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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 July 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 512 Seventh Avenue, New York, New York
    
    10018(Address of Principal Executive Offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year,
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    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  
July 31, 2010, July 31, 2009 and January 31, 2010
    
    
    3Condensed Consolidated Statements of Operations  
For the Three Months Ended July 31, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Operations  
For the Six Months Ended July 31, 2010 and 2009
    
    
    5Condensed Consolidated Statements of Cash Flows  
For the Six Months Ended July 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
    
    
    18Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 July 31,
    
    
    July 31,
    
    
    January 31,2010
    
    
    2009
    
    
    2010(Unaudited)
    
    
    (Unaudited)(In thousands, except share and per share amounts)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    6,147
    
    
    $
    5,682
    
    
    $
    46,813Accounts receivable, net of allowance for doubtful accounts and sales
discounts of $27,111, $17,199 and $29,092, respectively
    
    
    119,662
    
    
    
    90,897
    
    
    
    73,456Inventories
    
    
    223,543
    
    
    
    172,439
    
    
    
    119,877Prepaid income taxes
    
    
    
    
    
    
    7,418
    
    
    
    Deferred income taxes
    
    
    15,315
    
    
    
    11,565
    
    
    
    15,315Prepaid expenses and other current assets
    
    
    18,046
    
    
    
    16,554
    
    
    
    10,694Total current assets
    
    
    382,713
    
    
    
    304,555
    
    
    
    266,155PROPERTY AND EQUIPMENT, NET
    
    
    16,367
    
    
    
    9,146
    
    
    
    7,539DEFERRED INCOME TAXES
    
    
    10,672
    
    
    
    11,640
    
    
    
    10,672OTHER ASSETS
    
    
    2,340
    
    
    
    1,530
    
    
    
    1,723INTANGIBLES, NET
    
    
    19,137
    
    
    
    20,515
    
    
    
    19,826GOODWILL
    
    
    26,100
    
    
    
    25,713
    
    
    
    26,100$
    457,329
    
    
    $
    373,099
    
    
    $
    332,015LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESNotes payable
    
    $
    77,411
    
    
    $
    111,336
    
    
    $
    Income taxes payable
    
    
    1,363
    
    
    
    
    
    
    
    10,874Accounts payable
    
    
    107,521
    
    
    
    83,165
    
    
    
    50,337Accrued expenses
    
    
    19,012
    
    
    
    15,777
    
    
    
    29,333Deferred income taxes
    
    
    1,529
    
    
    
    1,578
    
    
    
    1,529Total current liabilities
    
    
    206,836
    
    
    
    211,856
    
    
    
    92,073DEFERRED INCOME TAXES
    
    
    6,495
    
    
    
    6,648
    
    
    
    6,495OTHER NON-CURRENT LIABILITIES
    
    
    4,289
    
    
    
    700
    
    
    
    1,237TOTAL LIABILITIES
    
    
    217,620
    
    
    
    219,204
    
    
    
    99,805STOCKHOLDERS EQUITYPreferred stock; 1,000,000 shares authorized; No shares issued and outstandingCommon stock  $.01 par value; 40,000,000 shares authorized;
19,540,272, 17,115,044 and 19,192,704 shares issued
    
    
    195
    
    
    
    171
    
    
    
    192Additional paid-in capital
    
    
    143,638
    
    
    
    100,747
    
    
    
    137,764Accumulated other comprehensive loss
    
    
    (41
    )
    
    
    
    
    
    
    (36
    )Retained earnings
    
    
    96,887
    
    
    
    53,947
    
    
    
    95,260Common stock held in treasury  367,225 shares at cost
    
    
    (970
    )
    
    
    (970
    )
    
    
    (970
    )239,709
    
    
    
    153,895
    
    
    
    232,210$
    457,329
    
    
    $
    373,099
    
    
    $
    332,015
 The accompanying notes are an integral part of these statements.
  3




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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended July 31,2010
    
    
    2009(Unaudited)(In thousands, except per share amounts)Net sales
    
    $
    188,960
    
    
    $
    135,926Cost of goods sold
    
    
    128,206
    
    
    
    95,111Gross profit
    
    
    60,754
    
    
    
    40,815Selling, general and administrative expenses
    
    
    53,844
    
    
    
    43,195Depreciation and amortization
    
    
    1,277
    
    
    
    1,384Operating profit / (loss)
    
    
    5,633
    
    
    
    (3,764
    )Interest and financing charges, net
    
    
    634
    
    
    
    1,022Income / (loss) before income taxes
    
    
    4,999
    
    
    
    (4,786
    )Income tax expense / (benefit)
    
    
    2,000
    
    
    
    (2,010
    )Net income / (loss)
    
    $
    2,999
    
    
    $
    (2,776
    )NET INCOME / (LOSS) PER COMMON SHARE:Basic:Net income / (loss) per common share
    
    $
    0.16
    
    
    $
    (0.17
    )Weighted average number of shares outstanding
    
    
    19,126
    
    
    
    16,726Diluted:Net income / (loss) per common share
    
    $
    0.15
    
    
    $
    (0.17
    )Weighted average number of shares outstanding
    
    
    19,652
    
    
    
    16,726
 The accompanying notes are an integral part of these statements.
  4




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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Six Months Ended July 31,2010
    
    
    2009(Unaudited)(In thousands, except per share amounts)Net sales
    
    $
    343,237
    
    
    $
    243,489Cost of goods sold
    
    
    233,447
    
    
    
    171,459Gross profit
    
    
    109,790
    
    
    
    72,030Selling, general and administrative expenses
    
    
    103,525
    
    
    
    84,078Depreciation and amortization
    
    
    2,557
    
    
    
    2,788Operating profit / (loss)
    
    
    3,708
    
    
    
    (14,836
    )Interest and financing charges, net
    
    
    996
    
    
    
    1,707Income / (loss) before income taxes
    
    
    2,712
    
    
    
    (16,543
    )Income tax expense / (benefit)
    
    
    1,085
    
    
    
    (6,948
    )Net income / (loss)
    
    $
    1,627
    
    
    $
    (9,595
    )NET INCOME / (LOSS) PER COMMON SHARE:Basic:Net income / (loss) per common share
    
    $
    0.09
    
    
    $
    (0.57
    )Weighted average number of shares outstanding
    
    
    19,016
    
    
    
    16,711Diluted:Net income / (loss) per common share
    
    $
    0.08
    
    
    $
    (0.57
    )Weighted average number of shares outstanding
    
    
    19,540
    
    
    
    16,711
 The accompanying notes are an integral part of these statements.
  5




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G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended July 31,2010
    
    
    2009(Unaudited)(In thousands)Cash flows from operating activitiesNet income / (loss)
    
    $
    1,627
    
    
    $
    (9,595
    )Adjustments to reconcile net income / (loss) to net cash
used in operating activities:Depreciation and amortization
    
    
    2,557
    
    
    
    2,788Stock based compensation
    
    
    1,534
    
    
    
    900Deferred financing charges
    
    
    498
    
    
    
    377Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (46,206
    )
    
    
    (21,202
    )Inventories
    
    
    (103,666
    )
    
    
    (55,827
    )Income taxes, net
    
    
    (9,511
    )
    
    
    (12,640
    )Prepaid expenses and other current assets
    
    
    (7,376
    )
    
    
    (6,235
    )Other assets, net
    
    
    (1,091
    )
    
    
    (49
    )Accounts payable, accrued expenses and other liabilities
    
    
    49,915
    
    
    
    28,342Net cash used in operating activities
    
    
    (111,719
    )
    
    
    (73,141
    )Cash flows from investing activitiesCapital expenditures
    
    
    (10,696
    )
    
    
    (1,180
    )Contingent purchase price paid
    
    
    
    
    
    
    (5,154
    )Net cash used in investing activities
    
    
    (10,696
    )
    
    
    (6,334
    )Cash flows from financing activitiesProceeds from notes payable, net
    
    
    77,411
    
    
    
    82,288Proceeds from exercise of stock options
    
    
    1,161
    
    
    
    65Tax benefit from exercise/vesting of equity awards
    
    
    3,182
    
    
    
    296Net cash provided by financing activities
    
    
    81,754
    
    
    
    82,649Effect of exchange rate changes
    
    
    (5
    )
    
    
    Net increase / (decrease) in cash and cash equivalents
    
    
    (40,666
    )
    
    
    3,174Cash and cash equivalents at beginning of period
    
    
    46,813
    
    
    
    2,508Cash and cash equivalents at end of period
    
    $
    6,147
    
    
    $
    5,682Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    1,304
    
    
    $
    1,667Income taxes
    
    
    7,404
    
    
    
    5,394
 The accompanying notes are an integral part of these statements.
  6




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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
  July 31,
    
    
    July 31,
    
    
    January 31,2010
    
    
    2009
    
    
    2010(In thousands)Finished goods
    
    $
    215,392
    
    
    $
    168,006
    
    
    $
    116,627Raw materials and work-in-process
    
    
    8,151
    
    
    
    4,433
    
    
    
    3,250$
    223,543
    
    
    $
    172,439
    
    
    $
    119,877
 Note 3  Net Income / (Loss) per Common Share
   7




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Three Months Ended July 31,
    
    
    Six Months Ended July 31,2010
    
    
    2009
    
    
    2010
    
    
    2009(In thousands, except per share amounts)Net income / (loss)
    
    $
    2,999
    
    
    $
    (2,776
    )
    
    $
    1,627
    
    
    $
    (9,595
    )Basic net income (loss) per share:Basic common shares
    
    
    19,126
    
    
    
    16,726
    
    
    
    19,016
    
    
    
    16,711Basic net income (loss) per share
    
    $
    0.16
    
    
    $
    (0.17
    )
    
    $
    0.09
    
    
    $
    (0.57
    )Diluted net income (loss) per share:Basic common shares
    
    
    19,126
    
    
    
    16,726
    
    
    
    19,016
    
    
    
    16,711Stock options, warrants and
restricted stock awards
    
    
    526
    
    
    
    
    
    
    
    524
    
    
    
    Diluted common shares
    
    
    19,652
    
    
    
    16,726
    
    
    
    19,540
    
    
    
    16,711Diluted net income (loss) per share
    
    $
    0.15
    
    
    $
    (0.17
    )
    
    $
    0.08
    
    
    $
    (0.57
    )
 Note 4  Notes Payable
    8




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Note 5  Segments
  Three Months Ended July 31,2010
    
    
    2009Wholesale
    
    
    
    
    
    
    
    
    
    
    WholesaleWholesale
    
    
    Non-
    
    
    
    
    
    
    Wholesale
    
    
    Non-Licensed
    
    
    Licensed
    
    
    Retail
    
    
    Licensed
    
    
    Licensed
    
    
    RetailNet sales (1)
    
    $
    129,656
    
    
    $
    40,732
    
    
    $
    23,833
    
    
    $
    90,875
    
    
    $
    28,816
    
    
    $
    20,968Cost of goods sold
(1)
    
    
    90,288
    
    
    
    29,951
    
    
    
    13,228
    
    
    
    66,400
    
    
    
    21,479
    
    
    
    11,965Gross profit
    
    
    39,368
    
    
    
    10,781
    
    
    
    10,605
    
    
    
    24,475
    
    
    
    7,337
    
    
    
    9,003Selling, general and administrative
    
    
    30,775
    
    
    
    9,235
    
    
    
    13,834
    
    
    
    22,488
    
    
    
    7,054
    
    
    
    13,653Depreciation and
amortization
    
    
    172
    
    
    
    768
    
    
    
    337
    
    
    
    210
    
    
    
    872
    
    
    
    302Operating profit (loss)
    
    $
    8,421
    
    
    $
    778
    
    
    $
    (3,566
    )
    
    $
    1,777
    
    
    $
    (589
    )
    
    $
    (4,952
    )
 Six Months Ended July 31,2010
    
    
    2009Wholesale
    
    
    
    
    
    
    
    
    
    
    WholesaleWholesale
    
    
    Non-
    
    
    
    
    
    
    Wholesale
    
    
    Non-Licensed
    
    
    Licensed
    
    
    Retail
    
    
    Licensed
    
    
    Licensed
    
    
    RetailNet sales (2)
    
    $
    222,087
    
    
    $
    80,998
    
    
    $
    53,838
    
    
    $
    150,873
    
    
    $
    57,595
    
    
    $
    48,124Cost of goods sold (2)
    
    
    158,559
    
    
    
    58,538
    
    
    
    30,036
    
    
    
    111,630
    
    
    
    44,315
    
    
    
    28,617Gross profit
    
    
    63,528
    
    
    
    22,460
    
    
    
    23,802
    
    
    
    39,243
    
    
    
    13,280
    
    
    
    19,507Selling, general and administrative
    
    
    57,440
    
    
    
    18,313
    
    
    
    27,772
    
    
    
    41,734
    
    
    
    14,460
    
    
    
    27,884Depreciation and amortization
    
    
    326
    
    
    
    1,584
    
    
    
    647
    
    
    
    418
    
    
    
    1,790
    
    
    
    580Operating profit (loss)
    
    $
    5,762
    
    
    $
    2,563
    
    
    $
    (4,617
    )
    
    $
    (2,909
    )
    
    $
    (2,970
    )
    
    $
    (8,957
    )
 (1)
    
    Net sales and cost of goods sold for the wholesale licensed apparel and wholesale
non-licensed apparel segments include an aggregate of $5.3 million and $4.8 million of
intersegment sales to the Companys retail operations for the three months ended July 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 $13.7 million and $13.1 million of intersegment sales to
the Companys retail operations for the six months ended July 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 July 31, 2010 compared to three months ended July 31, 2009
     13




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Six months ended July 31, 2010 compared to six months ended July 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.
 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 July 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 July 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 Form 10-Q for the fiscal quarter ended July 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 July 31,
2010.
  18




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SIGNATURES
  G-III APPAREL GROUP, LTD.
(Registrant)Date: September 9, 2010
    By:
    /s/ Morris GoldfarbMorris GoldfarbChief Executive OfficerDate: September 9, 2010
    By:
    /s/ Neal S. NackmanNeal S. NackmanChief Financial Officer  19