AMERICAN APPAREL, INC. REPORTS THIRD QUARTER
LOS ANGELES, November 10, 2014 - American Apparel, Inc. (the "Company") (NYSE MKT: APP), a vertically-integrated manufacturer, distributor, and retailer of branded fashion basic apparel, announced financial results for its third quarter ended September 30, 2014.
Financial Highlights for the Third Quarter of 2014
Loss per share was $0.11 compared to $0.01 in the third quarter of 2013
Adjusted EBITDA was $13.5 million, an increase of 38% against $9.8 million for the same period in 2013
Income from operations, excluding unusual and non-recurring expenses, was $4.8 million, compared to $1.6 million in the same period for 2013
Operating expenses, excluding unusual and non-recurring expenses, decreased $5.7 million, or 7%, for the quarter, compared to the same period in 2013
Inventories decreased $18.4 million, or 11%, from December 31, 2013
Scott Brubaker, Interim Chief Executive Officer, commented, “The strength of American Apparel’s operating model is evident in the 38% year-over-year improvement in adjusted EBITDA. We are proud to have achieved this growth during a period of company-wide operational restructuring and in a challenging macro-economic environment for retailers. I am encouraged by these results, and am optimistic about the future prospects of the business.”
Net sales for the third quarter of 2014 decreased $8.7 million, or 5%, compared to the same period in 2013. Lower retail and online sales were partially offset by increased wholesale sales. Comparable retail and online sales decreased by 7% and 5%, respectively, while wholesale sales increased by 2% over the same period in 2013.
Gross profit for the third quarter of 2014 decreased 2% to $82.5 million from $84.6 million for the same period in 2013, primarily due to the lower retail and online sales volume. Gross profit, excluding unusual and non-recurring expenses increased to 53.5% of net sales in the third quarter of 2014 from 52.2% in the third quarter of 2013, primarily due to a decrease in freight costs associated with the completion of our transition to the La Mirada distribution center in late 2013, partially offset by an increase in retail store sales discounts.
Operating expense for the third quarter of 2014 was $92.6 million, compared to $89.1 million for the same period in 2013. Excluding the effects of unusual and non-recurring costs related to the settlement of certain customs duties assessments and contingencies, the internal investigation of Dov Charney and employment settlement and severance costs, operating expenses decreased $5.7 million, or 7%, over the same period in 2013. The decrease in costs was due to lower payroll and lower costs related to our advertising and promotional activities from our ongoing cost reduction initiatives.
Net loss for the third quarter of 2014 was $19.2 million or $0.11 per share, compared to net loss of $1.5 million, or $0.01 per share for the third quarter of 2013. Results for the third quarter of 2014 include approximately $14.9 million, or $0.09 per share, related to unusual and non-recurring costs. Results for the third quarter of 2013 include approximately $6.1 million, or $0.05 per share, related to unusual and non-recurring costs.
Unusual and Non-Recurring Costs
Customs settlements and contingencies - In 2012, German customs issued retroactive punitive customs duty assessments of $5.4 million on certain containers of goods imported from 2009-2011, including interest and penalties. Although the Company has continued to dispute the special assessments with the German authorities and the European Commission, during the third quarter of 2014, the German authorities demanded, and we paid, $4.4 million in the third quarter of 2014 and the final balance of $85,000 in the fourth quarter of 2014. Additionally, during the third quarter of 2014 we incurred additional costs related to other customs settlements and contingencies.
Internal Investigation - On June 18, 2014, the Board of Directors (the "Board") voted to replace Mr. Charney as Chairman of the Board, suspended him, and notified him of its intent to terminate his employment as our President and CEO for cause. In connection with the Nomination, Standstill and Support agreement, dated July 9, 2014, with Standard General and Mr. Charney, the Board formed a new special committee for the purpose of overseeing the continuing investigation into the alleged misconduct
The following information was filed by American Apparel, Inc on Monday, November 10, 2014 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.