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American Apparel experiences improvement in production efficiency
20 May '10
5 min read
Operating expenses were also higher in the first quarter of 2010 due to the recognition of $1.1 million in merger related stock based compensation expense as a result of stock granted to employees pursuant to the 2007 merger between American Apparel, Inc. (formerly Endeavor Acquisition Corp., incorporated in Delaware) and American Apparel Inc., a California corporation. Operating expenses for the first quarter of 2010 are inclusive of $1.9 million in charges to reserve for the company's exposure against certain claims for workers compensation filed by former employees who were dismissed following the I-9 inspection by U.S. Immigration and Customs Enforcement.
Loss from operations for the first quarter of 2010 was $17.6 million, or a negative operating margin of 14.4%, versus an operating loss of $3.9 million in the prior year first quarter, or a negative operating margin of 3.4%.
Total debt increased by $8.0 million, to $91.4 million at March 31, 2010 from $83.4 million at December 31, 2009. As of March 31, 2010, the company had approximately $36 million and $4 million of availability under its U.S. and Canadian revolving credit facilities, respectively. For the quarter ended March 31, 2010, the company's cash flows used in operations were $5.6 million, and capital expenditures were $2.9 million. As of March 31, 2010, total assets were $324.9 million, total liabilities were $180.7 million, and total stockholders' equity was $144.2 million.
As of May 15, 2010, for the year the company has opened three new retail locations and closed two locations, with two additional store locations under signed leases and expected to be opened later in the year.
For the first quarter of 2010, the impact of lower manufacturing efficiency is estimated to have reduced operating income by approximately $4.4 million. The company currently expects that the reduced manufacturing efficiency at the company's production facilities beginning during the fourth quarter of 2009 could likely continue through the end of 2010, and could impact the company's financial results at least through early 2011.
The company experienced an improvement in production efficiency in the first quarter of 2010 versus the fourth quarter of 2009, but anticipates a temporary worsening in efficiency during the second quarter of 2010 as additional manufacturing workers will need to be hired and trained to meet a seasonal increased demand for the company's products. The duration and ultimate financial impact of the inefficiencies is difficult to estimate, and the financial impact in future quarters could differ significantly from the level experienced during the first quarter of 2010.
Loss from operations for the first quarter of 2010 was $17.6 million, or a negative operating margin of 14.4%, versus an operating loss of $3.9 million in the prior year first quarter, or a negative operating margin of 3.4%.
Total debt increased by $8.0 million, to $91.4 million at March 31, 2010 from $83.4 million at December 31, 2009. As of March 31, 2010, the company had approximately $36 million and $4 million of availability under its U.S. and Canadian revolving credit facilities, respectively. For the quarter ended March 31, 2010, the company's cash flows used in operations were $5.6 million, and capital expenditures were $2.9 million. As of March 31, 2010, total assets were $324.9 million, total liabilities were $180.7 million, and total stockholders' equity was $144.2 million.
As of May 15, 2010, for the year the company has opened three new retail locations and closed two locations, with two additional store locations under signed leases and expected to be opened later in the year.
For the first quarter of 2010, the impact of lower manufacturing efficiency is estimated to have reduced operating income by approximately $4.4 million. The company currently expects that the reduced manufacturing efficiency at the company's production facilities beginning during the fourth quarter of 2009 could likely continue through the end of 2010, and could impact the company's financial results at least through early 2011.
The company experienced an improvement in production efficiency in the first quarter of 2010 versus the fourth quarter of 2009, but anticipates a temporary worsening in efficiency during the second quarter of 2010 as additional manufacturing workers will need to be hired and trained to meet a seasonal increased demand for the company's products. The duration and ultimate financial impact of the inefficiencies is difficult to estimate, and the financial impact in future quarters could differ significantly from the level experienced during the first quarter of 2010.
American Apparel Inc
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