American Apparel Inc. Reports First Quarter Financial Results

Operating expense was $79.5 million for the first quarter 2014 versus $83.3 million for the first quarter 2013. As a percent of sales, operating expenses decreased to 58.0 percent for the first quarter 2014 versus 60.4 percent for the first quarter 2013. The decrease includes approximately $3 million in lower payroll and associated costs, advertising and marketing, and professional fees. The reductions are largely as a result of cost reduction efforts. In addition stock compensation expense was lower by $2.3 million and equipment lease expense increased $1.0 million. In the first quarter 2014 the Company incurred $0.5 million in retail store impairment charges versus $0.1 million in the first quarter 2013.

Other income for the first quarter 2014 was $2.5 million as compared with other expense of $35.6 million in the first quarter 2013. The $38.1 million change was primarily the result of an unrealized gain for the change in fair value of warrants of $12.7 million incurred in the first quarter 2014 as compared to an unrealized loss of $23.6 million in the first quarter 2013. For further explanation, please see "Explanation of Unrealized Gain (loss) of Change in Fair Value of Warrants."

Adjusted EBITDA increased to $1.4 million for the first quarter 2014 versus a loss of $0.7 million for the first quarter 2013. Please refer to Table A for a reconciliation of consolidated Adjusted EBITDA, a non-GAAP financial measure, to consolidated net loss.

Income tax provision in the first quarter 2014 was $0.5 million versus $0.5 million for the first quarter 2013. In accordance with U.S. GAAP, the Company has discontinued recognizing potential tax benefits associated with net operating loss carryovers.

Net loss for the first quarter 2014 was $5.5 million or $0.05 per common share, versus a net loss of $46.5 million, or $0.42 per common share for the first quarter 2013.