##### 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 July 31, 2009
 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)
  (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year,
  þ o
 Yes o No 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, 2009, July 31, 2008 and January 31, 2009
    
    
    3Condensed Consolidated Statements of Operations  
For the Three Months Ended July 31, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Operations  
For the Six Months Ended July 31, 2009 and 2008
    
    
    5Condensed Consolidated Statements of Cash Flows  
For the Six Months Ended July 31, 2009 and 2008
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    15Item 4. Controls and Procedures
    
    
    15Part II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    16Item 1A. Risk Factors
    
    
    16Item 4. Submission of Matters to a Vote of Stockholders
    
    
    16Item 6. Exhibits
    
    
    17Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   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
 July 31,
    
    
    July 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009(Unaudited)
    
    
    (Unaudited)(In thousands, except share and per share amounts)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    5,682
    
    
    $
    2,982
    
    
    $
    2,508Accounts receivable, net of allowance for doubtful accounts
and sales discounts of $17,199, $15,990 and $20,989,
respectively
    
    
    90,897
    
    
    
    83,467
    
    
    
    69,695Inventories
    
    
    172,439
    
    
    
    156,044
    
    
    
    116,612Prepaid income taxes
    
    
    7,418
    
    
    
    8,098
    
    
    
    Deferred income taxes
    
    
    11,565
    
    
    
    15,616
    
    
    
    11,565Prepaid expenses and other current assets
    
    
    16,554
    
    
    
    16,037
    
    
    
    10,319Total current assets
    
    
    304,555
    
    
    
    282,244
    
    
    
    210,699PROPERTY AND EQUIPMENT, NET
    
    
    9,146
    
    
    
    9,969
    
    
    
    9,863DEFERRED INCOME TAXES
    
    
    11,640
    
    
    
    3,941
    
    
    
    11,640OTHER ASSETS
    
    
    1,530
    
    
    
    2,330
    
    
    
    1,858INTANGIBLES, NET
    
    
    20,515
    
    
    
    26,183
    
    
    
    21,406GOODWILL
    
    
    25,713
    
    
    
    51,165
    
    
    
    25,494$
    373,099
    
    
    $
    375,832
    
    
    $
    280,960LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESNotes payable
    
    $
    111,336
    
    
    $
    118,326
    
    
    $
    29,048Income taxes payable
    
    
    
    
    
    
    
    
    
    
    5,222Accounts payable
    
    
    83,165
    
    
    
    65,196
    
    
    
    51,463Accrued expenses
    
    
    15,777
    
    
    
    19,569
    
    
    
    19,299Contingent purchase price payable
    
    
    
    
    
    
    
    
    
    
    4,935Deferred income taxes
    
    
    1,578
    
    
    
    1,298
    
    
    
    1,578Total current liabilities
    
    
    211,856
    
    
    
    204,389
    
    
    
    111,545DEFERRED INCOME TAXES
    
    
    6,648
    
    
    
    7,086
    
    
    
    6,648OTHER NON-CURRENT LIABILITIES
    
    
    700
    
    
    
    473
    
    
    
    538TOTAL LIABILITIES
    
    
    219,204
    
    
    
    211,948
    
    
    
    118,731STOCKHOLDERS EQUITYPreferred stock; 1,000,000 shares authorized; No shares
issued and outstandingCommon stock  $.01 par value; 40,000,000 shares authorized;
17,115,044, 16,879,502 and 17,063,002 shares issued
    
    
    171
    
    
    
    169
    
    
    
    171Additional paid-in capital
    
    
    100,747
    
    
    
    97,853
    
    
    
    99,486Retained earnings
    
    
    53,947
    
    
    
    66,832
    
    
    
    63,542Common stock held in treasury - 367,225 shares at cost
    
    
    (970
    )
    
    
    (970
    )
    
    
    (970
    )153,895
    
    
    
    163,884
    
    
    
    162,229$
    373,099
    
    
    $
    375,832
    
    
    $
    280,960
 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 31,2009
    
    
    2008(Unaudited)(In thousands, except per share amounts)Net sales
    
    $
    135,926
    
    
    $
    113,462Cost of goods sold
    
    
    95,111
    
    
    
    84,581Gross profit
    
    
    40,815
    
    
    
    28,881Selling, general and administrative expenses
    
    
    43,195
    
    
    
    32,523Depreciation and amortization
    
    
    1,384
    
    
    
    1,774Operating loss
    
    
    (3,764
    )
    
    
    (5,416
    )Interest and financing charges, net
    
    
    1,022
    
    
    
    1,099Loss before income taxes
    
    
    (4,786
    )
    
    
    (6,515
    )Income tax benefit
    
    
    (2,010
    )
    
    
    (2,663
    )Net loss
    
    $
    (2,776
    )
    
    $
    (3,852
    )NET LOSS PER COMMON SHARE:Basic and Diluted:Net loss per common share
    
    $
    (0.17
    )
    
    $
    (0.23
    )Weighted average number of shares outstanding
    
    
    16,726
    
    
    
    16,512
 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 31,2009
    
    
    2008(Unaudited)(In thousands, except per share amounts)Net sales
    
    $
    243,489
    
    
    $
    188,859Cost of goods sold
    
    
    171,459
    
    
    
    142,440Gross profit
    
    
    72,030
    
    
    
    46,419Selling, general and administrative expenses
    
    
    84,078
    
    
    
    59,688Depreciation and amortization
    
    
    2,788
    
    
    
    3,355Operating loss
    
    
    (14,836
    )
    
    
    (16,624
    )Interest and financing charges, net
    
    
    1,707
    
    
    
    1,665Loss before income taxes
    
    
    (16,543
    )
    
    
    (18,289
    )Income tax benefit
    
    
    (6,948
    )
    
    
    (7,549
    )Net loss
    
    $
    (9,595
    )
    
    $
    (10,740
    )NET LOSS PER COMMON SHARE:Basic and Diluted:Net loss per common share
    
    $
    (0.57
    )
    
    $
    (0.65
    )Weighted average number of shares outstanding
    
    
    16,711
    
    
    
    16,497
 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 31,2009
    
    
    2008(Unaudited)(In thousands)Cash flows from operating activitiesNet loss
    
    $
    (9,595
    )
    
    $
    (10,740
    )Adjustments to reconcile net loss to net cash used in
operating activities, net of assets and liabilities
acquired:Depreciation and amortization
    
    
    2,788
    
    
    
    3,355Stock based compensation
    
    
    900
    
    
    
    493Deferred financing charges
    
    
    377
    
    
    
    311Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (21,202
    )
    
    
    (11,149
    )Inventories
    
    
    (55,827
    )
    
    
    (70,311
    )Income taxes, net
    
    
    (12,640
    )
    
    
    (12,446
    )Prepaid expenses and other current assets
    
    
    (6,235
    )
    
    
    (5,812
    )Other assets, net
    
    
    (49
    )
    
    
    (978
    )Accounts payable, accrued expenses and other liabilities
    
    
    28,342
    
    
    
    37,790Net cash used in operating activities
    
    
    (73,141
    )
    
    
    (69,487
    )Cash flows from investing activitiesCapital expenditures
    
    
    (1,180
    )
    
    
    (1,291
    )Acquisition of Andrew Marc, net of cash acquired
    
    
    
    
    
    
    (43,019
    )Acquisition of Wilsons, net of cash acquired
    
    
    
    
    
    
    (22,179
    )Contingent purchase price paid
    
    
    (5,154
    )
    
    
    (4,904
    )Net cash used in investing activities
    
    
    (6,334
    )
    
    
    (71,393
    )Cash flows from financing activitiesProceeds from notes payable, net
    
    
    82,288
    
    
    
    118,326Repayment of term loan
    
    
    
    
    
    
    (13,060
    )Proceeds from exercise of stock options
    
    
    65
    
    
    
    91Tax benefit from exercise of stock options
    
    
    296
    
    
    
    164Net cash provided by financing activities
    
    
    82,649
    
    
    
    105,521Net increase (decrease) in cash and cash equivalents
    
    
    3,174
    
    
    
    (35,359
    )Cash and cash equivalents at beginning of period
    
    
    2,508
    
    
    
    38,341Cash and cash equivalents at end of period
    
    $
    5,682
    
    
    $
    2,982Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    1,667
    
    
    $
    1,250Income taxes
    
    
    5,394
    
    
    
    4,721Detail of Andrew Marc acquisition:Acquired intangibles
    
    
    
    
    
    $
    36,539Fair value of other assets acquired, net
    
    
    
    
    
    
    20,867Fair value of total assets acquired
    
    
    
    
    
    
    57,406Liabilities assumed
    
    
    
    
    
    
    (14,310
    )Cash paid for acquisition
    
    
    
    
    
    
    43,096Cash acquired
    
    
    
    
    
    
    77Net cash paid for acquisition
    
    
    
    
    
    $
    43,019Detail of Wilsons acquisition:Cash paid for acquisition
    
    
    
    
    
    $
    22,267Cash acquired
    
    
    
    
    
    
    88Net cash paid for acquisition
    
    
    
    
    
    $
    22,179
 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 31,2009
    
    
    2008
    
    
    2009(In thousands)Finished goods
    
    $
    168,006
    
    
    $
    151,998
    
    
    $
    113,824Raw materials and work-in-process
    
    
    4,433
    
    
    
    4,046
    
    
    
    2,788$
    172,439
    
    
    $
    156,044
    
    
    $
    116,612
 Note 3  Contingent Purchase Price Payable
  Note 4  Net Loss per Common Share
   7




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Note 5  Notes Payable
   Note 6  Segments
  Three Months Ended July 31,2009
    
    
    2008Wholesale
    
    
    
    
    
    
    
    
    
    
    WholesaleWholesale
    
    
    Non-
    
    
    
    
    
    
    Wholesale
    
    
    Non-Licensed
    
    
    Licensed
    
    
    Retail
    
    
    Licensed
    
    
    Licensed
    
    
    RetailNet sales (1)
    
    $
    90,875
    
    
    $
    28,816
    
    
    $
    20,968
    
    
    $
    67,834
    
    
    $
    38,431
    
    
    $
    7,197Cost of
goods sold (1)
    
    
    66,400
    
    
    
    21,479
    
    
    
    11,965
    
    
    
    50,570
    
    
    
    29,904
    
    
    
    4,107Gross profit
    
    
    24,475
    
    
    
    7,337
    
    
    
    9,003
    
    
    
    17,264
    
    
    
    8,527
    
    
    
    3,090Selling, general and
administrative
    
    
    22,488
    
    
    
    7,054
    
    
    
    13,653
    
    
    
    19,217
    
    
    
    9,011
    
    
    
    4,295Depreciation and
amortization
    
    
    210
    
    
    
    872
    
    
    
    302
    
    
    
    740
    
    
    
    953
    
    
    
    81Operating profit (loss)
    
    $
    1,777
    
    
    $
    (589
    )
    
    $
    (4,952
    )
    
    $
    (2,693
    )
    
    $
    (1,437
    )
    
    $
    (1,286
    )
  8




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##### Table of Contents



Note 6  Segments (continued)
 Six Months Ended July 31,2009
    
    
    2008Wholesale
    
    
    
    
    
    
    
    
    
    
    WholesaleWholesale
    
    
    Non-
    
    
    
    
    
    
    Wholesale
    
    
    Non-Licensed
    
    
    Licensed
    
    
    Retail
    
    
    Licensed
    
    
    Licensed
    
    
    RetailNet sales (1)
    
    $
    150,873
    
    
    $
    57,595
    
    
    $
    48,124
    
    
    $
    109,547
    
    
    $
    71,675
    
    
    $
    7,637Cost of
goods sold (1)
    
    
    111,630
    
    
    
    44,315
    
    
    
    28,617
    
    
    
    83,506
    
    
    
    54,585
    
    
    
    4,349Gross profit
    
    
    39,243
    
    
    
    13,280
    
    
    
    19,507
    
    
    
    26,041
    
    
    
    17,090
    
    
    
    3,288Selling, general and
administrative
    
    
    41,734
    
    
    
    14,460
    
    
    
    27,884
    
    
    
    34,331
    
    
    
    20,786
    
    
    
    4,571Depreciation and
amortization
    
    
    418
    
    
    
    1,790
    
    
    
    580
    
    
    
    1,381
    
    
    
    1,873
    
    
    
    101Operating loss
    
    $
    (2,909
    )
    
    $
    (2,970
    )
    
    $
    (8,957
    )
    
    $
    (9,671
    )
    
    $
    (5,569
    )
    
    $
    (1,384
    )
 (1)
    
    Net sales and cost of goods
sold for the wholesale licensed apparel and wholesale non-licensed apparel
segments include an aggregate of $4.8 million and $13.1 of intersegment sales to the
Companys retail operations for the three and six months ended July 31, 2009, respectively.
Intersegment sales for the prior comparable year were not significant.  Note 7  Recent Accounting Pronouncements
     9




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
   Overview
       10




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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.
        11




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##### Table of Contents



Results of Operations
 Three months ended July 31, 2009 compared to three months ended July 31, 2008
      12




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Six months ended July 31, 2009 compared to six months ended July 31, 2008
        13




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Liquidity and Capital Resources
    Financing Agreement
   Cash from Operating Activities
   Cash from Investing Activities
  Cash from Financing Activities
  Financing Needs
   14




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##### Table of Contents



Critical Accounting Policies
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4.
    
    Controls and Procedures.
    15




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors.
  
 Item 4.
    
    Submission of Matters to a Vote of Stockholders.
  BrokerFor
    
    
    Against
    
    
    Abstain
    
    
    Non-VotesElection of Directors:Morris Goldfarb
    
    
    12,592,785
    
    
    
    3,005,881
    
    
    
    155,079
    
    
    
    *Sammy Aaron
    
    
    8,956,250
    
    
    
    6,642,416
    
    
    
    155,079
    
    
    
    *Thomas J. Brosig
    
    
    12,124,690
    
    
    
    3,473,976
    
    
    
    155,079
    
    
    
    *Alan Feller
    
    
    15,423,977
    
    
    
    174,689
    
    
    
    155,079
    
    
    
    *Jeffrey Goldfarb
    
    
    12,502,925
    
    
    
    3,095,741
    
    
    
    155,079
    
    
    
    *Carl Katz
    
    
    11,898,748
    
    
    
    3,699,918
    
    
    
    155,079
    
    
    
    *Laura Pomerantz
    
    
    15,370,035
    
    
    
    228,631
    
    
    
    155,079
    
    
    
    *Willem van Bokhorst
    
    
    15,254,458
    
    
    
    344,208
    
    
    
    155,079
    
    
    
    *Richard White
    
    
    14,266,174
    
    
    
    1,332,492
    
    
    
    155,079
    
    
    
    *Approval of the
performance-based bonus
provision of the amended
Employment Agreement with
Sammy Aaron
    
    
    15,609,528
    
    
    
    125,658
    
    
    
    18,559
    
    
    
    *Approval of amendments to
our 2005 Stock Incentive
Plan
    
    
    13,321,524
    
    
    
    1,063,508
    
    
    
    1,450
    
    
    
    1,367,263Ratification of the
appointment of Ernst & Young
LLP as our independent
registered public accounting
firm for the fiscal year
ending January 31, 2010
    
    
    15,615,337
    
    
    
    137,707
    
    
    
    701
    
    
    
    *
 
 *
    
    Not Applicable  16




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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, 2009.31.2
    
    
    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, 2009.32.1
    
    
    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,
2009.32.2
    
    
    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,
2009.
  17




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SIGNATURES
  G-III APPAREL GROUP, LTD.(Registrant)Date:      September 8, 2009
    By:
    /s/ Morris GoldfarbMorris GoldfarbChief Executive OfficerDate:      September 8, 2009
    By:
    /s/ Neal S. NackmanNeal S. NackmanChief Financial Officer  18




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EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    
    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, 2009.31.2
    
    
    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, 2009.32.1
    
    
    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, 2009.32.2
    
    
    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, 2009.
  19