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American Apparel able to deliver profit in spite of crisis
11 Nov '09
6 min read
Interest expense for the third quarter of 2009 increased to $5.4 million versus $3.2 million for the same period last year. The increase in interest expense was largely due to the amortization of debt discount and deferred financing costs, and a higher weighted average interest rate on outstanding borrowings by the Company, as compared to in the third quarter of 2008.
The Company's income tax provision for the third quarter of 2009 was $3.3 million, as compared to $0.9 million in the third quarter of 2008. The Company's effective tax rate increased to 44.5%, compared to 26.9% in the third quarter of 2008.
Net income for the third quarter of 2009 was $4.2 million, or $0.05 per diluted common share. This compares to $2.3 million, or $0.03 per diluted common share, for the third quarter of 2008. Last year's earnings per diluted share was negatively impacted by $0.13 due to the after-tax impact of the $13.2 million merger related share based compensation expense. Please see Table B for more background on the impact of the merger related share based compensation expense on the 2008 results.
During the third quarter, the Company reduced the drawn balance on its revolving credit facilities by approximately $18.5 million, to $32.7 million at the end of the period from $51.2 million at the end of the second quarter, primarily from cash flow from operations. As of September 30, 2009, the Company had $23.0 million of availability under its U.S. revolving credit facility. Total debt decreased by $14.7 million, to $104.6 million at the end of the third quarter, down from $119.3 million at the end of the second quarter. Total inventories were $152.6 million at the end of the third quarter, a reduction of $6.6 million from $159.3 million at the end of the second quarter.
Dov Charney, Chairman and Chief Executive Officer, stated: "While we are pleased that we were able to deliver a profit in the third quarter in spite of the difficult environment, I believe the successes we had in terms of streamlining our inventories and significantly reducing our indebtedness will prove particularly valuable as we move forward. While it is still very early, we are encouraged by some indications pointing to the beginning of momentum in our sales. We believe that for the long term, our business remains on track as we continue to expand our brand's presence both in the U.S. and internationally.”
Outlook
As of October 31, 2009, American Apparel had opened 23 new store locations since the beginning of the year and closed 5 locations. The Company currently has 4 signed leases for new retail stores in its store pipeline, with 3 of those locations likely to open before the end of 2009.
Management continues to expect the previously communicated financial guidance for 2009: net sales in the range of $540 to $555 million, income from operations in the range of $25 to $30 million, and a net (loss) income in the range of ($1) to $4 million. These estimates are before any non-cash share based compensation expense from any equity awards that may be made to employees under the Company's 2007 Performance Equity Plan.
The Company's income tax provision for the third quarter of 2009 was $3.3 million, as compared to $0.9 million in the third quarter of 2008. The Company's effective tax rate increased to 44.5%, compared to 26.9% in the third quarter of 2008.
Net income for the third quarter of 2009 was $4.2 million, or $0.05 per diluted common share. This compares to $2.3 million, or $0.03 per diluted common share, for the third quarter of 2008. Last year's earnings per diluted share was negatively impacted by $0.13 due to the after-tax impact of the $13.2 million merger related share based compensation expense. Please see Table B for more background on the impact of the merger related share based compensation expense on the 2008 results.
During the third quarter, the Company reduced the drawn balance on its revolving credit facilities by approximately $18.5 million, to $32.7 million at the end of the period from $51.2 million at the end of the second quarter, primarily from cash flow from operations. As of September 30, 2009, the Company had $23.0 million of availability under its U.S. revolving credit facility. Total debt decreased by $14.7 million, to $104.6 million at the end of the third quarter, down from $119.3 million at the end of the second quarter. Total inventories were $152.6 million at the end of the third quarter, a reduction of $6.6 million from $159.3 million at the end of the second quarter.
Dov Charney, Chairman and Chief Executive Officer, stated: "While we are pleased that we were able to deliver a profit in the third quarter in spite of the difficult environment, I believe the successes we had in terms of streamlining our inventories and significantly reducing our indebtedness will prove particularly valuable as we move forward. While it is still very early, we are encouraged by some indications pointing to the beginning of momentum in our sales. We believe that for the long term, our business remains on track as we continue to expand our brand's presence both in the U.S. and internationally.”
Outlook
As of October 31, 2009, American Apparel had opened 23 new store locations since the beginning of the year and closed 5 locations. The Company currently has 4 signed leases for new retail stores in its store pipeline, with 3 of those locations likely to open before the end of 2009.
Management continues to expect the previously communicated financial guidance for 2009: net sales in the range of $540 to $555 million, income from operations in the range of $25 to $30 million, and a net (loss) income in the range of ($1) to $4 million. These estimates are before any non-cash share based compensation expense from any equity awards that may be made to employees under the Company's 2007 Performance Equity Plan.
American Apparel
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