American Apparel Inc. widened its third-quarter loss on one-time charges, including legal and consulting fees related to the internal investigation into founder Dov Charney.

This story first appeared in the November 11, 2014 issue of WWD. Subscribe Today.

The company said for the three months ended Sept. 30, the net loss widened to $19.2 million, or 11 cents, from a net loss of $1.5 million, or 1 cent, a year ago. Impacting the bottom line were one-time charges such as the $5.3 million in legal and consulting fees in connection with the suspension and subsequent internal probe of Charney, who was suspended from his president and chairman posts. The company is also disputing a $4.4 million payment that it had to pay in the quarter assessed by German authorities for retroactive punitive customs duty assessments of $5.4 million for goods imported from 2009 to 2011. The company also paid $3.1 million in previously disclosed employment-related claims.

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Net sales slipped 5.3 percent to $155.9 million from $164.5 million. Adjusted EBITDA was $13.5 million, or a 38 percent gain, from $9.8 million a year ago.

Analysts were expecting a loss of 4 cents a diluted share on sales of $162.4 million.

Scott Brubaker, interim ceo, said, “The strength of American Apparel’s operating model is evident in the 38 percent year-over-year improvement in adjusted EBITDA.”

Brubaker said he was “encouraged” by the results.

As of Sept. 30, the company had $9.4 million in cash, $27 million outstanding on its $50 million asset-backed revolving credit facility, and $20.4 million of availability for additional borrowings under the facility.

The company said it and Standard General Group are in talks to negotiate a $15 million unsecured credit agreement between one or more entities affiliated with the hedge fund, and expects to enter into the credit agreement in the fourth quarter.

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