American Apparel, Inc. Reports Third Quarter 2013 Financial Results

  American Apparel, Inc. Reports Third Quarter 2013 Financial Results

Business Wire

LOS ANGELES -- November 14, 2013

American Apparel, Inc. (NYSE MKT: APP), a vertically integrated manufacturer,
distributor, and retailer of branded fashion-basic apparel, announced
financial results for its third quarter ended September 30, 2013.

Financial Performance Summary for the Three and Nine Months Ended September
2013

  *For the three months ended September 30, 2013, net sales increased 1% to
    $164.5 million on a 2% increase in comparable store sales and a 2%
    increase in wholesale net sales.
  *For the three months ended September 30, 2013, adjusted EBITDA was $3.8
    million vs. $13.3 million in the 2012 third quarter.
  *For the nine months ended September 30, 2013, net sales increased 5% to
    $464.8 million on a 5% increase in comparable store sales and 6% increase
    in wholesale net sales.
  *For the nine months ended September 30, 2013, adjusted EBITDA was $11.0
    million vs. $18.8 million in the nine months ended September 30, 2012.
  *A substantial majority of the decrease in adjusted EBITDA for each period
    was a result of transition and start-up costs associated with the
    conversion to the company’s new distribution center (see Company Outlook
    and EBITDA Guidance Reconciliation below).

According to John Luttrell, Chief Financial Officer of American Apparel, Inc.,
“Our lower EBITDA performance was substantially impacted by events surrounding
the transition to and opening of our new distribution center. However, we
believe that these issues are now substantially behind us, and although there
will be some remaining transition costs in the fourth quarter of 2013, we do
not anticipate that these transition and start-up costs will negatively affect
our financial performance in 2014.

Sales momentum for the quarter was positive despite weak U.S. apparel sector
demand. Our sales were also impacted by the distraction from the distribution
center transition and by late product deliveries. This contributed to a
substantial increase in out of stock positions for some of our most popular
styles. We also believe we missed sales opportunities by not carrying enough
inventory of top selling items to meet both retail and wholesale demand.”

According to Dov Charney, Chairman and CEO of American Apparel, Inc., “No
question we had a rough 3rd quarter, although I think it is important to
emphasize that most of the challenges we have faced were primarily technically
oriented and we believe these challenges are substantially behind us. That
being said, I am confident in three things: our brand is strong, our customer
is energized, and our product line is being well received. I believe American
Apparel is a company that can grow significantly.

There are great opportunities for online growth, and there is a resurgence of
interest in Made in USA clothing especially within the wholesale ad-specialty
industry. Private label orders are also up significantly and we anticipate a
lot of growth in that area. An example of the Made in USA demand includes an
order we recently received for over 500,000 units that will be sold as printed
items at a major retailer. We are currently hiring over 300 sewing employees
to meet demand I anticipate in 2014. It is also noteworthy that our unit
inventories are at their lowest levels in three years.

There are requests for us to open stores all over the world in major cities
like Hong Kong, Taipei, Copenhagen and Madrid. I am looking forward to working
with our team to produce strong results for shareholders in 2014. The company
is uniquely positioned and has a competitive advantage as a result of its Made
in USA manufacturing, distribution, and retail infrastructure which has been
developed over the last 10 years. I believe that these factors present a
unique opportunity for growth.”

Supply Chain Update

Jim Sweeney joined the company in October as Distribution Director. Mr.
Sweeney brings decades of distribution experience and in the past was
Distribution Director at such apparel companies as the TJX Companies, Inc.,
Fifth & Pacific Companies, Inc. (formerly Liz Claiborne, Inc.), and Caldor,
Inc. Most recently, Mr. Sweeney was with SDI, a material handling integrator
that provides sortation and automation solutions for distribution activities.

According to Mr. Sweeney, “I am excited about the new distribution center and
its potential to meet the future growth requirements of American Apparel’s
businesses. We have made significant recent progress in completing the
installation. Specifically:

  *Transition activities have been substantially completed.
  *As illustrated in Graph 1 below, distribution delays caused out of stock
    positions at both stores and wholesale inventories that negatively
    impacted sales in the months of September and October. We have corrected
    these issues and recently our out of stock position has returned to
    historical levels.
  *We were able to “pressure test” the system through the Halloween selling
    season and the systems performed well.
  *As of November 1, we have begun to significantly reduce the distribution
    labor costs we incurred to help address center transition issues.”

For the three months and nine months ended September 30, 2013, the company
incurred incremental distribution costs (primarily labor costs) associated
with transition activities and recorded additional cost of sales and selling
expenses in its statement of operations for the periods indicated below ($ in
millions):

                   2013
                     Third Quarter  Year-to-Date
  Cost of sales      $1.2            $2.2
  Selling expenses   4.7             8.7
  Total              $5.9            $10.9

Beginning on November 1, 2013, we began to implement labor cost reductions for
our distribution activities. We have targeted additional reductions in the
remainder of the fourth quarter. However, if there are any further transition
issues associated with the new distribution center, sales could continue to be
negatively impacted, we could incur additional conversion costs and there
could be delays in achieving planned cost reductions, all of which could
negatively impact our operating performance, financial condition and
liquidity.

Explanation of Significant Non Operating Items

Lion Capital holds 21.6 million warrants at $0.75 per share and as our share
price increases the warrants become more valuable and we book an expense to
recognize the increase in value of warrants. Conversely, when our share price
decreases, we book a gain to recognize a decrease in the value of warrants.
Therefore, as our share price decreased during the third quarter of 2013, we
booked a non-cash gain of $12.9 million as a result of a mark-to-market
adjustment to our warrants. Conversely, the relative increase in our share
price during the third quarter of 2012, resulted in a non-cash loss of $13.3
million as a result of the same mark-to-market adjustment to our warrants.
Although the income statement impacts associated with the warrants are
appropriate and required under GAAP, they do not impact the operating
performance of the company. Also, they do not represent obligations that will
be settled with cash. Instead, these warrants will be reclassified to equity
when exercised.

Operating Results - Third Quarter 2013

Comparing the third quarter 2013 to the corresponding period last year, net
sales increased 1% to $164.5 million on a 2% increase in comparable store
sales in the retail and online business and a 2% increase in net sales in the
wholesale business. The following delineates the components of the increases
for the quarterly periods ended September 30, 2013 and 2012 as compared to the
corresponding quarter of the prior year:

                                2013 Third Quarter     2012 Third Quarter
                                                           ^(1)
  Comparable Store Sales          —%                     20%
  Comparable Online Sales         17%                    21%
  Comparable Retail & Online      2%                     20%
  Wholesale Net Sales             2%                     6%
  Total Net Sales                 1%                     15%
  ^(1) Comparable store sales have been adjusted to exclude impact of extra
  leap-year day in 2012.

Gross profit of $84.6 million for the third quarter 2013 represented a
decrease of 1% from $85.2 million reported for the third quarter 2012. Gross
margin decreased from 52.5% for the quarter ended September 30, 2012 to 51.4%
for the quarter ended September 2013. The decrease in the gross margin was
primarily due to higher distribution costs associated with transition to our
new center.

Operating expenses of $89.1 million for the third quarter 2013 represented an
increase of 11% from $80.6 million for the third quarter 2012. As a percent of
revenue, operating expenses increased from 49.7% for the quarter ended
September 2012 to 54.2% for the quarter ended September 2013. The increase in
operating expenses was due to higher salaries, wages and benefits primarily as
a result of the transition to our new distribution center in La Mirada,
California. We also experienced in the third quarter of 2013, and expect to
continue to incur, higher computer and leased equipment expenses.

Adjusted EBITDA in the third quarter of 2013 decreased to $3.8 million from
$13.3 million in the third quarter of 2012. For a reconciliation of
consolidated Adjusted EBITDA, a non-GAAP financial measure, to consolidated
net income or loss, as applicable, please refer to Table A.

Other income for the third quarter 2013 was $3.2 million as compared with
other expense of $23.1 million in the prior year quarter. The $26.3 million
change in non-operating expenses was primarily the result of a an unrealized
gain on the change in fair value of our warrants of $12.9 million for the
quarter ended September 2013 as compared with an unrealized loss of $13.3
million in the prior year quarter. For further explanation, please see
Explanation of Significant Non Operating Items above.

Income tax provision in the third quarter 2013 was $0.2 million versus $0.5
million in the 2012 third quarter. In accordance with U.S. GAAP, we have
discontinued recognizing potential tax benefits associated with current
operating losses.

Net loss for the third quarter of 2013 was $1.5 million, or $0.01 per common
share, compared to net loss for the third quarter of 2012 of $19.0 million, or
$0.18 per common share. The 2013 third quarter includes a
non-cash/non-operating gain of $12.9 million ($0.12 per common share)
associated with a decrease in the fair value of outstanding warrants. The 2012
third quarter includes a non-cash/non-operating charge of $13.3 million ($0.13
per common share) for the increase in the fair value of warrants. Excluding
the non-cash and non-operating items from both periods, the net loss for the
third quarter 2013 would have been $14.4 million, or $0.13 per share, compared
to $5.7 million, or $0.05 per share, in the third quarter 2012.

Fully-diluted weighted average shares outstanding were 110.4 million in the
third quarter of 2013 versus 106.2 million for the third quarter of 2012. As
of November 8, 2013 there were approximately 110.4 million shares outstanding.

Due to the decrease in our adjusted EBITDA in the third quarter of 2013, we
have received a waiver of our obligation under our credit facility with
Capital One to maintain a minimum fixed charge coverage ratio and a maximum
leverage ratio for the twelve-month period ending September 30, 2013, and we
are in discussions with respect to a waiver or amendment for future periods.
Further information with respect to the foregoing will be included in our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2013.

Company Outlook and EBITDA Guidance Reconciliation

In connection with the second quarter earnings release, the company issued
adjusted EBITDA guidance for 2013 in the range from $46 million to $51 million
and this implied adjusted EBITDA guidance for the first nine months of 2013 at
the mid-point of approximately $24 million. The following reconciles the
variance between the implied adjusted EBITDA guidance for the first nine
months of 2013 and the actual results ($ in millions):

                                                     
  Adjusted EBITDA guidance                              $ 24.0
  Gross Profit impact of reduced sales                  (5.8   ) *
  Gross Profit impact of higher distribution expenses   (2.6   ) *
  Gross Profit impact of mix shift                      (0.5   )
  Higher distribution expenses                          (3.3   ) *
  Other                                                 (0.8   )
  Consolidated Adjusted EBITDA                          $ 11.0 
  * Affected by the distribution center transition
  

As noted above, we believe the transition to our new distribution center has
negatively impacted adjusted EBITDA through a combination of lower sales and
gross profit as well as higher distribution and operating expenses. Most of
the transition and start-up issues have been addressed and the new
distribution facility is presently shipping deliveries on time. We also are
experiencing reductions in the distribution labor costs we incurred to help
address distribution center transition issues, and we have targeted additional
reductions throughout the remainder of the fourth quarter. Additionally, we
have increased production of our top-selling styles in the fourth quarter to
meet customer demand. However, we are unable to predict with certainty the
timing and magnitude of the remaining cost reductions at our distribution
center or of production increases to meet customer demand. We are therefore
unable to provide updated guidance for the fourth quarter and full year 2013
at this time and note that prior guidance should no longer be relied upon.

We do not anticipate that the transition and start-up costs associated with
the conversion of our new distribution center will negatively affect financial
performance in 2014, and will look to provide a full year 2014 outlook in our
fourth quarter and full year 2013 financial results press release.

For a reconciliation of adjusted EBITDA to net loss, please refer to Table A.

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 November 1, 2013, American Apparel had approximately 10,000
employees and operated 246 retail stores in 20 countries, including the United
States, Canada, Mexico, Brazil, United Kingdom, Ireland, Austria, Belgium,
France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland, Australia,
Japan, South Korea, and China. American Apparel also operates a global
e-commerce site that serves over 60 countries worldwide at
http://www.americanapparel.net. In addition, American Apparel operates a
leading wholesale business that supplies high quality T-shirts and other
casual wear to distributors and screen printers.

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 and liquidity (including the
impact on our compliance with, and availability under, our debt instruments
and waivers or amendments of those instruments), results of operations, and
future business plans and expectations, including statements related to the
effect of, and our expectations with respect to, the transition to our new
distribution center and future cost, inventory and sales impacts related
thereto. 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: our ability to generate or obtain from
external sources sufficient liquidity for operations and debt service; our
financial condition, operating results and projected cash flows; consequences
of our significant indebtedness, including our relationship with our lenders
and our ability to comply with our debt agreements and generate cash flow to
service our debt; including the risk of acceleration of borrowings thereunder
as a result of noncompliance; disruptions in the global financial markets; our
ability to maintain compliance with the exchange rules of the NYSE MKT, LLC;
adverse changes in our credit ratings and any related impact on financial
costs and structure; continued compliance with U.S. and foreign government
regulations, legislation, and regulatory environments, including
environmental, immigration, labor, and occupational health and safety laws and
regulations; 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; risks associated with our foreign operations and foreign supply
sources, such as disruption of markets, changes in import and export laws,
currency restrictions, and currency exchange rate fluctuations; the highly
competitive and evolving nature of our business in the U.S. and
internationally; changes in the level of consumer spending or preferences or
demand for our products; our ability to pass on the added cost of raw
materials to customers; our ability to attract customers to our stores; the
availability of store locations at appropriate terms and our ability to
identify locations and negotiate new store leases effectively and to open new
stores and expand internationally; our ability to renew leases at existing
locations on economic terms; loss or reduction in sales to our wholesale or
retail customers or financial nonperformance by our wholesale customers; risks
that our suppliers or distributors may not timely produce or deliver our
products; changes in the cost of materials and labor, including increases in
the price of raw materials in the global market; our ability to effectively
carry out and manage our strategy, including growth and expansion both in the
U.S. and internationally; technological changes in manufacturing, wholesaling,
or retailing; our ability to successfully implement our strategic, operating,
financial and personnel initiatives; changes in key personnel, our ability to
hire and retain key personnel, and our relationship with our employees; our
ability to maintain the value and image of our brand and protect our
intellectual property rights; our ability to improve manufacturing efficiency
at our production facilities; our ability to complete the transition to our
distribution facility located in La Mirada, California without further
unanticipated costs, negative sales impact or other transition issues,
including the ability to achieve, as and when planned, labor cost reductions;
the risk, including costs and timely delivery issues associated therewith,
that information technology systems changes may disrupt our supply chain or
operations and could impact our cash flow and liquidity, and our ability to
upgrade our information technology infrastructure and other risks associated
with the systems that operate our online retail operations; our ability to
effectively manage inventory levels; litigation and other inquiries and
investigations, including the risks that we, or our officers in cases where
indemnification applies, will not be successful in defending any proceedings,
lawsuits, disputes, claims or audits, and that exposure could exceed
expectations or insurance coverages; the adoption of new accounting standards
or changes in interpretations of accounting principles; seasonality and
fluctuations in comparable store sales and margins; location of our facilities
in the same geographic area; general economic conditions, including increases
in interest rates, geopolitical events, other regulatory changes and inflation
or deflation; disruptions due to severe weather or climate change; disruptions
due to earthquakes, flooding, tsunamis or other natural disasters; 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, 2012 and Form 10-Q for the quarter ended June 30, 2013, as
well as, when filed, the Company’s Form 10-Q for the quarter ended September
30, 2013. 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 and shares in thousands, except per share amounts)
  (unaudited)
                                                 
                         Three Months Ended          Nine Months Ended
                         September 30,               September 30,
                         2013         2012          2013         2012
  Net sales              $ 164,543    $ 162,160     $ 464,839    $ 444,282
                                                                   
  Cost of sales          79,903       76,960       223,461      209,990   
                                                                   
        Gross profit     84,640        85,200        241,378       234,292
                                                                   
  Operating expenses     89,133       80,583       258,262      240,179   
                                                                   
        (Loss) income
        from             (4,493    )   4,617         (16,884   )   (5,887    )
        operations
                                                                   
  Interest expense       10,121        10,454        29,555        30,274
  Foreign currency
  transaction (gain)     (449      )   (685      )   422           141
  loss
  Unrealized (gain)
  loss on change in      (12,922   )   13,312        5,225         15,340
  fair value of
  warrants
  Loss (gain) on
  extinguishment of      —             —             32,101        (11,588   )
  debt
  Other expense          58           36           42           188       
                                                                   
        Loss before      (1,301    )   (18,500   )   (84,229   )   (40,242   )
        income taxes
  Income tax provision   212          512          1,299        1,933     
                                                                   
        Net Loss         $ (1,513  )   $ (19,012 )   $ (85,528 )   $ (42,175 )
                                                                   
                                                                   
  Loss per share,        $ (0.01   )   $ (0.18   )   $ (0.78   )   $ (0.40   )
  basic and diluted
                                                                   
  Weighted average
  shares outstanding,    110,354       106,248       110,172       105,960
  basic and diluted
                                                                             
                                                                             

 AMERICAN APPAREL, INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED BALANCE SHEETS
  (Amounts in thousands)
  (unaudited)
                                                               
                                                  September 30,   December 31,
                                                  2013            2012
  ASSETS
  CURRENT ASSETS
  Cash                                            $  4,913        $  12,853
  Trade accounts receivable, net of allowances    23,053          22,962
  Restricted cash                                 —               3,733
  Prepaid expenses and other current assets       12,712          9,589
  Inventories, net                                170,723         174,229
  Income taxes receivable and prepaid income      1,018           530
  taxes
  Deferred income taxes, net of valuation         419            494        
  allowance
  Total current assets                            212,838         224,390
  PROPERTY AND EQUIPMENT, net                     71,515          67,778
  DEFERRED INCOME TAXES, net of valuation         1,229           1,261
  allowance
  OTHER ASSETS, net                               47,351         34,783     
  TOTAL ASSETS                                    $  332,933     $  328,212 
  LIABILITIES AND STOCKHOLDERS' (DEFICIT)
  EQUITY
  CURRENT LIABILITIES
  Cash overdraft                                  $  2,812        $  —
  Revolving credit facilities and current         33,014          60,556
  portion of long-term debt
  Accounts payable                                31,547          38,160
  Accrued expenses and other current              51,925          41,516
  liabilities
  Fair value of warrant liability                 22,466          17,241
  Income taxes payable                            1,753           2,137
  Deferred income tax liability, current          245             296
  Current portion of capital lease obligations    1,692          1,703      
  Total current liabilities                       145,454         161,609
  LONG-TERM DEBT, net of unamortized discount     207,237         110,012
  CAPITAL LEASE OBLIGATIONS, net of current       4,991           2,844
  portion
  DEFERRED TAX LIABILITY                          261             262
  DEFERRED RENT, net of current portion           18,936          20,706
  OTHER LONG-TERM LIABILITIES                     12,245         10,695     
  TOTAL LIABILITIES                               389,124        306,128    
                                                                  
  STOCKHOLDERS' (DEFICIT) EQUITY
  Common stock                                    11              11
  Additional paid-in capital                      185,119         177,081
  Accumulated other comprehensive loss            (3,510      )   (2,725     )
  Accumulated deficit                             (235,654    )   (150,126   )
  Less: Treasury stock                            (2,157      )   (2,157     )
  TOTAL STOCKHOLDERS' (DEFICIT) EQUITY            (56,191     )   22,084     
  TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)   $  332,933     $  328,212 
  EQUITY
                                                                             
                                                                             

 AMERICAN APPAREL, INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  (Amounts in thousands)
  (unaudited)
                                                   
                                                    Nine Months Ended
                                                     September 30,
                                                     2013         2012
  CASH FLOWS FROM OPERATING ACTIVITIES
  Cash received from customers                       $ 465,468     $ 439,634
  Cash paid to suppliers, employees and others       (468,632  )   (431,915  )
  Income taxes (paid) refunded                       (2,082    )   646
  Interest paid                                      (5,726    )   (6,635    )
  Other                                              35           (160      )
  Net cash (used in) provided by operating           (10,937   )   1,570     
  activities
                                                                   
  CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                               (18,907   )   (14,257   )
  Proceeds from sale of fixed assets                 30            70
  Restricted cash                                    1,594        (5,926    )
  Net cash used in investing activities              (17,283   )   (20,113   )
                                                                   
  CASH FLOWS FROM FINANCING ACTIVITIES
  Cash overdraft                                     2,812         704
  Repayments of expired revolving credit             (28,513   )   (48,324   )
  facilities, net
  Borrowings under current revolving credit          28,713        39,337
  facilities, net
  (Repayments) borrowings of term loans and notes    (25,463   )   30,042
  payable
  Repayment of Lion term loan                        (144,149  )   —
  Issuance of Senior Secured Notes                   199,820       —
  Payments of debt issuance costs                    (11,880   )   (4,965    )
  Repayments of capital lease obligations            (773      )   (810      )
  Net cash provided by financing activities          20,567       15,984    
                                                                   
  EFFECT OF FOREIGN EXCHANGE RATE ON CASH            (287      )   (548      )
                                                                  
  NET DECREASE IN CASH                               (7,940    )   (3,107    )
  CASH, beginning of period                          12,853       10,293    
  CASH, end of period                                $ 4,913      $ 7,186   
                                                                             
                                                                             

 AMERICAN APPAREL, INC. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
  (Amounts in thousands)
  (unaudited)
                                                   
                                                     Nine Months Ended
                                                     September 30,
                                                     2013         2012
  RECONCILIATION OF NET LOSS TO NET CASH (USED IN)
  PROVIDED BY OPERATING ACTIVITIES
  Net loss                                           $ (85,528 )   $ (42,175 )
  Depreciation and amortization of property and      19,155        17,040
  equipment, and other assets
  Retail store impairment                            311           129
  Loss on disposal of property and equipment         77            28
  Share-based compensation expense                   8,044         7,333
  Unrealized loss on change in fair value of         5,225         15,340
  warrants
  Amortization of debt discount and deferred         3,717         7,655
  financing costs
  Loss (gain) on extinguishment of debt              32,101        (11,588   )
  Accrued interest paid-in-kind                      6,875         15,984
  Foreign currency transaction loss                  422           141
  Allowance for inventory shrinkage and              964           (339      )
  obsolescence
  Bad debt expense                                   380           73
  Deferred income taxes                              (26       )   32
  Deferred rent                                      (1,667    )   (649      )
  Changes in cash due to changes in operating
  assets and liabilities:
  Trade accounts receivables                         249           (4,721    )
  Inventories                                        1,741         6,238
  Prepaid expenses and other current assets          (4,026    )   (3,343    )
  Other assets                                       (4,274    )   (5,756    )
  Accounts payable                                   (8,133    )   2,471
  Accrued expenses and other liabilities             14,261        (4,750    )
  Income taxes receivable/payable                    (805      )   2,427     
  Net cash (used in) provided by operating           $ (10,937 )   $ 1,570   
  activities
                                                                             
                                                                             

 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 September 30, 2013
                 U.S.        U.S. Retail  Canada      International  Consolidated
                 Wholesale
  Net sales to
  external       $ 50,225     $ 54,303      $ 15,033     $  44,982       $  164,543
  customers
  Gross profit   13,407       34,755        8,477        28,001          84,640
  Income
  (loss) from    1,441        (317      )   1,091        2,953           5,168
  segment
  operations
  Depreciation
  and            1,934        3,172         507          1,125           6,738
  amortization
  Capital        1,360        2,387         540          983             5,270
  expenditures
  Retail store   —            —             145          88              233
  impairment
  Deferred
  rent expense   5            (338      )   (66      )   (148        )   (547       )
  (benefit)
                 
                 Three Months Ended September 30, 2012
                 U.S.         U.S. Retail   Canada       International   Consolidated
                 Wholesale
  Net sales to
  external       $ 46,847     $ 52,714      $ 16,717     $  45,882       $  162,160
  customers
  Gross profit   12,873       34,361        10,166       27,800          85,200
  Income from
  segment        5,811        3,116         721          4,192           13,840
  operations
  Depreciation
  and            1,446        2,747         394          951             5,538
  amortization
  Capital        3,300        2,136         328          894             6,658
  expenditures
  Deferred
  rent expense   297          (349      )   (58      )   (122        )   (232       )
  (benefit)
                 
                 
                 Nine Months Ended September 30, 2013
                 U.S.         U.S. Retail   Canada       International   Consolidated
                 Wholesale
  Net sales to
  external       $ 146,028    $ 149,811     $ 42,842     $  126,158      $  464,839
  customers
  Gross profit   39,421       97,248        25,244       79,465          241,378
  Income
  (loss) from    12,156       (2,239    )   1,592        7,022           18,531
  segment
  operations
  Depreciation
  and            5,327        9,231         1,388        3,209           19,155
  amortization
  Capital        5,847        9,377         970          2,713           18,907
  expenditures
  Retail store   —            78            145          88              311
  impairment
  Deferred
  rent expense   43           (1,114    )   (279     )   (317        )   (1,667     )
  (benefit)
                 
                 Nine Months Ended September 30, 2012
                 U.S.         U.S. Retail   Canada       International   Consolidated
                 Wholesale
  Net sales to
  external       $ 131,612    $ 143,444     $ 45,096     $  124,130      $  444,282
  customers
  Gross profit   36,582       93,977        26,627       77,106          234,292
  Income
  (loss) from    18,324       449           (1,888   )   8,339           25,224
  segment
  operations
  Depreciation
  and            4,795        8,074         1,107        3,064           17,040
  amortization
  Capital        6,502        3,990         1,144        2,621           14,257
  expenditures
  Retail store   —            —             129          —               129
  impairment
  Deferred
  rent expense   393          (509      )   (156     )   (377        )   (649       )
  (benefit)
                                                                                    
                                                                                    

 AMERICAN APPAREL, INC. AND SUBSIDIARIES
  BUSINESS SEGMENT INFORMATION (continued)
  (Amounts in thousands)
  (unaudited)
                                            
                   Three Months Ended         Nine Months Ended
                   September 30,               September 30,
  Reconciliation
  to Loss before   2013         2012         2013             2012
  Income Taxes
  Income from
  segment          $ 5,168       $ 13,840      $ 18,531          $ 25,224
  operations
  Unallocated
  corporate        (9,661    )   (9,223    )   (35,415     )     (31,111     )
  expenses
  Interest         (10,121   )   (10,454   )   (29,555     )     (30,274     )
  expense
  Foreign
  currency         449           685           (422        )     (141        )
  transaction
  gain (loss)
  Unrealized
  gain (loss) on
  change in fair   12,922        (13,312   )   (5,225      )     (15,340     )
  value of
  warrants
  (Loss) gain on
  extinguishment   —             —             (32,101     )     11,588
  of debt
  Other expense    (58       )   (36       )   (42         )     (188        )
  Consolidated
  loss before      $ (1,301  )   $ (18,500 )   $ (84,229   )     $ (40,242   )
  income taxes
                                                 
                                                 
                   Three Months Ended          Nine Months Ended
                   September 30,                 September 30,
  Net sales to
  external         2013          2012          2013             2012
  customers
                                                                   
  U.S. Wholesale
  Wholesale        $ 41,232      $ 39,862        $    119,159      $    110,380
  Online           8,993        6,985          26,869           21,232
  consumer
  Total            $ 50,225     $ 46,847       $    146,028     $    131,612
                                                                   
  U.S. Retail      $ 54,303     $ 52,714       $    149,811     $    143,444
                                                                   
  Canada
  Wholesale        $ 3,044       $ 3,215         $    9,236        $    9,449
  Retail           11,321        13,086          31,664            34,181
  Online           668          416            1,942            1,466
  consumer
  Total            $ 15,033     $ 16,717       $    42,842      $    45,096
                                                                   
  International
  Wholesale        $ 1,725       $ 2,113         $    6,297        $    7,183
  Retail           39,278        39,256          105,629           102,859
  Online           3,979        4,513          14,232           14,088
  consumer
  Total            $ 44,982     $ 45,882       $    126,158     $    124,130
                                                                   
  Consolidated
  Wholesale        $ 46,001      $ 45,190        $    134,692      $    127,012
  Retail           104,902       105,056         287,104           280,484
  Online           13,640       11,914         43,043           36,786
  consumer
  Total            $ 164,543    $ 162,160      $    464,839     $    444,282
                                                                        
                                                                        

                                   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. Adjusted 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 expense and depreciation and
amortization. Consolidated Adjusted EBITDA represents EBITDA further adjusted
for other expense (income),foreign currency loss (gain), retail store
impairment, and share based compensation expense.American Apparel's
management uses Adjusted 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 Adjusted 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 Adjusted 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.

Adjusted 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, Adjusted 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 Adjusted EBITDA as a financial measure to assess the performance of its
business, there are material limitations to using a measure such as Adjusted
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 Adjusted 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 Adjusted EBITDA in
conjunction with its analysis of other GAAP financial measures, such as net
income (loss).

 Table A (continued)
  American Apparel, Inc. and Subsidiaries
  Calculation and Reconciliation of Consolidated Adjusted EBITDA
  (Amounts in thousands)
  (unaudited)
                                                  
                         Three Months Ended         Nine Months Ended
                          September 30,              September 30,
                          2013        2012          2013         2012
  Net Loss                $ (1,513 )   $ (19,012 )   $ (85,528 )   $ (42,175 )
  Income tax provision    212          512           1,299         1,933
  Interest expense        10,121       10,454        29,555        30,274
  Depreciation and        6,738        5,538         19,155        17,040
  amortization
  Unrealized (gain)
  loss on change in       (12,922  )   13,312        5,225         15,340
  fair value of
  warrants
  Loss (gain) on
  extinguishment of       —            —             32,101        (11,588   )
  debt
  Share-based             1,228        2,949         8,044         7,333
  compensation expense
  Foreign currency
  transaction (gain)      (449     )   (685      )   422           141
  loss
  Retail store            233          —             311           129
  impairment
  Other adjustments       135         246          383          394       
  Consolidated Adjusted   $ 3,783     $ 13,314     $ 10,967     $ 18,821  
  EBITDA
                                                                             

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Contact:

American Apparel, Inc.
John J. Luttrell, Chief Financial Officer
213-488-0226
or
ICR, Inc.
John Rouleau, Managing Director
203-682-8342
John.Rouleau@icrinc.com