##### 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, 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
    
    (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  October 31, 2009, October 31, 2008 and January 31, 2009
    
    
    3Condensed Consolidated Statements of Operations  For the Three Months Ended October 31, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Operations  For the Nine Months Ended October 31, 2009 and 2008
    
    
    5Condensed Consolidated Statements of Cash Flows  For the Nine Months Ended October 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 1A. Risk Factors
    
    
    16Item 6. Exhibits
    
    
    17Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements.
 G-III APPAREL GROUP, LTD. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 October 31,
    
    
    October 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009(Unaudited)
    
    
    (Unaudited)(In thousands, except share and per share amounts)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    16,633
    
    
    $
    9,728
    
    
    $
    2,508Accounts receivable, net of allowance for doubtful accounts
and sales discounts of $35,979, $28,018 and $20,989,
respectively
    
    
    235,943
    
    
    
    217,686
    
    
    
    69,695Inventories
    
    
    127,087
    
    
    
    131,028
    
    
    
    116,612Deferred income taxes
    
    
    11,565
    
    
    
    15,616
    
    
    
    11,565Prepaid expenses and other current assets
    
    
    5,660
    
    
    
    8,085
    
    
    
    10,319Total current assets
    
    
    396,888
    
    
    
    382,143
    
    
    
    210,699PROPERTY AND EQUIPMENT, NET
    
    
    8,455
    
    
    
    10,093
    
    
    
    9,863DEFERRED INCOME TAXES
    
    
    11,640
    
    
    
    3,938
    
    
    
    11,640OTHER ASSETS
    
    
    1,363
    
    
    
    2,241
    
    
    
    1,858INTANGIBLES, NET
    
    
    20,171
    
    
    
    25,138
    
    
    
    21,406GOODWILL
    
    
    25,900
    
    
    
    49,076
    
    
    
    25,494$
    464,417
    
    
    $
    472,629
    
    
    $
    280,960LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESNotes payable
    
    $
    167,815
    
    
    $
    170,659
    
    
    $
    29,048Income taxes payable
    
    
    15,484
    
    
    
    12,195
    
    
    
    5,222Accounts payable
    
    
    54,629
    
    
    
    62,785
    
    
    
    51,463Accrued expenses
    
    
    29,847
    
    
    
    24,533
    
    
    
    19,299Contingent purchase price payable
    
    
    
    
    
    
    
    
    
    
    4,935Deferred income taxes
    
    
    1,578
    
    
    
    1,298
    
    
    
    1,578Total current liabilities
    
    
    269,353
    
    
    
    271,470
    
    
    
    111,545DEFERRED INCOME TAXES
    
    
    6,648
    
    
    
    7,086
    
    
    
    6,648OTHER NON-CURRENT LIABILITIES
    
    
    785
    
    
    
    615
    
    
    
    538TOTAL LIABILITIES
    
    
    276,786
    
    
    
    279,171
    
    
    
    118,731STOCKHOLDERS EQUITYPreferred stock; 1,000,000 shares authorized; No shares
issued and outstandingCommon stock  $.01 par value; 40,000,000 shares authorized;
17,229,294, 16,905,502 and 17,063,002 shares issued
    
    
    172
    
    
    
    169
    
    
    
    171Additional paid-in capital
    
    
    102,215
    
    
    
    98,592
    
    
    
    99,486Accumulated other comprehensive income
    
    
    (36
    )
    
    
    
    
    
    
    Retained earnings
    
    
    86,250
    
    
    
    95,667
    
    
    
    63,542Common stock held in treasury  367,225 shares at cost
    
    
    (970
    )
    
    
    (970
    )
    
    
    (970
    )187,631
    
    
    
    193,458
    
    
    
    162,229$
    464,417
    
    
    $
    472,629
    
    
    $
    280,960
 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 31,2009
    
    
    2008(Unaudited)(In thousands, except per share amounts)Net sales
    
    $
    363,540
    
    
    $
    351,599Cost of goods sold
    
    
    237,912
    
    
    
    239,080Gross profit
    
    
    125,628
    
    
    
    112,519Selling, general and administrative expenses
    
    
    66,738
    
    
    
    58,937Depreciation and amortization
    
    
    1,303
    
    
    
    1,900Operating profit
    
    
    57,587
    
    
    
    51,682Interest and financing charges, net
    
    
    1,891
    
    
    
    2,496Income before income taxes
    
    
    55,696
    
    
    
    49,186Income tax expense
    
    
    23,393
    
    
    
    20,350Net income
    
    $
    32,303
    
    
    $
    28,836NET INCOME PER COMMON SHARE:Basic:Net income per common share
    
    $
    1.93
    
    
    $
    1.74Weighted average number of shares outstanding
    
    
    16,770
    
    
    
    16,526Diluted:Net income per common share
    
    $
    1.87
    
    
    $
    1.68Weighted average number of shares outstanding
    
    
    17,238
    
    
    
    17,160
 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
 Nine Months Ended October 31,2009
    
    
    2008(Unaudited)(In thousands, except per share amounts)Net sales
    
    $
    607,029
    
    
    $
    540,458Cost of goods sold
    
    
    409,371
    
    
    
    381,520Gross profit
    
    
    197,658
    
    
    
    158,938Selling, general and administrative expenses
    
    
    150,817
    
    
    
    118,625Depreciation and amortization
    
    
    4,091
    
    
    
    5,255Operating profit
    
    
    42,750
    
    
    
    35,058Interest and financing charges, net
    
    
    3,599
    
    
    
    4,161Income before income taxes
    
    
    39,151
    
    
    
    30,897Income tax expense
    
    
    16,443
    
    
    
    12,801Net income
    
    $
    22,708
    
    
    $
    18,096NET INCOME PER COMMON SHARE:Basic:Net income per common share
    
    $
    1.36
    
    
    $
    1.10Weighted average number of shares outstanding
    
    
    16,740
    
    
    
    16,507Diluted:Net income per common share
    
    $
    1.33
    
    
    $
    1.07Weighted average number of shares outstanding
    
    
    17,011
    
    
    
    16,990
 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
 Nine Months Ended October 31,2009
    
    
    2008(Unaudited)(In thousands)Cash flows from operating activitiesNet income
    
    $
    22,708
    
    
    $
    18,096Adjustments to reconcile net income to net cash used in
operating activities, net of assets and liabilities
acquired:Depreciation and amortization
    
    
    4,091
    
    
    
    5,255Stock based compensation
    
    
    1,387
    
    
    
    914Deferred financing charges
    
    
    484
    
    
    
    691Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (166,248
    )
    
    
    (145,368
    )Inventories
    
    
    (10,475
    )
    
    
    (45,799
    )Income taxes, net
    
    
    10,262
    
    
    
    7,950Prepaid expenses and other current assets
    
    
    4,659
    
    
    
    2,086Other assets, net
    
    
    11
    
    
    
    (708
    )Accounts payable, accrued expenses and other
liabilities
    
    
    13,961
    
    
    
    42,505Net cash used in operating activities
    
    
    (119,160
    )
    
    
    (114,378
    )Cash flows from investing activitiesCapital expenditures
    
    
    (1,448
    )
    
    
    (1,611
    )Acquisition of Andrew Marc, net of cash acquired
    
    
    
    
    
    
    (43,051
    )Acquisition of Wilsons, net of cash acquired
    
    
    
    
    
    
    (22,842
    )Contingent purchase price paid
    
    
    (5,341
    )
    
    
    (4,904
    )Net cash used in investing activities
    
    
    (6,789
    )
    
    
    (72,408
    )Cash flows from financing activitiesProceeds from notes payable, net
    
    
    138,767
    
    
    
    170,659Repayment of term loan
    
    
    
    
    
    
    (13,060
    )Proceeds from exercise of stock options
    
    
    854
    
    
    
    346Tax benefit from exercise of stock options
    
    
    489
    
    
    
    228Net cash provided by financing activities
    
    
    140,110
    
    
    
    158,173Effect of exchange rate changes
    
    
    (36
    )
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    14,125
    
    
    
    (28,613
    )Cash and cash equivalents at beginning of period
    
    
    2,508
    
    
    
    38,341Cash and cash equivalents at end of period
    
    $
    16,633
    
    
    $
    9,728Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    3,216
    
    
    $
    3,741Income taxes
    
    
    5,396
    
    
    
    4,721Detail of Andrew Marc acquisition:Acquired intangibles
    
    
    
    
    
    $
    34,451Fair value of other assets acquired, net
    
    
    
    
    
    
    20,867Fair value of total assets acquired
    
    
    
    
    
    
    55,318Liabilities assumed
    
    
    
    
    
    
    (12,190
    )Cash paid for acquisition
    
    
    
    
    
    
    43,128Cash acquired
    
    
    
    
    
    
    77Net cash paid for acquisition
    
    
    
    
    
    $
    43,051Detail of Wilsons acquisition:Cash paid for acquisition
    
    
    
    
    
    $
    22,929Cash acquired
    
    
    
    
    
    
    87Net cash paid for acquisition
    
    
    
    
    
    $
    22,842
 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
  October 31,
    
    
    October 31,
    
    
    January 31,2009
    
    
    2008
    
    
    2009(In thousands)Finished goods
    
    $
    123,744
    
    
    $
    127,413
    
    
    $
    113,824Raw materials and work-in-process
    
    
    3,343
    
    
    
    3,615
    
    
    
    2,788$
    127,087
    
    
    $
    131,028
    
    
    $
    116,612
 Note 3  Contingent Purchase Price Payable
  Note 4  Net Income per Common Share
   7




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Note 5  Notes Payable
   Note 6  Segments
  Three Months Ended October 31,2009
    
    
    2008Wholesale
    
    
    
    
    
    
    
    
    
    
    WholesaleWholesale
    
    
    Non-
    
    
    
    
    
    
    Wholesale
    
    
    Non-Licensed
    
    
    Licensed
    
    
    Retail
    
    
    Licensed
    
    
    Licensed
    
    
    RetailNet sales (2)
    
    $
    252,934
    
    
    $
    89,357
    
    
    $
    29,653
    
    
    $
    229,106
    
    
    $
    98,087
    
    
    $
    24,406Cost of goods sold (2)
    
    
    171,661
    
    
    
    59,133
    
    
    
    15,522
    
    
    
    155,900
    
    
    
    69,414
    
    
    
    13,766Gross profit
    
    
    81,273
    
    
    
    30,224
    
    
    
    14,131
    
    
    
    73,206
    
    
    
    28,673
    
    
    
    10,640Selling, general and
administrative
    
    
    40,724
    
    
    
    11,138
    
    
    
    14,876
    
    
    
    34,113
    
    
    
    10,683
    
    
    
    14,141Depreciation and amortization
    
    
    210
    
    
    
    782
    
    
    
    311
    
    
    
    691
    
    
    
    986
    
    
    
    223Operating profit (loss)
    
    $
    40,339
    
    
    $
    18,304
    
    
    $
    (1,056
    )
    
    $
    38,402
    
    
    $
    17,004
    
    
    $
    (3,724
    )
  8




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Note 6  Segments (continued)
 Nine Months Ended October 31,2009
    
    
    2008Wholesale
    
    
    
    
    
    
    
    
    
    
    WholesaleWholesale
    
    
    Non-
    
    
    
    
    
    
    Wholesale
    
    
    Non-Licensed
    
    
    Licensed
    
    
    Retail
    
    
    Licensed
    
    
    Licensed
    
    
    Retail (1)Net sales (2)
    
    $
    403,807
    
    
    $
    146,952
    
    
    $
    77,777
    
    
    $
    338,654
    
    
    $
    169,761
    
    
    $
    32,043Cost of goods sold (2)
    
    
    283,290
    
    
    
    103,448
    
    
    
    44,140
    
    
    
    239,407
    
    
    
    123,998
    
    
    
    18,115Gross profit
    
    
    120,517
    
    
    
    43,504
    
    
    
    33,637
    
    
    
    99,247
    
    
    
    45,763
    
    
    
    13,928Selling, general and
administrative
    
    
    82,459
    
    
    
    25,598
    
    
    
    42,760
    
    
    
    68,443
    
    
    
    31,470
    
    
    
    18,712Depreciation and amortization
    
    
    629
    
    
    
    2,572
    
    
    
    890
    
    
    
    2,073
    
    
    
    2,858
    
    
    
    324Operating profit (loss)
    
    $
    37,429
    
    
    $
    15,334
    
    
    $
    (10,013
    )
    
    $
    28,731
    
    
    $
    11,435
    
    
    $
    (5,108
    )
 (1)
    
    Results for the retail operations segment for the nine months ended October 31, 2008
only include operations of the Wilsons retail outlet stores from July 8, 2008, the date the
Company acquired certain assets related to the Wilsons retail outlet business.(2)
    
    Net sales and cost of goods sold for the wholesale licensed apparel and wholesale
non-licensed apparel segments include an aggregate of $8.4 million and $21.5 of intersegment
sales to the Companys retail operations for the three and nine months ended October 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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Results of Operations
 Three months ended October 31, 2009 compared to three months ended October 31, 2008
      12




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




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




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PART II  OTHER INFORMATION
 
 Item 1A.
    
    Risk Factors.
   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 October 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 October 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 October
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 October
31, 2009.
  17




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SIGNATURES
  G-III APPAREL GROUP, LTD.
(Registrant)Date:      December 4, 2009
    By:
    /s/ Morris GoldfarbMorris GoldfarbChief Executive OfficerDate:      December 4, 2009
    By:
    /s/ Neal S. NackmanNeal S. NackmanChief Financial Officer  18