UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2021

or

☐ 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.

(Exact name of registrant as specified in its charter) 

Delaware	41-1590959
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
512 Seventh Avenue, New York, New York	10018
(Address of principal executive offices)	(Zip Code)

(212) 403-0500

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	GIII	The Nasdaq Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)  Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No ☒

As of December 3, 2021, there were 48,568,473 shares of issuer’s common stock, par value $0.01 per share, outstanding.

TABLE OF CONTENTS

		Page No.
Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets – October 31, 2021, October 31, 2020 and January 31, 2021	3
	Condensed Consolidated Statements of Operations and Comprehensive Income - For the Three and Nine months Ended October 31, 2021 and 2020 (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity – October 31, 2021 and October 31, 2020 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows - For the Nine months Ended October 31, 2021 and 2020 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
Part II	OTHER INFORMATION
Item 1A.	Risk Factors	32
Item 6.	Exhibits	32

2

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,
	2021		2020		2021
	(Unaudited)		(Unaudited)
	(In thousands, except per share amounts)
ASSETS
Current assets
Cash and cash equivalents	$	279,564	$	149,745	$	351,934
Accounts receivable, net of allowance for doubtful accounts of $17.4 million, $15.5 million and $17.5 million, respectively		844,382		720,975		492,698
Inventories		448,991		461,769		416,503
Prepaid income taxes		994		2,043		26,102
Prepaid expenses and other current assets		53,532		37,274		56,803
Total current assets		1,627,463		1,371,806		1,344,040
Investments in unconsolidated affiliates		61,413		62,177		63,523
Property and equipment, net		49,948		60,973		57,064
Operating lease assets		176,530		181,187		186,070
Other assets, net		60,405		36,722		38,785
Other intangibles, net		32,208		35,669		35,059
Deferred income tax assets, net		4,682		18,136		5,098
Trademarks		450,252		441,062		443,612
Goodwill		265,116		261,684		263,135
Total assets	$	2,728,017	$	2,469,416	$	2,436,386
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of notes payable	$	4,063	$	4,083	$	4,402
Accounts payable		233,893		157,654		139,183
Accrued expenses		141,456		125,675		102,787
Customer refund liabilities		81,271		120,395		99,355
Current operating lease liabilities		45,117		65,554		43,560
Income tax payable		38,974		8,702		11,853
Other current liabilities		2,228		21		862
Total current liabilities		547,002		482,084		402,002
Notes payable, net of discount and unamortized issuance costs		513,466		504,328		507,950
Deferred income tax liabilities, net		21,306		8,313		20,353
Noncurrent operating lease liabilities		147,688		157,983		161,668
Other noncurrent liabilities		11,558		6,441		7,208
Total liabilities		1,241,020		1,159,149		1,099,181
Redeemable noncontrolling interests		758		—		964
Stockholders' Equity
Preferred stock; 1,000 shares authorized; no shares issued		—		—		—
Common stock - $0.01 par value; 120,000 shares authorized; 49,396, 49,396 and, 49,396 shares issued, respectively		264		264		264
Additional paid-in capital		450,768		446,662		448,417
Accumulated other comprehensive loss		(11,428)		(11,194)		(2,094)
Retained earnings		1,068,575		902,041		916,683
Common stock held in treasury, at cost - 827, 1,037 and 1,019 shares, respectively		(21,940)		(27,506)		(27,029)
Total stockholders' equity		1,486,239		1,310,267		1,336,241
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$	2,728,017	$	2,469,416	$	2,436,386

The accompanying notes are an integral part of these statements.

3

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
	(Unaudited)
	(In thousands, except per share amounts)
Net sales	$	1,015,392	$	826,561	$	2,018,383	$	1,528,904
Cost of goods sold		667,882		528,806		1,282,526		972,055
Gross profit		347,510		297,755		735,857		556,849
Selling, general and administrative expenses		182,360		177,625		470,803		454,347
Depreciation and amortization		7,024		10,187		21,166		29,745
Asset impairments, net of loss (gain) on lease modifications		—		(117)		—		17,372
Operating profit		158,126		110,060		243,888		55,385
Other income		898		225		4,693		112
Interest and financing charges, net		(12,354)		(18,681)		(36,932)		(38,237)
Income before income taxes		146,670		91,604		211,649		17,260
Income tax expense		40,198		28,430		59,692		8,357
Net income		106,472		63,174		151,957		8,903
Less: Loss attributable to noncontrolling interests		(202)		—		(206)		—
Net income attributable to G-III Apparel Group, Ltd.	$	106,674	$	63,174	$	152,163	$	8,903
NET INCOME PER COMMON SHARE ATTRIBUTABLE TO G-III APPAREL GROUP, LTD.:
Basic:
Net income per common share	$	2.20	$	1.31	$	3.14	$	0.18
Weighted average number of shares outstanding		48,567		48,359		48,474		48,201
Diluted:
Net income per common share	$	2.16	$	1.29	$	3.07	$	0.18
Weighted average number of shares outstanding		49,458		48,809		49,499		48,589
Net income	$	106,472	$	63,174	$	151,957	$	8,903
Other comprehensive income (loss):
Foreign currency translation adjustments		(4,402)		7,066		(9,340)		6,814
Other comprehensive income (loss):		(4,402)		7,066		(9,340)		6,814
Comprehensive income	$	102,070	$	70,240	$	142,617	$	15,717
Comprehensive loss attributable to noncontrolling interests:
Net loss		(202)		—		(206)		—
Foreign currency translation adjustments		—		—		6		—
Comprehensive loss attributable to noncontrolling interests		(202)		—		(200)		—
Comprehensive income attributable to G-III Apparel Group, Ltd.	$	101,868	$	70,240	$	142,417	$	15,717

The accompanying notes are an integral part of these statements.

4

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

					Accumulated				Common
			Additional		Other				Stock
	Common		Paid-In		Comprehensive		Retained		Held In
	Stock		Capital		Loss		Earnings		Treasury		Total
	(Unaudited)
	(In thousands)
Balance as of July 31, 2021	$	264	$	447,476	$	(7,026)	$	961,901	$	(22,003)	$	1,380,612
Equity awards exercised/vested, net		—		(63)		—		—		63		—
Share-based compensation expense		—		3,354		—		—		—		3,354
Taxes paid for net share settlements		—		1		—		—		—		1
Other comprehensive income, net		—		—		(4,402)		—		—		(4,402)
Net income attributable to G-III Apparel Group, Ltd.		—		—		—		106,674		—		106,674
Balance as of October 31, 2021	$	264	$	450,768	$	(11,428)	$	1,068,575	$	(21,940)	$	1,486,239
Balance as of July 31, 2020	$	264	$	444,384	$	(18,260)	$	838,867	$	(27,506)	$	1,237,749
Share-based compensation expense		—		2,278		—		—		—		2,278
Other comprehensive loss, net		—		—		7,066		—		—		7,066
Net income attributable to G-III Apparel Group, Ltd.		—		—		—		63,174		—		63,174
Balance as of October 31, 2020	$	264	$	446,662	$	(11,194)	$	902,041	$	(27,506)	$	1,310,267
Balance as of January 31, 2021	$	264	$	448,417	$	(2,094)	$	916,683	$	(27,029)	$	1,336,241
Equity awards exercised/vested, net		—		(5,089)		—		—		5,089		—
Share-based compensation expense		—		11,773		—		—		—		11,773
Taxes paid for net share settlements		—		(4,333)		—		—		—		(4,333)
Cumulative effect of change in accounting principle		—		—		—		(271)		—		(271)
Other comprehensive income, net		—		—		(9,334)		—		—		(9,334)
Net income attributable to G-III Apparel Group, Ltd.		—		—		—		152,163		—		152,163
Balance as of October 31, 2021	$	264	$	450,768	$	(11,428)	$	1,068,575	$	(21,940)	$	1,486,239
Balance as of January 31, 2020	$	264	$	452,142	$	(18,008)	$	893,138	$	(36,864)	$	1,290,672
Equity awards exercised/vested, net		—		(9,178)		—		—		9,358		180
Share-based compensation expense		—		4,015		—		—		—		4,015
Taxes paid for net share settlements		—		(317)		—		—		—		(317)
Other comprehensive loss, net		—		—		6,814		—		—		6,814
Net income attributable to G-III Apparel Group, Ltd.		—		—		—		8,903		—		8,903
Balance as of October 31, 2020	$	264	$	446,662	$	(11,194)	$	902,041	$	(27,506)	$	1,310,267

The accompanying notes are an integral part of these statements.

5

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended October 31,
	2021		2020
	(Unaudited)
	(In thousands)
Cash flows from operating activities
Net income attributable to G-III Apparel Group, Ltd.	$	152,163	$	8,903
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		21,166		29,745
Loss on disposal of fixed assets		55		474
Non-cash operating lease costs		31,635		59,643
Gain on lease modifications		—		(2,539)
Asset impairments		—		19,911
Dividend received from unconsolidated affiliate		1,376		2,695
Equity (gain)/loss in unconsolidated affiliates		(2,783)		(340)
Change in fair value of equity investment		(1,206)		—
Share-based compensation		11,773		4,015
Deferred financing charges and debt discount amortization		7,212		7,712
Extinguishment of deferred financing costs		—		6,503
Deferred income taxes		1,747		2
Changes in operating assets and liabilities:
Accounts receivable, net		(351,683)		(190,838)
Inventories		(32,488)		90,148
Income taxes, net		52,229		6,587
Prepaid expenses and other current assets		9,071		42,704
Other assets, net		1,003		(342)
Customer refund liabilities		(18,085)		(113,023)
Operating lease liabilities		(34,720)		(61,822)
Accounts payable, accrued expenses and other liabilities		136,147		(37,709)
Net cash used in operating activities		(15,388)		(127,571)
Cash flows from investing activities
Operating lease assets initial direct costs		—		(4,041)
Minority investment in e-commerce retailer		(25,000)		—
Capital expenditures		(13,004)		(12,392)
Investment in brand acquisition		(13,266)		—
Net cash used in investing activities		(51,270)		(16,433)
Cash flows from financing activities
Repayment of borrowings - revolving facility		—		(878,083)
Proceeds from borrowings - revolving facility		—		878,083
Repayment of borrowings - foreign facilities		(277)		—
Proceeds from borrowings - foreign facilities		100		—
Repayment of borrowings - unsecured term loan		—		(300,262)
Proceeds from borrowings - unsecured term loan		—		7,103
Proceeds from borrowings - senior secured notes		—		400,000
Payment of financing costs		—		(13,276)
Proceeds from exercise of equity awards		—		180
Taxes paid for net share settlements		(4,333)		(317)
Net cash (used in) provided by financing activities		(4,510)		93,428
Foreign currency translation adjustments		(1,202)		2,949
Net decrease in cash and cash equivalents		(72,370)		(47,627)
Cash and cash equivalents at beginning of period		351,934		197,372
Cash and cash equivalents at end of period	$	279,564	$	149,745
Supplemental disclosures of cash flow information
Cash payments:
Interest, net	$	36,954	$	14,864
Income tax payments, net	$	5,370	$	1,628
Stock received from licensing agreement	$	4,831	$	—

The accompanying notes are an integral part of these statements.

6

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

As used in these financial statements, the term “Company” or “G-III” refers to G-III Apparel Group, Ltd. and its subsidiaries. The Company designs, sources and markets an extensive range of apparel, including outerwear, dresses, sportswear, swimwear, women’s suits and women’s performance wear, as well as women’s handbags, footwear, small leather goods, cold weather accessories and luggage. The Company also operates retail stores and licenses its proprietary brands for several product categories.

The Company consolidates the accounts of its wholly-owned and majority-owned subsidiaries. Fabco Holding B.V (“Fabco”) is a Dutch joint venture limited liability company that was 49% owned by the Company through November 30, 2020 and was accounted for using the equity method of accounting. Effective December 1, 2020, the Company increased its ownership interest in Fabco to 75% and, as a result, Fabco is treated as a consolidated majority-owned subsidiary. KL North America B.V. (“KLNA”) is a Dutch joint venture limited liability company that is 49% owned by the Company. Karl Lagerfeld Holding B.V. (“KLH”) is a Dutch limited liability company that is 19% owned by the Company. The Company accounts for these two investments using the equity method of accounting. All material intercompany balances and transactions have been eliminated.

Vilebrequin International SA (“Vilebrequin”), a Swiss corporation that is wholly-owned by the Company, KLH, KLNA and Fabco report results on a calendar year basis rather than on the January 31 fiscal year basis used by the Company. Accordingly, the results of Vilebrequin, KLH, KLNA and Fabco are, and will be, included in the financial statements for the quarter ended or ending closest to the Company’s fiscal quarter end. For example, with respect to the Company’s results for the nine-month period ended October 31, 2021, the results of Vilebrequin, KLH, KLNA and Fabco are included for the nine-month period ended September 30, 2021. The Company’s retail operations segment reports on a 52/53-week fiscal year. For fiscal 2022 and 2021, the three and nine-month periods for the retail operations segment were each 13-week and 39-week periods, respectively, and ended on October 30, 2021 and October 31, 2020, respectively.

The results for the three and nine months ended October 31, 2021 are not necessarily indicative of the results expected for the entire fiscal year, given the seasonal nature of the Company’s business and the effects of the COVID-19 pandemic on the Company’s business. The accompanying financial statements included herein are unaudited. All adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim period presented have been reflected.

The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021 filed with the Securities and Exchange Commission (the “SEC”).

Assets and liabilities of the Company’s foreign operations, where the functional currency is not the U.S. dollar (reporting currency), are translated from foreign currency into U.S. dollars at period-end rates, while income and expenses are translated at the weighted-average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive loss within stockholders’ equity.

Change in Accounting Principle

Effective February 1, 2021, the Company elected to change its method of accounting for retail inventories from the lower of cost or market as determined by the retail inventory method to the lower of cost or net realizable value using the weighted average cost method. The Company believes the new method is preferable as it provides better matching of cost of goods sold with revenue, improves the precision of inventory valuation at the balance sheet dates, and more closely aligns with the valuation methods used throughout the rest of the Company. In addition, the change in inventory valuation better aligns with the way the Company manages its business with a focus on the actual margin realized.

7

The Company determined that it was impractical to apply this change in accounting principle retrospectively due to a lack of available information. As a result, the Company applied the change prospectively as of February 1, 2021. The cumulative adjustment as of February 1, 2021 was a decrease of $0.3 million in both inventories and retained earnings. The change in accounting principle did not have a material effect on the Company’s condensed consolidated financial statements as of and for the three and nine-month periods ended October 31, 2021.

Note 2 – Retail Restructuring

In fiscal 2021, the Company restructured its retail operations segment, including the closing of the Wilsons Leather, G.H. Bass and Calvin Klein Performance stores. Restructuring charges are recorded within selling, general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income. During the three months ended October 31, 2021, the Company paid the final $46,000 related to store closing costs. As a result, as of October 31, 2021, the Company has paid all remaining restructuring charges.

Note 3 – Allowance for Doubtful Accounts

The Company’s financial instruments consist of trade receivables arising from revenue transactions in the ordinary course of business. The Company considers its trade receivables to consist of two portfolio segments: wholesale and retail trade receivables. Wholesale trade receivables result from credit the Company has extended to its wholesale customers based on pre-defined criteria and are generally due within 30 to 60 days. Retail trade receivables primarily relate to amounts due from third-party credit card processors for the settlement of debit and credit card transactions and are typically collected within 3 to 5 days.

The Company’s accounts receivable and allowance for doubtful accounts as of October 31, 2021, October 31, 2020 and January 31, 2021 were:

	October 31, 2021
	Wholesale		Retail		Total
	(In thousands)
Accounts receivable, gross	$	860,245	$	1,586	$	861,831
Allowance for doubtful accounts		(17,412)		(37)		(17,449)
Accounts receivable, net	$	842,833	$	1,549	$	844,382
	October 31, 2020
	Wholesale		Retail		Total
	(In thousands)
Accounts receivable, gross	$	734,481	$	1,968	$	736,449
Allowance for doubtful accounts		(15,437)		(37)		(15,474)
Accounts receivable, net	$	719,044	$	1,931	$	720,975
	January 31, 2021
	Wholesale		Retail		Total
	(In thousands)
Accounts receivable, gross	$	509,010	$	1,147	$	510,157
Allowance for doubtful accounts		(17,429)		(30)		(17,459)
Accounts receivable, net	$	491,581	$	1,117	$	492,698

The allowance for doubtful accounts for wholesale trade receivables is estimated based on several factors. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations (such as in the case of bankruptcy filings (including potential bankruptcy filings), extensive delay in payment or substantial downgrading by credit rating agencies), a specific reserve for bad debt is recorded against amounts due from that customer to reduce the net recognized receivable to the amount reasonably expected to be collected. For all other wholesale customers, an allowance for doubtful accounts is determined through analysis of the aging of accounts receivable at the end of the reporting period for financial statements, assessments of collectability based on historical trends and an evaluation of the

8

impact of economic conditions. The Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

The allowance for doubtful accounts for retail trade receivables is estimated at the credit card chargeback rate applied to the previous 90 days of credit card sales. In addition, the Company considers both current and forecasted future economic conditions in determining the adequacy of its allowance for doubtful accounts.

The Company had the following activity in its allowance for credit losses:

	Wholesale		Retail		Total
	(In thousands)
Balance as of January 31, 2021	$	(17,429)	$	(30)	$	(17,459)
Provision for credit losses		(54)		(7)		(61)
Accounts written off as uncollectible		71		—		71
Balance as of October 31, 2021	$	(17,412)	$	(37)	$	(17,449)
Balance as of January 31, 2020	$	(628)	$	(82)	$	(710)
Provision for credit losses		(14,919)		45		(14,874)
Accounts written off as uncollectible		110		—		110
Balance as of October 31, 2020	$	(15,437)	$	(37)	$	(15,474)
Balance as of January 31, 2020	$	(628)	$	(82)	$	(710)
Provision for credit losses		(16,934)		52		(16,882)
Accounts written off as uncollectible		133		—		133
Balance as of January 31, 2021	$	(17,429)	$	(30)	$	(17,459)

Note 4 – Inventories

Wholesale inventories, which comprise a significant portion of the Company’s inventory, are stated at the lower of cost (determined by the first-in, first-out method) or net realizable value. Prior to February 1, 2021, retail inventories were valued at the lower of cost or market as determined by the retail inventory method. Effective February 1, 2021, the Company elected to change its method of accounting for retail inventories to the lower of cost (determined by the weighted average method) or net realizable value. See Note 1 – Basis of Presentation for more details on the preferability and application of this change in accounting principle. Vilebrequin inventories are stated at the lower of cost (determined by the weighted average method) or net realizable value. Substantially all of the Company’s inventories consist of finished goods.

The inventory return asset, which consists of the amount of goods that are anticipated to be returned by customers, represented $13.9 million, $20.6 million and $22.5 million as of October 31, 2021, October 31, 2020 and January 31, 2021, respectively. The inventory return asset is recorded within prepaid expenses and other current assets on the condensed consolidated balance sheets.

Inventory held on consignment by the Company’s customers totaled $5.6 million, $4.8 million and $3.5 million at October 31, 2021, October 31, 2020 and January 31, 2021, respectively. Consignment inventory is stored at the facilities of the Company’s customers. The Company reflects this inventory on its condensed consolidated balance sheets.

Note 5 – Fair Value of Financial Instruments

Generally Accepted Accounting Principles establish a three-level valuation hierarchy for disclosure of fair value measurements. The determination of the applicable level within the hierarchy for a particular asset or liability depends on the inputs used in its valuation as of the measurement date, notably the extent to which the inputs are market-based (observable) or internally-derived (unobservable). A financial instrument’s categorization within the valuation hierarchy

9

is based upon the lowest level of input that is significant to the fair value measurement. The three levels are defined as follows:

● Level 1 — inputs to the valuation methodology based on quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 — inputs to the valuation methodology based on quoted prices for similar assets or liabilities in active markets for substantially the full term of the financial instrument; quoted prices for identical or similar instruments in markets that are not active for substantially the full term of the financial instrument; and model-derived valuations whose inputs or significant value drivers are observable.

● Level 3 — inputs to the valuation methodology based on unobservable prices or valuation techniques that are significant to the fair value measurement.

The following table summarizes the carrying values and the estimated fair values of the Company’s debt instruments:

		Carrying Value						Fair Value
		October 31,		October 31,		January 31,		October 31,		October 31,		January 31,
Financial Instrument	Level	2021		2020		2021		2021		2020		2021
		(In thousands)
Secured notes	2	$	400,000	$	400,000	$	400,000	$	400,000	$	400,000	$	400,000
Note issued to LVMH	3		112,613		106,361		107,869		107,983		99,832		101,810
Unsecured loans	2		8,444		7,232		9,119		8,444		7,232		9,119
Overdraft facilities	2		2,841		2,885		3,007		2,841		2,885		3,007

The Company’s debt instruments are recorded at their carrying values in its condensed consolidated balance sheets, which may differ from their respective fair values. The carrying amount of the Company’s variable rate debt approximates the fair value, as interest rates change with the market rates. Furthermore, the carrying value of all other financial instruments potentially subject to valuation risk (principally consisting of cash, accounts receivable and accounts payable) also approximates fair value due to the short-term nature of these accounts.

The 2% note in the principal amount of $125 million (the “LVMH Note”) issued to LVMH Moet Hennessy Louis Vuitton Inc. (“LVMH”) in connection with the acquisition of Donna Karan International (“DKI”) was recorded on the balance sheet at a discount of $40.0 million in accordance with ASC 820 – Fair Value Measurements. For purposes of this fair value disclosure, the Company based its fair value estimate for the LVMH Note on the initial fair value as determined at the date of the acquisition of DKI and records the amortization using the effective interest method over the term of the LVMH Note.

The fair value of the LVMH Note was considered a Level 3 valuation in the fair value hierarchy.

Non-Financial Assets and Liabilities

The Company’s non-financial assets that are measured at fair value on a nonrecurring basis include long-lived assets, which consist primarily of property and equipment and operating lease assets. The Company reviews these assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable. For assets that are not recoverable, an impairment loss is recognized equal to the difference between the carrying amount of the asset or asset group and its estimated fair value. For operating lease assets, the Company determines the fair value of the assets by discounting the estimated market rental rates over the remaining term of the lease. These fair value measurements are considered level 3 measurements in the fair value hierarchy. During the second quarter of fiscal 2021, the Company recorded a $20 million impairment charge primarily related to operating lease assets, leasehold improvements and furniture and fixtures at certain Wilsons Leather, G.H. Bass, DKNY and Vilebrequin stores as a result of the performance at these stores.

Note 6 – Leases

The Company leases retail stores, warehouses, distribution centers, office space and certain equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

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Most leases are for a term of one to ten years.  Some leases include one or more options to renew, with renewal terms that can extend the lease term from one to ten years.  Several of the Company’s retail store leases include an option to terminate the lease based on failure to achieve a specified sales volume. The exercise of lease renewal options is generally at the Company’s sole discretion. The exercise of lease termination options is generally by mutual agreement between the Company and the lessor.

Certain of the Company’s lease agreements include rental payments based on a percentage of retail sales over contractual levels and others include rental payments adjusted periodically for inflation. The Company’s leases do not contain any material residual value guarantees or material restrictive covenants.

The Company’s lease assets and liabilities as of October 31, 2021, October 31, 2020 and January 31, 2021 consist of the following:

Leases Classification October 31, 2021 October 31, 2020