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| 8-K - AMERICAN APPAREL, INC | form8k.htm |
Exhibit 99.1
AMERICAN APPAREL, INC. REPORTS IMPROVED SECOND QUARTER FINANCIAL RESULTS
LOS ANGELES, August 8, 2011 - American Apparel, Inc. (NYSE Amex: APP), a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel, announced financial results for its second quarter ended June 30, 2011.
Comparing the 2011 second quarter to the corresponding period last year, the company reported that:
▪ | Retail comparable store sales were flat for the second quarter with improving trends as comparable store sales increased 3% in June followed by a 4% increase in July. Net sales were flat between periods despite a 9% decrease in the number of stores in operation. |
▪ | Internet sales increased 23% and wholesale net sales decreased 4%. |
▪ | Gross margin was 54.5% vs. 51.6%. |
▪ | Consolidated Adjusted EBITDA was $3.7 million vs. $0.1 million. |
▪ | Loss per common share was $0.00 vs. $0.21. |
“We are pleased to see improving sales trends with a comparable store sales increase of 3% in June followed by a 4% increase in July. I believe that our stores look better than ever and our sales improvements were achieved at normal margins.” said Dov Charney, chairman and CEO, American Apparel. “Consolidated Adjusted EBITDA production at $3.7 million for the quarter resulted primarily from improving manufacturing efficiency that more than offset higher yarn prices.”
“During the month of July we received $8.3 million in new capital in connection with share purchase transactions consummated in April 2011. To date, we have received $22.5 million in gross proceeds for the sale of shares and exercise of purchase rights in connection with these transactions. This additional capital will allow us to take advantage of improving business conditions in order to build upon our recent successes. Together with our improved operating performance, this new capital makes us well positioned to strengthen our balance sheet.”
Comparable store sales were flat for the second quarter of 2011 versus a decline of 16% reported for the same quarter last year. During the 2011 second quarter, the Company had an average of 254 stores in operation vs. an average of 280 stores during the second quarter last year. Reported sales for the international segment benefited from a weaker U.S. Dollar.
Gross margin for the second quarter of 2011 was 54.5% vs. 51.6% for the corresponding period last year. Gross margin increased primarily due to improvements in manufacturing efficiency and logistic related expenses, foreign currency gains from a weaker U.S. Dollar, and a shift in mix from wholesale to online sales. In addition, margins were favorably impacted as a result of reduced shrink from a June 2011 U.S. warehouse inventory which contributed to the overall margin improvement. These benefits were somewhat offset by higher yarn and fabric costs.
Loss from operations was $5.2 million for the second quarter of 2011, less than the loss of $8.6 million reported last year as a result of improved gross profit margins and higher gross profit of $3.9 million, lower distribution expenses of $0.8 million, lower store operating and other selling expenses of $0.8 million, offset by increase in general and administrative expenses of $2.1 million. General and administrative expenses were impacted by stock based compensation of $1.2 million, salaries and wages of $2.1 million primarily from increases in senior management personnel, $0.3 million in additional professional fees incurred primarily in connection with financial planning and associated legal fees, offset by a reduction in depreciation, impairment and other miscellaneous charges of $1.5 million.
Interest expense for the second quarter of 2011 increased to $7.8 million from $5.7 million in the second quarter of 2010 due to a higher balance of outstanding debt and a higher average rate of interest.
A non-cash change in the value of the Company's warrant liabilities caused a $14.0 million improvement in the loss before income taxes between the quarterly periods.
Net loss for the second quarter of 2011 was $0.2 million, or $0.00 per common share, compared to net loss for the second quarter of 2010 of $14.7 million, or $0.21 per common share. The 2011 second quarter net loss included an income tax provision of $0.5 million vs. an income tax benefit of $2.2 million in the 2010 second quarter.
In accordance with U.S. GAAP, the Company has discontinued recognizing potential tax benefits associated with current operating losses. As of December 31, 2010, the Company has available net operating loss and tax credit carry forwards of $33.9 million which may be available to reduce future U.S. income taxes that would otherwise be payable.
Weighted average shares outstanding for the 2011 second quarter were 89.1 million vs. 71.4 million for the 2010 second quarter. As of July 31, 2011 there were 103.3 million shares outstanding.
Please refer to the Table A attached to this press release wherein the Company presents a calculation and reconciliation of consolidated net income as reported to Consolidated Adjusted EBITDA, a non-GAAP financial measure.
About American Apparel
American Apparel is a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel based in downtown Los Angeles, California. As of June 30, 2011, American Apparel had approximately 10,000 employees and operated 254 retail stores in 20 countries, including the United States, Canada, Mexico, Brazil, United Kingdom, Ireland, Austria, Belgium, France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Japan, South Korea, and China. American Apparel also operates a leading wholesale business that supplies high quality T-shirts and other casual wear to distributors and screen printers. In addition to its retail stores and wholesale operations, American Apparel operates an online retail e-commerce website at http://www.americanapparel.net.
Safe Harbor Statement
This press release, and other statements that the Company may make, may contain forward-looking statements. Forward-looking statements are statements that are not historical facts and include statements regarding, among other things, the Company's future financial condition, results of operations and plans and the Company's prospects and strategies for future growth and cost savings. Such forward-looking statements are based upon the current beliefs and expectations of American Apparel's management, but are subject to risks and uncertainties, which could cause actual results and/or the timing of events to differ materially from those set forth in the forward-looking statements, including, among others: the ability to generate or obtain from external sources sufficient liquidity for operations and debt service; changes in the level of consumer spending or preferences or demand for the Company's products; increasing competition, both in the U.S. and internationally; the evolving nature of the Company's business; the Company's ability to hire and retain key personnel and the Company's relationship with its employees; suitable store locations and the Company's ability to attract customers to its stores; the availability of store locations at appropriate terms and the Company's ability to identify and negotiate new store locations effectively and to open new stores and expand internationally; effectively carrying out and managing the Company's strategy, including growth and expansion both in the U.S. and internationally; disruptions in the global financial markets; failure to maintain the value and image of the Company's brand and protect its intellectual property rights; declines in comparable store sales and wholesale revenues; financial nonperformance by the Company's wholesale customers; the adoption of new accounting pronouncements or changes in interpretations of accounting principles; seasonality of the business; consequences of the Company's significant indebtedness, including the Company's relationships with its lenders and the Company's ability to comply with its debt agreements, including the risk of acceleration of borrowings thereunder as a result of noncompliance; the Company's ability to generate cash flow to service its debt; the Company's ability to extend, renew or refinance its existing debt; the Company's liquidity and losses from operations and related impact on the Company's ability to continue as a going concern; the Company's ability to develop and implement plans to improve its operations and financial position; costs of materials and labor, including increases in the price of yarn and the cost of certain related fabrics; the Company's ability to pass on the added cost of raw materials to its wholesale and retail customers; the Company's ability to improve manufacturing efficiency at its production facilities; the Company's ability to effectively manage inventory and inventory reserves; location of the Company's facilities in the same geographic area; manufacturing, supply or distribution difficulties or disruptions; risks of financial nonperformance by customers; investigations, enforcement actions and litigation, including exposure from which could exceed expectations; compliance with or changes in U.S. and foreign government laws and regulations, legislation and regulatory environments, including environmental, immigration, labor and occupational health and safety laws and regulations; costs as a result of operating as a public company; material weaknesses in internal controls; interest rate and foreign currency risks; loss of U.S.
import protections or changes in duties, tariffs and quotas and other risks associated with international business including disruption of markets and foreign supply sources and changes in import and export laws; technological changes in manufacturing, wholesaling, or retailing; the Company's ability to upgrade its information technology infrastructure and other risks associated with the systems that are used to operate the Company's online retail operations and manage the Company's other operations; adverse changes in its credit ratings and any related impact on financing costs and structure; general economic and industry conditions, including U.S. and worldwide economic conditions; disruptions due to severe weather or climate change; and other risks detailed in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2010. The Company's filings with the SEC are available at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
AMERICAN APPAREL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Net sales | $ | 132,804 | $ | 132,733 | $ | 248,871 | $ | 254,547 | |||||||
Cost of sales | 60,378 | 64,248 | 112,807 | 124,922 | |||||||||||
Gross profit | 72,426 | 68,485 | 136,064 | 129,625 | |||||||||||
Operating expenses | 77,650 | 77,046 | 154,378 | 159,743 | |||||||||||
Loss from operations | (5,224 | ) | (8,561 | ) | (18,314 | ) | (30,118 | ) | |||||||
Interest expense | 7,752 | 5,682 | 14,883 | 10,728 | |||||||||||
Foreign currency transaction (gain) loss | (263 | ) | 1,927 | (1,074 | ) | 2,684 | |||||||||
Change in warrant liability expense | (13,000 | ) | 1,034 | (15,100 | ) | 1,034 | |||||||||
Loss on extinguishment of debt | — | — | 3,114 | — | |||||||||||
Other income | (20 | ) | (355 | ) | (55 | ) | (201 | ) | |||||||
Income (Loss) before income taxes | 307 | (16,849 | ) | (20,082 | ) | (44,363 | ) | ||||||||
Income tax provision (benefit) | 520 | (2,171 | ) | 876 | 13,158 | ||||||||||
Net loss | $ | (213 | ) | $ | (14,678 | ) | $ | (20,958 | ) | $ | (57,521 | ) | |||
Basic loss per share | $ | — | $ | (0.21 | ) | $ | (0.26 | ) | $ | (0.81 | ) | ||||
Diluted loss per share | $ | — | $ | (0.21 | ) | $ | (0.26 | ) | $ | (0.81 | ) | ||||
Weighted average basic common shares outstanding | 89,111 | 71,447 | 81,668 | 71,358 | |||||||||||
Weighted average diluted common shares outstanding | 89,111 | 71,447 | 81,668 | 71,358 | |||||||||||
AMERICAN APPAREL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share amounts)
2011 | 2010 | ||||||
ASSETS | |||||||
CURRENT ASSETS: | |||||||
Cash | $ | 6,881 | $ | 8,068 | |||
Trade accounts receivable, net of allowances of $2,692 and $1,819 at June 30, 2011 and June 30, 2010, respectively | 17,397 | 21,068 | |||||
Prepaid expenses and other current assets | 6,940 | 6,510 | |||||
Inventories, net | 192,589 | 153,030 | |||||
Income taxes receivable and prepaid income taxes | 6,141 | 6,374 | |||||
Deferred income taxes | 513 | 2,705 | |||||
Total current assets | 230,461 | 197,755 | |||||
PROPERTY AND EQUIPMENT, net | 77,067 | 89,482 | |||||
DEFERRED INCOME TAXES | 1,298 | 176 | |||||
OTHER ASSETS, net | 22,837 | 25,314 | |||||
TOTAL ASSETS | $ | 331,663 | $ | 312,727 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Cash overdraft | $ | 1,180 | $ | 1,395 | |||
Revolving credit facilities and current portion of LT debt, net of unamortized discount of $18,334 at June 30, 2010 | 56,546 | 112,229 | |||||
Accounts payable | 40,438 | 22,486 | |||||
Accrued expenses and other current liabilities | 38,289 | 38,418 | |||||
Income taxes payable | 519 | 384 | |||||
Fair value of warrant liability | 19,507 | — | |||||
Current portion of capital lease obligations | 1,243 | 1,077 | |||||
Total current liabilities | 157,722 | 175,989 | |||||
LONG-TERM DEBT, net of unamortized discount of $23,241 and $20,537 at June 30, 2011 and June 30, 2011, respectively | 84,175 | 388 | |||||
SUBORDINATED NOTES PAYABLE TO RELATED PARTY | — | 4,460 | |||||
CAPITAL LEASE OBLIGATIONS, net of current portion | 2,308 | 732 | |||||
DEFERRED TAX LIABILITY | 270 | — | |||||
DEFERRED RENT | 23,877 | 23,427 | |||||
OTHER LONG-TERM LIABILITIES | 11,058 | 7,898 | |||||
TOTAL LIABILITIES | 279,410 | 212,894 | |||||
COMMITMENTS AND CONTINGENCIES | |||||||
STOCKHOLDERS' EQUITY | |||||||
Preferred stock, $.0001 par value, authorized 1,000 shares; none issued | — | — | |||||
Common stock, $.0001 par value, authorized 230,000 shares; 99,219 shares issued and 94,054 shares outstanding at June 30, 2011 and 72,881 shares issued and 71,447 shares outstanding at June 30, 2010 | 10 | 7 | |||||
Additional paid-in capital | 150,652 | 151,675 | |||||
Accumulated other comprehensive loss | (1,753 | ) | (3,297 | ) | |||
Accumulated deficit | (94,499 | ) | (38,508 | ) | |||
Less: Treasury stock, 304 shares at cost at June 30, 2011 and 1,434 shares at cost at June 30, 2010 | (2,157 | ) | (10,044 | ) | |||
TOTAL STOCKHOLDERS' EQUITY | 52,253 | 99,833 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 331,663 | $ | 312,727 | |||
AMERICAN APPAREL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) (unaudited)
Six Months Ended June 30, | |||||||
2011 | 2010 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Cash received from customers | $ | 248,714 | $ | 249,838 | |||
Cash paid to suppliers, employees and others | (252,752 | ) | (265,567 | ) | |||
Income taxes paid | (2,030 | ) | (4,527 | ) | |||
Interest paid, net of capitalized interest | (2,550 | ) | (3,684 | ) | |||
Other | 125 | 218 | |||||
Net cash (used in) provided by operating activities | (8,493 | ) | (23,722 | ) | |||
CASH FLOWS USED IN INVESTING ACTIVITIES | |||||||
Capital expenditures | (4,727 | ) | (7,258 | ) | |||
Proceeds from sale of fixed assets | 68 | 39 | |||||
Net cash used in investing activities | (4,659 | ) | (7,219 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Cash overdraft from financial institution | (2,148 | ) | (2,338 | ) | |||
(Repayments) borrowings under revolving credit facility, net | (836 | ) | 34,973 | ||||
Net proceeds from issuance of common stock and purchase rights | 14,418 | — | |||||
Repurchase of common stock for payment of payroll tax withholding on stock-based compensation | — | (592 | ) | ||||
Proceeds from capital lease financing | 3,100 | — | |||||
Payment of debt issuance costs | (1,213 | ) | — | ||||
Borrowings under term loans and notes payable, net of $5,000 discount | — | — | |||||
Proceeds from term loans and notes payable | (7 | ) | — | ||||
Repayment of capital lease obligations | (651 | ) | (1,035 | ) | |||
Net cash provided by financing activities | 12,663 | 31,008 | |||||
EFFECT OF FOREIGN EXCHANGE RATE ON CASH | (286 | ) | (1,045 | ) | |||
NET DECREASE IN CASH | (775 | ) | (978 | ) | |||
CASH, beginning of period | 7,656 | 9,046 | |||||
CASH, end of period | $ | 6,881 | $ | 8,068 | |||
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES | |||||||
Six Months Ended June 30, | |||||||
2011 | 2010 | ||||||
Net (loss) income | $ | (20,958 | ) | $ | (57,521 | ) | |
Depreciation and amortization of property and equipment and other assets | 12,983 | 14,415 | |||||
Accrued interest - paid in kind | 8,781 | 3,263 | |||||
Amortization of debt discount and deferred financing costs | 3,564 | 2,939 | |||||
Gain on disposal of property and equipment | 71 | 16 | |||||
Stock-based compensation expense | 2,445 | 1,763 | |||||
Retail store impairment charges | 1,652 | 5,598 | |||||
Foreign currency transaction Loss (gain) | (1,074 | ) | 2,684 | ||||
Allowance for inventory shrinkage and obsolescence | (75 | ) | 1,397 | ||||
Loss on extinguishment of debt | 3,114 | — | |||||
Change in fair value of warrant liability | (15,100 | ) | 1,034 | ||||
Bad debt expense | 343 | 242 | |||||
Deferred income taxes | 608 | 13,670 | |||||
Deferred rent | (1,378 | ) | 1,835 | ||||
Changes in cash due to changes in operating assets and liabilities | |||||||
Trade accounts receivables | (501 | ) | (4,951 | ) | |||
Inventories | (12,294 | ) | (15,450 | ) | |||
Prepaid expenses and other current assets | 2,282 | 3,051 | |||||
Other assets | (1,439 | ) | (1,270 | ) | |||
Accounts payable | 9,606 | 3,388 | |||||
Accrued expenses and other liabilities | 639 | (1,005 | ) | ||||
Income taxes (receivable)/payable | (1,762 | ) | 1,180 | ||||
Net cash (used in) provided by operating activities | $ | (8,493 | ) | $ | (23,722 | ) | |
NON-CASH INVESTING AND FINANCING ACTIVITIES | |||||||
Property and equipment acquired and included in accounts payable | $ | 375 | $ | 506 | |||
Notes payable converted to equity | $ | 4,688 | — | ||||
Reclassification of lion warrant from equity to debt | $ | 11,339 | — | ||||
Issuance of warrants and purchase rights at fair value | $ | 5,036 | — | ||||
AMERICAN APPAREL, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Amounts in thousands)
(unaudited)
The following table presents key financial information for American Apparel's business segments before unallocated corporate expenses:
Three Months Ended June 30, 2011 | |||||||||||||||||||
U.S. Wholesale | U.S. Retail | Canada | International | Consolidated | |||||||||||||||
Net sales to external customers | $ | 38,139 | $ | 40,359 | $ | 14,364 | $ | 39,942 | $ | 132,804 | |||||||||
Gross profit | 10,533 | 27,685 | 8,075 | 26,133 | 72,426 | ||||||||||||||
Income (loss) from operations | 5,094 | (1,510 | ) | (547 | ) | 3,900 | 6,937 | ||||||||||||
Depreciation and amortization | 2,015 | 2,592 | 409 | 1,333 | 6,349 | ||||||||||||||
Capital expenditures | 301 | 1,645 | 53 | 165 | 2,164 | ||||||||||||||
Retail store impairment charges | — | 68 | — | 934 | 1,002 | ||||||||||||||
Deferred rent expense (benefit) | (84 | ) | (127 | ) | (414 | ) | 78 | (547 | ) | ||||||||||
Three Months Ended June 30, 2010 | |||||||||||||||||||
U.S. Wholesale | U.S. Retail | Canada | International | Consolidated | |||||||||||||||
Net sales to external customers | $ | 39,060 | $ | 42,741 | $ | 16,261 | $ | 34,671 | $ | 132,733 | |||||||||
Gross profit | 7,093 | 28,313 | 10,023 | 23,056 | 68,485 | ||||||||||||||
Income (loss) from operations | 752 | (3,441 | ) | 467 | 1,257 | (965 | ) | ||||||||||||
Depreciation and amortization | 2,320 | 2,650 | 599 | 1,730 | 7,299 | ||||||||||||||
Capital expenditures | 1,648 | 1,800 | 384 | 484 | 4,316 | ||||||||||||||
Retail store impairment charges | — | 687 | 235 | 485 | 1,407 | ||||||||||||||
Deferred rent expense (benefit) | 117 | 469 | (8 | ) | 275 | 853 | |||||||||||||
Six Months Ended June 30, 2011 | |||||||||||||||||||
U.S. Wholesale | U.S. Retail | Canada | International | Consolidated | |||||||||||||||
Net sales to external customers | $ | 72,789 | $ | 77,379 | $ | 26,992 | $ | 71,711 | $ | 248,871 | |||||||||
Gross profit | 21,621 | 52,424 | 16,031 | 45,988 | 136,064 | ||||||||||||||
Income (loss) from operations | 11,537 | (6,505 | ) | (1,427 | ) | 2,279 | 5,884 | ||||||||||||
Depreciation and amortization | 4,182 | 5,288 | 842 | 2,671 | 12,983 | ||||||||||||||
Capital expenditures | 1,341 | 2,679 | 132 | 575 | 4,727 | ||||||||||||||
Retail store impairment charges | — | 177 | 2 | 1,473 | 1,652 | ||||||||||||||
Deferred rent expense (benefit) | 152 | (1,046 | ) | (436 | ) | (48 | ) | (1,378 | ) | ||||||||||
Six Months Ended June 30, 2010 | |||||||||||||||||||
U.S. Wholesale | U.S. Retail | Canada | International | Consolidated | |||||||||||||||
Net sales to external customers | $ | 72,889 | $ | 83,634 | $ | 30,476 | $ | 67,548 | $ | 254,547 | |||||||||
Gross profit | 12,412 | 56,972 | 19,033 | 41,207 | 129,624 | ||||||||||||||
Income (loss) from operations | 57 | (7,817 | ) | 918 | (4,393 | ) | (11,235 | ) | |||||||||||
Depreciation and amortization | 4,620 | 5,268 | 1,164 | 3,363 | 14,415 | ||||||||||||||
Capital expenditures | 2,832 | 2,895 | 697 | 834 | 7,258 | ||||||||||||||
Retail store impairment charges | — | 2,661 | 477 | 2,460 | 5,598 | ||||||||||||||
Deferred rent expense | 236 | 1,191 | 2 | 406 | 1,835 | ||||||||||||||
AMERICAN APPAREL, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION (continued)
(Amounts in thousands) (unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Reconciliation to Income (loss) before Income Taxes | |||||||||||||||
Consolidated income (loss) from operations of reportable segments | $ | 6,937 | $ | (965 | ) | $ | 5,884 | $ | (11,235 | ) | |||||
Unallocated corporate expenses | (12,161 | ) | (7,596 | ) | (24,198 | ) | (18,883 | ) | |||||||
Interest expense | (7,752 | ) | (5,682 | ) | (14,883 | ) | (10,728 | ) | |||||||
Other income | 20 | 355 | 55 | 201 | |||||||||||
Loss on extinguishment of debt | — | - | (3,114 | ) | — | ||||||||||
Change in fair value of warrant and purchase rights | 13,000 | (1,034) | 15,100 | (1,034) | |||||||||||
Foreign currency transaction gain (loss) | 263 | (1,927 | ) | 1,074 | (2,684 | ) | |||||||||
Consolidated Income (loss) before Income Taxes | $ | 307 | $ | (16,849 | ) | $ | (20,082 | ) | $ | (44,363 | ) | ||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Net Sales by Class of Customer | |||||||||||||||
U.S. Wholesale | |||||||||||||||
Wholesale | $ | 32,945 | $ | 34,402 | $ | 62,061 | $ | 63,808 | |||||||
Online consumer | 5,194 | 4,658 | 10,728 | 9,081 | |||||||||||
Total | $ | 38,139 | $ | 39,060 | $ | 72,789 | $ | 72,889 | |||||||
U.S. Retail | $ | 40,359 | $ | 42,741 | $ | 77,379 | $ | 83,634 | |||||||
Canada | |||||||||||||||
Wholesale | $ | 3,338 | $ | 3,340 | $ | 5,753 | $ | 5,856 | |||||||
Retail | 10,582 | 12,477 | 20,302 | 23,781 | |||||||||||
Online consumer | 444 | 444 | 937 | 839 | |||||||||||
Total | $ | 14,364 | $ | 16,261 | $ | 26,992 | $ | 30,476 | |||||||
International | |||||||||||||||
Wholesale | $ | 2,785 | $ | 3,122 | $ | 4,654 | $ | 6,087 | |||||||
Retail | 32,853 | 28,559 | 58,814 | 55,519 | |||||||||||
Online consumer | 4,304 | 2,990 | 8,243 | 5,942 | |||||||||||
Total | $ | 39,942 | $ | 34,671 | $ | 71,711 | $ | 67,548 | |||||||
Consolidated | |||||||||||||||
Wholesale | $ | 39,068 | $ | 40,864 | $ | 72,468 | $ | 75,751 | |||||||
Retail | 83,794 | 83,777 | 156,495 | 162,934 | |||||||||||
Online consumer | 9,942 | 8,092 | 19,908 | 15,862 | |||||||||||
Total | $ | 132,804 | $ | 132,733 | $ | 248,871 | $ | 254,547 | |||||||
Table A
American Apparel, Inc. and Subsidiaries
Calculation and Reconciliation of Consolidated Adjusted EBITDA
(Amounts in thousands)
(unaudited)
In addition to its GAAP results, American Apparel considers non-GAAP measures of its performance. EBITDA, as defined below, is an important supplemental financial measure of American Apparel's performance that is not required by, or presented in accordance with, GAAP. EBITDA represents net income (loss) before income taxes, interest and other expense (income), and depreciation and amortization. American Apparel's management uses EBITDA as a financial measure to assess the ability of its assets to generate cash sufficient to pay interest on its indebtedness, meet capital expenditure and working capital requirements, pay taxes, and otherwise meet its obligations as they become due. American Apparel's management believes that the presentation of EBITDA provides useful information regarding American Apparel's results of operations because they assist in analyzing and benchmarking the performance and value of American Apparel's business. American Apparel believes that EBITDA is useful to stockholders as a measure of comparative operating performance, as it is less susceptible to variances in actual performance resulting from depreciation and amortization and more reflective of changes in pricing decisions, cost controls and other factors that affect operating performance.
EBITDA also is used by American Apparel's management for multiple purposes, including:
to calculate and support various coverage ratios with American Apparel's lenders
to allow lenders to calculate total proceeds they are willing to loan to American Apparel based on its relative strength compared to its competitors
to more accurately compare American Apparel's operating performance from period to period and company to company by eliminating differences caused by variations in capital structures (which affect relative interest expense), tax positions and amortization of intangibles.
In addition, EBITDA is an important valuation tool used by potential investors when assessing the relative performance of American Apparel in comparison to other companies in the same industry. Although American Apparel uses EBITDA as a financial measure to assess the performance of its business, there are material limitations to using a measure such as EBITDA, including the difficulty associated with using it as the sole measure to compare the results of one company to another and the inability to analyze significant items that directly affect a company's net income (loss) or operating income because it does not include certain material costs, such as interest and taxes, necessary to operate its business. In addition, American Apparel's calculation of EBITDA may not be consistent with similarly titled measures of other companies and should be viewed in conjunction with measures that are computed in accordance with GAAP. American Apparel's management compensates for these limitations in considering EBITDA in conjunction with its analysis of other GAAP financial measures, such as net income (loss).
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net loss | $ | (213 | ) | $ | (14,678 | ) | $ | (20,958 | ) | $ | (57,520 | ) | ||||
Income tax provision | 520 | (2,171 | ) | 876 | 13,158 | |||||||||||
Interest and other (gain) expense, net | (5,268 | ) | 6,361 | 2,842 | 11,561 | |||||||||||
Depreciation and amortization | 6,349 | 7,299 | 12,983 | 14,415 | ||||||||||||
Foreign currency (gain) loss | (263 | ) | 1,927 | (1,074 | ) | 2,684 | ||||||||||
Retail store impairment charges | 1,002 | 1,407 | 1,652 | 5,598 | ||||||||||||
Stock based compensation expense, including employer related payroll taxes | 1,574 | — | 2,445 | 1,763 | ||||||||||||
Consolidated Adjusted EBITDA | $ | 3,701 | $ | 145 | $ | (1,234 | ) | $ | (8,341 | ) | ||||||
Contact:
Tom Casey
Acting President
Or
John J. Luttrell
Chief Financial Officer
American Apparel
(213) 488-0226