##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended October 31, 2010
 OR
 o
    
    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.
  Delaware
    
    41-1590959(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 512 Seventh Avenue, New York, New York
    
    10018(Address of Principal Executive Offices)
    
    (Zip Code)
 
 
  þ o
  o o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o  o þ




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TABLE OF CONTENTS
 Page No.Part I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets 
October 31, 2010, October 31, 2009 and January 31, 2010
    
    
    3Condensed Consolidated Statements of Operations 
For the Three Months Ended October 31, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Operations 
For the Nine Months Ended October 31, 2010 and 2009
    
    
    5Condensed Consolidated Statements of Cash Flows 
For the Nine Months Ended October 31, 2010 and 2009
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4.
    
    Controls and Procedures
    
    
    17Part II
    
    OTHER INFORMATIONItem 1A.
    
    Risk Factors
    
    
    18Item 6.
    
    Exhibits
    
    
    18EX-10.1EX-10.2EX-10.3EX-10.4EX-10.5EX-10.6EX-10.7EX-10.8EX-10.9EX-10.10EX-31.1EX-31.2EX-32.1EX-32.2
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
 G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 October 31,
    
    
    October 31,
    
    
    January 31,2010
    
    
    2009
    
    
    2010(Unaudited)
    
    
    (Unaudited)(In thousands, except share and per share amounts)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    16,586
    
    
    $
    16,633
    
    
    $
    46,813Accounts receivable, net of allowance for doubtful accounts
and sales discounts of $39,942, $35,979 and $29,092,
respectively
    
    
    297,101
    
    
    
    235,943
    
    
    
    73,456Inventories
    
    
    208,507
    
    
    
    127,087
    
    
    
    119,877Deferred income taxes
    
    
    15,315
    
    
    
    11,565
    
    
    
    15,315Prepaid expenses and other current assets
    
    
    6,540
    
    
    
    5,660
    
    
    
    10,694Total current assets
    
    
    544,049
    
    
    
    396,888
    
    
    
    266,155PROPERTY AND EQUIPMENT, NET
    
    
    19,020
    
    
    
    8,455
    
    
    
    7,539DEFERRED INCOME TAXES
    
    
    10,672
    
    
    
    11,640
    
    
    
    10,672OTHER ASSETS
    
    
    2,275
    
    
    
    1,363
    
    
    
    1,723INTANGIBLES, NET
    
    
    18,793
    
    
    
    20,171
    
    
    
    19,826GOODWILL
    
    
    26,100
    
    
    
    25,900
    
    
    
    26,100$
    620,909
    
    
    $
    464,417
    
    
    $
    332,015LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESNotes payable
    
    $
    166,739
    
    
    $
    167,815
    
    
    $
    Income taxes payable
    
    
    28,232
    
    
    
    15,484
    
    
    
    10,874Accounts payable
    
    
    85,638
    
    
    
    54,629
    
    
    
    50,337Accrued expenses
    
    
    40,511
    
    
    
    29,847
    
    
    
    29,333Deferred income taxes
    
    
    1,529
    
    
    
    1,578
    
    
    
    1,529Total current liabilities
    
    
    322,649
    
    
    
    269,353
    
    
    
    92,073DEFERRED INCOME TAXES
    
    
    6,495
    
    
    
    6,648
    
    
    
    6,495OTHER NON-CURRENT LIABILITIES
    
    
    6,105
    
    
    
    785
    
    
    
    1,237TOTAL LIABILITIES
    
    
    335,249
    
    
    
    276,786
    
    
    
    99,805STOCKHOLDERS EQUITYPreferred stock; 1,000,000 shares authorized; No shares
issued and outstandingCommon stock  $.01 par value; 40,000,000 shares authorized;
19,666,072, 17,229,294 and 19,192,704 shares issued
    
    
    197
    
    
    
    172
    
    
    
    192Additional paid-in capital
    
    
    146,866
    
    
    
    102,215
    
    
    
    137,764Accumulated other comprehensive loss
    
    
    (43
    )
    
    
    (36
    )
    
    
    (36
    )Retained earnings
    
    
    139,610
    
    
    
    86,250
    
    
    
    95,260Common stock held in treasury  367,225 shares at cost
    
    
    (970
    )
    
    
    (970
    )
    
    
    (970
    )285,660
    
    
    
    187,631
    
    
    
    232,210$
    620,909
    
    
    $
    464,417
    
    
    $
    332,015
 The accompanying notes are an integral part of these statements.
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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended October 31,2010
    
    
    2009(Unaudited)(In thousands, except per share amounts)Net sales
    
    $
    450,002
    
    
    $
    363,540Cost of goods sold
    
    
    296,055
    
    
    
    237,912Gross profit
    
    
    153,947
    
    
    
    125,628Selling, general and administrative expenses
    
    
    80,140
    
    
    
    66,738Depreciation and amortization
    
    
    1,508
    
    
    
    1,303Operating profit
    
    
    72,299
    
    
    
    57,587Interest and financing charges, net
    
    
    1,706
    
    
    
    1,891Income before income taxes
    
    
    70,593
    
    
    
    55,696Income tax expense
    
    
    27,871
    
    
    
    23,393Net income
    
    $
    42,722
    
    
    $
    32,303NET INCOME PER COMMON SHARE:Basic:Net income per common share
    
    $
    2.22
    
    
    $
    1.93Weighted average number of shares outstanding
    
    
    19,227
    
    
    
    16,770Diluted:Net income per common share
    
    $
    2.16
    
    
    $
    1.87Weighted average number of shares outstanding
    
    
    19,764
    
    
    
    17,238
 The accompanying notes are an integral part of these statements.
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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Nine Months Ended October 31,2010
    
    
    2009(Unaudited)(In thousands, except per share amounts)Net sales
    
    $
    793,239
    
    
    $
    607,029Cost of goods sold
    
    
    529,502
    
    
    
    409,371Gross profit
    
    
    263,737
    
    
    
    197,658Selling, general and administrative expenses
    
    
    183,665
    
    
    
    150,817Depreciation and amortization
    
    
    4,065
    
    
    
    4,091Operating profit
    
    
    76,007
    
    
    
    42,750Interest and financing charges, net
    
    
    2,702
    
    
    
    3,599Income before income taxes
    
    
    73,305
    
    
    
    39,151Income tax expense
    
    
    28,955
    
    
    
    16,443Net income
    
    $
    44,350
    
    
    $
    22,708NET INCOME PER COMMON SHARE:Basic:Net income per common share
    
    $
    2.32
    
    
    $
    1.36Weighted average number of shares outstanding
    
    
    19,087
    
    
    
    16,740Diluted:Net income per common share
    
    $
    2.26
    
    
    $
    1.33Weighted average number of shares outstanding
    
    
    19,606
    
    
    
    17,011
 The accompanying notes are an integral part of these statements.
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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months Ended October 31,2010
    
    
    2009(Unaudited)(In thousands)Cash flows from operating activitiesNet income
    
    $
    44,350
    
    
    $
    22,708Adjustments to reconcile net income to net cash used in
operating activities:Depreciation and amortization
    
    
    4,065
    
    
    
    4,091Stock based compensation
    
    
    2,423
    
    
    
    1,387Deferred financing charges
    
    
    664
    
    
    
    484Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (223,645
    )
    
    
    (166,248
    )Inventories
    
    
    (88,630
    )
    
    
    (10,475
    )Income taxes, net
    
    
    17,358
    
    
    
    10,262Prepaid expenses and other current assets
    
    
    4,022
    
    
    
    4,659Other assets, net
    
    
    (1,084
    )
    
    
    11Accounts payable, accrued expenses and other
liabilities
    
    
    51,347
    
    
    
    13,961Net cash used in operating activities
    
    
    (189,130
    )
    
    
    (119,160
    )Cash flows from investing activitiesCapital expenditures
    
    
    (14,513
    )
    
    
    (1,448
    )Contingent purchase price paid
    
    
    
    
    
    
    (5,341
    )Net cash used in investing activities
    
    
    (14,513
    )
    
    
    (6,789
    )Cash flows from financing activitiesProceeds from notes payable, net
    
    
    166,739
    
    
    
    138,767Proceeds from exercise of stock options
    
    
    2,518
    
    
    
    854Tax benefit from exercise/vesting of equity awards
    
    
    4,166
    
    
    
    489Net cash provided by financing activities
    
    
    173,423
    
    
    
    140,110Effect of exchange rate changes
    
    
    (7
    )
    
    
    (36
    )Net (decrease) / increase in cash and cash equivalents
    
    
    (30,227
    )
    
    
    14,125Cash and cash equivalents at beginning of period
    
    
    46,813
    
    
    
    2,508Cash and cash equivalents at end of period
    
    $
    16,586
    
    
    $
    16,633Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    2,651
    
    
    $
    3,216Income taxes
    
    
    7,404
    
    
    
    5,396
 The accompanying notes are an integral part of these statements.
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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Basis of Presentation
    Note 2  Inventories
  October 31,
    
    
    October 31,
    
    
    January 31,2010
    
    
    2009
    
    
    2010(In thousands)Finished goods
    
    $
    204,987
    
    
    $
    123,744
    
    
    $
    116,627Raw materials and work-in-process
    
    
    3,520
    
    
    
    3,343
    
    
    
    3,250$
    208,507
    
    
    $
    127,087
    
    
    $
    119,877
 Note 3  Net Income per Common Share
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Three Months Ended
    
    
    Nine Months EndedOctober 31,
    
    
    October 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except per share amounts)Net income
    
    $
    42,722
    
    
    $
    32,303
    
    
    $
    44,350
    
    
    $
    22,708Basic net income per share:Basic common shares
    
    
    19,227
    
    
    
    16,770
    
    
    
    19,087
    
    
    
    16,740Basic net income per share
    
    $
    2.22
    
    
    $
    1.93
    
    
    $
    2.32
    
    
    $
    1.36Diluted net income per share:Basic common shares
    
    
    19,227
    
    
    
    16,770
    
    
    
    19,087
    
    
    
    16,740Stock options, warrants and
restricted stock awards
    
    
    537
    
    
    
    468
    
    
    
    519
    
    
    
    271Diluted common shares
    
    
    19,764
    
    
    
    17,238
    
    
    
    19,606
    
    
    
    17,011Diluted net income per share
    
    $
    2.16
    
    
    $
    1.87
    
    
    $
    2.26
    
    
    $
    1.33
 Note 4  Notes Payable
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Note 5  Segments
  Three Months Ended October 31,2010
    
    
    2009Wholesale
    
    
    
    
    
    
    
    
    
    
    WholesaleWholesale
    
    
    Non-
    
    
    
    
    
    
    Wholesale
    
    
    Non-Licensed
    
    
    Licensed
    
    
    Retail
    
    
    Licensed
    
    
    Licensed
    
    
    RetailNet sales (1)
    
    $
    319,853
    
    
    $
    106,805
    
    
    $
    32,046
    
    
    $
    252,934
    
    
    $
    89,357
    
    
    $
    29,653Cost of goods sold (1)
    
    
    216,987
    
    
    
    71,289
    
    
    
    16,481
    
    
    
    171,661
    
    
    
    59,133
    
    
    
    15,522Gross profit
    
    
    102,866
    
    
    
    35,516
    
    
    
    15,565
    
    
    
    81,273
    
    
    
    30,224
    
    
    
    14,131Selling, general and
administrative
    
    
    50,650
    
    
    
    14,101
    
    
    
    15,389
    
    
    
    40,724
    
    
    
    11,138
    
    
    
    14,876Depreciation and amortization
    
    
    187
    
    
    
    1,002
    
    
    
    319
    
    
    
    210
    
    
    
    782
    
    
    
    311Operating profit (loss)
    
    $
    52,029
    
    
    $
    20,413
    
    
    $
    (143
    )
    
    $
    40,339
    
    
    $
    18,304
    
    
    $
    (1,056
    )
 Nine Months Ended October 31,2010
    
    
    2009Wholesale
    
    
    
    
    
    
    
    
    
    
    WholesaleWholesale
    
    
    Non-
    
    
    
    
    
    
    Wholesale
    
    
    Non-Licensed
    
    
    Licensed
    
    
    Retail
    
    
    Licensed
    
    
    Licensed
    
    
    RetailNet sales (2)
    
    $
    541,940
    
    
    $
    189,324
    
    
    $
    84,363
    
    
    $
    403,807
    
    
    $
    146,952
    
    
    $
    77,777Cost of goods sold (2)
    
    
    375,545
    
    
    
    131,241
    
    
    
    45,104
    
    
    
    283,290
    
    
    
    103,448
    
    
    
    44,140Gross profit
    
    
    166,395
    
    
    
    58,083
    
    
    
    39,259
    
    
    
    120,517
    
    
    
    43,504
    
    
    
    33,637Selling, general and
administrative
    
    
    108,091
    
    
    
    32,414
    
    
    
    43,160
    
    
    
    82,459
    
    
    
    25,598
    
    
    
    42,760Depreciation and amortization
    
    
    513
    
    
    
    2,585
    
    
    
    967
    
    
    
    629
    
    
    
    2,572
    
    
    
    890Operating profit (loss)
    
    $
    57,791
    
    
    $
    23,084
    
    
    $
    (4,868
    )
    
    $
    37,429
    
    
    $
    15,334
    
    
    $
    (10,013
    )
 
 (1)
    
    Net sales and cost of goods sold for the wholesale licensed apparel and wholesale
non-licensed apparel segments include an aggregate of $8.7 million and $8.4 million of
intersegment sales to the Companys retail operations for the three months ended October
31, 2010 and 2009, respectively.(2)
    
    Net sales and cost of goods sold for the wholesale licensed apparel and wholesale
non-licensed apparel segments include an aggregate of $22.4 million and $21.5 million of
intersegment sales to the Companys retail operations for the nine months ended October 31,
2010 and 2009, respectively. 9




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Note 6  Fair Value Measurements
  Level 1:
    
    Observable inputs such as quoted prices in active markets;Level 2:
    
    Inputs, other than the quoted prices in active markets, that are
observable either directly or indirectly; andLevel 3:
    
    Unobservable inputs in which there is little or no market data
and require the reporting entity to develop its own assumptions.
   Note 7  New Accounting Pronouncements
  10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
   Overview
      11




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
    
    Improve the merchandise mix of outerwear at our stores, with increased emphasis
on leather outerwear and a stronger assortment of private label product;
    
    Emphasize presentation of product in our stores and training of our sales
associates;
    
    Incorporate an improved mix of private label and branded accessories; and
    
    Reduce overhead costs at the distribution center for our retail operations by
reducing our leased space by one-half at that distribution center.
       12




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Results of Operations
 Three months ended October 31, 2010 compared to three months ended October 31, 2009
   13




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Nine months ended October 31, 2010 compared to nine months ended October 31, 2009
    14




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Liquidity and Capital Resources
    Financing Agreement
   Cash from Operating Activities
   15




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Cash from Investing Activities
  Cash from Financing Activities
  Financing Needs
  Critical Accounting Policies
  16




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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
   17




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PART II  OTHER INFORMATION
 
 Item 1A. Risk Factors.
  
 Item 6. Exhibits.
 10.1
    
    Form of Indemnification Agreement10.2
    
    G-III Apparel Group, Ltd. 2005 Amended and Restated Stock Incentive
Plan10.3
    
    Amended and Restated Financing Agreement, dated April 3, 2008, by and
among The CIT Group/Commercial Services, Inc., as Agent, the Lenders that are
parties thereto, G-III Leather Fashions, Inc., J. Percy for Marvin Richards, Ltd.,
CK Outerwear, LLC, A. Marc & Co., Inc., and Andrew & Suzanne Company Inc.10.4
    
    Second Amendment of Lease (10th floor), dated March 26, 2010, by and
between G-III Leather Fashions, Inc. as Tenant and 500-512 Seventh Avenue Limited
Partnership as Landlord.10.5
    
    Second Amendment of Lease (33rd floor), dated March 26, 2010, by and
between G-III Leather Fashions, Inc. as Tenant and 500-512 Seventh Avenue Limited
Partnership as Landlord.10.6
    
    Second Amendment of Lease (34th and 35th floor), dated March 26, 2010,
by and between G-III Leather Fashions, Inc. as Tenant and 500-512 Seventh Avenue
Limited Partnership as Landlord.10.7
    
    Third Amendment of Lease (36th, 21st, 22nd, 23rd and 24th floor), dated
March 26, 2010, by and between G-III Leather Fashions, Inc. as Tenant and 500-512
Seventh Avenue Limited Partnership as Landlord.10.8
    
    Lease, dated February 10, 2009, between IRET Properties and AM Retail
Group, Inc.10.9
    
    Lease Agreement, dated December 21, 2009 and effective December 28,
2009, by and between G-III, as Tenant, and Granite South Brunswick LLC, as
Landlord.10.10
    
    Employment Agreement, dated as of July 11, 2005, by and between Sammy
Aaron and G-III Apparel Group, Ltd.31.1
    
    Certification by Morris Goldfarb, Chief Executive Officer of G-III
Apparel Group, Ltd., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, in
connection with G-III Apparel Group, Ltd.s Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 2010.31.2
    
    Certification by Neal S. Nackman, Chief Financial Officer of G-III
Apparel Group, Ltd., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, in
connection with G-III Apparel Group, Ltd.s Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 2010.32.1
    
    Certification by Morris Goldfarb, Chief Executive Officer of G-III
Apparel Group, Ltd., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, in connection with G-III Apparel
Group, Ltd.s Quarterly Report on
 18




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Form 10-Q for the fiscal quarter ended October 31, 2010.32.2
    
    Certification by Neal S. Nackman, Chief Financial Officer of G-III
Apparel Group, Ltd., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, in connection with G-III Apparel
Group, Ltd.s Quarterly Report on Form 10-Q for the fiscal quarter ended October
31, 2010.
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SIGNATURES
  G-III APPAREL GROUP, LTD.
(Registrant)Date:  December 10, 2010
    By:
    /s/ Morris GoldfarbMorris GoldfarbChief Executive OfficerDate: December 10, 2010
    By:
    /s/ Neal S. NackmanNeal S. NackmanChief Financial Officer 20