions, the LVMH Note 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
(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
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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 to, subject to specified exceptions, incur additional debt;
incur liens; sell or dispose of certain assets; merge with other companies;
liquidate or dissolve the Company; acquire other companies; make loans,
advances, or guarantees; and make certain investments. In certain circumstances,
the revolving credit facility also requires 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 ofApril 30, 2022,
the Company was in compliance with these covenants.
As of
Agreement. The ABL Credit Agreement also includes amounts available for letters
of credit. As of
letters of credit amounting to
At the date of the refinancing of the Prior Credit Agreement, we had
million
Agreement. We extinguished and charged to interest expense
prior debt issuance costs and incurred new debt issuance costs totaling
million
debt issuance costs related to our ABL Credit Agreement. As permitted under ASC
835, the debt issuance costs have been deferred and are presented as an asset
which is amortized ratably over the term of the ABL Credit Agreement.
Reference Rate Reform
The interest rate of our revolving credit facility is indexed to LIBOR. LIBOR
quotations could cease as of
to LIBOR with the administrative agent to our revolving credit facility and we
expect that if LIBOR can no longer be used as the indexed interest rate, we will
be able to use a viable alternative such as SOFR. We do not expect a material
change to our interest expense or results of operations if LIBOR is no longer
available.
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
per year.
payable on
payable on
Based on an independent valuation, it was determined that the LVMH Note should
be treated as having been issued at a discount of
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.
of Vilebrequin, borrowed funds under several unsecured loans. A portion of the
unsecured loans was 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. Additionally,
under European state backed loans that were part of COVID-19 relief
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programs. In the aggregate, the Company 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. As of
Company had an aggregate outstanding balance of €7.1 million (
under these unsecured loans.
Overdraft Facilities
During 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
interest rates of 0% to 0.5%. As of
million (
Outstanding Borrowings
Our primary operating cash requirements 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 asset-based credit facility during our third
fiscal quarter. The primary sources to meet our operating cash requirements have
been borrowings under this credit facility and cash generated from operations.
We had no borrowings outstanding under our revolving credit facility at
30, 2022
at
under open letters of credit was approximately
at
under these two loan agreements, at
of face value principal amount outstanding under the LVMH Note. As of
2022
million (
As of
million (
We had cash and cash equivalents of
million
Share Repurchase Program
In
shares covered by our share repurchase program to an aggregate amount of
10,000,000 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
authorized shares remaining under this program and 48,225,361 shares of common
stock outstanding.
Cash from Operating Activities
We generated
ended
and non-cash charges of
also generated cash from decreases of
an increase of
in part, by a decrease of
and an increase of
The changes in operating cash flow items varied in part from seasonal patterns
in prior years. Inventories, which normally decrease in the first quarter of our
fiscal year, increased due to early purchasing activity by us in an attempt to
mitigate the potential effects of supply chain disruptions. The decrease in
accounts payable and accrued expenses is primarily
27
Table of Contents
attributable to vendor payments related to inventory purchases and the payment
of year-end bonuses in our first fiscal quarter. Accounts receivable decreased
because we experience lower sales levels in our first quarter.
Cash from Investing Activities
We used
an e-commerce retailer. In addition, we also had
expenditures primarily related to infrastructure and information technology
expenditures and additional fixturing costs at department stores.
Cash from Financing Activities
Net cash used in financing activities was
settlements.
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
on these judgments and estimates. As of
material changes to our critical accounting policies.
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