By  on March 31, 2011

A $20 million fourth-quarter loss left American Apparel Inc. with $86.3 million in red ink for the year and continuing doubts about its ability to continue as a going concern, according to the company’s annual report.

The Form 10-K, filed with the Securities and Exchange Commission on Thursday, also said that Lyndon Lea and Neil Richardson, the two directors designated by Lion Capital, had resigned from the board “to allow Lion flexibility in evaluating its options to optimize its investment in American Apparel.” Lion retains the right to designate individuals to the board.

It projected that the company would suffer from a loss from operations and negative cash flow in 2011, as it did last year.

The resignations of the two Lion directors come just days after Dov Charney, the company’s chairman and chief executive officer, spent $2 million of his own money to buy 6 million shares of the company’s stock and convert a $4.7 million personal loan previously made to the company to a combination of 2.1 million shares and the right to acquire another 2.1 million shares at $1.11 should their price reach $3.50. Shares Thursday closed at 96 cents, down 3 cents, or 3.4 percent.

According to his most recent filing with the SEC, Charney holds 44.9 million shares of American Apparel, 62.7 percent of the 71.6 million outstanding listed in the annual report. Lion holds warrants that could be converted at $1.11 a share to 16 million shares of stock, which would dilute Charney’s holdings.

Charney purchased more than 1.1 million shares of his firm’s stock on Dec. 1 for $1.48 a share, or $1.7 million.

In the fourth quarter ended Dec. 31, the troubled Los Angeles-based vertical retailer recorded a net loss of $19.3 million, or 27 cents a diluted share, versus net income of $3 million, or 4 cents, in the final quarter of 2009. Sales declined 8.9 percent to $144 million from $158.1 million in the 2009 quarter as gross margin expanded to 55.6 percent of sales from 55 percent a year ago.

The $86.3 million net loss for the full year translated into $1.21 a diluted share and compared with a profit of $1.1 million, or 1 cent, in 2009. Sales receded 4.6 percent to $533 million from $558.8 million in 2009, while gross margin landed at 52.5 percent of sales versus the 57.3 percent recorded in 2009.

Same-store sales declined 13 percent during the year and 12 percent during the fourth quarter.

The company first noted doubts about its ability to continue as a going concern in August. In Thursday’s annual report, it cited not only results from operations and limitations with cash and credit, but also its 2010 sales results and “worldwide economic conditions and significant increases in yarn and fabric prices.”

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