AMERICAN APPAREL, INC. REPORTS
FOURTH QUARTER 2014 FINANCIAL RESULTS
LOS ANGELES, March 25, 2015 - 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 fourth quarter and year ended December 31, 2014.
Financial Highlights for the Fourth Quarter of 2014
Loss per share was $0.16 compared to $0.19 in the fourth quarter of 2013
Adjusted EBITDA was $10.3 million compared to $0.4 million in the fourth quarter of 2013
Operating expenses, excluding significant charges, decreased $10.9 million or 12% for the quarter, compared to the same period in 2013
Inventories decreased $21.8 million or 13%, compared to the same period in 2013
Paula Schneider, Chief Executive Officer, commented, "Our fourth quarter year-over-year growth in adjusted EBITDA and reduction in operating expenses position us for a solid turnaround of this business. We remain focused on putting the right processes and systems in place-such as a rigorous forecasting process and disciplined bottom-up budgeting-so that we can better leverage American Apparel's strong brand."
Operating Results - Fourth Quarter 2014
Net sales for the fourth quarter of 2014 decreased $15.6 million, or 9%, compared to the same period in 2013 due to lower sales in all three sales channels compared to the same period in 2013.
Gross profit for the fourth quarter of 2014 decreased 9% to $72.2 million from $79.5 million for the same period in 2013, primarily due to the lower retail and wholesale sales volume. Gross profit, excluding significant charges, increased to 52.2% of net sales in the fourth quarter of 2014 from 47.5% in the fourth quarter of 2013.
Operating expense for the fourth quarter of 2014 was $84.0 million, compared to $90.7 million for the same period in 2013. Excluding the effects of significant charges related to customs settlement and contingencies, the internal investigation of Dov Charney, and employment settlement and severance costs, operating expenses for the fourth quarter decreased $10.9 million or 12%, compared to 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 fourth quarter of 2014 was $28.0 million or $0.16 per share, compared to net loss of $20.8 million, or $0.19 per share for the fourth quarter of 2013. Results for the fourth quarter of 2014 include $15.4 million, or $0.09 per share, related to significant charges. Results for the fourth quarter of 2013 include $4.2 million, or $0.04 per share, related to significant charges.
Customs settlements and contingencies - We wrote off $3.3 million of duty receivables for our European subsidiaries based on a recoverability analysis and probability of collection. These duty receivables related to changes in transfer costs for product sold to the European entities.
Internal investigation - On June 18, 2014, the Board of Directors (the "Board") voted to replace Dov Charney as Chairman of the Board, suspended him, and notified him of its intent to terminate his employment as 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 investigation into alleged misconduct by Mr. Charney. We incurred investigation related legal and consulting fees of $3.8 million in the fourth quarter of 2014.
Employment settlements- In the fourth quarter of 2014, we entered into settlements of certain previously disclosed employment- related claims. The settlements resulted in additional charges totaling $1.1 million during the fourth quarter of 2014.
Additional inventory reserves - In late 2014, we initiated activities to review and improve store merchandising, working capital and liquidity, and, as such, accelerated the sale of slow-moving inventory through our retail and online sales channels. As part of this process, we also identified certain slow-moving, second quality finished goods and raw materials that required additional reserves. Based on our review of the inventory on-hand, we increased our excess and obsolescence reserve by $4.5 million.
The following information was filed by American Apparel, Inc on Wednesday, March 25, 2015 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-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.