G III APPAREL GROUP LTD (GIII) SEC Filing 10-Q Quarterly report for the period ending Wednesday, October 31, 2018

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Exhibit 99.1

 

G-III APPAREL GROUP, LTD.

 

G-III APPAREL GROUP, LTD. ANNOUNCES THIRD QUARTER FISCAL 2019 RESULTS

 

 

— Net Sales Increase to a Third Quarter Record of $1.07  Billion  —

—  Third Quarter Net Income and Net Income Per Share Exceed Guidance —

— Raises Full-Year Guidance —

 

New York, New York – December 6,  2018 -- G-III Apparel Group, Ltd. (NasdaqGS: GIII) today announced operating results for the third quarter of fiscal 2019 ended October 31,  2018. 

 

For the third quarter ended October 31, 2018, G-III reported that net sales increased 4.7% to $1.07 billion from $1.02 billion in the year-ago period. The Company reported net income for the third quarter of $94.0 million, or $1.86 per diluted share,  from $81.6 million, or $1.65 per diluted share, in the prior year’s comparable period.

 

Non-GAAP net income per diluted share was $1.88 for the third quarter of this year compared to $1.67 per share in the same period last year. Non-GAAP net income per diluted share excludes non-cash imputed interest expense related to the note issued to the seller as part of the consideration for the acquisition of Donna Karan International (“DKI”) of $1.2 million in this quarter and $1.4 million in the third quarter of last year.

 

Morris Goldfarb, G-III’s Chairman and Chief Executive Officer, said, “In our largest shipping quarter, the continued momentum in our wholesale business enabled us to surpass our third quarter earnings guidance. We again demonstrated great ability to successfully leverage our five global power brands. Our products are set-up well across our channels of distribution for the important holiday season and we believe we will have a strong finish to the year.”

1

 


The following information was filed by G III APPAREL GROUP LTD on Thursday, December 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • 18487864_114
    Financial - Expense
    Depreciation expense in the prior year comparable period was lower primarily due to lower depreciation and amortization recorded in the third quarter of fiscal 2018 compared to additional depreciation expense recorded in the first and second quarters of fiscal 2018 with respect to the fixed assets acquired in connection with the acquisition of DKI.
  • 18487864_132
    Revenue - Product
    Comparable same store sales increased by 3.1% at Wilsons, which benefited from favorable weather and increased promotional activities and by 19.9% at DKNY retail stores as a result of the sale of products designed and developed by us.
  • 18487864_208
    Financial - Expense
    The cash used in investing activities consisted $19.5 million in capital expenditures primarily related to additional fixturing costs at department stores, as well as improvements and remodels of our retail stores, and $9.9 million in funding the remaining obligation of our investment in Fabco Holding B.V. Cash from Financing Activities Net cash provided by financing activities was $292.8 million for the nine months ended October 31, 2018, primarily as a result of the net proceeds of $297.6 million in borrowings under the revolving credit facility partially offset by taxes paid for net share settlements.
  • 18487864_104
    Financial - Earnings
    The decrease in gross profit percentage was primarily the result of unfavorable product mix, lower gross margins in our DKNY and Donna Karan businesses and the reclassification of cooperative advertising from selling, general and administrative expenses to a reduction in net sales beginning in fiscal 2019 in connection with the adoption of ASC 606.
  • 18487864_147
    Financial - Expense
    Advertising costs increased by $7.0 million compared to the same period last year due to an increase in advertising purchased to promote the brands we own, increased advertising fees paid under many of our license agreements that are based on a percentage of net sales of licensed products, and an increase in expenses related to additional digital marketing initiatives.
  • 18487864_201
    Financial - Earnings
    These increases were offset, in part, by our net income of $114.0 million, a $169.0 million increase in customer refund liabilities, a $33.3 million increase in accounts payable and accrued expenses and non-cash depreciation and amortization of $28.9 million and share-based compensation of $14.9 million.
  • 18487864_101
    Revenue - Product
    Net sales of our retail operations segment were negatively affected by the decrease in the number of stores operated by us from 378 at October 31, 2017 to 343 at October 31, 2018.
  • 18487864_134
    Revenue - Product
    Net sales of our retail operations segment were negatively affected by the decrease in the number of stores operated by us from 378 at October 31, 2017 to 343 at October 31, 2018.
  • 18487864_102
    Financial - Earnings
    Gross profit decreased to $382.1 million, or 35.6% of net sales, for the three months ended October 31, 2018, from $391.1 million, or 38.2% of net sales, in the same period last year.
  • 18487864_200
    Financial - Expense
    Cash from Operating Activities We used $236.1 million of cash in operating activities during the nine months ended October 31, 2018, primarily due to a $525.3 million increase in accounts receivable, a $63.3 million increase in inventories and a $34.0 million increase in prepaid expenses and other current assets.
  • 18487864_62
    Revenue - Product
    As e-commerce sales of apparel continue to increase, we are developing additional digital marketing initiatives on our web sites and through social media.
  • 18487864_74
    Financial - Shares / Equity
    We have attempted to respond to 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.
  • 18487864_128
    Revenue - Product
    Net sales of Karl Lagerfeld Paris products increased by $27.9 million primarily related to the sportswear and new outerwear product lines.
  • 18487864_135
    Financial - Earnings
    24 Gross profit increased to $848.2 million, or 36.7% of net sales, for the nine months ended October 31, 2018, from $795.8 million, or 38.0% of net sales, in the same period last year.
  • 18487864_137
    Financial - Earnings
    The gross profit percentage in our wholesale operations segment was negatively impacted by unfavorable product mix and the reclassification of cooperative advertising from selling, general and administrative expenses to a reduction in net sales beginning in fiscal 2019 in connection with the adoption of ASC 606.
  • 18487864_115
    Financial - Expense
    In addition, depreciation expense increased due to capital expenditures during the current year.
  • 18487864_92
    Revenue - Product
    This increase is primarily the result of a $56.2 million increase in net sales of Tommy Hilfiger licensed products and a $35.1 million increase in net sales of our DKNY and Donna Karan products.
  • 18487864_126
    Revenue - Product
    This increase is primarily the result of an $115.9 million increase in net sales of our DKNY and Donna Karan product and a $92.6 million increase in net sales of Tommy Hilfiger licensed products.
  • 18487864_69
    Revenue - Geography
    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.
  • 18487864_60
    Financial - Earnings
    Significant trends that affect the apparel industry include retail chains closing unprofitable stores, an increased focus by retail chains and others on expanding e-commerce sales, the continued consolidation of retail chains and the desire on the part of retailers to consolidate vendors supplying them.
  • 18487864_34
    Revenue - Product
    20 Licensed Products The sale of licensed products is a key element of our strategy and we have continually expanded our offerings of licensed products for more than 20 years.
  • 18487864_140
    Financial - Earnings
    This decrease is primarily the result of a decrease in the gross profit percentage of our DKNY retail stores and our Wilsons stores compared to the same period last year.
  • 18487864_185
    Financial - Expense
    This discount is being amortized as interest expense using the effective interest method over the term of the LVMH Note.
  • 18487864_66
    Revenue - Product
    We have also increased sales to pure play online retail partners such as Amazon and Fanatics.
  • 18487864_94
    Revenue - Product
    Net sales of Karl Lagerfeld Paris products increased by $11.0 million as a result of increased sales of sportswear, outerwear, handbags and shoes.
  • 18487864_99
    Revenue - Product
    Comparable same store sales increased by 12.9% at DKNY retail stores as a result of the sale of products designed and developed by us.
  • 18487864_95
    Revenue - Product
    These increases were offset, in part, by a $27.3 million decrease in net sales of our Andrew Marc line of products, a $15.5 million decrease in net sales of Calvin Klein products, which were impacted by the Bon-Ton bankruptcy, and a $15.2 million decrease in net sales of our licensed sports divisions.
  • 18487864_191
    Other - Other
    We had borrowings outstanding under the revolving credit facility of $309.6 million and $349.6 million at October 31, 2018 and 2017, respectively, and under the Term Loan of $300.0 million at both October 31, 2018 and 2017.
  • 18487864_109
    Financial - Expense
    23 Selling, general and administrative expenses decreased to $232.1 million in the three months ended October 31, 2018 from $242.7 million in the same period last year.
  • 18487864_142
    Financial - Expense
    Selling, general and administrative expenses decreased to $633.0 million for the nine months ended October 31, 2018 from $636.0 million in the same period last year.
  • 18487864_197
    Financial - Shares / Equity
    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.
  • 18487864_182
    Other - Other
    $75.0 million of the principal amount of the LVMH Note is due and payable on June 1, 2023 and $50.0 million of such principal amount is due and payable on December 1, 2023.
  • 18487864_122
    Financial - Income
    Our effective tax rate includes the effect of an income tax benefit of $663,000 in the three months ended October 31, 2018 and $1.4 million in the three months ended October 31, 2017 in connection with the vesting of equity awards as provided for in ASU 2016 09.
  • 18487864_157
    Financial - Income
    Our effective tax rate includes the effect of an income tax benefit of $1.1 million in the nine months ended October 31, 2018 and $1.3 million in the nine months ended October 31, 2017 in connection with the vesting of equity awards as provided for in ASU 2016 09.
  • 18487864_107
    Financial - Earnings
    This decrease is primarily the result of a decline in the gross profit percentage of our DKNY stores.
  • 18487864_179
    Other - Other
    In certain circumstances, the revolving credit facility also requires us to maintain a minimum fixed charge coverage ratio, as defined, that may not exceed 1.00 to 1.00 for each period of twelve consecutive fiscal months of holdings.
  • 18487864_70
    Other - Other
    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.
  • 18487864_172
    Other - Other
    Amounts available under the revolving credit facility are subject to borrowing base formulas and over advances as specified in the revolving credit facility agreement.
  • 18487864_156
    Other - Other
    Our effective tax rate decreased to 25.9% for the nine months ended October 31, 2018 from 36.1% in the last year?s comparable period as a result of the reduction in the corporate tax rate by the TCJA.
  • 18487864_149
    Financial - Expense
    The increase in expense is due to capital expenditures during the current year.
  • 18487864_91
    Revenue - Product
    Net sales of our wholesale operations segment increased to $1.01 billion from $966.8 million in the comparable period last year.
  • 18487864_125
    Revenue - Product
    Net sales of our wholesale operations segment increased to $2.08 billion from $1.89 billion in the comparable period last year.
  • 18487864_89
    Revenue - Product
    Net sales for the three months ended October 31, 2018 increased to $1.07 billion from $1.02 billion in the same period last year.
  • 18487864_123
    Revenue - Product
    Net sales for the nine months ended October 31, 2018 increased to $2.31 billion from $2.09 billion in the same period last year.
  • 18487864_14
    Other - Other
    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 January 31, 2018 and in the Quarterly Report on Form 10-Q for the quarter ended July 31, 2018.
  • 18487864_80
    Revenue - Geography
    After the G20 summit held recently in Buenos Aires, Argentina, the United States government announced a three month postponement of the increase in tariffs to 25% while the U.S. and China seek to resolve their trade and related differences.
  • 18487864_152
    Other - Other
    This was offset, in part, by increased losses in unconsolidated entities in the current year compared to the prior year.
  • 18487864_164
    Financial - Shares / Equity
    The Term Loan is secured (i) on a first-priority basis by a lien on our real estate assets, equipment and fixtures, equity interests and intellectual property and certain related rights owned by us and by certain of our subsidiaries and (ii) by a second-priority security interest in other of our assets and certain of our subsidiaries, which secure on a first-priority basis our asset-based loan facility described below under the caption ?Revolving Credit Facility.?
  • 18487864_78
    Revenue - Geography
    Tariffs on handbags and leather outerwear imported from China were effective beginning September 24, 2018, and are initially in the amount of 10% of the merchandise cost to us.
  • 18487864_121
    Other - Other
    Our effective tax rate decreased to 26.5% in the current year?s quarter from 36.2% in last year?s comparable quarter primarily as a result of the reduction in the corporate tax rate in the TCJA.
  • 18487864_146
    Financial - Expense
    The Company recorded increased personnel costs of $14.1 million, primarily due to an increase in the bonus expense compared to the prior year as a result of our increased profitability.

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  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001558370-18-009614
  • Submitted to the SEC: Thursday, December 6, 2018 4:25:00 PM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: October 2018
  • Industry: Apparel And Other Finishd Prods Of Fabrics And Similar Matl