giii_Current_Folio_Proxy

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.)

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

 

 

 

Preliminary Proxy Statement

 

 

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a‑6(e)(2))

 

 

 

Definitive Proxy Statement

 

 

 

Definitive Additional Materials

 

 

 

Soliciting Material Pursuant to § 240.14a‑12

 

 

 

 

 

 

 

G-III APPAREL GROUP, LTD.

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of filing fee (Check the appropriate box):

 

 

 

No fee required.

 

 

 

Fee computed on table below per Exchange Act Rules 14a‑6(i)(1) and 0‑11.

 

 

 

 

 

(1)

 

Title of each class of securities to which transaction applies:

 

 

 

 

 

 

 

(2)

 

Aggregate number of securities to which transaction applies:

 

 

 

 

 

 

 

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0‑11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

 

 

 

(4)

 

Proposed maximum aggregate value of transaction:

 

 

 

 

 

 

 

(5)

 

Total fee paid:

 

 

 

 

 

 

 

 

 

 

 

Fee paid previously with preliminary materials.

 

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0‑11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

 

 

 

(1)

 

Amount previously paid:

 

 

 

 

 

 

 

(2)

 

Form, Schedule or Registration Statement No.:

 

 

 

 

 

 

 

(3)

 

Filing Party:

 

 

 

 

 

 

 

(4)

 

Date Filed:

 

 

 

 

 

 

 

 

 

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2020

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT

 

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Picture 1

 

G-III APPAREL GROUP, LTD.

512 SEVENTH AVENUE

NEW YORK, NEW YORK 10018

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of G-III Apparel Group, Ltd. to be held on Thursday, June 11, 2020 at 10:00 a.m., New York time, at the offices of Norton Rose Fulbright US LLP, 1301 Avenue of the Americas, 30th Floor, New York, New York 10019.

As part of our concern regarding the health and safety of our stockholders, directors, officers, employees, meeting attendees and the general public in light of the current COVID-19 outbreak, we are planning for the possibility that the Annual Meeting may be held solely or in part by means of a “virtual” meeting instead of a physical meeting. There is also the possibility that we may delay, postpone or adjourn the Annual Meeting, including changing the time, location or date of the Annual Meeting.  If we take any of these steps, we will provide you reasonable advance notice via a press release and an SEC filing, as well as a posting on our website.

If we determine that it is necessary or appropriate to hold a virtual Annual Meeting, stockholders or their proxy holders would need to log into the virtual meeting website at https://web.lumiagm.com/273796646 in order to attend the virtual Annual Meeting.  Further information about attending the virtual Annual Meeting, including how to demonstrate your ownership of our common stock as of the record date for the Annual Meeting, would be announced and instructions provided in advance of the meeting. Please note that you will only be able to access this website if we decide to hold a virtual Annual Meeting. The formal Notice of Meeting and the accompanying Proxy Statement set forth proposals for your consideration this year. You are being asked:

 

 

 

1

To elect eleven directors to serve on our Board of Directors for the ensuing year,

2

For an advisory and non-binding vote on the compensation of our named executive officers and

3

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2021.

 

At the meeting, we will also report on the affairs of G-III, and a discussion period will be provided for questions and comments of general interest to stockholders.

We look forward to greeting personally those of you who are able to be present at the meeting. However, whether or not you are able to be with us at the meeting, it is important that your shares be represented. Accordingly, you are requested to sign, date and mail, at your earliest convenience, the enclosed proxy in the envelope provided for your use, or vote your shares by calling the telephone number or visiting the website specified on your proxy card or voting instruction form.

Thank you for your cooperation.

 

 

 

Very truly yours,

 

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Morris Goldfarb

 

Chief Executive Officer

 

May 7, 2020

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Picture 59

 

G-III APPAREL GROUP, LTD.

512 SEVENTH AVENUE

NEW YORK, NEW YORK 10018

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “Annual Meeting”) of G-III Apparel Group, Ltd. will be held on:

 

 

 

 

 

 

 

Picture 27

 

 

Thursday,
June 11, 2020

 

Picture 228870

 

 

10:00 a.m., New York time

 

Picture 228871

 

 

The offices of Norton Rose Fulbright US LLP

1301 Avenue of the Americas

30th Floor

New York, New York 10019

 

 

For the following purposes:

 

 

1

To elect eleven directors to serve on our Board of Directors for the ensuing year,

2

To hold an advisory and non-binding vote on the compensation of our named executive officers,

3

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2021 and

4

To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.

 

Picture 228879 Only stockholders of record at the close of business on April 20, 2020 will be entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

 

As part of our concern regarding the health and safety of our stockholders, directors, officers, employees, meeting attendees and the general public in light of the current COVID-19 outbreak, we are planning for the possibility that the Annual Meeting may be held solely or in part by means of a “virtual” meeting instead of a physical meeting. There is also the possibility that we may delay, postpone or adjourn the Annual Meeting, including changing the time, location or date of the Annual Meeting.  If we take any of these steps, we will provide you reasonable advance notice via a press release and an SEC filing, as well as a posting on our website.

If we determine that it is necessary or appropriate to hold a virtual Annual Meeting, stockholders or their proxy holders would need to log into the virtual meeting website at https://web.lumiagm.com/273796646 in order to attend the virtual Annual Meeting. Further information about attending the virtual Annual Meeting, including how to demonstrate your ownership of our common stock as of the record date for the Annual Meeting, would be announced and instructions provided in advance of the meeting. Please note that you will only be able to access this website if we decide to hold a virtual Annual Meeting.

All stockholders are cordially invited to attend the Annual Meeting in person. However, whether or not you plan to attend the Annual Meeting in person, each stockholder is urged to complete, date and sign the enclosed form of proxy and return it promptly in the envelope provided, or vote your shares by calling the telephone number or visiting the website specified on your proxy card or voting instruction form.  No postage is required if the proxy is mailed in the United States. If you vote by telephone or internet, you do not need to mail back your proxy. Stockholders who attend the Annual Meeting may revoke their proxies and vote their shares in person.

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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on  June 11, 2020

The Proxy Statement and our 2019 Annual Report to Stockholders are available in the “Investors” section of our website at http://www.giii.com.

 

 

 

 

 

By Order of the Board of Directors

 

Picture 4

 

Wayne S. Miller

 

Secretary

New York, NY

 

May 7, 2020

 

 

 

Table of Contents

 

TABLE OF CONTENTS

1

PROXY STATEMENT

   

23

Risk Oversight

1

General Information

 

23

Leadership Structure of the Board

4

PROXY SUMMARY

 

24

Additional Corporate Governance Policies

4

Annual Meeting of Stockholders

 

26

CORPORATE SOCIAL RESPONSIBILITY

4

Business Information—About G-III

 

27

COMPENSATION DISCUSSION AND ANALYSIS

5

Our Business Performance in Fiscal 2020

 

27

CD&A Table of Contents

6

Strategic Initiatives

 

28

Executive Summary

7

Leadership Priorities in Fiscal 2020

 

35

Elements of Our Compensation Program—What We Pay and Why

9

Our Director Nominees

 

42

Other Compensation and Governance Programs, Policies and Considerations

10

Governance Highlights

 

43

How We Make Compensation Decisions

10

Stockholder Outreach

 

45

COMPENSATION COMMITTEE REPORT

11

Corporate Social Responsibility

 

46

EXECUTIVE COMPENSATION TABLES

11

Executive Compensation Highlights

 

57

CEO PAY RATIO

14

Our Performance Metrics and Why We Used Them

 

58

DIRECTOR COMPENSATION

16

BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN STOCKHOLDERS AND MANAGEMENT

 

60

PROPOSAL NO. 1 ELECTION OF DIRECTORS

18

Delinquent Section 16(a) Reports

 

64

PROPOSAL NO. 2 ADVISORY VOTE ON COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

19

CORPORATE GOVERNANCE

 

67

PROPOSAL NO. 3 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

19

Board of Directors

 

 

 

19

Audit Committee

 

68

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

20

Compensation Committee

 

69

STOCKHOLDER PROPOSALS

21

Nominating and Corporate Governance Committee

 

70

OTHER BUSINESS

22

Stockholder Communications

 

 

 

 

 

 

How to Vote in Advance

Your vote is important. Please vote as soon as possible by one of the methods shown below. Be sure to have your proxy card or voting instruction form in hand and follow the below instructions:

Picture 228886

By telephone – You can vote your shares by calling the number on your proxy card or voting instruction form

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By Internet – You can vote your shares online at the website shown on your proxy card or voting instruction form

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By mail – Complete, sign, date and return your proxy card or voting instruction form in the postage-paid envelope provided

 

 

 

 

 

 

2020 PROXY STATEMENT / i

 

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Picture 228855

 

G-III APPAREL GROUP, LTD.

512 SEVENTH AVENUE

NEW YORK, NEW YORK 10018

PROXY STATEMENT

General Information

This Proxy Statement (first mailed to stockholders on or about May 7, 2020) is furnished to the holders of common stock, par value $0.01 per share (“Common Stock”), of G-III Apparel Group, Ltd. (“G-III”) in connection with the solicitation by our Board of Directors of proxies for use at the Annual Meeting of Stockholders (the “Annual Meeting”), or at any adjournment thereof, pursuant to the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held on:

 

 

 

 

 

 

 

Picture 228893

 

 

Thursday,
June 11, 2020

 

Picture 228894

 

 

10:00 a.m., New York time

 

Picture 228895

 

 

The offices of Norton Rose Fulbright US LLP

1301 Avenue of the Americas

30th Floor

New York, New York 10019

 

 

As part of our concern regarding the health and safety of our stockholders, directors, officers, employees, meeting attendees and the general public in light of the current COVID-19 outbreak, we are planning for the possibility that the Annual Meeting may be held solely or in part by means of a “virtual” meeting instead of a physical meeting. There is also the possibility that we may delay, postpone or adjourn the Annual Meeting, including changing the time, location or date of the Annual Meeting.  If we take any of these steps, we will provide you reasonable advance notice via a press release and an SEC filing, as well as a posting on our website.

If we determine that it is necessary or appropriate to hold a virtual Annual Meeting, stockholders or their proxy holders would need to log into the virtual meeting website at https://web.lumiagm.com/273796646 in order to attend the virtual Annual Meeting. Further information about attending the virtual Annual Meeting, including how to demonstrate your ownership of our common stock as of the record date for the Annual Meeting, would be announced and instructions provided in advance of the meeting. Please note that you will only be able to access this website if we decide to hold a virtual Annual Meeting.

It is proposed that, at the Annual Meeting, we:

 

 

1

Elect eleven directors to serve on our Board of Directors for the ensuing year,

2

Hold an advisory and non-binding vote on the compensation of our named executive officers (“Named Executive Officers” or “NEOs”) and

3

Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2021.

 

Management currently is not aware of any other matters that will come before the Annual Meeting. If any other matters properly come before the Annual Meeting, the persons designated as proxies intend to vote in accordance with their best judgment on such matters. Proxies for use at the Annual Meeting are being solicited by our Board of Directors. Proxies will be solicited chiefly by mail; however, certain of our officers, directors, employees and agents, none of whom will receive additional compensation therefor, may solicit proxies by telephone or other personal contact. We will bear the cost of the

 

 

 

 

2020 PROXY STATEMENT / 1

 

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Proxy Statement

solicitation of the proxies, including postage, printing and handling, and will reimburse the reasonable expenses of brokerage firms and others for forwarding material to beneficial owners of shares of Common Stock.

REVOCABILITY AND VOTING OF PROXY

A form of proxy for use at the Annual Meeting and a return envelope for the proxy are enclosed, or you may vote your shares by calling the telephone number or visiting the website specified on your proxy card or voting instruction form. If you vote by telephone or internet, you do not need to mail back your proxy. Stockholders may revoke the authority granted by their execution of a proxy at any time prior to the effective exercise of the powers conferred by that proxy, by filing with the Secretary of G-III a written notice of revocation or a duly executed proxy bearing a later date, or by voting in person at the Annual Meeting. Beneficial owners of our Common Stock should contact their bank, brokerage firm or other custodian, nominee, or fiduciary if they wish to revoke their proxy.

Shares of Common Stock represented by executed and unrevoked proxies will be voted in accordance with the instructions specified in such proxies. If no instructions are given, the proxies intend to vote the shares represented thereby:

(i)

“FOR”  the election of each of the eleven nominees for director as shown on the form of proxy,

(ii)

“FOR”  approval of the compensation of our Named Executive Officers,

(iii)

“FOR”  the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2021 and

(iv)

in accordance with their best judgment on any other matters which may properly come before the meeting.

RECORD DATE AND VOTING RIGHTS

On  April 20, 2020, there were 48,051,248 shares of Common Stock outstanding (excluding shares held in treasury). Each of these shares is entitled to one vote upon each of the matters to be presented at the Annual Meeting. Only stockholders of record at the close of business on April 20, 2020 are entitled to notice of and to vote at the Annual Meeting or any adjournment thereof.

The quorum requirement for holding the Annual Meeting and transacting business is a majority of the outstanding shares entitled to be voted at the Annual Meeting. The shares may be present in person or represented by proxy at the Annual Meeting. Abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum.

A “broker non-vote” occurs when shares held by a broker, bank, or other nominee in “street name” for a beneficial owner are not voted with respect to a particular proposal because the broker, bank, or other nominee (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares with respect to that particular proposal. Under current New York Stock Exchange rules, brokers have discretionary voting power with respect to the proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 31, 2021, but will not be authorized to vote with respect to the (i) election of our eleven nominees for director or (ii) advisory vote on the compensation of our Named Executive Officers, unless you provide voting instructions to your broker.

The affirmative vote of the holders of a plurality of the shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the election of directors. The eleven nominees receiving the highest number of affirmative votes of the shares present in person or represented by proxy and entitled to vote for them shall be elected as directors; provided, however, that pursuant to our Director Selection and Qualification Standards and Resignation Policy, any nominee for director in this uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election must tender a written resignation to the Board. The Nominating and Corporate Governance Committee and the Board of Directors will consider the resignation and determine whether or not to accept the resignation.

Picture 34 See “Corporate Governance—Additional Corporate Governance Policies—Director Selection and Qualification Standards and Resignation Policy” for a more complete description of the application of this Policy.

 

 

 

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Proxy Statement

The affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required to decide the other matters to be voted on at the Annual Meeting.

You may vote “FOR” or “VOTE WITHHELD” with respect to each or all of the director nominees. If you elect not to vote on the election of directors, this will not have any effect on the election of directors. In tabulating the voting results for the election of directors, only “FOR” and “VOTE WITHHELD” votes are counted.

You may vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to the proposal to approve, on an advisory basis, the compensation of our Named Executive Officers and the proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm. If you elect to abstain from voting on any of these proposals, the abstention will have the same effect as an “AGAINST” vote with respect to such proposal.

If you sign and return your accompanying proxy card without giving specific voting instructions, your shares will be voted as recommended by our Board and in accordance with the discretion of the persons named on the accompanying proxy card with respect to any other matters to be voted upon at the Annual Meeting. If you are a beneficial holder and do not return a voting instruction form, your broker may not vote on any of the matters to be presented at the Annual Meeting.

 

 

 

 

 

 

2020 PROXY STATEMENT / 3

 

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PROXY SUMMARY

This summary highlights information on the proposals that require your vote at the Annual Meeting, as well as information on our business, our Board of Directors and our corporate governance structure. This summary does not contain all of the information that you should consider before voting and we ask that you read the entire Proxy Statement carefully. As used in the Proxy Statement, “G-III,” “our company” and “we” refer to G-III Apparel Group, Ltd. and its subsidiaries.

Annual Meeting of Stockholders

 

Proposals That Require Your Vote

 

Picture 229248

Date and Time

June 11, 2020,
10:00 a.m. New York time

Proposal

Board Vote
Recommendation

More Information

1

Annual election of 11 directors

Picture 228901FOR each
Nominee

Page 59

 

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Place

The offices of Norton Rose Fulbright US LLP

1301 Avenue of the Americas, 30th Floor

New York, New York 10019

(See page 1 for a discussion of the possibility of our holding, with reasonable prior notice, a virtual Annual Meeting in lieu of a physical meeting)

2

Advisory vote on the compensation of our Named Executive Officers

Picture 228903FOR

Page 63

3

Ratification of appointment of independent registered public accounting firm

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Page 66

 

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Availability of Proxy Materials

The Proxy Statement and our 2019 Annual Report to Stockholders are available in the “Investors” section of our website at http://www.giii.com.

Business InformationAbout G-III

G-III 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.

 

Under the leadership of Morris Goldfarb and a seasoned executive team with a long track record of delivering strong returns to stockholders, we have evolved from a small leather apparel manufacturer to the diversified apparel company we are today. G-III has a substantial portfolio of more than 30 licensed and proprietary brands, anchored by five global power brands: DKNY,  Donna Karan,  Calvin Klein,  Tommy Hilfiger and Karl Lagerfeld Paris.

 

We are not only licensees, but also brand owners, and we distribute our products through multiple brick and mortar and online channels. These brands are complementary, and we expect continued growth from our largest brand, Calvin Klein, as well as more significant growth from our other brands including DKNY,  Donna Karan,  Tommy Hilfiger and Karl Lagerfeld Paris.

 

 

 

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Proxy Summary

Our Business Performance in Fiscal 2020

 

 

 

 

 

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Fiscal 2020 stands out
as G-III’s best year ever.

 

 

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We closed our fiscal year with record-breaking results for a second consecutive year:

  Net sales                •  Net income

•   Earnings per share

 

 

Our performance in fiscal 2020 reflects continued growth across our portfolio of brands.

 

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Diluted earnings per share includes (i) non-cash imputed interest expense of $5.4 million in fiscal 2020 and $5.0 million in fiscal 2019 related to the note issued to seller (the "Seller Note") as part of the consideration for the acquisition of Donna Karan International, (ii) asset impairments primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores, net of gain on lease terminations, of $19.4 million in fiscal 2020 and $2.8 million in fiscal 2019 and (iii) a non-cash income tax gain of $6.7 million in fiscal 2020 primarily from foreign tax rate changes. The aggregate net effect of these exclusions was equal to $0.25 per diluted share in fiscal 2020 and $0.11 per diluted share in fiscal 2019.

 

 

 

 

 

2020 PROXY STATEMENT / 5

 

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Proxy Summary

Strategic Initiatives

We are focused on the following strategic initiatives, which we believe are critical to our long-term success:

·

Owning Brands. We now own a portfolio of proprietary brands, including DKNY,  Donna Karan,  VilebrequinEliza J, Jessica Howard, G.H. Bass and Andrew Marc. Owning our own brands is advantageous to us for several reasons:

We can realize significantly higher operating margins because we are not required to pay licensing fees on sales by us of our proprietary products and can also generate licensing revenues (which have no related cost of goods sold) for classes of products not manufactured by us.

There are no channel restrictions, permitting us to market our products internationally, and to utilize a variety of different distribution channels, including online and off-price channels.

We are able to license our proprietary brands in new categories and geographies to best in class licensees.

We are able to build equity in these brands to benefit the long-term interests of our stockholders.

·

Focusing on Our Five Global Power Brands. While we sell products under more than 30 licensed and proprietary brands, five global power brands anchor our business: DKNY,  Donna KaranCalvin Klein,  Tommy Hilfiger and Karl Lagerfeld Paris. Each of these brands has substantial name recognition and is well-known in the marketplace. We believe each brand also provides us with significant growth opportunities. We have leveraged the strength of our power brands to become a supplier of choice in a diversified range of product categories. This year, we expanded our expertise into the denim category and launched our first Calvin Klein Jeans denim collection during our third quarter of fiscal 2020. We expect to launch our Tommy Hilfiger Jeans and DKNY Jeans denim collections in fiscal 2021. We believe that our ability to add new product categories to our portfolio is one of our core competencies and that denim will provide another area of growth for us.

·

Expanding Our International Business.  We continue to expand our international business and enter new markets worldwide. We believe that the international sales and profit opportunity is quite significant for our DKNY and Donna Karan businesses. We are expanding our DKNY business globally through our distribution partners in key regions. The key markets in which our DKNY merchandise is currently distributed include the Middle East, Russia, Indonesia, the Philippines, South East Asia and Korea, as well as in China where we operate through a joint venture. Continued growth, brand development and marketing in these key markets is critical to driving global brand recognition.

·

Increasing Online Business Opportunities. We are continuing to make changes to our business to address the additional challenges and opportunities created by the evolving role of the online marketplace in the retail sector and expect to increase the sale of our products in an omni-channel environment. We are investing in digital personnel, marketing, logistics, planning and distribution. We believe that consumers are increasingly engaging with brands through online channels, and that this trend will continue to grow in the coming years. The five global power brands that serve as the anchor of our business position us to be the direct beneficiaries of this trend, whether by continuing to leverage our partnerships with the online businesses operated by our licensors and major retailers to facilitate customer engagement or by building out our own online capabilities.

·

Reducing the Losses in Our Retail Business. We are working towards the restructuring of our retail operations, which would greatly reduce the number of stores we operate and the losses we are incurring. We are working diligently with our landlords and outside advisors with a view to closing a significant number of stores in order to reshape and right-size our retail operations. Our ongoing plan for our retail business focuses on the operations and growth of our DKNY and Karl Lagerfeld Paris stores, as well as our e-commerce business. Our plan is based on the assumed continued strength of the DKNY and Karl Lagerfeld brands, improved store productivity, changes in planning and allocation and improvements in gross margin and payroll leverage.

 

 

 

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Proxy Summary

Leadership Priorities in Fiscal 2020

USING OUR COMPETITIVE ADVANTAGES TO DRIVE BUSINESS PERFORMANCE

In fiscal 2020, G-III continued its efforts to drive growth. We are harnessing our competitive strengths to drive our strategic initiatives described above.

Picture 6

 

DONNA KARAN INTERNATIONAL

The ongoing development of the Donna Karan International (“DKI”) businesses serves as a pillar of our strategic efforts. The acquisition of DKI added two proprietary power brands to our growing portfolio and the ability to expand our footprint globally, while enabling us to compete more effectively in omni-channel retail. The acquisition of DKI fit squarely into our strategy to diversify and expand our business and to increase our ownership of brands. We believe that DKNY and Donna Karan are two of the most iconic and recognizable power brands and that we are well positioned to unlock their potential, resulting in a much bigger opportunity than their previous management had realized. We are focusing on the expansion of the DKNY brand, while continuing to re-establish Donna Karan and other associated brands. We are leveraging our demonstrated ability to drive organic growth and develop talent throughout our company to maximize the potential of the DKNY and Donna Karan brands.

In fiscal 2018 and fiscal 2019, we restructured and repositioned the DKNY and Donna Karan brands.  We re-launched the DKNY apparel line and also re-launched Donna Karan as an aspirational luxury brand that is priced above DKNY and targeted to fine department stores globally. These steps began paying off in the second half of fiscal 2018 and through fiscal 2020. Our strategy is for DKNY and Donna Karan to be more accessible brands, both designed and priced to reach a wider range of customers. We believe there is untapped global licensing and distribution potential for these brands and intend to grow royalty streams in the DKNY and Donna Karan businesses through expansion of additional categories with existing licensees, as well as new categories with new licensees. We are committed to making DKNY the premier fashion and lifestyle brand. We expect to launch our DKNY Jeans denim collection during fiscal 2021.

CALVIN KLEIN

We have continually expanded our relationship with Calvin Klein, our most important license relationship representing over $1 billion of our sales in fiscal 2020. Initially, we had licenses for Calvin Klein men’s and women’s outerwear. We subsequently added licenses for women’s suits, dresses, women’s performance wear, women’s better sportswear, men’s and women’s swimwear, women’s handbags and small leather goods and luggage. In June 2019, we expanded our relationship with Calvin Klein by entering into a license agreement with an initial term of five years for the design, production

 

 

 

 

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Proxy Summary

and wholesale distribution of Calvin Klein Jeans women’s jeanswear in the United States and Canada. Shipments of our first Calvin Klein Jeans women’s jeanswear line began during our third quarter of fiscal 2020.

TOMMY HILFIGER AND KARL LAGERFELD PARIS

We also have a significant relationship with Tommy Hilfiger, with whom we have a multi-category womenswear license in the United States and Canada. This license for women’s sportswear, dresses, suit separates, performance and denim is in addition to our Tommy Hilfiger men’s and women’s outerwear license and Tommy Hilfiger luggage license, both also in the United States and Canada. We expect to launch our Tommy Hilfiger Jeans denim collection in fiscal 2021.

We own a 49% interest in a joint venture that owns the trademarks for the Karl Lagerfeld brand in North America. As part of that relationship, we have a long-term license agreement with the joint venture for the Karl Lagerfeld Paris brand in North America, pursuant to which we produce and distribute women’s apparel, women’s footwear, women’s handbags, men’s apparel, men’s footwear and luggage under the Karl Lagerfeld Paris brand.

OUR ABILITY TO PARTNER

We believe that retailers today are seeking resources with the size and power to partner effectively on all aspects of the supply chain, from design, sourcing and quality control to logistics and warehousing. We believe that G-III is a partner of choice in these endeavors, and that we are able to capitalize on our competitive strengths to expand our position as an all-season diversified apparel company.

 

 

 

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Proxy Summary

Our Director Nominees

Picture 228908

 

 

The Board of Directors recommends that stockholders vote FOR Proposal No. 1 to elect eleven directors to serve on our Board of Directors for the ensuing year.

 

 

Our director nominees are listed below.

Name and

Primary Occupation

Age

Director
since

Independent

Committee and Board Roles

Audit

Compensation

Nominating &
Corporate
Governance

Morris Goldfarb Picture 228909

Chairman & CEO, G-III

69

1974

 

 

 

 

Sammy Aaron

Vice Chairman and President, G-III

60

2005

 

 

 

 

Thomas J. Brosig

President, Nikki Beach Worldwide and President and CEO, Penrod’s Restaurant Group

70

1992

Picture 228912

Picture 5

 

Picture 228923

Alan Feller

Retired CFO, G-III

78

1996

Picture 26

Picture 228921Picture 19

 

 

Jeffrey Goldfarb

Executive Vice President, G-III

43

2009

 

 

 

 

Victor Herrero

Former Chief Executive Officer of Guess?, Inc.

51

2019

Picture 229453

 

 

 

Jeanette Nostra

Senior Advisor, G-III

68

2013

 

 

 

 

Laura Pomerantz

Vice Chairman and Head of Strategic Accounts, Cushman & Wakefield

72

2005

Picture 15

 

 

Willem van Bokhorst

Managing Partner, STvB Advocaten

74

1989

Picture 228916

 

 

Cheryl Vitali

Global President, US Luxe Brands,  L’Oréal

59

2011

Picture 228917

 

 

Richard White Picture 228911

CEO, Aeolus Capital Group LLC

66

2003

Picture 228918

Picture 228919

Picture 228922

Meetings in Fiscal 2020

 

6

6

1

 

 

 

 

 

 


Picture 228924 Committee Chair    

Member

Picture 228925 Financial Expert   

Picture 228926 Chairman of the Board       

Picture 228927 Lead Independent Director

 

 

 

 

 

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Governance Highlights

G-III has established strong policies that follow best practices for corporate governance:

 

 

 

 

Picture 229139

Annual election of directors

Picture 229146

Robust stock ownership guidelines for executive officers and directors

Picture 229140

Experienced Lead Independent Director

Picture 229147

Anti-pledging and anti-hedging policies

Picture 229141

Regular executive sessions of independent directors

Picture 229148

Clawback policy for executive compensation in the event of financial restatements

Picture 229142

Board committees composed entirely of independent directors

Picture 229149

Established standards for director selection, independence and qualifications

Picture 229143

Extensive stockholder outreach led by our Lead Independent Director and COO to obtain direct stockholder feedback

Picture 229150

Director resignation policy if a nominee to the Board of Directors fails to receive majority support

Picture 229145

Enhanced disclosure of environmental, social and governance initiatives

 

 

 

Stockholder Outreach

G-III values the opinions of its stockholders and its Board and management communicates with stockholders regularly through multiple channels. These include quarterly earnings calls, our SEC filings, investor conferences and our website at http://www.giii.com.

During fiscal 2020, we reached out to 35 stockholders who owned an aggregate of 83.1% of our shares and met with 22 stockholders who owned an aggregate of 64.8% of our shares and the major proxy advisory services. The outreach was led by our Lead Independent Director, who is also Chairman of our Compensation Committee. Our Chief Operating Officer, our Vice President, Investor Relations, and the Compensation Committee’s independent compensation consultant also participated in meetings with investors. During each meeting, we presented an update on our business, our preliminary thinking on changes to our compensation program for fiscal 2020 that we expected to make and our environmental, social and governance initiatives, which we refer to as Corporate Social Responsibility. We actively solicited feedback from our stockholders and received valuable input on each of these topics.

In developing our long-term incentive program for fiscal 2020, the Compensation Committee factored stockholder input into its redesign of our long-term incentive program.

·

Effected a comprehensive redesign of our long-term incentive program, replacing annual grants of performance-based restricted stock units (“PRSUs”) with performance share unit (“PSU”) grants. The first PSU grants under the new program were made in April 2019.

·

Incorporated a longer, three-year performance period, plus an additional two-year post-vesting holding period for shares earned pursuant to the PSU grants to our Named Executive Officers, as well as new performance metrics and rigorous financial targets with no re-testing features.

 

From February to April 2020, we continued to engage with our stockholders, building on the progress made during the prior year. We reached out to 38 stockholders who owned an aggregate of 90.9% of our shares and met with 19 stockholders who owned an aggregate of 59.1% of our shares. We updated our stockholders on the impact the COVID-19 pandemic was having on our wholesale business given that our retail partners largely closed their stores in the spring and our own retail stores closed in March. We also continued to provide updates on our executive compensation program, our progress on board refreshment and diversity and our Corporate Social Responsibility initiatives.

Picture 229151 More information on our stockholder outreach is provided on page 32.

 

 

 

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Corporate Social Responsibility

Our business has been built on family values and the belief that with hard work, conviction and a commitment to the greater good, we could redefine what is possible. By maintaining a commitment to our principles of Engage our People, Protect our Environment and Invest in Our Communities, over the past year we have taken meaningful steps to ensure that our business continues to drive value for all of our stakeholders, while also making a positive impact on our communities and the world around us.

Engage Our People - Our greatest asset is our talented employee base who come to work every day around the globe with incredible dedication, drive, compassion and care. Our focus remains on further enhancing the working environment for our employees and taking steps to ensure that G-III remains a great company to work for. We recognize that insights and ideas from a diverse range of backgrounds will better position us for the future and a significant portion of the top 34 management positions are currently occupied by women. We continue to benchmark our programs and practices to our peer group and provide recommendations where appropriate. Finally, our commitment to Board diversity has not waivered, and we are actively exploring opportunities for new perspectives that can enhance our already strong Director group.

As our sourcing and licensing footprints continue to expand, we have taken steps to foster sustainability throughout the organization. As we expand our supplier relationships beyond China, we are committed to scaling our social and factory compliance programs accordingly. We are also working to formalize and enhance our initiatives and laying the foundation for future programs. We lead multi-brand sustainability training sessions and pilot shared audit programs with our key business partners that are designed to allow us to reach more stakeholders with greater efficiency. We initiated a program to develop additional resources in the field by mentoring interns on sustainability matters.  

·

Protect Our Environment - Our efforts to reduce environmental impacts in fiscal 2020 spanned both immediate and longer-term projects that we believe will lead to meaningful reductions in waste and energy usage. We implemented several projects, including installing LED lighting at our largest warehouse and as part of our New York office renovations, as well as conducting an office-wide energy assessment to better understand our footprint and incorporate solutions to cut our energy use. We provided reusable coffee mugs and water bottles to employees and started various recycling programs. This momentum also extends to our key divisions, where we are now piloting the use of lower impact materials in our products.

·

Invest in Our Communities – Organization-wide, we continued our deep levels of support for the Ronald McDonald House of New York, celebrated the 10th year of G-III and DKNY’s partnership with City Harvest, and also worked to mentor students at the Fashion Institute of Technology on business and sustainability insights. We worked with Women In Need (WIN) to provide back-to-school packed backpacks and holiday gifts. However, our commitment to community extends far beyond the reaches of New York with our support of WIN’s sponsorship of International Women’s Day, as well as supporting My Friend’s Place in their efforts to help homeless youth. G-III continued its strong financial backing for important organizations including the Hetrick-Martin Institute and DeliveringGood. In this time of the COVID-19 pandemic, we have provided more than 35,000 masks and fabric for producing masks, protective gowns and shields to medical facilities and first responders in the United States. In addition, there are countless other examples of G-III employees around the world taking time out of their schedules to volunteer with numerous other groups that are making a difference.

We are committed to embedding these principles into our business and better engaging our employees and those who work in our contracted factories, protecting our environment and supporting our communities while accepting our responsibility to be a good corporate citizen.

Executive Compensation Highlights

More than 90% of our Chairman and CEO’s compensation and more than 80% of the average compensation of our other Named Executive Officers (“NEOs”) in fiscal 2020 consisted of at-risk annual and long-term incentive compensation. The annual cash incentives earned by our Chairman and CEO and our Vice Chairman and President are contractually guaranteed and reflect our record-breaking results in fiscal 2020. Achieving excellent results in the short-term enhances stockholder value over the long-term. While equity incentives were weighted less heavily in fiscal 2020,  our meaningful

 

 

 

 

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grants of performance-based equity in fiscal 2020 help us to retain our executives and align their interests with those of our stockholders.

Chairman and CEO Compensation Mix

 

Other NEOs Compensation Mix

Picture 10

Annual cash incentives for fiscal 2020 reflect our company’s record-breaking financial results. The annual cash incentive formulas for Mr. Goldfarb and Mr. Aaron are contractual and have previously been modified twice as a result of discussions between the Compensation Committee and Mr. Goldfarb to reduce awards as a result of Compensation Committee analysis, advice of the Compensation Committee’s compensation consultant and a desire to address concerns raised by stockholders. Mr. Goldfarb and Mr. Aaron voluntarily accepted these modifications even though they were under no obligation to do so. Annual cash incentives to Mr. Goldfarb and Mr. Aaron for fiscal 2020 paid out at 80% of target because our pre-tax income was lower than forecast by 19%.

 

Annual cash incentives to the remaining NEOs decreased by 10% compared to the prior year. The cash incentive programs are designed to recognize and reward short-term performance in the volatile fashion industry, with payouts directly aligned to annual profitability.

Picture 229153 More information is provided in the “Compensation Discussion and Analysis” beginning on page 27 and the “Executive Compensation Tables” beginning on page 45.

 

 

 

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Proxy Summary

The following table depicts how the Chairman and CEO’s  annual cash incentive has tracked G‑III’s annual pre-tax income.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ending

 

  

  

  

1/31/2016

  

  

1/31/2017

  

  

1/31/2018

  

  

1/31/2019

  

  

1/31/2020

 

 

(in thousands)

Annual cash incentive

 

 

 

$11,306

 

 

$1,410

 

 

$6,285

 

 

$12,419

 

 

$11,314

Pre-tax income

 

 

 

$179,133

 

 

$77,762

 

 

$110,049

 

 

$183,830

 

 

$182,098

 

Picture 9

After obtaining extensive stockholder feedback during the outreach process, PSU grants replaced the prior program of PRSUs beginning with the grants made in April 2019 for fiscal 2020. The features of the fiscal 2020 PSU grants were intended to provide a powerful incentive to our NEOs to create sustained long-term stockholder value. We believe that the design of the PSUs directly reflects critical features identified as important by our stockholders during our fiscal 2020 outreach: use of a longer, three-year performance period, an additional two-year post-vesting holding period, new performance metrics and rigorous financial targets with no re-testing features. Highlights of these grants are provided below:

·

The first three-year performance period spans cumulative performance for fiscal 2020, 2021 and 2022;

·

Our metrics consist of three-year cumulative adjusted earnings before interest and taxes (“Adjusted EBIT”) (75% weighting) and three-year average return on invested capital (“ROIC”) (25% weighting);

·

Rigorous financial metrics were established by the Compensation Committee for the performance period.

o

The target Adjusted EBIT metric is based on achieving meaningful annual compounded growth over the three-year performance period and the maximum Adjusted EBIT metric requires a doubling of this annual compounded growth rate. 

o

Satisfaction of the ROIC metric is based on achieving a substantial improvement in average ROIC over the three-year performance period compared to the three-year period ended in fiscal 2019.

·

No re-testing of metrics is allowed—PSUs are either earned or forfeited based on cumulative performance during the three-year performance period;

·

Earned PSUs vest on June 15, 2022, after the completion of the three-year performance period;

 

 

 

 

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·

Our Named Executive Officers will be restricted from selling any shares that vest (other than shares sold or net shares settled to cover related taxes) until June 24, 2024, an additional two years, for a total performance/holding period that spans five years; and

·

The number of PSUs earned could increase up to 150% based on exceeding performance targets by specified amounts and could decrease to 50% if results fall below performance targets by specified amounts. None of the PSUs would vest if the results achieved are less than the threshold performance targets and no more than 150% of the PSUs would vest even if the results achieved exceed the maximum performance targets.

Our Performance Metrics For Fiscal 2020 and Why We Used Them

 

 

Annual Cash Incentive: Pre-tax income metric

    This metric is a fundamental measure of G-III’s success in the short-term, aligning annual cash incentives paid to Messrs. Goldfarb and Aaron directly with profitability.

 

PSUs: Adjusted EBIT metric

    EBIT measures our ability to grow profitably over time.

 

    Various pre-established adjustments will be made to GAAP results when determining performance to align incentives with performance within management’s control.

 

PSUs: ROIC metric

    ROIC measures our success in allocating capital to invest for profitable growth in our portfolio of brands, make successful acquisitions and manage our working capital efficiently.

 

    Similar pre-established adjustments will be applied to GAAP results when calculating ROIC.

 

 

Impact of COVID-19 On Our Compensation Program For Fiscal 2021

The determination of executive compensation for fiscal 2020 was based on our record-breaking results for fiscal 2019 and 2020. The impact of the COVID-19 pandemic is expected to have a material adverse effect on our business and results of operations in fiscal 2021. The Compensation Committee will continue to consider the impact of this pandemic on our business, results of operations and financial condition in evaluating fiscal 2021 compensation decisions. The effects of the pandemic have already impacted the compensation of our executive officers, employees and directors.

 

·

Our Chief Executive Officer and Vice Chairman voluntarily agreed to temporarily reduce their annual salaries, effective March 30, 2020. Morris Goldfarb and Sammy Aaron agreed to receive no salary other than payment by G-III of their employee contributions with respect to medical benefits and long-term disability.

·

Our other NEOs, Wayne Miller, Neal Nackman and Jeffrey Goldfarb, each voluntarily agreed to temporarily reduce their annual salaries by 40%, also effective March 30, 2020.

·

We anticipate that the business impacts of the COVID-19 pandemic will result in significantly reduced annual cash incentive payments for fiscal 2021.

·

As a result of the anticipated adverse impact of the COVID-19 pandemic on our earnings and returns on invested capital, we believe that last year’s PSU grants may not vest during their 3-year measurement period. Other unvested PRSU grants may also not satisfy their performance vesting conditions. Accordingly, we are concerned about retention of management and senior executives.

·

To provide additional retention value and a greater degree of certainty during a period of extreme market volatility, in April 2020, our Compensation Committee granted time-based restricted stock units (“RSUs”) with a 3-year cliff vesting period to our NEOs.

·

We expect to return to our practice of granting PSUs in fiscal 2022, but the Compensation Committee intends to maintain flexibility to evaluate business conditions next year and determine compensation accordingly.

·

Our non-employee directors receive an annual RSU grant with a value of $100,000 each year on the date of the Annual Meeting. To respond to recent extreme volatility in the price of our Common Stock and limit the potential number of shares granted, the Compensation Committee approved an RSU grant valued at $100,000 resulting in 

 

 

 

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10,183 RSUs for each non-employee director, reflecting the same price used to determine the grant date fair value of the RSUs granted to our NEOs.  The Compensation Committee also made annual RSU grants to the Lead Independent Director, Chair of the Audit Committee and Chair of the Nominating and Corporate Governance Committee on a similar basis. All of these RSU grants vest over a three-year period and are subject to the election of each person granted RSUs as a director at the Annual Meeting.

 

Picture 229056

 

 

Based on the information in this “Proxy Summary,” as well as the more detailed information contained in the “Compensation Discussion and Analysis,” our Board and our Compensation Committee strongly believe that our stockholders should vote FOR Proposal No. 2—Advisory Vote on Compensation of our Named Executive Officers, commonly known as the “Say on Pay” proposal.

 

 

 

 

 

Picture 229154 More information is provided in the “Compensation Discussion and Analysis” beginning on page 27 and the “Executive Compensation Tables” beginning on page 45.

 

 

 

 

 

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BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN STOCKHOLDERS AND MANAGEMENT

The following table sets forth information as of March 23, 2020 (except as otherwise noted in the footnotes) regarding the beneficial ownership of our Common Stock of: (i) each director; (ii) each person known by us to own beneficially more than five percent of our outstanding Common Stock; (iii) each executive officer named in the Fiscal 2020 Summary Compensation Table; and (iv) all directors and executive officers as a group. Except as otherwise specified, the named beneficial owner has the sole voting and investment power over the shares listed. The percentage of ownership is based on 48,009,346 shares of Common Stock outstanding (excluding treasury shares) as of March 23, 2020 (except as otherwise noted in the footnotes). Unless otherwise indicated in the table below, each beneficial owner has an address in care of our principal executive offices at 512 Seventh Avenue, New York, New York 10018.

 

 

 

 

 

 

 

 

    

Amount and Nature of

    

 

 

 

 

 

Beneficial Ownership of

 

 

Percentage of

 

Name and Address of Beneficial Owner

 

Common Stock

 

 

Common Stock

 

Morris Goldfarb

 

3,697,867

(1)

 

7.7%

 

Sammy Aaron

 

162,619

(2)

 

*

 

Thomas J. Brosig

 

18,588

(3)

 

*

 

Alan Feller

 

11,194

(4)

 

*

 

Jeffrey Goldfarb

 

357,606

(5)

 

*

 

Victor Herrero

 

 —

 

 

 —

 

Jeanette Nostra

 

15,065

(6)

 

*

 

Laura Pomerantz

 

40,058

(7)

 

*

 

Willem van Bokhorst

 

50,000

(8)

 

*

 

Cheryl Vitali

 

24,774

(9)

 

*

 

Richard White

 

67,911

(10)

 

*

 

BlackRock, Inc.

 

 

 

 

 

 

55 East 52nd Street

 

 

 

 

 

 

New York, NY 10055

 

6,977,144

(11)

 

14.5%

 

The Vanguard Group

 

 

 

 

 

 

100 Vanguard Blvd.

 

 

 

 

 

 

Malvern, PA 19355

 

4,303,360

(12)

 

9.0%

 

Dimensional Fund Advisors LP

 

 

 

 

 

 

Building One

 

 

 

 

 

 

6300 Bee Cave Road

 

 

 

 

 

 

Austin, Texas 78746

 

4,068,946

(13)

 

8.2%

 

Cramer Rosenthal McGlynn LLC

 

 

 

 

 

 

520 Madison Ave.

 

 

 

 

 

 

New York, NY 100122

 

2,734,387

(14)

 

5.7%

 

Wayne S. Miller

 

65,231

(15)

 

*

 

Neal S. Nackman

 

45,655

(16)

 

*

 

All directors and executive officers as a group (13 persons)

 

4,556,568

(17)

 

9.5%

 

 

*     Less than one percent

 

(1)

Includes (i) 166,750 shares of Common Stock held by Goldfarb Family Partners, L.L.C., of which Mr. Goldfarb is the sole Manager; (ii) 76,175 shares of Common Stock owned by The Morris and Arlene Goldfarb Family Foundation, Inc., of which Mr. Goldfarb is the President and Treasurer; (iii) 882,600 shares of Common Stock owned jointly by Mr. Goldfarb and his wife, Arlene Goldfarb; (iv) 29,666 shares of Common Stock owned by Arlene Goldfarb; (v) 200,000 shares of Common Stock held by The Morris Goldfarb 2012 Delaware Trust (Mr. Goldfarb serves as a member of the Trust Committee of the Trust, which directs the Trustee’s decisions as to voting and disposition of the shares held in the Trust); (vi) 200,000 shares of Common Stock held by The Arlene Goldfarb 2012 Delaware Trust (Arlene Goldfarb serves as a member of the Trust Committee of the Trust, which directs the Trustee’s decisions as to voting and disposition of the shares held in the Trust). The shares listed in the table also include 33,714 shares of Common Stock pursuant to PRSU awards, which will vest within 60 days of March 23, 2020. In addition to the shares listed in the table, Mr. Goldfarb has the right to receive (i) an aggregate of 88,082 shares of Common Stock pursuant to PRSU awards for which performance conditions have been satisfied, subject to the satisfaction of required time vesting periods; (ii) an aggregate of 103,287 shares of Common Stock pursuant to PRSU awards, subject to the satisfaction of performance conditions and required time vesting periods; and (iii) an aggregate of 111,665 shares of Common Stock pursuant to PSU awards, subject to the satisfaction of performance

 

 

 

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Beneficial Ownership of Common Stock by Certain Stockholders and Management

conditions and required time vesting periods. The number of shares earned pursuant to PSU awards could increase or decrease depending upon actual performance achieved relative to performance targets.

 

(2)

Includes 21,071 shares of Common Stock pursuant to PRSU awards, which will vest within 60 days of March 23, 2020. In addition to the shares listed in the table, Mr. Aaron has the right to receive (i) an aggregate of 111,659 shares of Common Stock pursuant to PRSU awards for which performance conditions have been satisfied, subject to the satisfaction of required time vesting periods; (ii) an aggregate of 79,451 shares of Common Stock pursuant to PRSU awards, subject to the satisfaction of performance conditions and required time vesting periods; and (iii) an aggregate of 74,443 shares of Common Stock pursuant to PSU awards, subject to the satisfaction of performance conditions and required time vesting periods. The number of shares earned pursuant to PSU awards could increase or decrease depending upon actual performance achieved relative to performance targets.

 

(3)

Includes 2,400 shares of Common Stock, which may be acquired upon the exercise of options that have vested within 60 days of March 23, 2020. In addition to the shares listed in the table, Mr. Brosig has the right to receive an aggregate of 7,438 shares of Common Stock pursuant to RSU awards, subject to the satisfaction of required time vesting periods.

 

(4)

In addition to the shares listed in the table, Mr. Feller has the right to receive an aggregate of 7,972 shares of Common Stock pursuant to RSU awards, subject to the satisfaction of required time vesting periods.

 

(5)

Includes (i) 70,663 shares of Common Stock held by Jeffrey and Stacey Goldfarb, Mr. Goldfarb’s wife, as joint tenants; (ii) 24,896 shares of Common Stock owned by the Amanda Julie Goldfarb Trust 2007 of which Mr. Goldfarb and his wife are co-trustees; and (iii) 2,200 shares of Common Stock owned by the Ryan Gabriel Goldfarb Trust 2009 of which Mr. Goldfarb and his wife are co-trustees. The shares listed in the table include 2,950 shares of Common Stock pursuant to PRSU awards, which will vest within 60 days of March 23, 2020. In addition to the shares listed in the table, Mr. Goldfarb has the right to receive (i) an aggregate of 22,020 shares of Common Stock pursuant to PRSU awards for which performance conditions have been satisfied, subject to the satisfaction of required time vesting periods; (ii) an aggregate of 26,483 shares of Common Stock pursuant to PRSU awards, subject to the satisfaction of performance conditions and required time vesting periods; and (iii) an aggregate of 29,312 shares of Common Stock pursuant to PSU awards, subject to the satisfaction of performance conditions and required time vesting periods. The number of shares earned pursuant to PSU awards could increase or decrease depending upon actual performance achieved relative to performance targets.

 

(6)

In addition to the shares listed in the table, Ms. Nostra has the right to receive an aggregate of 4,211 shares of Common Stock pursuant to PRSU awards for which performance conditions have been satisfied, subject to the satisfaction of required time vesting periods.

 

(7)

Includes 6,000 shares of Common Stock, which may be acquired upon the exercise of options that have vested within 60 days of March 23, 2020. In addition to the shares listed in the table, Ms. Pomerantz has the right to receive an aggregate of 6,636 shares of Common Stock pursuant to RSU awards, subject to the satisfaction of required time vesting periods.

 

(8)

In addition to the shares listed in the table, Mr. van Bokhorst has the right to receive an aggregate of 6,636 shares of Common Stock pursuant to RSU awards, subject to the satisfaction of required time vesting periods.

 

(9)

In addition to the shares listed in the table, Ms. Vitali has the right to receive an aggregate of 6,636 shares of Common Stock pursuant to RSU awards, subject to the satisfaction of required time vesting periods.

 

(10)

Includes (i) 1,268 shares of Common Stock owned by the Elizabeth White Grantor Trust, of which Mr. White is the trustee and over which he has investment control and (ii) 1,268 shares of Common Stock owned by the Alexandra White Grantor Trust, of which Mr. White is the trustee and over which he has investment control. The shares listed in the table includes 6,000 shares of Common Stock, which may be acquired upon the exercise of options that have vested within 60 days of March 23, 2020. In addition to the shares listed in the table, Mr. White has the right to receive an aggregate of 9,955 shares of Common Stock pursuant to RSU awards, subject to the satisfaction of required time vesting periods.

 

(11)

Information is derived from the Schedule 13G/A filed by BlackRock, Inc. (“BlackRock”) with the Securities and Exchange Commission on February 4, 2020. BlackRock is a parent holding company or control person in accordance with Exchange Act Rule 13d‑1(b)(1)(ii)(G) and reported sole voting power with respect to 6,814,608 of such shares and sole dispositive power with respect to 6,977,144 of such shares. The filing reported that such shares are beneficially owned by several BlackRock subsidiaries.

 

(12)

Information is derived from the Schedule 13G/A filed by The Vanguard Group, Inc. (“Vanguard”) with the Securities and Exchange Commission on February 12, 2020. Vanguard is an investment adviser in accordance with Exchange Act Rule 13d‑1(b)(1)(ii)(E) and reported sole voting power with respect to 42,701 of such shares, shared voting power with respect to 6,766 of such shares, sole dispositive power with respect to 4,259,963 of such shares and shared dispositive power with respect to 43,397 of such shares. The filing reported that Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 36,631 shares of Common Stock as a result of its serving as investment manager of collective trust accounts, and Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial owner of 12,836 shares of Common Stock as a result of serving as investment manager of Australian investment offerings.

 

 

 

 

 

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Beneficial Ownership of Common Stock by Certain Stockholders and Management

(13)

Information is derived from the Schedule 13G/A filed by Dimensional Fund Advisors LP (“DFA”) with the Securities and Exchange Commission on February 12, 2020. DFA is an investment advisor in accordance with Exchange Act Rule 13d‑1(b)(1)(ii)(E) and reported sole voting power with respect to 3,971,588 of such shares and sole dispositive power with respect to 4,068,946 of such shares. The filing reported that DFA is an investment adviser registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). All securities reported in this filing are owned by the Funds.

 

(14)

Information is derived from the Schedule 13G/A filed by Cramer Rosenthal McGlynn LLC (“Cramer”) with the Securities and Exchange Commission on February 13, 2020. Cramer is an investment adviser in accordance with Exchange Act Rule 13d‑1(b)(1)(ii)(E) and reported sole voting power with respect to 2,650,463 of such shares and sole dispositive power with respect to 2,734,387 of such shares.

 

(15)

Includes 4,636 shares of Common Stock pursuant to PRSU awards, which will vest within 60 days of March 23, 2020. In addition to the shares listed in the table, Mr. Miller has the right to receive (i) an aggregate of 44,041 shares of Common Stock pursuant to PRSU awards for which performance conditions have been satisfied, subject to the satisfaction of required time vesting periods, (ii) an aggregate of 52,967 shares of Common Stock pursuant to PRSU awards, subject to the satisfaction of performance conditions and required time vesting periods and (iii) an aggregate of 58,624 shares of Common Stock pursuant to PSU awards, subject to the satisfaction of performance conditions and required time vesting periods. The number of shares earned pursuant to PSU awards could increase or decrease depending upon actual performance achieved relative to performance targets.

 

(16)

Includes 1,686 shares of Common Stock pursuant to PRSU awards, which will vest within 60 days of March 23, 2020. In addition to the shares listed in the table, Mr. Nackman has the right to receive (i) an aggregate of 7,799 shares of Common Stock pursuant to PRSU awards for which performance conditions have been satisfied, subject to the satisfaction of required time vesting periods; (ii) an aggregate of 10,593 shares of Common Stock pursuant to PRSU awards, subject to the satisfaction of performance conditions and required time vesting periods; and (iii) an aggregate of 10,381 shares of Common Stock pursuant to PSU awards, subject to the satisfaction of performance conditions and required time vesting periods. The number of shares earned pursuant to PSU awards could increase or decrease depending upon actual performance achieved relative to performance targets.

 

(17)

Includes an aggregate of 14,400 shares of Common Stock, which may be acquired upon the exercise of options that have vested within 60 days of March 23, 2020 and an aggregate of 72,117 shares of Common Stock pursuant to PRSU awards, which will vest within 60 days of March 23, 2020. In addition to the shares listed in the table, all directors and officers as a group have the right to receive (i) an aggregate of 327,023 shares of Common Stock pursuant to PRSU and RSU awards for which applicable performance conditions have been satisfied, subject to the satisfaction of required time vesting periods; (ii) an aggregate of 272,781 shares of Common Stock pursuant to PRSU awards, subject to the satisfaction of performance conditions and required time vesting periods; and (iii) an aggregate of 284,425 shares of Common Stock pursuant to PSU awards, subject to the satisfaction of performance conditions and required time vesting periods. The number of shares earned pursuant to PSU awards could increase or decrease depending upon actual performance achieved relative to performance targets.

 

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires our officers and directors, as well as any person or entity who owns more than 10% of our Common Stock, to file with the Securities and Exchange Commission (the “SEC”) certain reports of ownership and changes in ownership of our securities. Officers, directors and stockholders who hold more than 10% of our outstanding Common Stock are required by the SEC to furnish us with copies of all required forms filed under Section 16(a). We typically prepare Section 16(a) forms on behalf of our officers and directors based on the information provided by them or available to us.

To our knowledge, our directors, officers and beneficial owners of more than ten percent of our Common Stock were in compliance with the reporting requirements of Section 16(a) under the Exchange Act during fiscal 2020, except that we inadvertently failed to timely file a Form 4 on behalf of Morris Goldfarb relating to stock purchased on June 13, 2019, and a Form 4 on behalf of Thomas Brosig, Alan Feller, Victor Herrero, Laura Pomerantz, Willem van Bokhorst, Cheryl Vitali and Richard White relating to their annual Board stock grant on June 13, 2019, due to a clerical issue with filing codes. G-III filed the Form 4’s on June 18, 2019.

 

 

 

 

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CORPORATE GOVERNANCE

Board of Directors

The Board of Directors has determined that Thomas Brosig, Alan Feller, Victor Herrero, Laura Pomerantz, Willem van Bokhorst, Cheryl Vitali and Richard White are independent directors.  The independent directors constitute a majority of the Board of Directors. In making its determination regarding the independence of the directors, the Board relied upon information provided by each of the directors and noted that each independent director meets the standards for independence set out in Nasdaq Listing Rule 5605(a)(2) and under the applicable rules and regulations of the SEC, and that there is no material business relationship between G-III and any independent director, including any business entity with which any independent director is affiliated.

The Board of Directors held four meetings during the fiscal year ended January 31, 2020. During the fiscal year ended January 31, 2020, each director attended all meetings of the Board of Directors (other than two directors who attended at least 75% of the meetings of the Board), and each director attended all meetings of committees of the Board on which he or she served. We do not have a formal policy regarding attendance by members of the Board of Directors at annual stockholders’ meetings. All of our directors attended the 2019 Annual Meeting of Stockholders.

Our Board of Directors has an Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each member of our Audit, Compensation and Nominating and Corporate Governance Committees has been determined by the Board of Directors to be “independent” within the meaning of Nasdaq Listing Rule 5605(a)(2). Each member of the Audit Committee is “independent” within the meaning of Nasdaq Listing Rule 5605(c)(2)(A) and under the applicable rules and regulations of the SEC regarding the independence of audit committee members. Each member of the Compensation Committee is “independent” within the meaning of Nasdaq Listing Rule 5605(d)(2)(A).

 

 

 

 

 

AUDIT COMMITTEE

Meetings during the fiscal year ended January 31, 2020:

6

 

    Alan Feller Picture 229062Picture 21

    Thomas Brosig Picture 229442

    Richard White Picture 20

Picture 229067 ALL MEMBERS OF THE AUDIT COMMITTEE ARE INDEPENDENT.

Responsibilities

The Audit Committee is responsible for, among other things:

Assisting the Board in monitoring:

(i)the integrity of our financial statements,

(ii)the qualifications and independence of our independent auditors,

(iii)the performance of our internal audit function and independent auditors, and

(iv)the compliance by us with legal and regulatory requirements.

The appointment, compensation and oversight of the work of G-III’s independent registered public accounting firm.

 

Qualifications

Picture 23 The Board has determined that each of Messrs. Feller, Brosig and White is an audit committee financial expert as such term is defined in the rules of the SEC.

 

Charter

A copy of the Audit Committee’s charter is available in the “Investors” section of our website at http://www.giii.com.

 

 

 

 

 

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COMPENSATION COMMITTEE

Meetings during the fiscal year ended January 31, 2020:  

6

 

    Richard White Picture 229069

    Laura Pomerantz

    Willem van Bokhorst

 

Responsibilities

The Compensation Committee discharges the responsibilities of the Board relating to compensation of G-III’s directors and executive officers. The Committee has overall responsibility for approving and evaluating director and executive officer compensation plans, policies and programs of G-III, including establishing and monitoring the basic philosophy and policies governing the compensation of G-III’s directors and officers.

The Compensation Committee is responsible for reviewing and discussing with management, and recommending to the Board the inclusion of the Compensation Discussion and Analysis in our annual Proxy Statement.

Picture 229070ALL MEMBERS OF THE COMPENSATION COMMITTEE ARE INDEPENDENT.

Specific duties and responsibilities of the Committee include, but are not limited to:

(i)reviewing and approving the corporate goals and objectives relevant to the compensation of our executive officers and evaluating their performance in light of those corporate goals and objectives;

(ii)recommending the compensation of our executive officers, giving consideration to the results of our most recent “Say on Pay” vote;

(iii)reviewing and recommending adoption, amendment and termination of employment agreements and severance arrangements or plans for our executive officers;

(iv)reviewing and recommending changes to director compensation;

(v)reviewing and recommending adoption, amendment and termination of incentive compensation plans, equity-based plans and other compensation and benefit plans for directors or officers, giving consideration to the results of our most recent “Say on Pay” vote in considering plans for executive officers;

(vi)administering G-III’s stock-based compensation, incentive and benefit plans; and

(vii)administering, interpreting and carrying out our Stock Ownership Guidelines for directors and executive officers and Executive Incentive Compensation Recoupment Policy for executive officers.

The Compensation Committee also may form and delegate authority to any subcommittee comprised solely of its members who are independent so long as such formation and delegation comply with applicable law and the Nasdaq Listing Rules.

The Compensation Committee met six times and acted by unanimous written consent three times during the year ended January 31, 2020.

 

Charter

A copy of the Compensation Committee’s charter is available in the “Investors” section of our website at http://www.giii.com.

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the year ended January 31, 2020, Laura Pomerantz, Willem van Bokhorst and Richard White served on our Compensation Committee. None of the members of the Compensation Committee (i) has ever been an officer or employee of ours or (ii) had any relationship requiring disclosure by us under Item 404 of Regulation S-K. None of our executive officers served on the board or compensation committee (or other committee serving as equivalent function) of any other entity, where an executive officer of the other entity served on our Board of Directors or Compensation Committee.

 

 

 

 

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NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

Meetings during the fiscal year ended January 31, 2020:  

1

 

    Thomas Brosig Picture 229071

    Cheryl Vitali

    Richard White

 

Picture 229072ALL MEMBERS OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE ARE INDEPENDENT.

Responsibilities

The Nominating and Corporate Governance Committee:

(a)assists the Board in its selection of individuals

(i)as nominees for election to the Board at G-III’s annual meeting of the stockholders or

(ii)to fill any vacancies or newly created directorships on the Board and

(b)developing and maintaining G-III’s corporate governance policies, and any related matters required by the federal securities laws.

The Nominating and Corporate Governance Committee met to review the performance and the experience, qualifications, attributes and skills of the members of the Board and recommended to our Board the persons to be nominated for election as directors at the Annual Meeting. The Nominating and Corporate Governance Committee met with Victor Herrero and reviewed his qualifications and subsequently recommended to the Board that he be nominated for election as a director by the stockholders at the Annual Meeting. Mr. Herrero was initially recommended to the Nominating and Corporate Governance Committee by our Chief Executive Officer.

 

Charter

A copy of the Nominating and Corporate Governance Committee’s charter is available in the “Investors” section of our website at http://www.giii.com.

 

NOMINATIONS PROCESS

It is the policy of the Nominating and Corporate Governance Committee to consider candidates for Board membership suggested by Nominating and Corporate Governance Committee members and other Board members, management, our stockholders, third-party search firms and any other appropriate sources. As a stockholder, you may recommend any person for consideration as a nominee for director by writing to the Secretary of G-III, c/o G-III Apparel Group, Ltd., 512 Seventh Avenue, New York, New York 10018. Recommendations must be received by March 13, 2021 to be considered for the 2021 Annual Meeting of Stockholders. Recommendations must include the name and address of the stockholder making the recommendation, a representation setting forth the number of shares of our Common Stock beneficially owned by the recommending stockholder, a statement that the recommended nominee has expressed his or her intent to serve on the Board if elected, biographical information about the recommended nominee, any other information the stockholder believes would be helpful to the Nominating and Corporate Governance Committee in evaluating the individual recommended nominee and a description of all arrangements or understandings between the recommending stockholder and each nominee and any other person concerning the nomination.

Under the Director Selection and Qualification Standards and Resignation Policy (the “Director Policy”), the Nominating and Corporate Governance Committee is responsible for (i) assisting the Board in evaluating the independence of directors, (ii) developing and revising, as appropriate, for approval by the Board, selection criteria and qualification standards for Board nominees, (iii) identifying individuals believed to be qualified to become Board members consistent with criteria approved by the Board and applicable law and regulations, (iv) recommending candidates or nominees to the Board and (v) recommending to the Board whether or not to accept the resignation of a nominee for Director in an uncontested election who receives more votes “withheld” from his or her election than votes “for” such election.

 

 

 

 

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In evaluating candidates, the Nominating and Corporate Governance Committee considers the following criteria:

 

 

●    personal integrity,

●    the extent to which a candidate would be a desirable addition to the Board and any committees of the Board,

●    skill,

●    independence (as that term is defined under the rules of the SEC and the Nasdaq Listing Rules),

●    sound business judgment,

●    the requirement to maintain a Board that is composed of a majority of independent directors,

●    diversity,

●    potential conflicts of interest,

●    business and professional skills and experience,

●    the extent to which a candidate would fill a present need and

●    experience with businesses and other organizations of comparable size,

●    concern for the long-term interests of stockholders.

●    the interplay of the candidate’s experience with the experience of other Board members,

 

 

In any particular situation, the Nominating and Corporate Governance Committee may focus on persons possessing a particular background, experience or qualifications that the Committee believes would be important to enhance the effectiveness of the Board.

The Nominating and Corporate Governance Committee does not have a formal policy with respect to considering diversity in identifying director nominees. The Board and the Nominating and Corporate Governance Committee believe it is important that the Board members represent diverse viewpoints and a variety of skills so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee our business. The evaluation process for stockholder recommendations is the same as for candidates recommended from any other source. The needs of the Board and the factors that the Nominating and Corporate Governance Committee consider in evaluating candidates are reassessed on an annual basis, when the Committee’s charter is reviewed.

 

Stockholder Communications

The Board of Directors has provided a process for stockholders to send communications to the Board. Stockholders who wish to send communications to the Board of Directors, or any particular director, should address such communications to the Board or such director c/o G-III Apparel Group, Ltd., 512 Seventh Avenue, New York, New York 10018, Attn: Secretary. All such communications should include a representation from the submitting stockholder setting forth the stockholder’s address and the number of shares of our Common Stock beneficially owned by the stockholder. The Board will give appropriate attention to written communications on issues that are submitted by stockholders and will respond as appropriate. Absent unusual circumstances, the Secretary of G-III will (i) be primarily responsible for monitoring communications from stockholders and (ii) provide copies or summaries of such communications to the Board, the Lead Independent Director (who serves as a non-management resource for stockholders seeking to communicate with our Board) or the director to whom such communication is addressed, as the Secretary considers appropriate. Each stockholder communication will be forwarded to all directors, the Lead Independent Director or the director to whom it is addressed, if it relates to a substantive matter and includes suggestions or comments that the Secretary considers to be important for the directors, or director, to know. In general, stockholder communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than stockholder communications relating to personal grievances and matters as to which we may receive repetitive or duplicative communications.

Additionally, G-III’s by-laws set forth “advance notice” requirements for stockholders’ meetings consistent with the purpose of establishing an orderly process for stockholders seeking to nominate directors or propose business at stockholder meetings. The advance notice provisions in the by-laws require stockholders to deliver notice to G-III of their intention to make director nominations or bring other business before the meeting not later than the close of business on the 90th day, nor earlier than the close of business on the 120th day, in advance of the anniversary of the previous year’s annual meeting if the meeting is to be held on a day which is not more than 30 days in advance of the anniversary of the previous year’s  

 

 

 

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annual meeting or not later than 70 days after the anniversary of the previous year’s annual meeting. The advance notice provisions of the by-laws prescribe information that the stockholder’s notice must contain, both as to itself and its proposed director nominee, if the stockholder wishes to nominate a candidate for the annual meeting director election, prescribe information that the stockholder’s notice must contain if the stockholder wishes to bring business other than a director nomination before the annual meeting, and set forth rules and procedures relating to special meetings of stockholders.

Risk Oversight

The risk oversight function of our Board of Directors is carried out by both the Board and the Audit Committee. A fundamental part of risk oversight is not only understanding the material risks a company faces and the steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the company. While the full Board has overall responsibility for risk oversight, the Board has delegated oversight related to certain risks to the Audit Committee. The Audit Committee is responsible for reviewing and discussing with management our major and emerging risk exposures, including financial, operational, technology, privacy, data security, disaster recovery and ethics and compliance. The Audit Committee meets periodically with management and our internal audit department to discuss our major financial and operating risks and the steps, guidelines and policies management and our internal audit team have taken to monitor and control exposures to risk, including G-III’s risk assessment and risk management policies. The Chair of the Audit Committee regularly reports to the Board the substance of such reviews and discussions. Both the Board and the Audit Committee regularly review cybersecurity risk matters.

Our Compensation Committee incorporates considerations of risk into its deliberations of our executive compensation program. The Compensation Committee believes that G-III’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on G-III. In addition, our internal disclosure committee reviews with management the “risk factors” that appear in our Annual Report on Form 10‑K prior to its filing with the SEC, as well as prior to the filing of our Quarterly Reports on Form 10‑Q.

The Board encourages management to promote a corporate culture that incorporates risk management into our corporate strategy and day-to-day business operations. The Board continually works, with input from our executive officers, to assess and analyze the most likely areas of future risk for us and our business.

Leadership Structure of the Board

The Board of Directors believes that Morris Goldfarb’s service in the dual roles of Chairman of the Board and Chief Executive Officer is in our best interest, as well as the best interest of our stockholders. Mr. Goldfarb is the director most familiar with our business and industry and possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing us and our business. Thus, he is in the best position to develop agendas and plans that ensure that the Board’s time and attention are focused on the most critical matters. We believe that Mr. Goldfarb is viewed by our customers, suppliers, business partners, investors and other stakeholders as providing strong leadership for our company in the marketplace and in our industry. This approach is often utilized by other public companies in the United States and we believe it has been effective for our company as well.

Although the Board believes that the combination of the Chairman of the Board and Chief Executive Officer roles is appropriate for us in the current circumstances, our Board does not have a specific policy as to whether or not these roles should be combined or separated.

LEAD INDEPENDENT DIRECTOR

In order to promote independent leadership on our Board and help ensure that the Board operates in a cohesive manner, the Board established the position of Lead Independent Director and elected Richard White as the Lead Independent Director. The responsibilities of the Lead Independent Director include:

(i)

advising the Chairman of the Board on Board meeting agendas and materials sent to the Board;

(ii)

serving as a liaison between non-management directors and the Chairman of the Board;

(iii)

calling and presiding over executive sessions of the non-management directors;

 

 

 

 

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(iv)

presiding over Board meetings in the absence of the Chairman of the Board;

(v)

serving as a non-management resource for stockholders and other external constituencies seeking to communicate with our Board;

(vi)

oversight of the Board’s annual assessment of the performance of our Chairman and Chief Executive Officer; and

(vii)

oversight of the Board’s annual self-assessment of its own performance, along with the Chairman of the Nominating and Corporate Governance Committee.

Additional Corporate Governance Policies

We also maintain the following corporate governance policies:

CODE OF ETHICS AND CONDUCT

All of our employees and employees of our subsidiaries (“Company Personnel”), officers and directors must adhere to our Code of Ethics and Conduct. It codifies those standards that we believe are reasonably designed to deter wrong-doing and to promote, among other things, adherence to the following principles:

(i)

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

(ii)

full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by G-III;

(iii)

compliance with applicable governmental laws, rules and regulations;

(iv)

the prompt internal reporting of violations of the Code of Ethics and Conduct; and

(v)

accountability for adherence to the Code of Ethics and Conduct.

A copy of the Code of Ethics and Conduct is available in the “Investors” section of our website at http://www.giii.com.

WHISTLEBLOWER POLICY

The Whistleblower Policy protects all of our Company Personnel, officers and directors if they raise concerns regarding G-III, such as concerns regarding incorrect financial reporting including questionable accounting, internal controls or auditing matters; unlawful activities; activities that are not in line with G-III policies, including the Code of Ethics and Conduct; or activities which otherwise amount to serious improper conduct. A copy of the Whistleblower Policy is available in the “Investors” section of our website at http://www.giii.com.

INSIDER TRADING, HEDGING AND PLEDGING POLICY

The Insider Trading, Hedging and Pledging Policy applies to all of our Company Personnel, directors and officers, and prohibits trading or causing trading of our securities while the applicable person is in possession of material non-public information. The Insider Trading, Hedging and Pledging Policy prohibits directors, executive officers and other Company Personnel specified by us, from time to time, from trading in G-III securities during our established blackout periods, except (i) pursuant to Board-approved written trading plans adopted in accordance with Rule 10b5‑1 under the Exchange Act, at least 30 days prior to any trade, (ii) stock option exercises for cash with no associated open market transaction and (iii) the surrender of shares to us or the retention and withholding of shares by us in satisfaction of tax withholding obligations with respect to stock-settled incentive compensation awards with no associated open market transaction. The Insider Trading, Hedging and Pledging Policy also prohibits Company Personnel from entering into hedging transactions with respect to our securities, pledging our securities as collateral for a loan or holding our securities in a margin account. The Board may, in limited circumstances, permit a share pledge by a director or executive officer after giving consideration to the number of shares to be pledged as a percentage of his or her total shares held and G-III’s total shares outstanding. A copy of the Insider Trading, Hedging and Pledging Policy is available in the “Investors” section of our website at http://www.giii.com.

 

 

 

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STOCK OWNERSHIP GUIDELINES

The Stock Ownership Guidelines require:

 

 

 

Position

    

Value of Stock Ownership

Chief Executive Officer

 

6x annual base salary

Vice Chairman and President

 

2x annual base salary

All Other Named Executive Officers and Directors who are Employees

 

1x annual base salary

Non-Employee Directors

 

5x annual cash retainer

 

Until these share ownership levels are achieved, our executive officers and directors are required to retain 50% of any net, after-tax, shares received upon exercise or vesting of our equity grants. All of our officers and directors are in compliance with our Stock Ownership Guidelines, except for one director initially elected to the Board last year.  A copy of the Stock Ownership Guidelines is available in the “Investors” section of our website at http://www.giii.com.

EXECUTIVE INCENTIVE COMPENSATION RECOUPMENT POLICY

Pursuant to the Executive Incentive Compensation Recoupment Policy, or “Clawback Policy,” in the event that we are required to restate our financial statements for any financial year, other than as a result of a change in generally accepted accounting principles or their interpretation, the Compensation Committee may, in its discretion, recoup incentive compensation paid to individuals who were executive officers within one year prior to the restatement. The incentive compensation subject to recoupment will consist of performance-based bonuses (including bonuses paid pursuant to employment agreements) and long-term incentive awards or equity grants, to the extent that such bonuses, awards or grants were predicated upon achievement of financial results that are subsequently restated. A copy of the Executive Incentive Compensation Recoupment Policy is available in the “Investors” section of our website at http://www.giii.com.

DIRECTOR SELECTION AND QUALIFICATION STANDARDS AND RESIGNATION POLICY

The Director Policy describes the Board’s criteria for selecting director nominees and the roles of the Board and the Nominating and Corporate Governance Committee in evaluating director independence and qualifications. In addition, the Director Policy provides that any nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election must tender a written resignation to the Board. The Nominating and Corporate Governance Committee will consider the resignation and make a recommendation to the Board as to whether to accept or reject the resignation. Thereafter, the Board will deliberate and determine the action to be taken with respect to the tendered resignation. Following the Board’s determination, G-III will publicly disclose the Board’s decision and the reasons for the decision. A copy of the Director Policy is available in the “Investors” section of our website at http://www.giii.com.

 

 

 

 

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CORPORATE SOCIAL RESPONSIBILITY

Our business has been built on family values and the belief that with hard work, conviction and a commitment to the greater good, we could redefine what is possible. By maintaining a commitment to our principles of Engage our People, Protect our Environment and Invest in Our Communities, over the past year we have taken meaningful steps to ensure that our business continues to drive value for all of our stakeholders, while also making a positive impact on our communities and the world around us.

Engage Our People - Our greatest asset is our talented employee base who come to work every day around the globe with incredible dedication, drive, compassion and care. Our focus remains on further enhancing the working environment for our employees and taking steps to ensure that G-III remains a great company to work for. We recognize that insights and ideas from a diverse range of backgrounds will better position us for the future and a significant portion of the top 34 management positions are currently occupied by women. We continue to benchmark our programs and practices to our peer group and provide recommendations where appropriate. Finally, our commitment to Board diversity has not waivered, and we are actively exploring opportunities for new perspectives that can enhance our already strong Director group.

As our sourcing and licensing footprints continue to expand, we have taken steps to foster sustainability throughout the organization. As we expand our supplier relationships beyond China, we are committed to scaling our social and factory compliance programs accordingly. We are also working to formalize and enhance our initiatives and laying the foundation for future programs. We lead multi-brand sustainability training sessions and pilot shared audit programs with our key business partners that are designed to allow us to reach more stakeholders with greater efficiency. We initiated a program to develop additional resources in the field by mentoring interns on sustainability matters.  

·

Protect Our Environment - Our efforts to reduce environmental impacts in fiscal 2020 spanned both immediate and longer-term projects that we believe will lead to meaningful reductions in waste and energy usage. We implemented several projects, including installing LED lighting at our largest warehouse and as part of our New York office renovations, as well as conducting an office-wide energy assessment to better understand our footprint and incorporate solutions to cut our energy use. We provided reusable coffee mugs and water bottles to employees and started various recycling programs. This momentum also extends to our key divisions, where we are now piloting the use of lower impact materials in our products.

·

Invest in Our Communities – Organization-wide, we continued our deep levels of support for the Ronald McDonald House of New York, celebrated the 10th year of G-III and DKNY’s partnership with City Harvest, and also worked to mentor students at the Fashion Institute of Technology on business and sustainability insights. We worked with Women In Need (WIN) to provide back-to-school packed backpacks and holiday gifts. However, our commitment to community extends far beyond the reaches of New York with our support of WIN’s sponsorship of International Women’s Day, as well as supporting My Friend’s Place in their efforts to help homeless youth. G-III continued its strong financial backing for important organizations including the Hetrick-Martin Institute and DeliveringGood. In this time of the COVID-19 pandemic, we have provided more than 35,000 masks and fabric for producing masks, protective gowns and shields to medical facilities and first responders in the United States. In addition, there are countless other examples of G-III employees around the world taking time out of their schedules to volunteer with numerous other groups that are making a difference.

 

We are committed to embedding these principles into our business and better engaging our employees and those who work in our contracted factories, protecting our environment and supporting our communities while accepting our responsibility to be a good corporate citizen.

 

 

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation Discussion and Analysis (CD&A) presents our executive compensation for fiscal 2020, describing how different components of compensation support our business objectives and how we determined the amounts of each component of compensation paid to our Named Executive Officers, or NEOs. In this Proxy Statement, references to a fiscal year refers to the year ended January 31 of that year.

CD&A Table of Contents 

28

EXECUTIVE SUMMARY

 

41

Other Compensation Elements

29

Our Business Performance in Fiscal 2020

 

41

Employment Agreements

30

Our Long-Term Business Performance

 

42

OTHER COMPENSATION AND GOVERNANCE PROGRAMS, POLICIES AND CONSIDERATIONS

30

Our Pay Mix is Heavily Weighted Towards Incentive-Based Compensation

 

42

Stock Ownership Guidelines

30

Our “Say on Pay” and Stockholder Outreach Initiative

 

42

Clawback/Executive Incentive Compensation Recoupment Policy

34

Our Compensation Program Reflects Best Practices

 

42

Anti-Hedging Policy

35

ELEMENTS OF OUR COMPENSATION PROGRAM―WHAT WE PAY AND WHY

 

42

Anti-Pledging Policy

35

Our Compensation Philosophy

 

43

Effect of Section 162(m) of The Code

35

Base Salary

 

43

HOW WE MAKE COMPENSATION DECISIONS

35

Annual Cash Incentives for Our Chairman and CEO and Our Vice Chairman and President

 

43

The Role of the Compensation Committee

37

Annual Cash Incentives for Our Other Named Executive Officers

 

43

The Role of Management

38

Long-Term Incentives

 

43

The Role of Independent Compensation Consultants

39

Fiscal 2020 Awards Under Our Long-Term Incentive Program

 

44

The Role of Competitive Marketplace Practice

41

Timing of Equity Awards

 

44

The Consideration of Risk

 

 

 

 

 

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Executive Summary

For fiscal 2020, the following individuals were our NEOs:

 

 

 

 

Name

Age

Title

Years with G-III

Morris Goldfarb

69

Chairman of the Board and Chief Executive Officer

46

Neal S. Nackman

60

Chief Financial Officer and Treasurer

16

Sammy Aaron

60

Vice Chairman and President

14

Wayne S. Miller

62

Chief Operating Officer and Secretary

22

Jeffrey Goldfarb

43

Executive Vice President and Director of Strategic Planning

17

 

When discussing performance metrics for annual cash incentive awards for our Chairman and CEO and for our Vice Chairman and President, we refer to our pre-tax income. Unless otherwise defined, pre-tax income means the net income of G-III and its subsidiaries as reported in our consolidated financial statements, plus the sum of (i) the income taxes reported in our financial statements and (ii) the amount of the annual cash incentive payable to each NEO; provided however that pre-tax income is determined without regard to items that are both unusual and infrequent, as defined in generally accepted accounting principles (“GAAP”). Pre-tax income is defined in this way in the employment agreements with each of these NEOs and is a non-GAAP measure. Our use of non-GAAP metrics for annual cash incentive awards is not intended to replace GAAP results.

 

 

 

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OUR BUSINESS PERFORMANCE IN FISCAL 2020

 

 

 

 

 

Picture 229079

 

 

Fiscal 2020 stands out
as G-III’s best year ever.

 

 

Picture 229175

 

 

We closed our fiscal year with record-breaking results for a second consecutive year:

  Net sales                  Net income

  Earnings per share

 

 

Our performance in fiscal 2020 reflects continued growth across our portfolio of brands.

Picture 12

Diluted earnings per share includes (i) non-cash imputed interest expense of $5.4 million in fiscal 2020 and $5.0 million in fiscal 2019 related to the Seller Note, (ii) asset impairments primarily related to leasehold improvements and furniture and fixtures at certain of our retail stores, net of gain on lease terminations, of $19.4 million in fiscal 2020 and $2.8 million in fiscal 2019 and (iii) a non-cash income tax gain of $6.7 million in fiscal 2020 primarily from foreign tax rate changes. The aggregate net effect of these exclusions was equal to $0.25 per diluted share in fiscal 2020 and $0.11 per diluted share in fiscal 2019.

 

 

 

 

 

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OUR LONG-TERM BUSINESS PERFORMANCE

Under the leadership of Morris Goldfarb, our Chairman and Chief Executive Officer, and our dedicated team of executive officers, G-III has delivered consistently strong financial performance. Our revenue growth and net income growth have consistently out-performed our competitors over the long-term and we achieved two consecutive years of record-breaking results in fiscal 2019 and 2020, demonstrating both our long-term orientation, as well as our commitment to delivering top tier results to our stockholders.

While the long-term performance of our Common Stock, as measured by total stockholder return, has been very strong, our stock price performance over the past three to five years has underperformed the S&P Textiles, Apparel & Luxury Goods Industry Index and the S&P 500 Index during this period. We attribute the lower performance of our stock price to uncertainty connected with the performance of our retail partners and our own retail stores, as well as trade, tariffs and our Company’s exposure to China for its supply chain.  Our management team is taking steps to mitigate these issues and increase the value of our global power brands.

 

 

 

OUR PAY MIX IS HEAVILY WEIGHTED TOWARDS INCENTIVE-BASED COMPENSATION

More than 90% of our Chairman and CEO’s compensation and more than 80% of the average compensation of our other NEOs in fiscal 2020 consisted of at-risk annual and long-term incentive compensation. The annual cash incentives earned by our Chairman and CEO and our Vice Chairman and President are contractually guaranteed and reflect our record-breaking results in fiscal 2020. Achieving excellent results in the short-term enhances stockholder value over the long-term. While equity incentives were weighted less heavily in fiscal 2020,  our meaningful grants of performance-based equity in fiscal 2020 help us to retain our executives and align their interests with those of our stockholders.

 

 

 

 

Chairman and CEO Compensation Mix

 

Other NEOs Compensation Mix

Picture 16

 

OUR “SAY ON PAY” AND STOCKHOLDER OUTREACH INITIATIVE

G-III values the opinions of its stockholders and has spent considerable time soliciting information regarding their views. The Compensation Committee was pleased to receive 75% support from our stockholders for the “Say on Pay” proposal presented at our 2019 Annual Meeting after receiving less than majority support in 2018. The Compensation Committee

 

 

 

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concluded that the expanded stockholder outreach campaign, enhancements to our disclosure and the re-design of our executive pay program were well received.

During fiscal 2020, we reached out to 35 stockholders who owned an aggregate of 83.1% of our shares and met with 22 stockholders who owned an aggregate of 64.8% of our shares and the major proxy advisory firms. The outreach was led by our Lead Independent Director, who is also Chairman of our Compensation Committee. Our Chief Operating Officer, our Vice President, Investor Relations, and the Compensation Committee’s independent compensation consultant also participated in meetings with investors. During each meeting, we presented an update on our business, our preliminary thinking on changes to our compensation program for fiscal 2020 that we expected to make and our Corporate Social Responsibility initiatives. We actively solicited feedback from stockholders and received valuable input from our stockholders on these topics.

From February to April 2020, we continued to engage with our stockholders, building on the progress made during the prior year. We reached out to 38 stockholders who owned an aggregate of 90.9% of our shares and met with 19 stockholders who owned an aggregate of 59.1% of our shares.  We updated our stockholders on the impact the COVID-19 pandemic was having on our wholesale business given that our retail partners largely closed their stores in the spring and our own retail stores closed in March. We also continued to provide updates on our executive compensation program, our progress on board refreshment and diversity and our Corporate Social Responsibility initiatives.

REVIEW OF COMPENSATION OF OUR ChAIRMAN AND CEO AND VICE CHAIRMAN

Some investors have questioned the amount of total compensation to our two highest paid executives, Morris Goldfarb, our Chairman and Chief Executive Officer and Sammy Aaron, our Vice Chairman and President, and the metrics used in determining their annual cash incentive. 

The Compensation Committee engaged with our Chief Executive Officer on the design of the annual cash incentive formulas in effect for him and for our Vice Chairman and President pursuant to their employment agreements. The annual cash incentive is a contractual obligation that cannot be changed unilaterally. The Committee discussed implementing a new annual cash incentive program but determined that this would have required the Board to give notice that the employment agreements with these two executives would not be automatically extended. Even then, the contractual annual cash incentive would remain in place until each employment agreement terminates.  The Committee believes this step would create enormous disruption and uncertainty both internally and externally—among investors, our retail partners, the licensors of our brands and our customers—resulting in substantial erosion of stockholder value. The Committee concluded that if the employment agreements were not so extended, this action would be interpreted internally and externally as a change in senior leadership of our company which would severely disrupt our business. The metric for the annual cash incentive is pre-tax income. This metric is fundamental to our success, and a critical measure of short-term performance. The annual cash incentive is performance-based and aligns directly with profitability, moving both up and down, and there are no redundant metrics.

The Compensation Committee discussed the possibility of terminating the employment agreements with the full Board of Directors. The Board expressed great confidence in the ability of our Chairman and CEO and our Vice Chairman and President to successfully lead G-III and continue their track record of producing excellent financial results and stockholder value creation, as well as leading the company through the disruption caused by COVID-19. For these reasons, the Committee decided that the best approach was to allow the automatic extension of the employment agreements and, in doing so, to keep the current annual cash incentive program for the two of them.

The Compensation Committee factored stockholder input into its decisions relating to the elements of fiscal 2020 compensation that were not contractual, as evidenced by the meaningful changes made to the long-term incentive program:

 

(1)

No salary increases have been approved for our Chairman and CEO since fiscal 2009. Furthermore, peer group comparisons indicate that his current salary of $1,000,000 is below market.

(2)

The annual cash incentive formulas were previously modified twice before as a result of discussions between the Compensation Committee and Mr. Goldfarb, for fiscal 2014 and again for fiscal 2015, specifically to address concerns that had been raised by our stockholders. Mr. Goldfarb and Mr. Aaron voluntarily accepted these modifications even though they were under no obligation to do so. Over the past four years, the voluntary reductions

 

 

 

 

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in annual cash incentive compensation resulting from these voluntary modifications of the employment agreements totaled $4.7 million for Mr. Goldfarb and $3.0 million for Mr. Aaron.

(3)

The grant date fair value of fiscal 2020 grants made in April 2019 to each of Mr. Goldfarb and Mr. Aaron was equal to the grant date fair value of the fiscal 2019 grants, with no increase in the fair value of the grants made to these two executives despite our Company’s record-breaking fiscal 2019 financial results.

(4)

The financial metrics which must be achieved for the April 2019 PSU grants to vest are more rigorous and more aligned with stockholder interests than the metrics used for previous grants of PRSUs.

(5)

PSUs granted in fiscal 2020 will vest after a three-year performance period is completed and will be subject to an additional two-year post-vesting holding period for a total vesting/holding period of five years.

The Compensation Committee also considered that our Chairman and CEO is our fourth largest stockholder, beneficially owning approximately 7.7% of our Common Stock, and concluded that he is heavily invested in our long-term value creation.

RESULTS OF OUR STOCKHOLDER OUTREACH PROCESS

Last year, investors welcomed the opportunity to discuss our proposed responses to the Say on Pay vote, indicating that outreach was extremely helpful to build understanding and bridge differences. We have summarized what we heard from investors about our redesign of our long-term incentive program and a description of the steps taken in response to comments from our stockholders:

 

 

 

What We Heard from Investors

Our Response

Comprehensive redesign of long-term incentive program

    Stockholders uniformly support performance-based approaches to long-term incentives and equity.

Picture 229081

 

G-III provided 100% of long-term incentives awarded to NEOs in performance-based awards in fiscal 2020.

    Performance periods should be at least three years long and some stockholders preferred five years.

Picture 229084

 

G-III measured performance over a cumulative three‑year period for performance-based awards granted in fiscal 2020, rather than using a combination of one‑year, two‑year and three‑year metrics.

 

Our Named Executive Officers are restricted from selling any shares that vest from these awards (other than shares sold or net share settled to cover related taxes) for an additional two years, for a total performance/holding period that spans 5 years.

    Awards must be either earned or not earned based on results during the performance period.

Picture 229083

 

Awards granted in fiscal 2020 contain no retesting of performance metrics, i.e., no “second bites at the apple.”

    Investors support rigorous performance targets that contain an appropriate degree of stretch, but that are grounded in a realistic evaluation of the business.

Picture 229085

 

We established rigorous performance targets for awards granted under this new program that are designed to satisfy investor concerns.

    In general, investors were not overly prescriptive about the type or number of metrics, although many identified ROIC as their preferred metric for long-term value creation. Investors want to understand how the metrics connect to business strategy and value creation.

Picture 229087

 

We chose three-year cumulative Adjusted EBIT (for 75% of the target award) and three-year average ROIC (for 25% of the target award) as the metrics for long-term incentive awards approved in April 2019 for fiscal 2020.

 

Adjusted EBIT measures our ability to grow profitably over time. We chose ROIC as a metric because it measures our success in allocating capital to invest for profitable growth in our portfolio of brands, make successful acquisitions and properly manage our working capital.

 

In response to comments made by investors, we also eliminated an exception that had been made to our anti-pledging policy and committed to increase our Corporate Social Responsibility initiatives.

 

 

 

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IMPACT OF COVID-19 ON OUR COMPENSATION PROGRAM FOR FISCAL 2021

The determination of executive compensation for fiscal 2020 was based on our record-breaking results for fiscal 2019 and 2020. The impact of the COVID-19 pandemic is expected to have a material adverse effect on our business and results of operations in fiscal 2021. The Compensation Committee will continue to consider the impact of this pandemic on our business, results of operations and financial condition in evaluating fiscal 2021 compensation decisions. The effects of the pandemic have already impacted the compensation of our executive officers, employees and directors.

 

·

Our Chief Executive Officer and Vice Chairman voluntarily agreed to temporarily forfeit their annual salaries, effective March 30, 2020. Morris Goldfarb and Sammy Aaron agreed to receive no salary other than payment by G-III of their employee contributions with respect to medical benefits and long-term disability.

·

Our other NEOs, Wayne Miller, Neal Nackman and Jeffrey Goldfarb, each voluntarily agreed to temporarily reduce their annual salaries by 40%, also effective March 30, 2020.

·

We anticipate that the business impacts of the COVID-19 pandemic will result in significantly reduced annual cash incentive payments for fiscal 2021.

·

As a result of the anticipated adverse impact of the COVID-19 pandemic on our earnings and returns on invested capital, we believe that last year’s PSU grants may not vest during their 3-year measurement period. Other unvested PRSU grants may also not satisfy their performance vesting conditions. Accordingly, we are concerned about retention of management and senior executives.

·

To provide additional retention value and a greater degree of certainty during a period of extreme market volatility, in April 2020, our Compensation Committee granted time-based RSUs with a 3-year cliff vesting period to our NEOs.

·

We expect to return to our practice of granting PSUs in fiscal 2022, but the Compensation Committee intends to maintain flexibility to evaluate business conditions next year and determine compensation accordingly.

·

Our non-employee directors receive an annual RSU grant with a value of $100,000 each year on the date of the Annual Meeting. To respond to recent extreme volatility in the price of our Common Stock and limit the potential number of shares granted, the Compensation Committee approved an RSU grant valued at $100,000 resulting in 10,183 RSUs for each non-employee director, reflecting the same price used to determine the grant date fair value of the RSUs granted to our NEOs.  The Compensation Committee also made annual RSU grants to the Lead Independent Director, Chair of the Audit Committee and Chair of the Nominating and Corporate Governance Committee on a similar basis. All of these RSU grants vest over a three-year period and are subject to the election of each person granted RSUs as a director at the Annual Meeting.

 

 

 

 

 

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OUR COMPENSATION PROGRAM REFLECTS BEST PRACTICES

Our compensation program incorporates excellent compensation governance practices that benefit our stockholders:

 

 

 

 

 

What We Do

 

What We Don’t Do

Picture 229090

We pay for performance and set rigorous goals for short-term and long-term incentives

Picture 229099

No overlapping metrics for annual cash incentives and long-term incentive awards

Picture 229091

Conduct extensive stockholder outreach

Picture 229103

No practices that could encourage excessive risk-taking

Picture 229092

Double trigger equity acceleration upon a change in control

Picture 229100

No repricing of underwater stock options without stockholder approval

Picture 229094

Anti-hedging and anti-pledging policies

Picture 229104

No guaranteed salary increases or annual cash incentive bonuses for NEOs

Picture 229096

Clawback policy

Picture 229101

No excise tax gross-ups upon a change in control

Picture 229098

Capped annual cash incentive payouts

Picture 229105

No tax gross-ups on perquisites or benefits

Picture 229097

Robust share ownership guidelines, with 50% share retention requirement until guidelines are met

Picture 229102

No excessive executive perquisites

Picture 58

Annual Say on Pay vote

 

 

 

 

 

 

 

 

 

 

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Elements of Our Compensation ProgramWhat We Pay and Why

OUR COMPENSATION PHILOSOPHY

Our compensation program is designed to enhance stockholder value in the following ways:

·

Belief in Pay for Performance. A substantial majority of compensation paid to our executives is variable and aligned with the short and long-term performance of G-III;

·

Focus on Annual Profitability. Our annual cash incentive compensation structure is oriented towards bottom-line results, fosters an entrepreneurial environment and empowers management with the flexibility to quickly make decisions that are responsive to ever-changing market conditions, a hallmark of the fashion business;

·

Alignment with Stockholders. Our long-term incentive program aligns the interests of our executive officers with those of our stockholders and supports maximum stockholder value creation; and

·

Competitive Packages. We offer a competitive compensation program, which enables us to attract and retain highly qualified managerial and executive talent necessary to achieve our objectives.

 

BASE SALARY

Base salaries provide a competitive rate of fixed pay and help us to attract and retain executives needed to manage our business for the benefit of our stockholders. The Compensation Committee determines base salaries after considering the breadth and complexity of the role, tenure, individual performance and the competitive market for talent. No adjustments to the base salaries of our NEOs were made in fiscal 2019. Mr. Goldfarb’s base salary has not been increased since fiscal 2009. 

ANNUAL CASH INCENTIVES FOR OUR CHAIRMAN AND CEO AND OUR VICE CHAIRMAN AND PRESIDENT

As detailed under “Executive Summary―Our “Say on Pay” and Stockholder Outreach Initiative” and “Review of Compensation of our Chairman and CEO and Vice Chairman” above, the Committee decided to retain the existing annual cash incentive arrangements for Morris Goldfarb and Sammy Aaron for fiscal 2020 because the Compensation Committee believes that terminating the employment agreements unilaterally would have disrupted our business and reduced shareholder value. In contrast, incentivizing Messrs. Goldfarb and Aaron in the same manner promotes a shared focus in the successful operation of our business.

The use of pre-tax income, the metric used in these annual cash incentive arrangements, is fundamental to our success, is designed to reward annual performance and, we believe, contributes to the long-term stock price performance of G-III. These annual cash incentive awards are structured to recognize the unique roles held by Messrs. Goldfarb and Aaron in the overall management of our business and the design and execution of our corporate strategy.

The Compensation Committee is committed to aligning Chairman and CEO compensation with performance and maintaining its pay-for-performance philosophy. The following tables depict how the Chairman and CEO’s bonus has tracked G‑III’s operating performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year Ending

 

  

  

  

1/31/2016

  

  

1/31/2017

  

  

1/31/2018

  

  

1/31/2019

  

  

1/31/2020

 

 

(in thousands)

Annual cash incentive

 

 

 

$11,306

 

 

$1,410

 

 

$6,285

 

 

$12,419

 

 

$11,314

Pre-tax income

 

 

 

$179,133

 

 

$77,762

 

 

$110,049

 

 

$183,830

 

 

$182,098

 

 

 

 

 

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Picture 47

 

The annual cash incentive arrangement for Mr. Goldfarb is codified in his employment agreement with us. This arrangement was initially established in 1989.

The annual cash incentive arrangements were previously modified twice based on discussions between the Compensation Committee and Mr. Goldfarb, effective beginning in fiscal 2014 and again in fiscal 2015, although Mr. Goldfarb was under no obligation to do so, to reduce awards as a of result Committee analysis, advice of the Committee’s compensation consultant and a desire to address concerns that had been raised by our stockholders. Voluntary modifications included reducing the cap on awards to 150% of the amount payable at budget from 200%, adding a penalty that reduced the award when actual pre-tax income fell below budget by more than 15% and including a significantly higher threshold level of pre-tax income below which no award would be paid.

The annual cash incentive arrangement for Mr. Aaron was first established in 2008 and mirrors Mr. Goldfarb’s annual cash incentive. Mr. Aaron also voluntarily agreed to similar modifications to his employment agreement.

The annual reduction in bonus payments for each executive resulting from these voluntary modifications of their annual cash incentive agreements is summarized below:

 

 

 

 

 

 

 

 

 

 

 

 

    

Fiscal 2020

    

    

Fiscal 2019

    

    

Fiscal 2018

    

Fiscal 2017

 

 

(in thousands)

Reduction in Mr. Goldfarb’s annual cash incentive award

 

$170

 

 

 —

 

 

$1,310

 

$3,220

Reduction in Mr. Aaron’s annual cash incentive award

 

$110

 

 

 —

 

 

$830

 

$2,080

 

The key provisions of the annual cash incentive arrangements in effect for Mr. Goldfarb and Mr. Aaron are summarized below. The basic award opportunity is expressed as a percentage of pre-tax income (“PTI”) for each executive. Mr. Goldfarb is eligible to receive 6% of pre-tax income in excess of $2 million, subject to a cap equal to 150% of the amount payable for achieving our forecast for the year. Mr. Aaron is eligible to receive 4% of pre-tax income in excess of $2 million, also subject to a cap equal to 150% of the amount payable for achieving our forecast for the year. In addition, there is an accelerator

 

 

 

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that increases the bonus if actual results significantly exceed the forecast and a penalty if actual results are significantly below the forecast.

The accelerator provides for an additional percentage of pre-tax income for performance that exceeds our forecast by more than 15%. Mr. Goldfarb receives an additional 2% of pre-tax income that is 15% in excess of our forecast up to 30% above our forecast and an additional 4% of pre-tax income that exceeds our forecast by more than 30%. Mr. Aaron receives an additional 1.33% of pre-tax income that is 15% in excess of our forecast up to 30% above our forecast and an additional 2.66% of pre-tax income that exceeds our forecast by more than 30%. Notwithstanding the accelerator provision, the annual cash incentive for each of Mr. Goldfarb and Mr. Aaron may not exceed the 150% cap described in the preceding paragraph.

The penalty reduces the percentage of pre-tax income awarded if actual pre-tax income is below our forecast by more than 15% up to 30% below forecast. The percentage of pre-tax income awarded to Mr. Goldfarb is reduced by 2% of pre-tax income that is 15% less than our forecast up to 30% below our forecast and reduced by 4% of pre-tax income that is more than 30% below our forecast. Similarly, the percentage of pre-tax income awarded to Mr. Aaron is reduced by 1.33% of pre-tax income that is 15% less than our forecast up to 30% below our forecast and reduced by 2.66% of pre-tax income that is more than 30% below our forecast. No annual cash incentive is payable to either executive if pre-tax income falls below a threshold amount calculated based on the formula for reducing the award if actual pre-tax income is below the forecast.

The pre-tax income goals for the annual cash incentives for Mr. Goldfarb and Mr. Aaron established by the Committee reflect our public guidance. Our guidance is thoroughly vetted and approved by our Audit Committee prior to the establishment of the target payout amounts by the Committee. We established an aggressive pretax income goal for fiscal 2020, set 21.5% higher than our record-breaking results in fiscal 2019.  We achieved record revenues, net income and EPS in fiscal 2020. As a result of the shortfall compared to our guidance for pre-tax income, annual cash incentives paid to Messrs. Goldfarb and Aaron were reduced by $170,000 and $110,000, respectively, compared to their target amounts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

Forecasted

  

  

Actual

  

  

 

  

  

Threshold

  

  

Maximum

 

 

 

PreTax

 

 

PreTax Income

 

 

% Increase

 

 

PreTax

 

 

PreTax

 

 

 

Income GAAP Goal

 

 

GAAP Results

 

 

(Decrease) Over

 

Income Goal

 

 

Income GAAP Goal

Fiscal Year

 

 

($mil)

 

 

($mil)

 

 

Prior Year

 

($mil)

 

 

($mil)

Fiscal 2020

 

 

$223.4

 

 

$182.1

 

 

-0.9%

 

 

$70.5

 

 

$334.2

Fiscal 2019

 

 

$136.1

 

 

$183.8

 

 

67.0%

 

 

$43.4

 

 

$188.0

Fiscal 2018

 

 

$67.6

 

 

$110.0

 

 

41.5%

 

 

$22.2

 

 

$93.4

 

ANNUAL CASH INCENTIVES FOR OUR OTHER NAMED EXECUTIVE OFFICERS

The annual cash incentives formulas for Wayne Miller and Jeffrey Goldfarb for fiscal 2020 were structured to establish maximum awards for each executive, with the Compensation Committee exercising its discretion to reduce these amounts. This structure was originally intended to preserve beneficial tax treatment for G-III under Section 162(m) of the Code as it existed before Section 162(m) was amended as part of the Tax Cuts and Jobs Act. Mr. Nackman’s award depends on his individual performance, subject to Committee discretion. The following table summarizes the annual cash incentive award

 

 

 

 

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structure and criteria considered by the Committee with respect to annual cash incentive awards with respect to fiscal 2020 for Mr. Miller, Mr. Goldfarb and Mr. Nackman.

Annual Cash Incentives

Executive

Award Opportunity

Criteria Considered by the
Compensation Committee

Maximum
Award
($000)

Actual
Award
($000)

Wayne Miller

Up to 3% of pre-tax income, provided PTI exceeded $10 million and subject to Committee discretion

  G-III financial performance, including sales growth, margin improvement and cost reduction, as well as development of long-term strategies with respect to the growth of G-III

  Execution of strategies to address tariffs on imported goods and the restructuring of our retail outlet business

  Performance of dress and sports divisions

 $5,463

 $2,700

Jeffrey Goldfarb

Up to 2.5% of pre-tax income, provided PTI exceeded $10 million and subject to Committee discretion

  G-III financial performance, including sales growth, margin improvement