10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-K

_________________________________________________

(Mark One)

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2013

or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______     

Commission File Number 001-32697

_____________________________________________

American Apparel, Inc.

(Exact name of registrant as specified in its charter)

_____________________________________________

Delaware	20-3200601
(State of Incorporation)	(I.R.S. Employer Identification No.)

747 Warehouse Street

Los Angeles, California 90021-1106

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (213) 488-0226

__________________________________

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.0001 per share	NYSE MKT
(Title of Each Class)	(Name of Each Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  o    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x   No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 28, 2013 was approximately $115,070,051 based upon the closing price of the common stock on such date as reported by the NYSE MKT.

The number of shares of the registrant’s common stock issued and outstanding as of March 31, 2014 was approximately 175,108,823 and 173,377,302.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the registrant’s 2014 Annual Meeting of Stockholders (the “2014 Proxy Statement”), to be filed within 120 days of the end of the fiscal year ended December 31, 2013, are incorporated by reference into Part III herein. If the 2014 Proxy Statement is not filed in the 120-day period, the Items comprising the Part III information will be filed as an amendment to this Form 10-K not later than the end of the 120-day period. Except with respect to the information specifically incorporated by reference in Part III of this Form 10-K, the 2014 Proxy Statement is not deemed to be filed as part of this Form 10-K.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, including the documents incorporated by reference herein, contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements in this Annual Report on Form 10-K other than statements of historical fact are “forward-looking statements” for purposes of these provisions. Statements that include the use of terminology such as “may,” “will,” “expects,” “believes,” “plans,” “estimates,” “potential,” or “continue,” or the negative thereof or other and similar expressions are forward-looking statements. In addition, in some cases, you can identify forward-looking statements by words or phrases such as “trend,” “potential,” “opportunity,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions.

Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business, our goals, strategies, focuses and plans, and other characterizations of future events or circumstances, including statements expressing general expectations or beliefs, whether positive or negative, about future operating results or the development of our products, and any statement of assumptions underlying any of the foregoing are forward-looking statements. Forward-looking statements in this report may include, without limitation, statements about:

•our future financial condition, results of operations, our plans and our prospects, expectations, goals and

strategies for future growth, operating improvements and cost savings and the timing of any of the foregoing;

• our ability to make our debt service payments and remain in compliance or achieve compliance with financial covenants under our financing arrangements and obtain appropriate waivers or amendments with respect to any noncompliance;

•our liquidity and projected cash flows;

•our plan to make continued investments in advertising and marketing;

•our growth, expansion and acquisition prospects and strategies, the success of such strategies, and the benefits we

believe can be derived from such strategies;

•the outcome of investigations, enforcement actions and litigation matters, including exposure, which could exceed

expectations;

•our intellectual property rights and those of others, including actual or potential competitors, our personnel,

consultants, and collaborators;

•operations outside the United States;

•trends in raw material costs and other costs both in the industry and specific to the Company;

•the supply of raw materials and the effects of supply shortages on our financial condition, results of operations

and cash flows;

•economic and political conditions;

•overall industry and market performance;

•the impact of accounting pronouncements;

•our ability to regain and maintain compliance with the listing requirements of NYSE MKT, LLC;

•our ability to improve manufacturing efficiency at our production facilities;

•our ability to improve efficiency and control costs at our distribution facility located in La Mirada, California

and successful operation of that facility;

•management's goals and plans for future operations; and

•other assumptions described in this Annual Report on Form 10-K underlying or relating to any forward-looking

statements.

The forward-looking statements in this report speak only as of the date of this report and caution should be taken not to place undue reliance on any such forward-looking statements, which are qualified in their entirety by this cautionary statement. Forward-looking statements are subject to numerous assumptions, events, risks, uncertainties and other factors, including those that may be outside of our control and that change over time. As a result, actual results and/or the timing of events could differ materially from those expressed in or implied by the forward-looking statements and future results could differ materially from

historical performance. Such assumptions, events, risks, uncertainties and other factors include, among others, those described under Part I, Item 1A and elsewhere in this report, as well as in other reports and documents we file with the United States Securities and Exchange Commission (the "SEC") and include, without limitation, the following:

• 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 relationships with our lenders and our ability to comply with our debt agreements and generate cash flow to service our debt;

• our ability to generate cash flow to service our debt and the risk of acceleration of borrowings thereunder as a result of noncompliance;

• disruptions in the global financial markets;

• our ability to regain and maintain compliance with the exchange rules of 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, 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 and labor 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;

• 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 and increases in minimum wages;

• 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 operate our distribution facility located in La Mirada, California without further unanticipated costs or, negative sales impacts, including the ability to achieve, as and when planned, labor cost reductions;

• location of our facilities in the same geographic area;

• 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 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;

• our ability to renew leases at existing locations on economic terms;

• risks associated with the recent downturn in apparel spending in the United States;

• litigation and other inquiries and investigations, including the risks that we, our officers, or directors 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;

• tax assessments by domestic or foreign governmental authorities, including import or export duties on our products and the applicable rates for any such taxes or duties;

• the adoption of new accounting standards or changes in interpretations of accounting principles;

• seasonality and fluctuations in comparable store sales and wholesale net sales, and associated margins;

• 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; and

• disruptions due to earthquakes, flooding, tsunamis or other natural disasters.

All forward-looking statements included in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

American Apparel, Inc.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2013

TABLE OF CONTENTS

	PART I	6
Item 1.	Business	6
Item 1A.	Risk Factors	13
Item 2.	Properties	24
Item 3.	Legal Proceedings	29
Item 4.	Mine Safety Disclosures	32
	PART II	32
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures and Market Risks	56
Item 8.	Financial Statements	60
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	105
Item 9A.	Controls and Procedures	105
Item 9B.	Other Information	107
	PART III	108
Item 10.	Directors, Executive Officers and Corporate Governance	108
Item 11.	Executive Compensation	108
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	108
Item 13.	Certain Relationships and Related Transactions and Director Independence	108
Item 14.	Principal Accountant Fees and Services	108
	PART IV	109
Item 15.	Exhibits and Financial Statement Schedules	109

PART I

Item 1. Business

Unless the context indicates otherwise, when we refer to “we”, “us”, “our”, "American Apparel" or the “Company” in this Form 10-K, we are referring to American Apparel, Inc. and its subsidiaries on a consolidated basis. Our year ends on December 31 and references to fiscal 2013, fiscal 2012 and fiscal 2011 refer to the years ended December 31, 2013, 2012 and 2011, respectively. In addition, all amounts in this Form 10-K are presented in thousands, except for per share items and unless otherwise specified.

Overview

We are a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel and accessories for women, men, children and babies. We are based in downtown Los Angeles, California. As of February 28, 2014, we had approximately 10,000 employees and operated 246 retail stores in 20 countries: the United States, Canada, Mexico, Brazil, United Kingdom, Ireland, Austria, Belgium, France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Japan, South Korea, and China. We also operate an e-commerce website with 12 different localized online stores in seven languages that serves customers from 30 countries worldwide at www.americanapparel.com. In addition, American Apparel operates a leading wholesale business that supplies high quality T-shirts and other casual wear to distributors and the imprintable industry.

We conduct our primary apparel manufacturing operations out of an 800,000 square foot facility in the warehouse district of downtown Los Angeles, California. The facility houses our executive offices, as well as cutting, sewing and warehousing operations. We conduct knitting operations in Los Angeles and Garden Grove, California, which produce a majority of the fabric we use in our products. We also operate dye houses that currently provide dyeing and finishing services for nearly all of the raw fabric used in production. We operate a fabric dyeing and finishing facility in Hawthorne, California. We also operate a cutting, sewing and garment dyeing and finishing facility located in South Gate, California. We operate a fabric dyeing and finishing facility located in Garden Grove, California, which also includes cutting, sewing and knitting operations. Since 2013 we have conducted our warehousing and distribution operations out of La Mirada, California.

Because we manufacture domestically and are vertically integrated, we believe this enables us to more quickly respond to customer demand and to changing fashion trends and to closely monitor product quality. Our products are noted for their quality and fit, and together with our distinctive branding these attributes have differentiated our products in the marketplace. “American Apparel^®” is a registered trademark of American Apparel (USA), LLC.

American Apparel was founded in 1998. Since inception, we have operated a wholesale business that supplies high quality T-shirts and other casual wear to distributors and the imprintable industry. In October 2003, we opened our first retail store in Los Angeles. In 2004, we began our online retail operations, and opened our first retail stores in Canada and Europe. Since 2005, we have opened stores in Asia, Australia, Israel, Latin America, and have further expanded throughout the United States, Canada, Europe, and Asia. All of our retail stores sell the Company's apparel products directly to consumers.

Business Segments

We report the following four operating segments: U.S. Wholesale, U.S. Retail, Canada, and International. We believe this method of segment reporting reflects both the way our business segments are managed and the way the performance of each segment is evaluated. The U.S. Wholesale segment consists of our wholesale operations of sales of undecorated apparel products to distributors and third party screen printers in the United States, as well as our online consumer sales to U.S. customers. The U.S. Retail segment consists of our retail store operations in the United States, which were comprised of 139 retail stores as of December 31, 2013. The Canada segment consists of our retail, wholesale and online consumer operations in Canada. As of December 31, 2013, the retail operations in the Canada segment were comprised of 32 retail stores. The International segment consists of our retail, wholesale and online consumer operations outside of the United States, and Canada. As of December 31, 2013, the retail operations in the International segment were comprised of 77 retail stores in the following 18 countries: the United Kingdom, Ireland, Austria, Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Brazil, Mexico, Japan, South Korea, and China.

The results of the respective business segments exclude corporate expenses, which consist of shared overhead costs. These costs are presented separately and generally include information technology, human resources, accounting and finance, executive management and legal. Financial information by segment, together with certain geographical information, for the fiscal years ended December 31, 2013, 2012 and 2011 is included in Note 17 - Business Segment and Geographic Area Information to our consolidated financial statements under Part II, Item 8.

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Core Business Strengths

American Apparel has relied on a number of core business strengths that we believe have contributed to our past success and will contribute to our future growth:

Design Vision

American Apparel’s design vision and aesthetic are intended to appeal to young, metropolitan adults by providing them with a core line of iconic, timeless styles which are offered year-round in a wide variety of colors at reasonable prices. Since our founding, American Apparel has operated with the belief that there is a large potential market among young adults, for well-designed, high-quality fashion essentials. Led by Dov Charney, our founder and chief executive officer, our in-house creative team has carefully developed the product line based on this core belief.

Advertising and Branding

American Apparel attracts customers through internally-developed, edgy, high-impact, visual advertising campaigns which use print, outdoor, in-store, and electronic communication vehicles. These advertising campaigns communicate a distinct brand image that differentiates us from our competitors and seek to establish a connection with our customers. Our retail stores are an important part of the American Apparel branding and convey a modern, internationalist lifestyle. At various times, we have also drawn attention to the “Made in USA” nature of our products and the “Sweatshop Free” environment in which our garments are produced.

Speed to Market

Our vertically integrated business model, with manufacturing and various other elements of our business processes centered in downtown Los Angeles, allows us to play a role in originating and defining new and innovative trends in fashion, while enabling us to quickly respond to market and customer demand for classic styles and new products. For our wholesale operations, being able to fulfill orders of any size with quick turn-around allows American Apparel to capture business. The ability to swiftly respond to the market means that our retail operations can deliver on-trend apparel in a timely manner and maximize sales of popular styles by replenishing product that would have otherwise sold out.

Quality

American Apparel prides itself on its use of quality fabrics with quality construction. We have an active quality control department that oversees the in-house production of fabric at our knitting facilities, the outside knitting contractors who work to our strict specifications, and the cutting, sewing, dyeing and finishing of our garments at our Los Angeles area facilities. Because cutting and sewing operations are conducted mostly in-house, we believe we have the ability to exercise greater control over clothing manufacturing than competitors who use contract sewing facilities.

Broad Appeal

While our marketing and products initially targeted young, metropolitan adults in the U.S., the clean, simple styles and quality of our garments creates a product that appeals to various demographics around the world. We believe that our product appeal has been augmented by, and should continue to benefit from, the growing trends toward casual attire and higher quality apparel.

Growth Strategy

We have developed a growth strategy that is designed to capitalize on our core business strengths. The principal elements contributing to the success of this growth strategy are:

Store Expansion

Our long-term growth strategy and the success of our business depends in part on opening new American Apparel retail stores, the renewal of existing store leases on favorable terms that meet our financial targets, the remodeling of existing stores in a timely manner and the operation of these stores in a cost-efficient manner. We opened nine new stores and closed twelve stores in 2013. Over the long term, we plan to expand our presence in the U.S. and increase our store footprint in markets throughout Europe and Asia.

We evaluate potential store sites based on traffic patterns, co-tenancies, average sales per square foot achieved by neighboring stores, lease economics, demographic characteristics and other factors considered important regarding the specific location.

New Merchandise Introduction

As we have expanded beyond our original product offering of T-shirts, we have increased the variety of products available to our growing customer base. We have strategically expanded our product offerings to include denim, sweaters, jackets and

7

accessories, to name a few such categories. We also intend to judiciously introduce new merchandise to complement our existing products in order to attract new customers and increase the frequency of customer visits and the size of customer purchases.

Web Business Refinement

Our website operation represents a growth opportunity for American Apparel as it has the potential to not only increase online sales but also in-store sales. Improvements to the online shopping experience have contributed to our financial growth. In order to remain competitive, we intend to continue refining our online stores with improved functionality, personalized offers, increased service levels and visually optimized content as well as expanding our web presence in more countries and channels. We currently operate 12 e-commerce stores in seven languages that serve customers from 30 countries around the world.

Continue In-Sourcing Manufacturing Activities

We believe that having certain elements of our production process in-house affords us the opportunity to exert higher quality control while simultaneously lowering production costs. In the past we have made strategic acquisitions to consolidate our manufacturing operations and continue to produce high quality products. We may pursue strategic opportunities to further consolidate our operations while maintaining production in the United States; however, we have no such strategic opportunities identified and will not make any such strategic investments until we see a substantial improvement in our financial performance and financial condition.

New Distribution Center

In June 2012 we entered into a new operating lease agreement for a new distribution center located in La Mirada, California and fully transitioned our distribution operations into this new facility during 2013. Related to these efforts, we installed the High Jump warehouse management system for all distribution activities. Although we incurred significant transition costs and implementation delays associated with this transition, we believe that the new distribution center will contribute to processing efficiencies and effectiveness and will reduce operating expenses and cost of sales as it offers an improved distribution platform to scale both retail and wholesale sales channels. The transition to the new distribution center was successfully completed during the fourth quarter of 2013. The center is now fully operational, and labor costs have been reduced.

Enhance Information Systems Infrastructure

We successfully completed the first phase of an enterprise resources planning (“ERP”) system in 2008. This phase included the conversion of our systems for manufacturing and warehouse operations, inventory management and control and wholesale operations. After this first successful implementation, from 2009 through 2013, we have been upgrading and consolidating the financial accounting and control systems for our U.S., European and Canadian operations.

In 2011 we completed the implementation of workforce and labor scheduling optimization systems in all of our retail and manufacturing locations.

In 2012, we upgraded our production forecasting and allocation systems and as a result, enhanced our forecasting accuracy with Logility's demand planning solution.

From 2010 through 2013, we have been installing sales conversion tracking devices and radio frequency identification (RFID) at our stores and as of the end of 2013, achieved full implementation. We believe that these systems will enhance sales through improvements in stock positions and replenishment activities.

Additionally, during 2012, we replaced our web and e-commerce systems with Oracle's ATG Web Commerce application for our U.S. online store. As of the end of 2013, we have implemented this system for our Canada, United Kingdom, Europe (Euro zone countries), Australia, Hong Kong and Singapore online stores. We intend to implement this system to our remaining online stores by the middle of 2014. The new system offers a complete e-commerce software platform that speeds response times and enables us to deliver a personalized customer buying experience.

In conjunction with the implementation of the Oracle ATG Web Commerce application, we replaced our existing payment processing system with new electronic payment services from CyberSource. In addition, we implemented a payment fraud detection solution. We intend to complete the upgrade of our payment processing system by the middle of 2014.

During 2012 and 2013 we successfully completed the virtualization of over 300 servers, including all our key servers. We plan to complete the virtualization of our servers and move our data center to an off-site location during 2014. We believe that this not only maximizes our server resources but will also enhance system performance and enable faster uptime in a disaster recovery situation.

8

Execution of the Strategy

The execution of our growth strategy and internal initiatives may result in material additional costs.

Store expansion initiatives will require the opening of new retail locations and additional retail personnel. Investments in additional sales personnel to service new geographic territories will also be necessary to grow our wholesale distribution channel. Both of these initiatives will increase our occupancy and payroll expenses.

New merchandise introductions will require expenditures to design new products in existing and new categories, as well as incremental manufacturing costs associated with new products.

To support these and other initiatives, ongoing infrastructure investments may be required. In the intermediate term, this may include expenditures for machinery and equipment, upgraded information systems and additions to our management team.

In order to reduce the impact of these additional costs, we will continue to identify ways to improve the efficiency of our current manufacturing operations and enhance other operating processes.

Manufacturing Operations

We conduct all of our manufacturing operations in the Los Angeles metropolitan area, and principally at our cutting and sewing facility in downtown Los Angeles. We also have knitting, garment dyeing, cutting and sewing operations at our South Gate and Garden Grove, California facilities.

Purchased yarn is sent to knitters to be knit into “greige” fabric, which is fabric that is not dyed or processed. We operate circular and flat knitting machines, which use jersey, piqué, fleece and ribbing to produce fabric using cotton and cotton/polyester yarns. We also utilize third-party commissioned knitters. As of December 31, 2013, our knitting facilities knit approximately 63% of the total greige fabric used in our garments and had approximately 84 employees. Knitted greige fabric produced by our Los Angeles and Garden Grove facilities, or by other commissioned knitters, is batched for bleaching and dyeing. The greige fabric is then transported to our dyeing and finishing facilities or other commissioned dye houses. In some cases, dyed fabric is transferred to subcontractors for fabric laundering.

As of December 31, 2013, our dyeing and finishing facilities in the Los Angeles metropolitan area dye approximately 99% of the dyed fabric used in our garments and had approximately 226 employees. Most fabric is shipped to our primary manufacturing facility in downtown Los Angeles, where it is inspected and then cut on manual and automated cutting tables, and subsequently sewn into finished garments. Approximately 19% of our fabric is purchased directly from third parties, along with all trims. Garments are sewn by teams of sewing operators typically ranging from ten to thirty operators, depending on the complexity of a particular garment. Each sewing operator performs a different sewing operation on a garment before passing it to the next operator. Sewing operators are compensated on a modified piece-rate basis. Quality control personnel inspect finished garments for defects and reject any defective product. We also manufacture certain hosiery products in-house at the downtown Los Angeles facility, where we do knitting and inspection. Washing, boarding and packaging is performed at our South Gate facility. As of December 31, 2013, approximately 3,835 employees were directly involved in the cutting, sewing, and hosiery operations at the downtown Los Angeles facility, as well as our South Gate and Garden Grove facilities.

We purchase yarn, certain fabrics and other raw materials from a variety of vendors during the course of a year. The inputs that we use are produced competitively by a large number of potential suppliers.

Retail

As of December 31, 2013, our retail operations consisted of 248 retail stores in 20 countries, including the United States, Canada, Mexico, Brazil, United Kingdom, Ireland, Austria, Belgium, Germany, France, Italy, the Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Japan, South Korea and China. Our retail operations principally target young adults aged 18 to 35 via our unique assortment of fashionable clothing, accessories and compelling in-store experience. We have established a reputation with our customers who are culturally sophisticated, creative, and independent-minded. Our product offerings include basic apparel and accessories for men and women, as well as apparel for children. Stores average approximately 2,500-3,000 square feet of selling space. Our stores are primarily located in large metropolitan areas, emerging neighborhoods, and select university communities.

We strive to instill enthusiasm and dedication in our store managers and sales associates through regular communication with the stores.

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Wholesale

Our wholesale operations sell to over a dozen authorized distributors and approximately 10,000 screen printers and advertising specialty companies. These screen printers and advertising specialty companies decorate our blank product with corporate logos, brands and other images. Our wholesale customers sell imprinted sportswear and accessories to a highly diversified range of end-consumers, including corporations, sporting venues, concert promoters, athletic leagues, and educational institutions, among others. In order to better serve customers, we allow customers to order products by the piece, by the dozen, or in full case quantities. We also, to a lesser extent, fulfill custom and private-label orders. We do not have any major customers that account for ten percent or more of our total consolidated net sales.

To serve our wholesale customers, we operate a call center out of our Los Angeles headquarters. The call center is staffed with approximately 50 customer service representatives initiating sales calls, answering incoming phone calls, emails and faxes, and assisting customers in placing orders, checking stock levels, looking for price quotes or requesting adjustments. During the second half of 2012, we moved one of our call centers from Neuss, Germany to Montreal, Canada.

While we operate primarily on a “make-to-stock” basis, manufacturing and maintaining a sufficient inventory of products to meet demand, our in-house manufacturing capacity also allows us to fulfill orders rapidly. Credit approved orders to be shipped by ground service are generally shipped the same day if the order is received before 7:30 pm Eastern time while those to be shipped by air are generally shipped the same day when received by 6:30 pm Eastern time. The majority of our wholesale and internet customer orders are processed within these parameters. For these reasons, we do not typically maintain a large backlog of orders.

Online Consumer Sales

We currently have 12 different online stores in the United States, Canada, the United Kingdom, Continental Europe, Switzerland, Japan, South Korea, Australia, Mexico, Brazil, Singapore and Hong Kong. All online stores can be accessed at www.americanapparel.com.

Brand, Advertising, and Marketing

Our advertising and direct marketing initiatives have been developed to elevate brand awareness, facilitate customer acquisition and retention and support key growth strategies. Our in-house creative team works to create edgy, high-impact, provocative ads which are produced year-round and are sometimes featured in leading national and local lifestyle publications, on billboards, and on specialty online websites. We maintain a photo studio at our headquarters. Content for our website and online store are also generated in-house. While the primary intent of this advertising is to support our retail and online e-commerce operations, the wholesale business also benefits from the greater overall brand awareness generated by this advertising.

For our wholesale operations, we utilize industry trade shows to expand and enhance customer relationships, exhibit product offerings and share new promotions with customers. We participate in approximately two dozen trade shows annually. We also produce print catalogs of our wholesale products, designed to be of the standard of high-end consumer retail catalogs with attractive models, appealing photographs and a clear display of products.

Product Development

We employ an in-house staff of designers and creative professionals to develop updated versions of timeless, iconic styles. Led by our chief executive officer, Dov Charney, this team takes its inspiration from classic styles of the past, as well as the latest emerging fashion trends. Our design team will often continue to update or renew a style long after its launch.

Intellectual Property

Our trademarks and service marks, and certain other trademarks, have been registered, or are the subject of pending trademark applications with the United States Patent and Trademark Office and with the registries of many foreign countries and/or are protected by common law. In the United States, we are the registered owner of the “American Apparel^®,” “Classic Girl^®,” “Standard American^®,” “Classic Baby^®,” and “Sustainable Edition^®” trademarks, among others. We have

licensed certain logos and designs from third-parties for use in products featuring those logos and designs, but there is no

licensed intellectual property which accounts for a material portion of our products or revenues.

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Competition

The specialty retail, online retail and wholesale apparel businesses are each highly competitive. The apparel industry is characterized by rapid shifts in fashion, consumer demand, and competitive pressures, resulting in both price and demand volatility. We believe that our emphasis on quality fashion essentials mitigates these factors.

Our retail operations compete on the basis of store location, the breadth, quality, style, and availability of merchandise, the level of customer service offered, and the price of goods for similar brand name quality. While we believe that the fit and quality of our garments as well as the broad variety of colors and styles of casual fashion essentials that we offer help differentiate us, we compete against a wide variety of smaller, independent specialty stores, as well as department stores and national and international specialty chains. Companies that operate in this space include, but are not limited to: The Gap, Urban Outfitters, H&M, Uniqlo and Forever 21. Many of these companies have greater financial, marketing, and other resources when compared to American Apparel.

The wholesale business competes with numerous wholesale companies based on the quality, fashion, availability, and price of our wholesale product offering. These companies include Gildan Activewear, HanesBrands, Russell Athletic and Fruit of the Loom. Many of these companies have greater name recognition than American Apparel in the wholesale market. Many of these companies also have greater financial and other resources when compared to American Apparel.

Along with the competitive factors noted above, other key competitive factors for American Apparel’s online e-commerce operations include the success or effectiveness of customer mailing lists, social media acceptance, advertising response rates, merchandise delivery, web site design and web site availability. The online e-commerce operations compete against numerous web sites, many of which may have a greater volume of web traffic, and greater financial, marketing, and other resources.

Seasonality

We experience seasonality in our operations. Historically, sales during the third and fourth fiscal quarters have generally been the highest, with sales during the first fiscal quarter the lowest. This reflects the combined impact of the seasonality of the wholesale and retail segments. Generally, our retail segment has not experienced the same pronounced sales seasonality as other retailers.

Employees

As of December 31, 2013, we employed a work force of approximately 10,000 employees worldwide. To ensure our long-term success, we must attract, hire, develop, and retain skilled manufacturing, retail, sales, creative, and administrative employees, as well as executives. Competition for such employees can be intense.

We view our employees as long-term investments and adhere to a philosophy of providing employees with good working conditions in a technology-driven environment which allows us to attain improved efficiency, while promoting employee loyalty. We provide a compensation structure and benefits package for manufacturing employees that includes above-market wages, company-subsidized health insurance, free massage, free parking, as well as other benefits. We also provide for a well-lit working environment that is properly ventilated and heated or cooled in our manufacturing facilities. We believe these factors are key elements in achieving our desire to be an “employer of choice” in the Los Angeles area. None of our employees are covered by a collective bargaining agreement. We believe that our relations with our employees are excellent. We make diligent efforts to comply with all employment and labor regulations, including immigration laws, in the many jurisdictions in which we conduct operations. See “Risk Factors—We are subject to customs, advertising, consumer protection, zoning and occupancy and labor and employment laws that could require us to modify our current business practices and incur increased costs.” and “Risk Factors—Litigation exposure could exceed expectations and have a material adverse effect on our financial condition and results of operations.” in Part I, Item 1A.

Information Technology

We are committed to utilizing technology to enhance our competitive position. Our information systems provide data for production, merchandising, distribution, retail stores and financial systems. Our core business systems, which consist of both purchased and, to a much lesser degree, internally developed software, are accessed over a company-wide network providing corporate employees with access to key business applications. We dedicate a significant portion of our information technology resources to web services, which include the operation of our corporate website at www.americanapparel.net and our online retail site at www.americanapparel.com.

To support continued growth, we have initiated a strategic review of our information systems. We implemented an ERP system that replaced, enhanced and integrated many elements of our existing information systems. In 2013, we completed a financial system consolidation for our Canadian, Japan and Australian operations; replaced our web and e-commerce systems with Oracle's ATG Web Commerce application for our Canada, United Kingdom, Europe (Euro countries), Australia, Hong Kong

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and Singapore online stores; and installed the High Jump warehouse management system for all distribution activities at our La Mirada distribution center.

Environmental Regulation

Our operations are subject to various environmental and occupational health and safety laws and regulations. Because we monitor, control and manage environmental issues, we believe we are in compliance in all material respects with the regulatory requirements of those jurisdictions in which our facilities are located. In line with our commitment to the environment as well as to the health and safety of our employees, we will continue to make expenditures to comply with these requirements, and do not believe that compliance will have a material adverse effect on our business. See "Risk Factors - Current environmental laws, or laws enacted in the future, may harm our business." in Part I, Item 1A.

Available Information

We will make available on our website, www.americanapparel.net, under “Investor Relations” free of charge, our annual reports on Form 10-K, as well as the latest quarterly reports on Form 10-Q, the latest reports on Form 8-K, the latest proxy statements and amendments to those documents as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. You can also obtain copies of these materials at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information on the operation of the public reference facilities by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that makes available reports, proxy statements and other information regarding American Apparel that we file electronically with it. By referring to our corporate website, www.americanapparel.net, and our online retail website, www.americanapparel.com, we do not incorporate these websites or their contents into this Form 10-K.

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Item 1A. Risk Factors

We have substantial indebtedness, which could have adverse consequences to us, and we may not be able to generate sufficient cash flow to fund our liquidity needs, including servicing our indebtedness.

We currently have substantial indebtedness. Our level of indebtedness has important consequences to us and to you and your investment. For example, our level of indebtedness may:

• require us to dedicate a substantial portion of our cash flow from operations to pay interest and principal on our debt, which would reduce the funds available to use for operations, investments, future business opportunities and other general corporate purposes; 

• make it more difficult for us to satisfy our debt obligations, and any failure to comply with such obligations, including financial and other restrictive covenants, could result in an event of default or an inability to borrow under the agreements governing such indebtedness;

• in the case of a default or an event of default, as applicable, lead to, among other things, cross-defaults with our other indebtedness, an acceleration of our indebtedness or foreclosure on the assets securing our indebtedness, which could have a material adverse effect on our business or financial condition;  

• limit our ability to obtain additional financing, or to sell assets to raise funds, if needed, for working capital, capital expenditures, expansion plans and other investments, which may limit our ability to implement our business strategy; 

• result in higher interest expense if interest rates increase on our floating rate borrowings; 

• place us at a competitive disadvantage relative to others in the industry as it is not common for companies involved in the retail apparel business to operate with such high leverage;     

• heighten our vulnerability to downturns in our business, the industry or in the general economy and limit our flexibility in planning for or reacting to changes in our business and the retail industry; or  

• reduce our ability to carry out our plans to expand our store base, product offerings and sales channels.

Our ability to service our indebtedness is dependent on our ability to generate cash from internal operations sufficient to make required payments on such indebtedness, which is, to a significant extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, some of which factors are further described in this “Risk Factors” section. We are permitted by the terms of our indebtedness, including our senior secured notes and the Capital One Credit Facility (as defined below), to incur additional indebtedness, subject to the restrictions therein. We have experienced negative cash flows from operating activities in the past, and our business may not generate sufficient cash flow from operations to enable us to service our indebtedness or to fund our other liquidity needs. Such event could have a material adverse effect on us and we may need to take various actions, which also could have material adverse consequences to us, including seeking to refinance all or a portion of our indebtedness, seeking additional debt or equity financing or reducing or delaying capital expenditures, strategic acquisitions or investments, and we may not be able to do so on commercially reasonable terms or at all.

The terms of our indebtedness contain various covenants that may limit our business activities, and our failure to comply with these covenants could have material adverse consequences to us.

The terms of our indebtedness contain, and our future indebtedness may contain, various restrictive covenants that limit our management's discretion in operating our business. In particular, these agreements include, or may include, covenants relating to limitations on: 

• dividends on, and redemptions and repurchases of, capital stock; 

• payments on subordinated debt;  

• liens and sale-leaseback transactions; 

• loans and investments;  

• debt and hedging arrangements; 

• mergers, acquisitions and asset sales;  

• transactions with affiliates;  

• disposals of assets;  

• changes in business activities conducted by us and our subsidiaries; and  

• capital expenditures, including to fund future store openings.

Under the Capital One Credit Facility, we were in violation of certain covenants for the twelve consecutive fiscal months ended September 30, 2013 and December 31, 2013, and we anticipated a violation for the twelve months ended March 31, 2014.

On November 14, 2013, we entered into a third amendment to the Capital One Credit Facility, which among other things, waived the obligation to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio for the twelve consecutive fiscal month period ending September 30, 2013. As a condition to the waiver, we agreed to a one percentage point increase in the interest rate to either LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at our option) and limitations on

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amounts available to be borrowed, consisting of the imposition of a reserve against the line that gradually reduced the total borrowing capacity to $47,500 and certain amendments to the borrowing base calculation. 

On March 25, 2014, we entered into a fifth amendment to the Capital One Credit Facility which, effective upon its receipt of at least $25,000 of net proceeds from a financing prior to April 15, 2014, among other things: waives the obligation to maintain the minimum fixed charge coverage and maximum leverage ratios for the three month periods ended December 31, 2013 and March 31, 2014; resets for future periods the fixed charge coverage ratio, the maximum leverage ratio and the maximum capital expenditures allowed; adds a minimum EBITDA covenant; increases the interest rate payable under the credit agreement by 0.5% per annum to either LIBOR plus 5.0% or the bank's prime rate plus 4.0% (at our option); and increases the fees payable upon early termination.

Under the indenture governing our senior secured notes, a special interest trigger event occurred as of December 31, 2013 because our consolidated total net leverage ratio, as calculated under the indenture, exceeded 4.50 to 1.00. As a result, interest on the senior secured notes now accrues at a rate of 15% annum, with the interest in excess of 13% per annum payable in-kind for any interest payment date prior to April 15, 2018 and in cash for any interest payment date thereafter. The additional 2% per annum of interest accrues retroactively from the issue date of the senior secured notes. Similarly, because of the special interest trigger event, the interest rate on the Lion Loan Agreement also increased from 18% to 20% per annum with the additional 2% payable retroactively from the date of the loan agreement. Interest under the loan agreement is payable in cash or, to the extent permitted by our other debt agreements, in-kind. We are currently paying the interest under the Lion Loan Agreement in cash as the terms of our other debt agreements do not currently permit payment in-kind.

In addition, our credit agreements contain, and any future credit agreements or loan agreements may contain, certain financial and maintenance covenants, including covenants relating to our capital expenditures, fixed charge coverage, borrowing availability and leverage, some of which may be tied to consolidated EBITDA, in each case as defined in the applicable debt agreements.

Such restrictive and other covenants could limit our ability to respond to market conditions, to provide for unanticipated capital requirements or to take advantage of business or acquisition opportunities.

In addition, our failure to comply with the various covenants under our indebtedness could have material adverse consequences to us. Such failure may result in our being unable to borrow under our revolving credit facility, which we utilize to access our working capital, and as a result may adversely affect our ability to finance our operations or pursue our expansion plans. Our debt agreements contain cross-default or cross-acceleration provisions by which non-compliance with covenants, or the acceleration of other indebtedness of at least a specified outstanding principal amount, could also constitute an event of default under such debt agreements. Accordingly, such a failure could result in the acceleration of all of our outstanding debt, and may adversely affect our ability to obtain financing that may be necessary to effectively operate our business and grow the business going forward. In addition, substantially all of our assets are used to secure our indebtedness, including loans under our credit agreements, our senior secured notes and certain equipment leasing agreements. In the event of a default on these agreements, substantially all of our assets could be subject to liquidation by the creditors, which liquidation could result in no assets being left for the stockholders after the creditors receive their required payment. In such an event, we would be required to seek alternative sources of liquidity, and there can be no assurance that any alternative source of liquidity would be available on terms acceptable to us, or at all.

Fluctuations in our results of operations from quarter to quarter could have a disproportionate effect on our overall financial condition and results of operations.

We experience seasonal fluctuations in revenues and operating income. Historically, sales during the third and fourth fiscal quarters have generally been the highest, with sales during the first fiscal quarter being the lowest. Any factors that harm our third or fourth quarter operating results, including adverse weather or unfavorable economic conditions, could have a disproportionate effect on our results of operations for the entire fiscal year.

In order to prepare for our peak selling season, we must produce and keep in stock more merchandise than we would carry at other times of the year. Any unanticipated decrease in demand for our products during our peak selling season could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross profit.

A variety of factors affect comparable store sales, including fashion trends, competition, current economic conditions, pricing, inflation, the timing of release of new merchandise and promotional events, changes in our merchandise mix, the success of marketing programs, timing and level of markdowns and weather conditions. These factors may cause our comparable store sales results to differ materially from prior periods and from our expectations, which could cause a decrease in our earnings.

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Significant fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our revenues, operating income, net income and earnings per share, as well as future cash flows.

We face exposure to adverse movements in foreign currency exchange rates as a result of our international operations. These exposures may change over time, and they could have a material adverse impact on our financial results and cash flows. An increase in the value of the U.S. dollar relative to foreign currencies could make our products more expensive and therefore potentially less competitive in foreign markets. Conversely, lowering our price in local currency may result in lower U.S.-based revenue. A decrease in the value of the U.S. dollar relative to foreign currencies could increase the cost of local operating expenses.

Our stock price may be volatile.

Our stock price may fluctuate substantially as a result of quarter to quarter variations in our actual or anticipated financial results or the financial results of other companies in the retail and apparel industries. In addition, the stock market has experienced price and volume fluctuations that have affected the market price of many retail and other stocks and that have often been unrelated or disproportionate to the operating performance of these companies. Failure to meet the expectations of investors, security analysts or credit rating agencies in one or more future periods could reduce the market price of our common stock and cause our credit ratings to decline. In addition, the fluctuation of our stock price also could cause us to fail to meet listing standards on the NYSE MKT if our stock price trades at a low price per share for a substantial period of time and we fail to effect a reverse split of our shares.

If we are unable to maintain the listing of the common stock on the NYSE MKT or any other securities exchange, it may be more difficult for you to sell your securities.

The common stock is currently traded on the NYSE MKT. On February 28, 2014, we received a letter from NYSE MKT indicating that we are not in compliance with the continued listing standards of NYSE MKT set forth in Section 1003(a)(iv) of the NYSE MKT LLC Company Guide. In order to maintain its listing, we have submitted a plan of compliance by addressing how we intend to regain compliance with Section 1003(a)(iv) of the Company Guide by April 15, 2014. If the plan is accepted, we may be able to continue our listing but will be subject to periodic review by NYSE MKT. If the plan is not accepted or if we do not make progress consistent with the plan by April 15, 2014, NYSE MKT will initiate delisting proceedings as appropriate. No assurance can be given that we will regain compliance with those listing requirements or that we will continue to meet the listing requirements of NYSE MKT in the future. If for any reason the NYSE MKT should delist the common stock, and we are unable to obtain listing on another national securities exchange, we could face significant material adverse consequences, including:

• a limited availability of market quotations for our securities;

• a limited amount of news and analyst coverage;

• a decreased ability to issue additional securities or obtain additional financing in the future; and

• a determination that the common stock is a “penny stock,” if the securities sell for a substantial period of time at a low price per share which would require brokers trading in the common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for the common stock.

There will be a substantial number of shares of our common stock available for issuance or sale in the future that would result in dilution to existing public stockholders, may increase the volume of common stock available for sale in the open market and may cause a decline in the market price of our common stock.

Dov Charney and our warrant-holders currently own or have the right to acquire a substantial number of shares of our common stock. As of December 31, 2013, Mr. Charney owned 47.2 million shares of our common stock and has the contractual right to receive, upon the satisfaction of certain performance conditions or stock price thresholds, up to an additional 25.0 million shares of our common stock. We also have outstanding warrants exercisable to purchase an aggregate of 21.6 million shares of our common stock. Mr. Charney and Lion Capital LLP ("Lion") also have certain registration rights with respect to their shares of common stock (in the case of Lion, the shares underlying its warrants).

As of December 31, 2013 assuming (i) issuance in full of the shares of common stock that Mr. Charney has a right to purchase or receive as described above, (ii) exercise in full of the warrants described above (including new warrants issuable to Lion if such shares are issued to Mr. Charney), (iii) exercise in full of currently outstanding employee options to purchase, vesting of unvested restricted stock awards, including issuance of contingent employee restricted stock awards and options, with respect to a total of 25.0 million shares of common stock and (iv) no other issuances of common stock or securities convertible, exercisable or exchangeable for common stock, the percentage ownership of stockholders other than Mr. Charney, the Investors (as defined below), and holders of outstanding warrants as described above would be reduced from approximately 45% to approximately 30%.

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Voting control by our executive officers, directors, lenders and other affiliates may limit your ability to influence the outcome of director elections and other matters requiring stockholder approval.

As of March 31, 2014, Mr. Charney beneficially owned approximately 27% of our outstanding common stock and Lion beneficially owned approximately 12% of our outstanding common stock. Mr. Charney and Lion also have the right to acquire additional beneficial ownership under certain circumstances as described above.

In addition, Mr. Charney and Lion are parties to an investment agreement pursuant to which Lion has the right to designate up to two directors on our Board of Directors and a board observer (or, if we increase our board size to 12, up to three directors and no board observers), subject to maintaining certain minimum ownership thresholds of common stock or shares of common stock issuable under Lion's warrants. The investment agreement also restricts us from increasing the size of our Board of Directors to more than 10 directors (or 13 directors in the event we elect to increase the size of our Board of Directors to 12 directors as described above). The two Lion designees on our board of directors and Lion's board observer resigned on March 30, 2011. Lion retains its ability to re-designate directors to our board of directors and a board observer.

Mr. Charney and Lion also are parties to an investment voting agreement which provides that, for so long as Lion has the right to designate any person or persons to the Board of Directors, Mr. Charney will vote his shares of common stock in favor of Lion's designees, and Lion will vote its shares of common stock in favor of Mr. Charney and each other designee of Mr. Charney, in each case subject to Mr. Charney maintaining certain minimum ownership thresholds of common stock.

This concentration of share ownership and agreements may adversely affect the trading price for the common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. Also, some or all of our significant stockholders, if they were to act together, would be able to control our management and affairs and matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change of control would benefit our other stockholders and may prevent our stockholders from realizing a premium over the current market price for their shares of common stock. Furthermore, our significant stockholders may also have interests that differ from yours and may vote their shares of common stock in a way with which you disagree and which may be adverse to your interests.

Purchases of retail apparel merchandise are generally discretionary and economic conditions may cause a decline in consumer spending which could adversely affect our business and financial performance.

Our operations and performance depend significantly on worldwide economic conditions and their impact on levels of consumer spending, particularly in discretionary areas such as fashion apparel. Our business and financial performance, including our sales and the collection of our accounts receivable, may be adversely affected by any future decreases in economic activity in the markets we serve that could potentially cause a decline in consumer spending, including a reduction in the availability of credit, increased unemployment levels, higher fuel and energy costs, rising interest rates, adverse conditions in the housing markets, financial market volatility, recession, decreased access to credit, reduced consumer confidence in future economic conditions and political conditions, acts of terrorism, consumer perceptions of personal well-being and security and other macroeconomic factors affecting consumer spending behavior. A decrease in consumer discretionary spending as a result of economic conditions may decrease the demand for our products. In addition, reduced consumer spending may cause us to lower prices, or drive us to offer additional products at promotional prices, any of which would have a negative impact on gross profit.

Our ability to meet customers' demands depends, in part, on our ability to obtain timely and adequate delivery of materials, parts and components from our suppliers. Global financial conditions may materially and adversely affect the ability of our suppliers to obtain financing for significant purchases and operations. If certain key suppliers were to become capacity constrained or insolvent as a result of the financial crisis, it could result in a reduction or interruption in supplies or a significant increase in the price of supplies and adversely impact consumer purchases and our financial results. As a consequence, our operating results for a particular period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the foregoing effects could have a material adverse effect on our business, results of operations, and financial condition and could adversely affect our stock price.

If we are unable to gauge fashion trends and react to changing consumer preferences in a timely manner, our sales will decrease.

Our success is largely dependent upon our ability to gauge the fashion tastes of our customers and to provide merchandise that satisfies customer demand in a timely manner. The retail apparel business fluctuates according to changes in consumer preferences dictated, in part, by fashion and season. To the extent we misjudge the market for our merchandise or the products suitable for our market, our sales will be adversely affected. Merchandise misjudgments could have a material adverse effect

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on our image with our customers and on our operating results. Fluctuations in the apparel retail market affect the inventory owned by apparel retailers, since merchandise usually must be manufactured in advance of the season and frequently before fashion trends are evidenced by customer purchases. In addition, the cyclical nature of the retail apparel business requires us to carry a significant amount of inventory, especially prior to peak selling seasons when we build up our inventory levels. As a result, we will be vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise production. If sales do not meet expectations, too much inventory may lower planned margins. Our brand image may also suffer if customers believe we are no longer able to offer the latest fashion. The occurrence of these events could adversely affect our financial results by decreasing sales.

Our failure to adequately protect our trademarks and other intellectual property rights could diminish the value of our brand and reduce demand for our merchandise.

Our trademarks and service marks, and certain other intellectual property, have been registered, or are the subject of pending applications with the United States Patent and Trademark Office and with the registries of many foreign countries and/or are protected by common law. Our products are noted for their quality and fit, and our edgy, distinctive branding has differentiated us in the marketplace. As such, the trademark and variations thereon are valuable assets that are critical to our success. We intend to continue to vigorously protect our trademark and brand against infringement, but we may not be successful in doing so. In addition, the laws of certain foreign countries may not protect proprietary rights to the same extent as do the laws of the United States. The unauthorized reproduction or other misappropriation of our trademark would diminish the value of our brand, which could reduce demand for our products or the prices at which we can sell our products.

If we fail to maintain the value and image of our brand, our sales are likely to decline.

Our success depends on the value and image of our brand. Our name is integral to our business as well as to the implementation of our strategies for expanding our business. Maintaining, promoting and positioning our brand depend largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high quality customer experience. Our brand could be adversely affected if we fail to achieve these objectives or if our public image or reputation or those of our senior personnel were to be tarnished by negative publicity. Any of these events could result in decreases in sales.

Our ability to attract customers to our stores depends heavily on the success of the shopping areas in which they are located.

In order to generate customer traffic, we locate many of our stores in prominent locations within successful shopping areas. Net sales at these stores are partly dependent on the volume of traffic in those shopping areas. Our stores benefit from the ability of a shopping area's other tenants to generate consumer traffic in the vicinity of our stores and the continuing popularity of the shopping areas. We cannot control the availability or cost of appropriate locations within existing or new shopping areas, competition with other retailers for prominent locations or the success of individual shopping areas. In addition, factors beyond our control impact shopping area traffic, such as economic conditions nationally or in a particular area, competition from internet retailers, changes in consumer demographics in a particular market, the closing or decline in popularity of other stores in the shopping areas where our stores are located, deterioration in the financial conditions of the operators of the shopping areas or developers and consumer spending levels. A significant decrease in shopping area traffic could have a material adverse effect on our financial condition or results of operations. Furthermore, in pursuing our growth strategy, we will be competing with other retailers for prominent locations within the same successful shopping areas. If we are unable to secure these locations or unable to renew store leases on acceptable terms as they expire from time-to-time we may not be able to continue to attract the number or quality of customers we normally have attracted or would need to attract to sustain our projected growth. All these factors may also impact our ability to meet our growth targets and could have a material adverse effect on our financial condition or results of operations.

Our growth strategy relies in part on the opening of new stores, the remodeling of existing stores and expanding our business internationally, which may strain our resources, adversely impact the performance of our existing store base and delay or prevent successful penetration into international markets.

Our growth strategy and the success of our business depends in part on the opening of new retail stores, both domestically and internationally, the renewal of existing store leases on terms that meet our financial targets, the remodeling of existing stores in a timely manner, and the operation of these stores in a cost-efficient manner. Successful implementation of this portion of our growth strategy depends on a number of factors including, but not limited to, our ability to: 

• identify and obtain suitable store locations and negotiate acceptable leases for these locations; 

• complete store design and remodeling projects on time and on budget;  

• manage and expand our infrastructure to accommodate growth;  

• generate sufficient operating cash flows or secure adequate capital on commercially reasonable terms to fund our expansion plan and remain in compliance with the capital expenditure covenant and other relevant covenants in our credit facilities that may limit our ability to fund such expansion plans; 

• manage inventory effectively to meet the needs of new and existing stores on a timely basis;  

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• avoid construction delays and cost overruns in connection with the build-out of new stores;  

• hire, train and retain qualified store managers and sales people.

• gain acceptance from foreign customers;

• manage foreign exchange risks effectively;

• address existing and changing legal, regulatory and political environments in target foreign markets; and  

• manage international growth, if any, in a manner that does not unduly strain our financial, operating and management resources.

Our plans to expand our store base and to remodel certain existing stores may not be successful and the implementation of these plans may not result in an increase in our revenues even though they increase our costs. Additionally, new stores that we open may place increased demands on our existing financial, operational, managerial and administrative resources, which could cause us to operate less effectively.

Our ability to obtain real estate to open new stores in desirable locations depends upon the availability of real estate that meets our criteria, which includes, among other items, projected foot traffic, square footage, customer demographics and whether we are able to negotiate lease terms that meet our operating budget. In addition, we must be able to effectively renew our existing store leases from time to time. Failure to secure real estate in desirable locations on economically beneficial terms or to renew leases on existing store locations on economically beneficial terms could have a material adverse effect on our results of operations.

Further, our ability to fund expansion in the future and other capital expenditures will depend on our ability to generate sufficient cash from internal operations (after taking into account our debt service obligations and subject to the covenants in our debt agreements) or to access financing, which ability is, to a significant extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control and which financing may not be available on commercially reasonable terms or at all.

Furthermore, it is possible that by opening a new store in an existing market, we could adversely affect the previously existing stores in that market by drawing away traffic from the previously existing stores. Our new stores may not be immediately profitable and, as such, we may incur losses until these stores become profitable. Any failure to successfully open and operate new stores would adversely affect our results of operations.

We anticipate that we will incur significant costs related to starting up and maintaining additional foreign operations. Costs may include, and will not be limited to, setting up foreign offices and hiring experienced management. These increased demands may cause us to operate our business less effectively, which in turn could cause deterioration in the performance of our stores. Furthermore, our ability to conduct business in international markets may be affected by legal, regulatory, political and economic risks.

Our plans to expand our product offerings and sales channels may not be successful, and implementation of these plans may divert our operational, managerial and administrative resources, which could impact our competitive position.

Our ability to grow our existing brand and develop or identify new growth opportunities depends in part on our ability to appropriately identify, develop and effectively execute strategies and initiatives. Failure to effectively identify, develop and execute strategies and initiatives may lead to increased operating costs without offsetting benefits and could have a material adverse effect on our results of operations. These plans involve various risks discussed elsewhere in these risk factors, including:

• implementation of these plans may be delayed or may not be successful;  

• if our expanded product offerings and sales channels fail to maintain and enhance our distinctive brand identity, our brand image may be diminished and our sales may decrease;  

• implementation of these plans may divert management's attention from other aspects of our business and place a strain on our management, operational and financial resources, as well as our information systems.

In addition, our ability to successfully carry out our plans to expand our product offerings may be affected by, among other things, economic and competitive conditions, changes in consumer spending patterns and changes in consumer preferences and fashion trends. Our expansion plans could be delayed or abandoned, could cost more than anticipated and could divert resources from other areas of our business; any of which could impact our competitive position and reduce our revenue and profitability.

We depend on key personnel, and our ability to grow and compete will be harmed if we do not retain the continued services of such personnel, or we fail to identify, hire and retain additional qualified personnel.

We depend on the efforts and skills of our management team and other key personnel, and the loss of services of one or more members of this team, each of whom have substantial experience in the apparel industry, could have an adverse effect on our business. Our senior officers closely supervise all aspects of our business, in particular the design and production of

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merchandise and the operation of our stores. If we are unable to hire and retain qualified management or if any member of our management leaves, such departure could have an adverse effect on our operations and could adversely affect our ability to design new products and to maintain and grow the distribution channels for our products. In particular, we believe we have benefited substantially from the leadership and strategic guidance of Dov Charney. The loss of Dov Charney would be particularly harmful as he is considered intimately connected to our brand identity and is the principal driving force behind our core concepts, designs and growth strategy.

Our ability to anticipate and effectively respond to changing fashion trends depends in part on our ability to attract and retain key personnel in our design, merchandising and marketing areas, and other functions. In addition, if we experience material growth, we will need to attract and retain additional qualified personnel. The market for qualified and talented design and marketing personnel in the apparel industry is intensely competitive, and we cannot be sure that we will be able to attract and retain a sufficient number of qualified personnel in future periods. If we are unable to attract or retain qualified personnel as needed, our growth will be hampered and our operating results could be materially adversely affected.

Unionization of employees at our facilities could result in increased risk of work stoppages and high labor costs.

Our employees are not party to any collective bargaining agreement or union. If employees at our manufacturing or distribution facilities were to unionize, our relationship with our employees could be adversely affected. We would also face an increased risk of work stoppages and higher labor costs. Accordingly, unionization of our employees could have a material adverse impact on our operating costs and financial condition and could force us to raise prices on our products, curtail operations and/or relocate all or a portion of our operations overseas.

Cost increases in, or shortages of, the materials or labor used to manufacture our products could negatively impact our business and financial condition.

The manufacture of our products is labor intensive and utilizes raw materials supplied by third parties. An important part of American Apparel branding and marketing is that our products are made in the United States. The Federal Trade Commission has stated that for a product to be called “Made in USA”, or claimed to be of domestic origin without qualifications or limits on the claim, the product must be “all or virtually all” made in the United States. The term “United States” includes the 50 states, the District of Columbia, and the U.S. territories and possessions. “All or virtually all” means that all significant parts and processing that go into the product must be of U.S. origin. That is, the product should contain no - or negligible - foreign content. We meet the Federal Trade Commission's “Made in USA” standard and from the knitting process to the final sewing of a garment, all of the processes are conducted in the United States, either directly by us in our knitting, manufacturing, dyeing and finishing facilities located in Los Angeles or through commission knitters, dyers and sewers in the Los Angeles metropolitan area and other regions in the United States. If the cost of labor materially increases, our financial results could be materially adversely affected and our ability to compete against companies with lower labor costs could be hampered. Material increases in labor costs in the United States could also force us to move all or a portion of our manufacturing overseas, which could adversely affect our brand identity.

Similarly, increases in the prices of raw materials or the prices we pay to the suppliers of the raw materials used in the manufacturing of our products, and shortages in such materials, could have a material adverse effect on our financial condition and results of operations. For example, the price of yarn and the cost of certain related fabrics has historically fluctuated. Such shortages may result in an increase in our manufacturing costs and could result in a material adverse effect on our financial condition and results of operations, and we are unable to predict whether we will be able to successfully pass on the added cost of raw materials to our wholesale and retail customers. In addition, increases in the cost of, or shortages in, our raw material inputs could adversely affect our ability to compete. Further, we could be forced to seek to offset any increased raw material costs by relocating all or a portion of our manufacturing overseas to locations with lower labor costs.

Our manufacturing operations are located and will be located in higher-cost geographic locations, placing us at a possible disadvantage to competitors that have a higher percentage of their manufacturing operations overseas.

Despite the general industry-wide migration of manufacturing operations to lower-cost locations, such as Central America, the Caribbean Basin and Asia, our textile manufacturing operations are still located in the United States, which is a higher-cost location relative to these offshore locations. In addition, our competitors generally source or produce a greater portion of their textiles from regions with lower costs than we, which also places us at a cost disadvantage. Our competitor's lower costs of production may allow them to offer their products at a lower price than our selling prices for similar products. This could force us to lower our margins or to compete more vigorously with non-price competitive strategies to preserve our margins and sales volume.

Our reliance on operational facilities located in the same vicinity makes our business susceptible to disruptions or adverse conditions affecting the location of our facilities.

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We conduct all of our manufacturing operations in the Los Angeles metropolitan area. Specifically, we operate principally out of an 800,000 square foot facility in downtown Los Angeles, which houses our executive offices, as well as our cutting and sewing operations. Our distribution operations are located in La Mirada, California. We also operate the following: a knitting facility in Los Angeles, California; a cutting, sewing, garment dyeing and finishing facility in South Gate, California; a fabric dyeing and finishing facility in Hawthorne, California; as well as a a cutting, sewing, fabric dyeing and finishing facility in Garden Grove, California. As a result of geographic concentration, our operations are susceptible to local and regional factors, such as accidents, system failures, economic and weather conditions, natural disasters, and demographic and population changes, as well as other unforeseen events and circumstances.

Southern California is particularly susceptible to earthquakes. Any significant interruption in the operation of any of these facilities could reduce our ability to receive and process orders and provide products and services to our stores and customers, which could result in lost sales, canceled sales and a loss of loyalty to our brand. Furthermore, if there were a major earthquake, we may have to cease operations for a significant portion of time due to possible damage to our factory or inability to deliver products to our distribution center.

The process of upgrading our information technology infrastructure may disrupt our operations.

We are increasingly dependent on information systems to operate our website, process transactions, respond to customer inquiries, manage inventory and production, purchase, sell and ship goods on a timely basis and maintain cost-efficient operations. We have performed an evaluation of our information technology systems and requirements and have implemented upgrades to our information technology systems supporting the business. These upgrades involve replacing legacy systems with successor systems, making changes to legacy systems or acquiring new systems with new functionality. There are inherent risks associated with replacing and changing these systems, including accurately capturing data and system disruptions. We may experience operational problems with our information systems as a result of system failures, viruses, computer “hackers” or other causes. Any material disruption or slowdown of our systems, including a disruption or slowdown caused by our failure to successfully upgrade our systems could cause information, including data related to customer orders, to be lost or delayed which could-especially if the disruption or slowdown occurred during the holiday season-result in delays in the delivery of merchandise to our stores and customers or lost sales, which could reduce demand for our merchandise and cause our sales to decline.

Moreover, we may not be successful in developing or acquiring technology that is competitive and responsive to the needs of our customers and might lack sufficient resources to make the necessary investments in technology to compete with our competitors. Accordingly, if changes in technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our growth, we could lose customers.

A failure in our Internet operations could significantly disrupt our business and lead to reduced sales and reputational damage.

Our online retail operations accounted for approximately 10% of net sales for the year ended December 31, 2013 and are subject to numerous risks that could have a material adverse effect on our operational results. Risks to online revenue include, but are not limited to, the following: 

• changes in consumer preferences and buying trends relating to Internet usage; 

• changes in required technology interfaces; 

• web site downtime; 

• difficulty in recreating the in-store experience on our website; and

• risks related to the failure of the systems that operate the web sites and their related support systems, including computer viruses, theft of customer information, telecommunication failures and electronic break-ins and similar disruptions. 

Our failure to successfully respond to these risks and uncertainties could reduce Internet sales and damage our brand's reputation.

Failure to protect the integrity and security of our information systems and our customers’ information could materially, adversely affect our results of operations, damage our reputation and expose us to litigation.

Our operations, including sales through our e-commerce website and retail stores, involve the collection, storage and transmission of customers' credit card information and personal identification data, as well as employee information and non-public company data. The costs associated with maintaining the security of such information, including increased investments in technology, the costs of compliance with consumer protection laws, and costs resulting from consumer fraud or a malicious breach of our information systems, could materially adversely affect our results of operations. If the security of the customer data stored on our servers or transmitted by our networks were breached, our reputation may be materially adversely affected, which could negatively impact our sales results, and we may be subject to litigation. To date, we have not experienced a significant security breach.

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We operate in the highly competitive retail and apparel industries and our market share may be adversely impacted at any time by the significant number of competitors in our industries that may compete more effectively than we can.

The apparel industry is characterized by rapid shifts in fashion, consumer demand and competitive pressures, resulting in both price and demand volatility. The retail apparel industry, in general, and the imprintable apparel market, specifically, is fragmented and highly competitive. Prices of certain products we manufacture, particularly T-shirts, are determined based on market conditions, including the price of raw materials. There can be no assurance that we will be able to compete successfully in the future. We compete with national and local department stores, specialty and discount store chains, independent retail stores and Internet businesses that market similar lines of merchandise. Many of our competitors are, and many of our potential competitors may be, larger, have substantially greater name recognition than we do and have greater financial, marketing and other resources and, therefore, may be able to adapt to changes in customer requirements more quickly, devote greater resources to the marketing and sale of their products, generate greater national brand recognition or adopt more aggressive pricing policies than we can.  

We also face competition in European, Asian and Canadian markets from established regional and national chains. Our success in these markets depends on determining a sustainable profit formula to build brand loyalty and gain market share in these challenging retail environments. If our international business is not successful our results of operations could be adversely affected.

The wholesale business competes with numerous wholesale companies based on the quality, fashion, availability, and price of our wholesale product offerings. Many of these companies have greater name recognition than American Apparel in the wholesale market. Many of these companies also have greater financial and other resources when compared to American Apparel. If we cannot successfully compete with these companies, our results of operations could be adversely affected.

Elimination or scaling back of U.S. import protections would weaken an important barrier to the entry of foreign competitors who produce their merchandise in lower labor cost locations. This could place us at a disadvantage to those competitors.

Our products are subject to foreign competition. Foreign producers of apparel often have significant labor cost advantages, which can enable them to sell their products at relatively lower prices. However, foreign competitors have faced significant U.S. government import restrictions in the form of tariffs and quotas. The extent of import protection afforded to domestic apparel producers has been, and is likely to remain, subject to political considerations, and is therefore unpredictable. Given the number of foreign low cost producers, the substantial elimination or scaling back of the import protections that protect domestic apparel producers such as American Apparel could have a material adverse effect on our business and the financial condition and results of operation.

Because we utilize foreign suppliers and sell into foreign markets, we are subject to numerous risks associated with international business that could increase our costs or disrupt the supply of our products, resulting in a negative impact on our business and financial condition.

Our international operations subject us to risks, including: 

• economic and political instability; 

• restrictive actions by foreign governments; 

• greater difficulty enforcing intellectual property rights and weaker laws protecting intellectual property rights;

• changes in import duties or import or export restrictions; 

• fluctuations in currency exchange rates, which could negatively affect profit margins; 

• timely shipping of product;

• complications complying with the laws and policies of the United States affecting the exportation of goods, including duties, quotas, and taxes; and 

• complications in complying with trade and foreign tax laws. 

These and other factors beyond our control could disrupt the supply of our products, influence the ability of our suppliers to export our products cost-effectively or at all, inhibit our suppliers' ability to procure certain materials and increase our expenses, any of which could harm our business, financial condition and results of operations.

We rely heavily on immigrant labor, and changes in immigration laws or enforcement actions or investigations under such laws could significantly adversely affect our labor force, manufacturing capabilities, operations and financial results.

We rely heavily on immigrant labor. Adverse changes to existing laws and regulations applicable to employment of immigrants, enforcement requirements or practices under those laws and regulations, and inspections or investigations by immigration authorities or the prospects or rumors of any of the foregoing, even if no violations exist, could negatively impact the availability and cost of personnel and labor to us. As a result, we could experience very substantial turnover of employees on short or no notice, which could result in manufacturing and other delays. We may also have difficulty attracting or hiring

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new employees in a timely manner, resulting in further delays. These delays could materially adversely affect our revenues and costs and our ability to compete. If we are not able to continue to attract and retain sufficient employees, our manufacturing capabilities, operations and financial results would be adversely affected.

We are subject to customs, advertising, consumer protection, zoning and occupancy and labor and employment laws that could require us to modify our current business practices and incur increased costs.

We are subject to numerous regulations, including customs, truth-in-advertising, consumer protection and zoning and occupancy laws and ordinances that regulate retailers generally and/or govern the importation, promotion and sale of merchandise and the operation of retail stores and warehouse facilities. We also are subject to numerous federal and state labor laws, such as minimum wage laws and other laws relating to employee benefits. If these regulations were to change or were violated by our management, employees, suppliers, buying agents or trading companies, the costs of certain goods could increase, or we could experience delays in shipments of our goods, be subject to fines or penalties, or suffer reputational harm, which could reduce demand for our merchandise and hurt our business and results of operations. In addition, changes in federal and state minimum wage laws and other laws relating to employee benefits could cause us to incur additional wage and benefits costs, which could adversely affect our profitability. We are currently defending five wage and hour suits. Should these matters be decided against us, we could incur substantial liability, experience an increase in similar suits, and suffer reputational harm. We are unable to predict the financial outcome of these matters at this time, and any views we form as to the viability of these claims or the financial exposure in which they could result may change. No assurance can be made that these matters will not result in material financial exposure, which together with the potential for similar suits and reputational harm, could have a material adverse effect upon our financial condition and results of operations. See the section entitled “Item 3. Legal Proceedings” for a more detailed discussion of our pending litigation.

Legal requirements are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations. We may be required to make significant expenditures or modify our business practices to comply with existing or future laws and regulations, which may increase our costs and materially limit our ability to operate our business.

Current environmental laws, or laws enacted in the future, may harm our business.

We are subject to federal, state and local laws, regulations and ordinances that govern activities or operations that may have adverse environmental effects (such as emissions to air, discharges to water, and the generation, handling, storage and disposal of solid and hazardous wastes). We are also subject to laws, regulations and ordinances that impose liability for the costs of clean up or other remediation of contaminated property, including damages from spills, disposals or other releases of hazardous substances or wastes, in certain circumstances without regard to fault. Certain of our operations routinely involve the handling of chemicals and wastes, some of which are or may become regulated as hazardous substances. Our product design and procurement operations must comply with new and future requirements relating to the materials composition of our products. If we fail to comply with the rules and regulations regarding the use and sale of such regulated substances, we could be subject to liability. The costs and timing of costs under environmental laws are difficult to predict.

As is the case with manufacturers in general, if a release of hazardous substances occurs on or from our properties or any associated offsite disposal locations, or if contamination from prior activities is discovered at any of our properties, we may be held liable. The amount of such liability could be material. 

Litigation exposure could exceed expectations and have a material adverse effect on our financial condition and results of operations.

We are subject to regulatory inquiries, investigations, claims and suits. We are currently defending a consolidated putative shareholder class action, two consolidated shareholder derivative actions proceeding in federal and state court, respectively, five wage and hour suits, and numerous employment related claims and suits. In the event one or more of these matters are decided against us, we may incur substantial liability, experience an increase in similar suits or suffer reputational harm. We are unable to predict the financial outcome that could result from these matters at this time and any views we form as to the viability of these claims or the financial exposure in which they could result could change from time to time as the matters proceed through their course, as facts are established and various judicial determinations are made. No assurance can be made that these matters will not result in material financial exposure, which together with the potential for similar suits and reputational harm, could have a material adverse effect upon our financial condition and results of operations. See the section entitled “Item 3. Legal Proceedings” for a more detailed discussion of American Apparel's pending litigation.

We are currently being audited by government tax agencies regarding our operating activities in previous periods which may result in an assessment of a material amount, the payment of which may adversely impact our financial conditions and operations.

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As of December 31, 2013, we are being audited by Government agencies in various jurisdictions in regards to sales, VAT, income, and other taxes and customs duties for certain previous years. In connection with one such audit, the German customs authority has issued retroactive assessments on our imports totaling €3,634 or $5,003 at the December 31, 2013 exchange rates. Although we believe that we properly assess and remit all required sales, VAT, income, and other taxes and customs duties in Germany and other applicable jurisdictions, no assurance can be made that these matters will not have a material adverse effect on our financial condition and results of operations. In particular, disruptions in our operations in Germany as a result of customs enforcement actions or otherwise could have a material adverse effect on our E.U. business and operations.

Third party failure to deliver merchandise to stores and customers could result in lost sales or reduced demand for our merchandise.

The efficient operation of our stores and wholesale business depends on the timely receipt of merchandise from our distribution centers. Independent third party transportation companies deliver a substantial portion of our merchandise to our stores. These shippers may not continue to ship our products at current pricing or terms. These shippers may employ personnel represented by labor unions. Disruptions in the delivery of merchandise or work stoppages by employees or contractors of these third parties could delay the timely receipt of merchandise, which could result in canceled sales, a loss of loyalty to our brand and excess inventory. There can be no assurance that such stoppages or disruptions will not occur in the future. Any failure by these third parties to respond adequately to our distribution needs would disrupt our operations and could have a material adverse effect on our financial condition and results of operations.

Timely receipt of merchandise by our stores and our customers may also be affected by factors such as inclement weather, natural disasters and acts of terrorism. We may respond by increasing markdowns or initiating marketing promotions, which would decrease our gross profits and net income.

We have potentially adverse exposure to credit risks on our wholesale sales.

We are exposed to the risk of financial non-performance by our customers, primarily in our wholesale business. Sales to wholesale customers represented approximately 28% of our net sales for the year ended December 31, 2013. Our extension of credit involves considerable use of judgment and is based on an evaluation of each customer's financial condition and payment history. We monitor our credit risk exposure by periodically obtaining credit reports and updated financials of our customers. We maintain an allowance for doubtful accounts for potential credit losses based upon historical trends and other available information. However, delays in collecting or the inability to collect on sales to significant customers or a group of customers could have a material adverse effect on our results of operations.

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Item 2. Properties

The following table sets forth the location and use of each of American Apparel’s principal non-retail properties, which are all leased each of which is used in connection with all of our operating segments, with the exception of our foreign offices,

which are used solely in connection with our Canada and International segments respectively:

Los Angeles, California	Headquarters, Sewing, Cutting and Warehousing
Los Angeles, California	Knitting Facility
Hawthorne, California	Fabric Dyeing and Finishing Facility
South Gate, California	Cutting, Sewing, Garment Dyeing and Finishing Facility
Garden Grove, California	Cutting, Sewing, Knitting, Fabric Dyeing and Finishing Facility
La Mirada, California	Distribution Center
Montreal, Quebec	Offices
London, England	Offices
Tokyo, Japan	Offices
Seoul, South Korea	Offices

All of our retail stores are leased, well maintained and in good operating condition. Our retail stores are typically leased for a term of five to ten years with renewal options for an additional five to ten years. Most of these leases provide for base rent, as well as maintenance and common area charges, real estate taxes and certain other expenses. Selling space of opened stores will sometimes change due to store renovations that modify space utilization, use of staircases, the configuration of cash registers, and other factors. As well, a number of our store locations have undergone expansions in the past several years. Among our retail operations, we also operate seven concession locations as of December 31, 2013.

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The following tables set forth American Apparel’s existing retail stores by geographic region, as of December 31, 2013:

Domestic Locations (139)

Arizona (2)		Florida (7)	Massachusetts (3)
Scottsdale		Boca Raton	Boston—
Tucson		Miami Beach—	Back Bay
		Lincoln Road	Newbury Street
California (38)		Sunset Drive	Cambridge
Arcadia	Manhattan Beach	Washington Ave.
Berkeley	Palo Alto	Orlando
Camarillo	Pasadena	St. Augustine	Michigan (3)
Claremont	Rancho Cucamonga	Wellington	Ann Arbor
Commerce	San Diego—		East Lansing
Costa Mesa	Fashion Valley	Georgia (2)	Royal Oak
Gilroy	Hillcrest	Atlanta—
Huntington Beach	Pacific Beach	Lenox Mall	Minnesota (2)
Irvine Spectrum	San Francisco—	Little Five Points	Bloomington
Los Angeles—	China Gate		Minneapolis
Canoga Park	Haight Ashbury	Hawaii (1)
Echo Park	Union Street	Honolulu—	Missouri (1)
Factory Store	Santa Barbara	Ala Moana	Kansas City
Hollywood	Santa Clara
Little Tokyo	Santa Cruz	Illinois (7)	Nevada (3)
Los Feliz	Santa Monica—	Chicago—	Las Vegas—
Melrose	Main Street	Belmont & Clark	Boca Park
Robertson	Third Street Promenade	Gold Coast	Miracle Mile
Westwood Village	Studio City	Lincoln Park	Premium Outlets
West Hollywood	Venice	State St.
Malibu	Ventura	Wicker Park	New Jersey (4)
		Evanston	Cherry Hill
Colorado (2)		Schaumburg	Edison
Boulder			Hoboken
Denver		Louisiana (1)	Paramus
		New Orleans
Connecticut (2)
New Haven		Maryland (4)
South Norwalk		Annapolis
		Baltimore
District of Columbia (2)		Bethesda
Georgetown		Silver Spring
Lincoln Square

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Domestic Locations (139) (cont'd.)

New York (25)	Pennsylvania (4)	Oregon (4)	Washington (3)
Brooklyn—	King of Prussia	Eugene	Seattle—
Bond Street	Philadelphia—	Portland—	Capitol Hill
Carroll Gardens	Sansom Common	Hawthorne Blvd.	Downtown Seattle
Court Street	Walnut Street	Stark Street	University Way
Nassau Avenue	Pittsburgh—	Tigard
Park Slope	Shadyside
Williamsburg		Wisconsin (2)
Central Valley	South Carolina (1)	Madison
Garden City	Charleston	Milwaukee
Manhattan—
Bleecker Street	Tennessee (2)
Chelsea	Memphis
Columbia University	Nashville
Columbus Circle
FIT	Texas (7)
Flatiron	Austin—
Gramercy Park	Congress Ave
Harlem	Guadalupe Street
Hell’s Kitchen	Dallas—
Lower Broadway	Mockingbird
Lower East Side	NorthPark Center
Noho	Houston
Soho	Round Rock
Tribeca	San Antonio—
Upper East Side	La Cantera
Upper West Side
White Plains
North Carolina (1)	Utah (1)
Charlotte—	Salt Lake City
SouthPark Mall
	Vermont (1)
Ohio (3)	Burlington
Cincinnati
Cleveland	Virginia (1)
Columbus	Richmond

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Canada (32)

Alberta (4)	Ontario (12)	Saskatchewan (1)
Calgary—	Kingston	Saskatoon
17th Avenue	London
Market Mall	Ottawa—
Edmonton—	Rideau Centre
82nd Avenue	Thornhill
West Edmonton Mall	Toronto—
	Bloor Street
British Columbia (6)	Queen Street
Burnaby	Sherway Gardens
Kelowna	Yonge & Dundas
Vancouver—	Yonge & Eglington
Granville	Yorkdale Shopping Centre
South Granville	Vaughan
West 4th Street	Waterloo
Victoria
	Quebec (7)
Manitoba (1)	Laval
Winnipeg	Montreal—
	Cours Mont-Royal
Nova Scotia (1)	Mont-Royal Est
Halifax	St-Denis
	Ste-Catherine West
	Pointe-Claire
	Quebec—
	Westmount

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International Locations (77)

Europe (57)
Austria (1)	Germany (10)	United Kingdom (22)	Spain (1)
Vienna	Berlin—	Birmingham	Barcelona
	Bayreuther Strasse	Brighton
Belgium (1)	Münzstrasse	Bristol	Sweden (2)
Antwerp	Düsseldorf	Glasgow	Stockholm—
	Frankfurt	Leeds	Götgatan
France (12)	Hamburg—	Liverpool	Kungsgatan
Aix-en-Provence	Jungfernstieg	London—
Lyon	Schanzenstrasse	Camden High Street	Switzerland (2)
Paris—	Köln	Carnaby Street	Zurich—
Marais	Munich—	Covent Garden	Josefstrasse
Vielle du Temple	Sendlinger Strasse	Kensington High Street	Rennweg
Beaurepaire	Oberhausen	King's Cross
Avenue Victor Hugo	Stuttgart	Oxford Street
Saint-Germain		Portobello Road
Saint-Honore (2)	Ireland (1)	Selfridges
Galeries Lafayette	Dublin	Shoreditch
La Defense		Stanstead
Toulouse	Italy (2)	Stratford
	Milan	Westfield
	Rome	Manchester (3)
		Nottingham
	Netherlands (3)
	Amsterdam—
	Bijenkorf
	Noordermarkt
	Utrechtsestraat
Asia (12)		Other International (8)
China (3)	South Korea (5)	Israel (1)	Australia (5)
Beijing—	Busan	Tel Aviv	Adelaide
Nali Mall	Seoul—		Melbourne
PVG	Chungdam	Mexico (1 )	Myer Melbourne
Joy City	Hong Dae	Mexico City—	Myer Sydney
	Kangnam	Polanco	Sydney
	Myung-dong
Japan (4)		Brazil (1)
Osaka—		São Paulo
Shinsaibashi
Tokyo—
Daikanyama
Shibuya (2)

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Item 3. Legal Proceedings

We are subject to various claims and contingencies in the ordinary course of business, including those related to litigation, business transactions, employee-related matters and taxes, and others. When we are aware of a claim or potential claim, we assess the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, we will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. There is no assurance that such matters will not materially and adversely affect our business, financial position, and results of operations or cash flows.

Individual Actions

On February 7, 2006, Sylvia Hsu, a former employee of American Apparel, filed a Charge of Discrimination with the Los Angeles District Office of the Equal Employment Opportunity Commission (“EEOC”) (Hsu v. American Apparel: Charge No. 480- 2006-00418), alleging that she was subjected to sexual harassment by a co-worker and constructively discharged as a result of the sexual harassment and a hostile working environment. On March 9, 2007, the EEOC expanded the scope of its investigation to other employees of American Apparel who may have been sexually harassed. On August 9, 2010, the EEOC issued a written determination finding that reasonable cause exists to believe we discriminated against Ms. Hsu and women, as a class, on the basis of their female gender, by subjecting them to sexual harassment. No finding was made on the issue of Ms. Hsu's alleged constructive discharge. In August 2013 the parties entered into a Conciliation Agreement providing for an immaterial compensatory payment to Ms. Hsu and our agreement to comply with our Policy on Sexual Harassment and Sexual Discrimination, which Policy was reviewed by the EEOC, and take certain administrative measures relating thereto. The Conciliation Agreement remains in effect for three years.

On November 5, 2009, Guillermo Ruiz, a former employee of American Apparel, filed suit against us on behalf of putative classes of all current and former non-exempt California employees (Guillermo Ruiz, on behalf of himself and all others similarly situated v. American Apparel, Inc., Case Number BC425487) in the Superior Court of the State of California for the County of Los Angeles, alleging we failed to pay certain wages due for hours worked, to provide meal and rest periods or compensation in lieu thereof and to pay wages due upon termination to certain of our employees. The complaint further alleges that we failed to comply with certain itemized employee wage statement provisions and violations of unfair competition law.  The plaintiff is seeking compensatory damages and economic and/or special damages in an unspecified amount, premium pay, wages and penalties, injunctive relief and restitution, and reimbursement for attorneys' fees, interest and the costs of the suit.

On June 21, 2010, Antonio Partida, a former employee of American Apparel, filed suit against us on behalf of putative classes of current and former non-exempt California employees (Antonio Partida, on behalf of himself and all others similarly situated v. American Apparel (USA), LLC, Case No. 30-2010-00382719-CU-OE-CXC) in the Superior Court of the State of California for the County of Orange, alleging we failed to pay certain wages for hours worked, to provide meal and rest periods or compensation in lieu thereof, and to pay wages due upon separation. The complaint further alleges that we failed to timely pay wages, unlawfully deducted wages and failed to comply with certain itemized employee wage statement provisions and violations of unfair competition law. The plaintiff is seeking compensatory damages and economic and/or special damages in an unspecified amount, premium pay, wages and penalties, injunctive relief and restitution, and reimbursement of attorneys' fees, interest and the costs of the suit.

On or about December 2, 2010, Emilie Truong, a former employee of American Apparel, filed suit against us on behalf of putative classes of current and former non-exempt California employees (Emilie Truong, individually and on behalf of all others similarly situated v. American Apparel, Inc. and American Apparel LLC, Case No. BC450505) in the Superior Court of the State of California for the County of Los Angeles, alleging we failed to timely provide final paychecks upon separation.  Plaintiff is seeking unspecified premium wages, attorneys' fees and costs, disgorgement of profits, and an injunction against the alleged unlawful practices.

On or about February 9, 2011, Jessica Heupel, a former retail employee filed suit on behalf of putative classes of current and former non-exempt California employees (Jessica Heupel, individually and on behalf of all others similarly situated v. American Apparel Retail, Inc., Case No. 37-2011-00085578-CU-OE-CTL) in the Superior Court of the State of California for the County of San Diego, alleging we failed to pay certain wages for hours worked, to provide meal and rest periods or compensation in lieu thereof, and to pay wages due upon separation.  The plaintiff is seeking monetary damages as follows: (1) for alleged meal and rest period violations; (2) for alleged failure to timely pay final wages, as well as for punitive damages for the same; and (3) unspecified damages for unpaid minimum wage and overtime.  In addition, Plaintiff seeks premium pay, wages and penalties, injunctive relief and restitution, and reimbursement of attorneys' fees, interest and the costs of the suit. This matter is now proceeding in arbitration. On or about September 9, 2011, Anthony Heupel, a former retail employee initiated arbitration proceedings on behalf of putative classes of current and former non-exempt California employees, alleging we failed to pay certain wages for hours worked, to provide meal and rest periods or compensation in lieu thereof, and to pay wages due upon separation.  The plaintiff is seeking monetary damages in an amount in excess of $3,600, as follows: (1) for alleged meal and rest period violations; (2) for alleged failure to timely pay final wages, as well as for punitive damages for the

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same; and (3) unspecified damages for unpaid minimum wage and overtime.  In addition, Plaintiff seeks premium pay, wages and penalties, injunctive relief and restitution, and reimbursement of attorneys' fees, interest and the costs of the suit.

We do not have insurance coverage for the above matters. Each of the aforementioned wage and hour cases have been proceeding in arbitration. All of these cases have been settled on an aggregate and class-wide basis for a payment by us in the total amount of $875, most of which will be paid to class members and to their attorneys. Certain class members have opted out of the settlement and so may proceed with individual claims. Also, the settlement is subject to and conditional upon approval of the arbitrator, and if the arbitrator approves, one or more of the California Superior Courts. There is no guarantee that such approvals will be obtained.

Additionally, we are currently engaged in other employment-related claims and other matters incidental to our business.  We believe that all such claims against us are without merit or not material, and we intend to vigorously dispute the validity of the plaintiffs' claims. While the ultimate resolution of such claims cannot be determined, based on information at this time, we believe, but we cannot provide assurance that, the amount, and ultimate liability, if any, with respect to these actions will not materially affect our business, financial position, results of operations, or cash flows. Should any of these matters be decided against us, we could not only incur liability but also experience an increase in similar suits and suffer reputational harm.

Derivative Matters

Two shareholder derivative lawsuits (Case No. CV106576 GAF (JCx) and Case No. CV107518 RSWL (FFMx)) were filed in the United States District Court for the Central District of California which were subsequently consolidated for all purposes into a case entitled In re American Apparel, Inc. Shareholder Derivative Litigation, Lead Case No. CV106576 (the “Federal Derivative Action”).  Plaintiffs in the Federal Derivative Action allege a cause of action for breach of fiduciary duty arising out of (i) our alleged failure to maintain adequate accounting and internal control policies and procedures; (ii) our alleged violation of state and federal immigration laws in connection with the previously disclosed termination of over 1,500 employees following an Immigration and Customs Enforcement inspection; and (iii) our alleged failure to implement controls sufficient to prevent a sexually hostile and discriminatory work environment.  We do not maintain any direct exposure to loss in connection with these shareholder derivative lawsuits. Our status as a “Nominal Defendant” in the actions reflects the fact that the lawsuits are maintained by the named plaintiffs on behalf of American Apparel and that plaintiffs seek damages on our behalf. We filed a motion to dismiss the Federal Derivative Action which was granted with leave to amend on July 31, 2012. Plaintiffs did not amend the complaint and subsequently filed a motion to dismiss each of their claims, with prejudice, for the stated purpose of taking an immediate appeal of the Court's July 31, 2012 order. On October 16, 2012, the Court granted the Plaintiffs' motion to dismiss and entered judgment accordingly. On November 12, 2012, Plaintiffs filed a Notice of Appeal to the Ninth Circuit Court of Appeals where the case is currently pending.

Four shareholder derivative lawsuits (Case No. BC 443763, Case No. BC 443902, Case No. BC 445094, and Case No. BC 447890) were filed in fall of 2010 in the Superior Court of the State of California for the County of Los Angeles, which were subsequently consolidated for all purposes into a case entitled In re American Apparel, Inc. Shareholder Derivative Litigation, Lead Case No. BC 443763 (the "State Derivative Action"). 

Three of the matters comprising the State Derivative Action allege causes of action for breach of fiduciary duty arising out of (i) our alleged failure to maintain adequate accounting and internal control policies and procedures; and (ii) our alleged violation of state and federal immigration laws in connection with the previously disclosed termination of over 1,500 employees following an Immigration and Customs Enforcement inspection.  The fourth matter alleges seven causes of action for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets also arising out of the same allegations. On April 12, 2011, the Court issued an order granting a stay (which currently remains in place) of the State Derivative Action on the grounds that the case is duplicative of the Federal Derivative Action, as well as the Federal Securities Action currently pending in the United States District Court for the Central District of California (see below).

Both the Federal Derivative Action and State Derivative Actions are covered under our Directors and Officers Liability insurance policy, subject to a deductible and a reservation of rights.

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Other Proceedings

Four putative class action lawsuits, (Case No. CV106352 MMM (RCx), Case No. CV106513 MMM (RCx), Case No. CV106516 MMM (RCx), and Case No. CV106680 GW (JCGx)) were filed in the United States District Court for the Central District of California in the Fall of 2010 against American Apparel and certain of our officers and executives on behalf of American Apparel shareholders. On December 3, 2010, the four lawsuits were consolidated for all purposes into a case entitled In re American Apparel, Inc. Shareholder Litigation, Lead Case No. CV106352 MMM (JCGx) (the “Federal Securities Action”). The lead plaintiff filed a consolidated class action complaint on April 29, 2011 on behalf of shareholders who purchased our common stock between November 28, 2007 and August 17, 2010. The lead plaintiff alleges two causes of action for violations of Section 10(b) and 20(a) of the 1934 Act, and Rule 10b-5 promulgated under Section 10(b), arising out of alleged misrepresentations contained in our press releases, public filings with the SEC, and other public statements relating to (i) the adequacy of our internal and financial control policies and procedures; (ii) our employment practices; and (iii) the effect that the dismissal of over 1,500 employees following an Immigration and Customs Enforcement inspection would have on us. Plaintiff seeks damages in an unspecified amount, reasonable attorneys' fees and costs, and equitable relief as the Court may deem proper.  We filed two motions to dismiss the Federal Securities Action which the court granted with leave to amend. Plaintiffs filed a Second Amended Complaint on February 15, 2013. We filed a motion to dismiss the complaint on March 15, 2013. The hearing on the motion was held on June 3, 2013, at which time, the Court took the matter under submission. On August 8, 2013, the court issued its final order granting the motion to dismiss in regards to certain claims. Defendants answered the complaint's remaining claims on September 27, 2013. On November 6, 2013, the Court issued an order staying the case pending ongoing settlement discussions between the parties. Plaintiff filed an unopposed Motion for Preliminary Approval of the settlement on December 16, 2013. The settlement, if approved, would result in a payment by our insurance carrier of $4,800. The Federal Securities Action is covered under our Directors and Officers Liability insurance policy, subject to a deductible and a reservation of rights.

Should any of the above matters (i.e., the Federal Derivative Action, the State Derivative Action, or the Federal Securities Action) be decided against us in an amount that exceeds our insurance coverage, or if liability is imposed on grounds which fall outside the scope of our insurance coverage, we could not only incur a substantial liability, but also experience an increase in similar suits and suffer reputational harm.  We are unable to predict the financial outcome of these matters at this time, and any views formed as to the viability of these claims or the financial exposure which could result may change from time to time as the matters proceed through their course. However, no assurance can be made that these matters, either individually or together with the potential for similar suits and reputational harm, will not result in a material financial exposure, which could have a material adverse effect upon our financial condition, results of operations, or cash flows.

The Company has previously disclosed an arbitration filed by the Company on February 17, 2011, related to cases filed in the Supreme Court of New York, County of Kings (Case No. 5018-1) and Superior Court of the State of California for the County of Los Angeles (Case Nos. BC457920 and BC460331) against American Apparel, Dov Charney and certain members of the Board of Directors asserting claims of sexual harassment, assault and battery, impersonation through the internet, defamation and other related claims.  The Company settled one of these cases with no monetary liability to the Company.  In another case, the arbitrator ruled that both American Apparel and the plaintiff had established certain claims and damages against one another resulting in a net inconsequential amount awarded to the plaintiff. The Company is awaiting the arbitrator’s ruling on the outstanding attorney’s fees issue in this case.  The Company cannot provide assurances that, the amount and ultimate liability, if any, with respect to the remaining actions will not materially affect the Company's business, financial position, results of operations, or cash flows. 

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Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market Information

The principal market on which our common stock is traded is the NYSE MKT. Our common stock is traded under the symbol APP.

The following table sets forth the range of high and low sales prices for our common stock and for the periods indicated:

	Common Stock
	High		Low
2012
Fourth Quarter	$	1.61	$	0.83
Third Quarter	1.70		0.82
Second Quarter	1.09		0.75
First Quarter	1.21		0.63
2013
Fourth Quarter	$	1.52	$	1.01
Third Quarter	2.09		1.23
Second Quarter	2.20		1.76
First Quarter	2.40		1.00

(b) Holders

On March 31, 2014 there were 1,250 record holders and approximately 9,036 beneficial holders of our common stock.

(c) Dividends

As a public company, we have not paid any cash dividends. We intend to continue to retain earnings for use in the operation and expansion of our business and therefore do not anticipate paying any cash dividends in the foreseeable future. In addition, restrictions imposed by our debt agreements significantly restrict us from making dividends or distributions to stockholders.

(d) Authorization of Common Stock

On June 21, 2011 the Company's stockholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Common Stock from 120,000 to 230,000 with par value of $0.0001 per share.

(e) Securities Authorized for Issuance Under Equity Compensation Plans

See Note 14, Share-Based Compensation to the consolidated financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

(f) Recent Sales of Unregistered Securities

None.

(g) Stock Price Performance Graph

The graph below compares the cumulative total return of our common stock from December 31, 2009 through December 31, 2013 with the cumulative total return of companies comprising the Dow Jones Industrial Average, the Dow Jones U.S. Retail Index, and the S&P500. The graph plots the growth in value of an initial investment of $100 in each of our common stock, the Dow Jones Industrial Average, the Dow Jones U.S. Retail Index, and the S&P500 over the indicated time periods, assuming reinvestment of all dividends, if any, paid on the securities. We have not paid any cash dividends and, therefore, the cumulative

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total return calculation for us is based solely upon stock price appreciation and not upon reinvestment of cash dividends. The stock price performance shown on the graph is not necessarily indicative of future price performance.

Dates	American  Apparel	Dow Jones U.S. Retail	Dow Jones Industrial	S&P 500
December 31, 2008	100.00	100.00	100.00	100.00
December 31, 2009	155.78	127.75	118.82	123.45
December 30, 2010	83.42	147.91	131.92	139.24
December 31, 2011	36.18	156.29	139.21	139.23
December 31, 2012	50.75	188.34	149.31	157.90
December 31, 2013	117.59	255.28	188.88	204.63

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Item 6. Selected Financial Data

The selected historical financial data presented below under the heading “Consolidated Statement of Operations Data” and “Per Share Data” for the years ended December 31, 2013, 2012 and 2011 and the selected historical financial data presented below under the heading “Consolidated Balance Sheet Data” as of December 31, 2013 and 2012 have been derived from, and are qualified by reference to, our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The selected historical financial data presented below under the heading “Consolidated Statement of Operations Data” and “Per Share Data” for the years ended December 31, 2010 and 2009 and the selected historical financial data presented below under the heading “Consolidated Balance Sheet Data” as of December 31, 2011, 2010 and 2009 have been derived from, and are qualified by reference to, our audited consolidated financial statements which are not included in this Annual Report on Form 10-K.

The data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.

	Year Ended December 31,
	2013			2012			2011			2010			2009
	(In Thousands Except Per Share Data)
Consolidated Statements of Operations Data:
Net sales	$	633,941		$	617,310		$	547,336		$	532,989		$	558,775
Gross profit	$	320,885		$	327,383		$	294,900		$	279,909		$	319,912
(Loss) income from operations	$	(29,295	)	$	962		$	(23,293	)	$	(50,053	)	$	24,415
Net (loss) income	$	(106,298	)	$	(37,272	)	$	(39,314	)	$	(86,315	)	$	1,112
Per Share Data:
Net (loss) earnings per common share - basic	$	(0.96	)	$	(0.35	)	$	(0.42	)	$	(1.21	)	$	0.02
Net (loss) earnings per common share - diluted	$	(0.96	)	$	(0.35	)	$	(0.42	)	$	(1.21	)	$	0.01
Weighted average number of common shares outstanding:
Basic	110,326			105,980			92,599			71,626			71,026
Diluted	110,326			105,980			92,599			71,626			76,864
Consolidated Balance Sheets Data:
Total assets	$	333,752		$	328,212		$	324,721		$	327,950		$	327,579
Working capital (1)	$	74,261		$	80,022		$	97,013		$	3,379		$	121,423
Total long-term debt less current maturities (2)	$	218,921		$	112,856		$	98,868		$	5,597		$	71,372
Stockholders’ (deficit) equity	$	(77,404	)	$	22,084		$	48,130		$	75,024		$	157,341

___________________________

(1) Excludes fair value of warrants of $20,954, $17,241, $9,633, and $993 as of December 31, 2013, 2012, 2011 and 2010, respectively.

(2) Includes capital leases.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion together with Part II, Item 6 “Selected Financial Data” and our audited consolidated financial statements and the related notes thereto included in Part II, Item 8 “Financial Statements and Supplementary Data.” In addition to historical consolidated financial information, this discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Actual results could differ from these expectations as a result of factors including those described under Item 1A “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in Part I and elsewhere in this Annual Report on Form 10-K. In addition, all dollar and share amounts in this Form Item 7 are presented in thousands, except for per share items and unless otherwise specified.

Overview

We are a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel and accessories for women, men, children and babies. We are based in downtown Los Angeles, California. As of February 28, 2014, we 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, Israel, Australia, Japan, South Korea, and China. We currently operate 12 e-commerce stores in seven languages that serve customers from 30 countries worldwide at www.americanapparel.com. In addition, American Apparel operates a leading wholesale business that supplies high quality T-shirts and other casual wear to distributors and the imprintable industry

We conduct our primary apparel manufacturing operations out of an 800,000 square foot facility in the warehouse district of downtown Los Angeles, California. The facility houses our executive offices, as well as cutting, sewing and warehousing operations. We conduct knitting operations in Los Angeles and Garden Grove, California, which produce a majority of the fabric we use in our products. We also operate dye houses that currently provide dyeing and finishing services for nearly all of the raw fabric used in production. We operate a fabric dyeing and finishing facility in Hawthorne, California. We also operate a cutting, sewing and garment dyeing and finishing facility located in South Gate, California. We operate a fabric dyeing and finishing facility located in Garden Grove, California, which also includes cutting, sewing and knitting operations. Since 2013 we have conducted our warehousing and distribution operations out of La Mirada, California.

Because we manufacture domestically and are vertically integrated, we believe this enables us to more quickly respond to customer demand and to changing fashion trends and to closely monitor product quality. Our products are noted for their quality and fit, and together with our distinctive branding these attributes have differentiated our products in the marketplace. “American Apparel^®” is a registered trademark of American Apparel (USA), LLC.

We report the following four operating segments: U.S. Wholesale, U.S. Retail, Canada, and International. We believe this method of segment reporting reflects both the way our business segments are managed and the way the performance of each segment is evaluated. The U.S. Wholesale segment consists of our wholesale operations and our online consumer operations in the United States. The U.S. Retail segment consists of our retail store operations in the United States, which were comprised of 139 retail stores as of December 31, 2013. The Canada segment consists of our retail, wholesale and online consumer operations in Canada. As of December 31, 2013, the retail operations in the Canada segment were comprised of 32 retail stores. The International segment consists of our retail, wholesale and online consumer operations outside of the United States and Canada. As of December 31, 2013, the retail operations in the International segment comprised 77 retail stores in the following 18 countries: the United Kingdom, Ireland, Austria, Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Brazil, Mexico, Japan, South Korea, and China.

The results of the respective business segments exclude unallocated corporate expenses, which consist of our shared overhead costs. These costs are presented separately and generally include corporate costs such as human resources, legal, finance, information technology, accounting, and executive management.

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The following table details, by segment, the change in retail store count during the years ended December 31, 2013, 2012 and 2011:

Stores Opened by Year

	United States		Canada		International		Total
Stores open as of December 31, 2010	157		40		76		273
2011
Opened	1		—		4		5
Closed	(15	)	(3	)	(11	)	(29	)
Stores open as of December 31, 2011	143		37		69		249
2012
Opened	1		—		9		10
Closed	(4	)	(2	)	(2	)	(8	)
Stores open as of December 31, 2012	140		35		76		251
2013
Opened	3		—		6		9
Closed	(4	)	(3	)	(5	)	(12	)
Stores open as of December 31, 2013	139		32		77		248

Comparable Store Sales

The table below shows the increase (decrease) in comparable store sales for our retail and online stores, by quarter, for the years ended December 31, 2013, 2012, and 2011 and the number of retail stores included in the comparison at the end of each period. Comparable store sales are defined as the percentage change in sales for stores that have been open for more than twelve full months. Remodeled and expanded stores are excluded from the determination of comparable stores for the following twelve month period if the remodel or expansion results in a change of greater than 20% of selling square footage. Closed stores are excluded from the base of comparable stores following their last full month of operation.

In calculating constant currency amounts, we convert the results of our foreign operations both in the current period and the prior year comparable period using the weighted-average foreign exchange rate for the prior comparable period to achieve a consistent basis for comparison.

	For the Quarter Ended
	March 31	June 30	September 30	December 31	Full year
2013 (1)	8%	7%	2%	(3)%	3%
Number of Stores	238	237	237	235
2012	14%	16%	20%	11%	15%
Number of Stores	243	244	242	238
2011	(5)%	1%	3%	8%	2%
Number of Stores	249	248	244	241

⁽¹⁾Comparable store sales results include the impact of online store sales and has been adjusted to exclude impact of extra leap-year day in 2012.

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Executive Summary

Results of Operations

Net sales for the year ended December 31, 2013 increased $16,631, or 2.7%, to $633,941 from $617,310 reported for the year ended December 31, 2012 due to higher sales at our U.S. Wholesale and U.S. Retail segments.

Net sales at our U.S. Wholesale segment increased by $15,896, or 8.6%, driven by higher sales order volume from existing and new customers. We improved our service levels through better inventory planning, which helped facilitate new account generation as well as grow business with our existing client roster. The launch of a new and expanded wholesale catalog and the addition of new products to our wholesale offering attracted a more diversified customer base. We continue our focus on increasing our customer base by targeting direct sales, particularly to third party screen printers. Online consumer net sales increased primarily as a result of the implementation of a new e-commerce platform in late 2012, which improved web store functionality, as well as a result of targeted online advertising and promotion efforts.

Net sales at our U.S. Retail segment increased $6,125, or 3.1%, due to a 3% increase in comparable store sales as a result of continued strength in product offerings and targeted strategic promotions.

Net sales at our Canada and International segments decreased $5,390, or 2.3%, due primarily to store closures and the negative impact of foreign currency fluctuations.

Gross margin for the year ended December 31, 2013 was 50.6% compared to 53.0% for the year ended December 31, 2012. The decrease in the gross margin was primarily due to higher distribution costs and promotions associated with our retail operation and increased production costs associated with our manufacturing operation. See Changes in Supply Chain Operation below.

Operating expenses include selling, general and administrative costs, and retail store impairment charges, and as a percentage of sales was approximately 55.2% in 2013 and 52.9% in 2012. Excluding the effects of depreciation, amortization, impairment charges and share-based compensation expenses between the two periods, operating expenses as a percentage of sales increased from 47.2% to 49.5%. The increase was primarily attributable to incremental costs associated with the transition to our new distribution center in La Mirada, California. See Changes in Supply Chain Operation below.

Loss from operations was $29,295 for the year ended December 31, 2013 as compared to income from operations of $962 for the year ended December 31, 2012. Higher sales volume was offset by lower gross margins and an increase in our operating expenses as discussed above.

Net loss for the year ended December 31, 2013 was $106,298 as compared to $37,272 for the year ended December 31, 2012 primarily as a result of a loss on extinguishment of debt related to our April 2013 refinancing and added costs associated with our distribution center. For the year ended December 31, 2013, we recognized a loss on extinguishment of debt of $32,101 related to our April debt refinancing. For the year ended December 31, 2012, we recognized a gain on extinguishment of debt of $11,588. See Results of Operations for further details.

Changes in Supply Chain Operation

The transition to our new distribution center in La Mirada, California had a significant negative impact on our earnings and cash flow in 2013. We incurred incremental distribution costs associated with these transition activities and recorded additional cost of sales of approximately $3,027 and selling expenses of approximately $11,847 in our statement of operations for the year ended December 31, 2013. The issues related to the transition primarily relate to improper system design and integration and inadequate training and staffing. These issues caused processing inefficiencies that required us to employ additional staff in order to meet customer demand. In addition, although we are unable to quantify the impact, we believe the disruption caused by the cut-over to the new distribution center had a negative impact on sales. The transition was successfully completed during the fourth quarter of 2013. The center is now fully operational and labor costs have been reduced.

Liquidity Trends

We generate cash primarily through the sale of products manufactured by us at our retail stores and through our wholesale operations. Primary uses of cash are for the purchase of raw materials, payroll for our manufacturing and retail employees, retail store operating expenses and rent for retail stores.

As of December 31, 2013, we had approximately $8,676 in cash and $6,268 of availability for additional borrowings under our asset-backed revolving credit facility with Capital One Business Credit Corp. ("Capital One" and such facility, the "Capital One Credit Facility") and our credit agreement with Bank of Montreal ("the Bank of Montreal Credit Agreement"). Additionally, we had $43,526 outstanding on a $50,000 asset-backed revolving credit facility under our Capital One Credit Facility and $443

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outstanding on a C$5,000 (Canadian dollars) revolving credit facility under the Bank of Montreal Credit Agreement, which was reduced to C$2,000 (Canadian dollars) effective February 28, 2014. Amounts outstanding under the Bank of Montreal Credit Agreement were repaid, and on March 31, 2014 expired by its terms. See Note 7, Revolving Credit Facilities and Current Portion of Long-Term Debt and Note 8, Long-Term Debt to our consolidated financial statements under Part II, Item 8.

As of February 28, 2014, we had approximately $4,878 in cash and $3,299 of availability for additional borrowings under the Capital One Credit Facility and Bank of Montreal Credit Agreement.

On April 4, 2013, we closed a private offering of $206,000 aggregate principal amount of our 13% Senior Secured Notes (the "Notes") due April 15, 2020 at 97% of par and also entered into a new $35,000 asset-backed revolving credit facility with Capital One maturing on April 4, 2018, subject to a January 15, 2018 maturity under certain circumstances. Subsequently, on July 5, 2013, we entered into an amendment to the credit agreement governing our credit facility with Capital One, pursuant to which the total commitment under the credit facility was raised to $50,000. Interest on the Notes approximating $13,500 per payment period (in 2014), is payable semi-annually, in arrears, on April 15 and October 15 of each year, beginning on October 15, 2013. We used the net proceeds from the offering of the notes, together with borrowings under the new credit facility to repay and terminate our credit agreement with Crystal Financial LLC ("Crystal") and our loan agreement with Lion. The notes and the new credit facility are our senior secured obligations and are guaranteed, on a senior secured basis, by our domestic restricted subsidiaries, subject to some exceptions. See Notes 7 and 8 to our consolidated financial statements under Part II, Item 8.

During the third quarter of 2013, we determined it was probable that a special interest trigger event under the indenture governing the Notes would occur as of December 31, 2013 and accrued interest on the Notes at 15% retroactive to April 4, 2013, representing an additional 2% interest, which additional interest is payable in kind until April 15, 2018 and in cash on subsequent interest dates. We recorded $3,044 in additional interest expense related to the special interest trigger event for the year ended December 31, 2013. We will pay in-kind the additional 2% interest retroactive to the issue date of the Notes on the next interest payment date, April 15, 2014.

Under the Capital One Credit Facility, we were in violation of certain covenants for the twelve consecutive fiscal months ended September 30, 2013 and December 31, 2013, and we anticipated a violation for the twelve months ended March 31, 2014.

On November 14, 2013, we entered into a third amendment to the Capital One Credit Facility, which among other things, waived the obligation to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio for the twelve consecutive fiscal month period ending September 30, 2013. As a condition to the waiver, we agreed to a one percentage point increase in the interest rate to either LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at our option) and limitations on amounts available to be borrowed, consisting of the imposition of a reserve against the line that gradually reduced the total borrowing capacity to $47,500 and certain amendments to the borrowing base calculation. In addition, we paid a waiver fee of $75.

On March 25, 2014, we entered into a fifth amendment to the Capital One Credit Facility which, effective upon its receipt of at least $25,000 of net proceeds from a financing prior to April 15, 2014, among other things: waives the obligation to maintain the minimum fixed charge coverage and maximum leverage ratios for the three month periods ended December 31, 2013 and March 31, 2014; resets for future periods the fixed charge coverage ratio, the maximum leverage ratio and the maximum capital expenditures allowed; adds a minimum EBITDA covenant; increases the interest rate payable under the credit agreement by 0.5% per annum to either LIBOR plus 5.0% or the bank's prime rate plus 4.0% (at our option); and increases the fees payable upon early termination.

On May 22, 2013 we entered into a loan agreement with Lion (the “Lion Loan Agreement”) in a principal amount of $4,500. On November 29, 2013, the Lion Loan Agreement was amended to increase the amount we borrowed by $5,000 and to make certain other technical amendments. The term loans under the Lion Loan Agreement mature on October 4, 2018 and bear interest at an initial interest rate of 18% per annum, which interest rate increased to 20% per annum due to the occurrence of a special interest trigger event under our Notes. Interest under the loan agreement is payable in cash or, to the extent permitted by our other debt agreements, in-kind.

On March 31, 2014, we completed a public offering of approximately 61,645 shares of our common stock at $0.50 per share for net proceeds of approximately $28,500. As a result of this offering, our common stock issued and outstanding were 175,109 and 173,377 shares. Additionally, our underwriters have a 30 day option to acquire up to an additional 8,500 shares of our common stock at $0.50 per share.

Management Plan

We continue to develop initiatives intended to either increase sales, reduce costs or improve liquidity. In the fourth quarter of 2013 and continuing into January of 2014, significant reductions were made in payroll and related costs associated with

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manufacturing and administrative overheads. We also instituted a program in the first quarter of 2014 to limit capital expenditures. Additionally, we intend to continue to drive productivity improvements from our new distribution center, further reduce inventories, reduce store labor costs, and evaluate further consolidation of administrative and manufacturing functions. Efforts to identify additional ways to reduce costs and improve productivity are ongoing.

Some of our key initiatives in 2013 include:

Completed RFID implementation – From 2010 through 2013, we enhanced our stores by installing sales conversion tracking device and radio frequency identification (RFID) tracking systems. As of the end of 2013, we completed the enhancement of our stores by installing sales conversion tracking device and radio frequency identification (RFID) tracking systems at all of our stores worldwide. We believe that these systems will enhance sales through improvements in stock positions and replenishment activities.

New e-commerce platform – During the third quarter of 2012 we implemented a new online store platform for our U.S. online stores that resulted in functional improvements to our website and fulfillment processes and will allow us to tailor the look and feel of the online store to enhance the customer online shopping experience. The new store platform will also enable faster deployment of online stores to new international regions. As of the end of 2013, we have implemented this system for our Canada, United Kingdom, Europe (Euro zone countries), Australia, Hong Kong and Singapore online stores. We intend to implement this system to our remaining online stores by the middle of 2014. The new system offers a complete e-commerce software platform that speeds response times and enables us to deliver a personalized customer buying experience and we believe that these improvements will contribute to our continued financial growth as our website has the potential to not only increase online sales but also in-store sales.

In conjunction with the implementation of the Oracle ATG Web Commerce application discussed above, we replaced our existing payment processing system with new electronic payment services from CyberSource. In addition, we implemented a payment fraud detection solution. We intend to complete the upgrade of our payment processing system by the middle of 2014.

In addition to completing the implementation of the Oracle ATG Web Commerce application for our retail online stores, we intent to roll-out a new business-to-business online platform for our wholesale channel in 2014. The new system will improve distributors' ability to place sales order and will be mobile optimized, which we believe will enhance the shopping experience for our distributors.

During 2012 and 2013 we successfully completed the virtualization of over 300 servers, including all our key servers. We plan to complete the virtualization of our servers and move our data center to an off-site location during 2014. We believe that this not only maximizes our server resources but will also enhance system performance and enable faster uptime in a disaster recovery situation.

New distribution center - In June 2012 we entered into a new operating lease agreement for a new distribution center located in La Mirada, California and fully transitioned our distribution operations into this new facility during 2013. Related to these efforts, we installed the High Jump warehouse management system for all distribution activities. Although we incurred significant transition costs and implementation delays associated with this transition, we believe that the new distribution center will contribute to processing efficiencies and effectiveness and will reduce operating expenses and cost of sales as it offers an improved distribution platform to scale both retail and wholesale sales channels. The transition to the new center was successfully completed during the fourth quarter of 2013. The center is now fully operational and labor costs have been reduced.

Although we have made significant improvements under this plan, there can be no assurance that further planned improvement will be successful.

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Results of Operations

Year Ended December 31, 2013 compared to Year Ended December 31, 2012

(Amounts in thousands)

	For the Years Ended December 31,
	2013			% of net sales		2012			% of net sales
U.S. Wholesale	$	201,251		31.7	%	$	185,355		29.6	%
U.S. Retail	205,011			32.3	%	198,886			32.2	%
Canada	60,134			9.5	%	63,669			10.3	%
International	167,545			26.4	%	169,400			27.9	%
Total net sales	633,941			100.0	%	617,310			100.0	%
Cost of sales	313,056			49.4	%	289,927			47.0	%
Gross profit	320,885			50.6	%	327,383			53.0	%
Selling expenses	241,683			38.1	%	227,447			36.8	%
General and administrative expenses	106,957			16.9	%	97,327			15.8	%
Retail store impairment	1,540			0.2	%	1,647			0.3	%
(Loss) income from operations	(29,295		)	(4.6	)%	962			0.2	%
Interest expense	39,286					41,559
Foreign currency transaction loss	1					120
Unrealized loss on change in fair value of warrants	3,713					4,126
Loss (gain) on extinguishment of debt	32,101					(11,588		)
Other expense	131					204
Loss before income tax	(104,527		)			(33,459		)
Income tax provision	1,771					3,813
Net loss	$	(106,298	)			$	(37,272	)

U.S. Wholesale: Total net sales for the U.S. Wholesale segment increased $15,896, or 8.6%, to $201,251 for the year ended December 31, 2013 as compared to $185,355 for the year ended December 31, 2012.

Wholesale net sales, excluding online consumer net sales, increased $10,071, or 6.7%, to $159,682 for the year ended December 31, 2013 as compared to $149,611 for the year ended December 31, 2012 due to higher sales order volume. This increase was attributed to the continued strength of our existing and new product offerings. Additionally, in early 2013, we released an expanded wholesale catalog, and as new styles were added, released quarterly updates to the catalog. We continue our focus on increasing our customer base by targeting direct sales, particularly sales to third party screen printers.

Online consumer net sales increased $5,825, or 16.3%, to $41,569 for the year ended December 31, 2013 as compared to $35,744 for the year ended December 31, 2012 primarily due to certain targeted promotional efforts and improved merchandising of the web store and as a result of the implementation of a new e-commerce platform in late 2012, which improved web store functionality.

U.S. Retail: Net sales for the U.S. Retail segment increased $6,125, or 3.1%, to $205,011 for the year ended December 31, 2013 as compared to $198,886 for the year ended December 31, 2012. Net sales growth was generated by the continued strength of our product offerings and targeted strategic promotions which contributed to a 3%, or $5,270, increase in our comparable store sales. Additionally, new stores contributed $4,037 in net sales. These increases were partially offset by $2,035 of lower warehouse sales in 2013 as compared to 2012 and a decrease of $1,861 as a result of store closures.

Canada:Total net sales for the Canada segment decreased $3,535, or 5.6%, to $60,134 for the year ended December 31, 2013 as compared to $63,669 for the year ended December 31, 2012 due primarily to lower sales in the retail sales channel as a result of store closures. Additionally, the impact of foreign currency changes contributed to the sales decrease: holding foreign currency exchange rates constant to those prevailing in the comparable period in 2012, total revenue for the current period would have been approximately $61,948, or 2.7% lower when compared to 2012.

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Retail net sales decreased by $3,336, or 6.9%, to $45,163 in 2013 as compared to $48,499 in 2012 due to $1,140 lower sales as a result of the closure of three stores and the negative impact of foreign currency fluctuation. Holding foreign currency exchange rates constant to those prevailing in fiscal 2012, retail sales for 2013 would have been approximately $46,526, or 4.1% lower when compared to 2012.

Wholesale net sales decreased $914, or 7.0%, to $12,092 in 2013 as compared to $13,006 in 2012, largely as a result of foreign currency fluctuation and lower sales volume from smaller customers. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2012, total wholesale net sales for the Canada segment for 2013 would have been approximately $12,457, or 4.2% lower when compared to 2012.

Online consumer net sales increased $715, or 33.0%, to $2,879 in 2013 as compared to $2,164 to 2012. This increase was primarily a result of targeted promotion efforts and email advertising campaigns. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2012, total revenue for the Canada segment for 2013 would have been approximately $2,965, or 37.1% higher when compared to 2012.

International: Total net sales for the International segment decreased $1,855, or 1.1%, to $167,545 for the year ended December 31, 2013 as compared to $169,400 for the year ended December 31, 2012 as a result of the negative impact of foreign currency fluctuation. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2012, total revenue for the International segment for 2013 would have been approximately $170,084, or 0.4% higher when compared to 2012.

Retail net sales decreased $221, or 0.2%, to $141,517 for the year ended December 31, 2013 as compared to $141,738 for the year ended December 31, 2012 as a result of the negative impact of foreign currency fluctuation. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2012, retail sales for 2013 would have been approximately $143,601, or 1.3% higher when compared to the same period last year. Higher sales of $1,274 from new stores were partially offset by $610 of lower sales from store closures.

Wholesale net sales decreased $1,385, or 13.5%, to $8,893 in 2013 as compared to $10,278 in 2012, primarily as a result of a decrease in wholesale sales in the U.K. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2012, sales for the current period would have been approximately $8,741, or 15.0% lower during 2013 when compared to 2012.

Online consumer net sales decreased $249, or 1.4%, to $17,135 in 2013 as compared to $17,384 in 2012, primarily as a result of changes in foreign currency exchange rates. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2012, sales for the current period would have been approximately $17,742, or 2.1% higher when compared to 2012.

Changes in supply chain operation: The transition to our new distribution center in La Mirada, California had a significant negative impact on our earnings and cash flow. For the year ended December 31, 2013, we incurred incremental distribution costs associated with these transition activities and recorded additional cost of sales of approximately $3,027 and selling expenses of approximately $11,847 for a total charge of $14,874 in our statement of operations for the year ended December 31, 2013. These issues caused processing inefficiencies that required us to employ additional staff in order to meet customer demand. In addition, although we are unable to quantify the impact, we believe the disruption caused by the cut-over to the new distribution center had a negative impact on sales. The transition was successfully completed during the fourth quarter of 2013. The center is now fully operational and labor costs have been reduced.

Gross margin: Gross margin for the year ended December 31, 2013 was 50.6% compared to 53.0% for the year ended December 31, 2012. The decrease in gross margin was due to higher distribution costs and promotions associated with our retail operation and increased production costs associated with our manufacturing operation. See Changes in Supply Chain Operation above.

Selling expenses: Selling expenses increased $14,236, or 6.3%, to $241,683 for the year ended December 31, 2013 as compared to $227,447 for the year ended December 31, 2012. As a percentage of sales, selling expenses increased to 38.1% in 2013 from 36.8% in 2012.

The increase in selling expenses was primarily due to approximately $11,847 higher distribution labor and rent costs at our U.S. Wholesale operations associated with the changes to our supply chain operations as discussed above. This was partially offset by $5,996 lower payroll and rent costs at our Canadian operations as a result of the closure of our warehouse in Montreal, Canada. Additionally, we incurred higher rent expense of $2,827 at our U.S. Retail and International segments primarily related to new stores and lease renewals, higher travel and related expenses of $964 as we completed our RFID implementation and make other store improvements, and higher supplies expenses of $2,760 associated with our RFID implementation activities. The increases were partly offset by lower advertising and marketing expenses of $2,300.

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General and administrative expenses: General and administrative expenses increased $9,630, or 9.9%, to $106,957 for the year ended December 31, 2013 as compared to $97,327 for the year ended December 31, 2012. As a percentage of sales, general and administrative expenses increased to 16.9% in 2013 from 15.8% in 2012. The increase in general and administrative expenses was primarily due to higher computer software licensing related costs of $3,109 associated with the recent improvements to our online store stores and other software upgrades, higher equipment lease expenses of $3,181 and higher depreciation and amortization expenses of $2,584 consistent with increased capital expenditures.

Retail store impairment charges: For the years ended December 31, 2013 and 2012, we recorded impairment charges relating to retail stores of $1,540 and $1,647, respectively.

Interest expense: Interest expense decreased $2,273 to $39,286 for the year ended December 31, 2013 from $41,559 for the year ended December 31, 2012, primarily due to lower average interest rates on our outstanding debt. Interest expense for the year ended December 31, 2013 relates primarily to interest on our Notes and our credit agreement with Lion that was terminated in April 2013 ("the Lion Credit Agreement"). For the year ended December 31, 2013, amortization of debt discount and deferred financing cost was $4,325 and interest paid in cash was $18,948.

Unrealized loss on change in fair value of warrants: We recorded a loss of $3,713 and loss of $4,126 in fair value of warrants for the years ended December 31, 2013 and 2012, respectively associated with the fair value measurements of the Lion and SOF warrants. See Note 13, Stockholders' Equity to our consolidated financial statements under Part II, Item 8.

Loss (gain) on extinguishment of debt: During the year ended December 31, 2013, we recorded a loss on extinguishment of debt of $32,101 relating to the termination of our credit agreements with Crystal and Lion in April 2013. During the year ended December 31, 2012, we recorded a gain on extinguishment of debt pertaining to an amendment to the Lion Credit Agreement of approximately $11,588. See Note 7, Revolving Credit Facilities and Current Portion of Long-Term Debt and Note 8, Long-Term Debt to our consolidated financial statements under Part II, Item 8.

Income tax provision: The provision for income tax decreased to $1,771 for the year ended December 31, 2013 as compared to $3,813 for the year ended December 31, 2012. Although we incurred a loss from operations on a consolidated basis for the year ended December 31, 2013, some of our foreign domiciled subsidiaries reported income from operations and are taxed on a stand-alone reporting basis. In 2013 and 2012, we recorded valuation allowances against a majority of our deferred tax assets, including 100% of the U.S. deferred tax assets and certain foreign deferred tax assets. We recognized no tax benefits on our loss before income taxes in 2013 and 2012. See Note 11, Income Taxes to our consolidated financial statements under Part II, Item 8.

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Year Ended December 31, 2012 compared to Year Ended December 31, 2011

(Amounts in thousands)

	For the Years Ended December 31,
	2012			% of net sales		2011			% of net sales
U.S. Wholesale	$	185,355		30.0	%	$	158,628		29.0	%
U.S. Retail	198,886			32.2	%	174,837			31.9	%
Canada	63,669			10.3	%	61,865			11.3	%
International	169,400			27.4	%	152,006			27.8	%
Total net sales	617,310			100.0	%	547,336			100.0	%
Cost of sales	289,927			47.0	%	252,436			46.1	%
Gross profit	327,383			53.0	%	294,900			53.9	%
Selling expenses	227,447			36.8	%	209,841			38.3	%
General and administrative expenses	97,327			15.8	%	104,085			19.0	%
Retail store impairment	1,647			0.3	%	4,267			0.8	%
Income (loss) from operations	962			0.2	%	(23,293		)	(4.3	)%
Interest expense	41,559					33,167
Foreign currency transaction loss	120					1,679
Unrealized loss (gain) on change in fair value of warrants and purchase rights	4,126					(23,467		)
(Gain) loss on extinguishment of debt	(11,588		)			3,114
Other expense (income)	204					(193		)
Loss before income taxes	(33,459		)			(37,593		)
Income tax provision	3,813					1,721
Net loss	$	(37,272	)			$	(39,314	)

U.S. Wholesale: Total net sales for the U.S. Wholesale segment increased $26,727, or 16.8%, to $185,355 for the year ended December 31, 2012 as compared to $158,628 for the year ended December 31, 2011.

Wholesale net sales, excluding online consumer net sales, increased $17,476, or 13.2%, to $149,611 for the year ended December 31, 2012 as compared to $132,135 for the year ended December 31, 2011, driven by higher sales order volume from a significant number of existing and new customers. We improved our service levels through better inventory planning, which helped facilitate new account generation as well as grow business with our existing client roster. The launch of a new wholesale catalog and the addition of new products to our wholesale offering attracted a more diversified customer base. We continue our focus on increasing our customer base by targeting direct sales, particularly to third party screen printers.

Online consumer net sales increased $9,251, or 34.9%, to $35,744 for the year ended December 31, 2012 as compared to $26,493 for the year ended December 31, 2011, as a result of targeted online advertising and promotion efforts and implementation of a new e-commerce platform, which improved web store functionality.

U.S. Retail: Net sales for the U.S. Retail segment increased $24,049 or 14%, to $198,886 for the year ended December 31, 2012 as compared to $174,837 for the year ended December 31, 2011. Net sales growth was generated by a stronger inventory position in high volume categories, improvements to distribution operations, strategic promotions to drive volume in key basics, success in new women's and unisex fashion, including women's denim, and improved presentation of our floor sets. Throughout the period, improvements to logistics and the speed of allocation helped to support a buying strategy that is faster and more proactive.

Comparable store sales for the year ended December 31, 2012 increased by $24,233, or 15%, while warehouse sales consisting primarily of discounted merchandise contributed an incremental $4,288 increase from 2011 to 2012. The sales increase was partially offset by a $1,710 sales decrease as a result of a reduction in the number of stores in operation from 143 at December 31, 2011 to 140 stores at December 31, 2012.

Canada:Net sales for the Canada segment increased $1,804, or 3%, to $63,669 for the year ended December 31, 2012 as compared to $61,865 for the year ended December 31, 2011. The increase is primarily due to higher net sales in the wholesale

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channel. Holding foreign currency exchange rates constant to those prevailing in the comparable period in fiscal 2011, total net sales for the Canada segment for 2012 would have been approximately $64,357, or 4% higher when compared to the same period last year.

Retail net sales for the year ended December 31, 2012 was $48,499 and was essentially unchanged from the prior year. Comparable store sales for the year ended December 31, 2012 increased by $2,747, or 6%. Since December 31, 2011, the number of retail stores in the Canada segment in operation decreased from 37 to 35. Holding foreign currency exchange rates constant to those prevailing in fiscal 2011, total retail net sales for the Canada segment for 2012 would have been approximately $49,023, or 1% higher when compared to the same period last year.

Wholesale net sales increased $1,514, or 13%, to $13,006 for the year ended December 31, 2012 as compared to $11,492 for the year ended December 31, 2011. The increase in net sales is due to better focus on key customers and an improved pricing strategy. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2011, total wholesale net sales for the Canada segment for 2012 would have been approximately $13,147, or 14% higher when compared to the same period last year.

Online consumer net sales increased $318, or 17%, to $2,164 for the year ended December 31, 2012 as compared to $1,846 for the year ended December 31, 2011. Foreign currency effects were minimal.

International: Total net sales for the International segment increased $17,394, or 11.4%, to $169,400 for the year ended December 31, 2012 as compared to $152,006 for the year ended December 31, 2011. The increase is due to higher sales in the retail and online sales channels. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2011, total revenue for the International segment for 2012 would have been approximately $176,131, or 16% higher when compared to the same period last year.

Retail net sales increased $14,870, or 12%, to $141,738 for the year ended December 31, 2012 as compared to $126,868 for the year ended December 31, 2011. The change is mainly due to higher sales in the U.K. of $7,655, Japan of $6,159 and Australia of $2,478 offset by lower sales in Continental Europe of $1,269 primarily due to the closure of two stores during 2012. Comparable store sales for the year ended December 31, 2012 increased by $17,026, or 15% as compared to the year ended December 31, 2011. Since December 31, 2011, the number of retail stores in the International segment increased from 69 to 76 at December 31, 2012. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2011, retail net sales for 2012 would have been approximately $147,349, or 16% higher when compared to the same period last year.

Wholesale net sales decreased $128, or 1%, to $10,278 for the year ended December 31, 2012 as compared to $10,406 for the year ended December 31, 2011. The decrease is due to unfavorable exchange rates. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2011, sales for the current period would have been approximately $10,802, or 4% higher during 2012 when compared to the same period last year.

Online consumer net sales increased $2,652 or 18%, to $17,384 for the year ended December 31, 2012 as compared to $14,732 for the year ended December 31, 2011. Holding foreign currency exchange rates constant to those prevailing in the comparable period in 2011, sales for the current period would have been approximately $17,980, or 22% higher when compared to the same period last year.

Gross margin: Gross margin as a percentage of net sales was 53% and 53.9% for the years ended December 31, 2012 and 2011, respectively. The decrease in gross margin was due to the net sales impact of planned promotional activities and the effect of warehouse type clearance sales as part of our overall inventory reduction strategy, as well as reduced production in connection with our inventory turn improvement efforts.

Selling expenses: Selling expenses increased $17,606, or 8%, to $227,447 for the year ended December 31, 2012 from $209,841 for the year ended December 31, 2011. The increase was a result of improving sales. Additionally, we increased our spending on print, outdoor and online advertising to $22,114 for the year ended December 31, 2012 from $15,194 for the comparable period in 2011 in order to continue the sales momentum. As a percentage of sales, selling expenses decreased to 36.8% for the year ended December 31, 2012 from 38.3% for the year ended December 31, 2011.

General and administrative expenses: General and administrative expenses decreased $6,758, or 6%, to $97,327 for the year ended December 31, 2012 as compared to $104,085 for the year ended December 31, 2011. As a percentage of sales, general and administrative expenses decreased to 15.8% during the year ended December 31, 2012 from 19.0% during the year ended December 31, 2011. The decrease in general and administrative expenses was primarily due a $6,482 reduction in professional fees (primarily consulting, accounting and legal related fees), a decrease of $1,878 in medical benefit costs in the U.S., a decrease of $1,694 in depreciation and amortization expenses and certain other items, offset by an increase of $3,033 in share-based compensation expense and $2,284 higher salaries, wages and bonus expenses.

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Retail store impairment charges: At December 31, 2012, we performed a recoverability test and an impairment test of our long lived assets at our retail stores and we recorded impairment charges relating primarily to certain retail store leasehold improvements of $1,647 and $4,267 for the years ended December 31, 2012 and 2011, respectively.

Interest expense: Interest expense increased $8,392 to $41,559 for the year ended December 31, 2012 from $33,167 for the year ended December 31, 2011 primarily due to a higher average balance of debt outstanding and higher interest rates related to our credit agreement with Crystal ("the Crystal Credit Agreement"). Interest expense for the year ended December 31, 2012 relates primarily to interest on the Lion Credit Agreement and Crystal Credit Agreement. For the year ended December 31, 2012, amortization of debt discount and deferred financing cost was $10,261 and interest paid in cash was $10,954.

Foreign currency transaction loss: Foreign currency transaction loss was $120 for the year ended December 31, 2012, as compared to a loss of $1,679 for the year ended December 31, 2011. The change related to a lower valuation of the U.S. dollar relative to functional currencies used by our subsidiaries.

Unrealized (gain) loss on change in fair value of warrants and purchase rights: We recorded a $4,126 loss in fair value of warrants for the year ended December 31, 2012 associated with the fair value measurements of the Lion and SOF warrants. We recorded a $23,467 gain in the fair value of warrants and purchase rights for the year ended December 31, 2011 associated with the fair value measurement of purchase rights to an investor group and Mr. Charney, and additional warrants to Lion at December 31, 2011. There were no purchase rights outstanding in 2012. See Note 13, Stockholders' Equity to our consolidated financial statements under Part II, Item 8.

(Gain) loss on extinguishment of debt: During the year ended December 31, 2012, we recorded a gain on extinguishment of debt relating to an amendment to the Lion Credit Agreement of approximately $11,588. During the year ended December 31, 2011, we recorded a loss on extinguishment of debt pertaining to an amendment to the Lion Credit Agreement of approximately $3,114. See Note 8, Long-Term Debt to our consolidated financial statements under Part II, Item 8.

Income tax provision: The provision for income tax increased to $3,813 for the year ended December 31, 2012 as compared to $1,721 for the year ended December 31, 2011. We have recorded valuation allowances against a majority of our deferred tax assets, including 100% of the U.S. deferred tax assets and certain foreign deferred tax assets. Similarly, we recognized no tax benefits on our loss before income taxes in 2012. See Note 11, Income Taxes to our consolidated financial statements under Part II, Item 8.

Liquidity and Capital Resources

Summary

As of December 31, 2013, we had approximately $8,676 in cash and $6,268 of availability for additional borrowings under the Capital One Credit Facility and Bank of Montreal Credit Agreement. Additionally, we had $43,526 outstanding out of $50,000 of commitments under the Capital One Credit Facility and $443 outstanding on the C$2,000 (Canadian dollars) Bank of Montreal Credit Agreement, which was reduced from C$11,000 (Canadian dollars) effective February 28, 2014. Amounts outstanding under the Bank of Montreal Credit Agreement were repaid, and on March 31, 2014 expired by its terms. See Note 7, Revolving Credit Facilities and Current Portion of Long-Term Debt and Note 8, Long-Term Debt to our consolidated financial statements under Part II, Item 8.

As of February 28, 2014, we had approximately $4,878 in cash and $3,299 of availability for additional borrowings under the Capital One Credit Facility and Bank of Montreal Credit Agreement.

On April 4, 2013, we closed a private offering of $206,000 aggregate principal amount of our Senior Secured Notes due April 15, 2020 at 97% of par and also entered into a new $35,000 asset-backed revolving credit facility with Capital One maturing on April 4, 2018, subject to a January 15, 2018 maturity under certain circumstances. Subsequently, on July 5, 2013, we entered into an amendment to the Capital One Credit Facility increasing the total commitment to $50,000. Interest on the Notes approximating $13,500 per payment period (in 2014), is payable semi-annually, in arrears, on April 15 and October 15 of each year, beginning on October 15, 2013. We used the net proceeds from the offering of the Notes, together with borrowings under the new credit facility, to repay and terminate our credit agreement with Crystal Financial LLC and our loan agreement with Lion Capital LLP. The notes and the new credit facility are our senior secured obligations and are guaranteed, on a senior secured basis, by our domestic restricted subsidiaries, subject to some exceptions.

During the third quarter ended September 30, 2013, we determined it was probable that a special interest trigger event under the indenture governing the Notes would occur as of the December 31, 2013 measurement date, and accrued interest on the Notes at 15% retroactive to April 4, 2013 representing an additional 2% interest, which additional interest is payable in kind until April 15, 2018 and in cash on subsequent interest dates. We recorded $3,044 in additional interest expense related to the

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special interest trigger event for the year ended December 31, 2013. We will pay in kind the additional 2% interest retroactive to the issue date of the Notes on the next interest payment date, April 15, 2014.

Under the Capital One Credit Facility, we were in violation of certain covenants for the twelve consecutive fiscal months ended September 30, 2013 and December 31, 2013, and we anticipated a violation for the twelve months ended March 31, 2014.

On November 14, 2013, we entered into a third amendment to the Capital One Credit Facility, which among other things, waived the obligation to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio for the twelve consecutive fiscal month period ending September 30, 2013. As a condition to the waiver, we agreed to a one percentage point increase in the interest rate to either LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at our option) and limitations on amounts available to be borrowed, consisting of the imposition of a reserve against the line that gradually reduced the total borrowing capacity to $47,500 and certain amendments to the borrowing base calculation. In addition, we paid a waiver fee of $75.

On March 25, 2014, we entered into a fifth amendment to the Capital One Credit Facility which, effective upon its receipt of at least $25,000 of net proceeds from a financing prior to April 15, 2014, among other things: waives the obligation to maintain the minimum fixed charge coverage and maximum leverage ratios for the three month periods ended December 31, 2013 and March 31, 2014; resets for future periods the fixed charge coverage ratio, the maximum leverage ratio and the maximum capital expenditures allowed; adds a minimum EBITDA covenant; increases the interest rate payable under the credit agreement by 0.5% per annum to either LIBOR plus 5.0% or the bank's prime rate plus 4.0% (at our option); and increases the fees payable upon early termination.

On May 22, 2013 we entered into the Lion Loan Agreement in a principal amount of $4,500. On November 29, 2013, the Lion Loan Agreement was amended to increase the amount we borrowed by $5,000 and to make certain other technical amendments. The term loans under the Lion Loan Agreement mature on October 4, 2018 and bear interest at an initial interest rate of 18% per annum, which interest rate increased to 20% per annum due to the occurrence of a special interest trigger event under our Notes. Interest under the loan agreement is payable in cash or, to the extent permitted by our other debt agreements, in-kind.

On March 31, 2014, we completed a public offering of approximately 61,645 shares of our common stock at $0.50 per share for net proceeds of approximately $28,500. As a result of this offering, our common stock issued and outstanding were 175,109 and 173,377 shares. Additionally, our underwriters have a 30 day option to acquire up to an additional 8,500 shares of our common stock at $0.50 per share.

Over the past years, our operations have been funded through a combination of borrowings from related and unrelated parties, bank and other debt, lease financing, proceeds from the exercise of purchase rights and issuance of common stock. As discussed under Management Plan above, we continue to develop initiatives intended to either increase sales, reduce costs or improve liquidity. In the fourth quarter of 2013 and continuing into January of 2014, significant reductions were made in payroll and related costs associated with manufacturing and administrative overheads. We also instituted a program in the first quarter of 2014 to limit capital expenditures. Additionally, we intend to continue to drive productivity improvements from our new distribution center, further reduce inventories, reduce store labor costs, and evaluate further consolidation of administrative and manufacturing functions. Efforts to identify additional ways to reduce costs and improve productivity are ongoing.

Our principal liquidity requirements are for working capital interest payments, capital expenditures and to fund operations. We fund our liquidity requirements primarily through cash on hand, cash flow from operations and borrowings under our credit facilities. Our credit agreements have from time to time contained covenants requiring us to meet specified targets for measures related to earnings, limits on capital expenditures, minimum fixed charge coverage ratios and maximum leverage ratios, and our inability to achieve such targets or to obtain a waiver of compliance would negatively impact the availability of credit under those credit facilities or result in an event of default.

We believe that we have sufficient financing commitments to meet funding requirements for the next twelve months.

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Cash Flow Overview

Cash Flow Overview for the years ended December 31, 2013, 2012 and 2011 is as follows (dollars in thousands):

	2013			2012			2011
Net cash (used in) provided by:
Operating activities	$	(12,723	)	$	23,589		$	2,305
Investing activities	(25,147		)	(24,853		)	(10,759		)
Financing activities	34,228			4,214			12,582
Effect of foreign exchange rate changes on cash	(535		)	(390		)	(1,491		)
Net (decrease) increase in cash	$	(4,177	)	$	2,560		$	2,637

Year Ended December 31, 2013

Cash used in operating activities was $12,723. This was a result of a net loss of $106,298 as a result of a decrease in our gross profit rate, the impact to our cost of sales and operating expenses from the transition to our new distribution facility, and higher computer software and store supply expenses as we continue to improve both our online and retail stores. These were offset by non-cash expenses of $85,764 and a decrease in working capital requirements of $7,811.

Non-cash expenses during the year relate primarily to loss on extinguishment of debt from our April 2013 refinancing, depreciation, amortization and impairment charges, the fair value of our warrant liability, stock-based compensation expense, and non-cash interest expense from the amortization of deferred financing costs and loan discounts and from the accrual for paid-in-kind interest.

The decrease in working capital requirements was primarily due to a $11,764 increase in accrued expenses as a result of accrued interest related to the Notes and timing of deferred revenue related to recent promotional activities. Additionally, inventory decreased $3,715 as a result of our efforts to reduce inventory levels. These decreases in working capital requirements were offset by a $6,063 increase in prepaid expenses related primarily to higher prepaid software maintenance fees and higher prepaid store supplies. Additionally, other assets increased $4,393 due primarily to an increase in deferred financing costs related to our April 2013 refinancing and higher deposits related to our workers compensation program.

Cash used in investing activities was $25,147. This was primarily related to $27,054 in capital expenditures as we continue to make improvements to our existing stores and open new stores, invest in equipment and software for our new distribution center, and continue to invest in our manufacturing equipment, computer software and website development. During this period, six new retail stores were opened in the International segment.

Cash provided by financing activities was $34,228. This consisted primarily of proceeds of $199,820 from issuance of the Notes and $39,794 in borrowings from our Capital One and Bank of Montreal revolving credit facilities. The net proceeds from the offering of the Notes, together with borrowings under the new credit facility were used to repay and terminate the outstanding amounts with Lion Capital of $144,149 and with Crystal Financial of $66,411.

Year Ended December 31, 2012

Cash provided by operating activities was $23,589. This was a result of a net loss of $37,272 offset by non-cash expenses of $56,608 and a decrease in working capital of $4,253.

Non-cash expenses during the year relate primarily to depreciation, amortization and impairment charges, a decrease in the fair value of our warrant liability, stock-based compensation expense, and non-cash interest expense from the amortization of deferred financing costs and loan discounts and from the accrual for paid-in-kind interest. These non-cash charges were offset by a gain on extinguishment of debt.

The decrease in working capital was primarily due to a decrease in inventories of $13,949. The decrease in inventory is due to a year-over-year 20% decrease in units as a result of improvements in our sales and improvements in inventory planning. This was partially offset by an increase in other assets of $8,455 as a result of higher deposits required for our self-insured workers compensation policy.

Cash used in investing activities was $24,853. This consisted primarily of $21,607 in capital expenditures and $3,720 in restricted cash used as collateral to secure our standby letters of credit associated with the worker's compensation self-insurance program and other liabilities. Net investments in property and equipment in the U.S. Wholesale segment consisted mostly of expenditures for manufacturing equipment and computer hardware and software. We upgraded our production forecasting and allocation systems and significantly enhanced our online web store capabilities with a new back office web platform. We also

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invested in our new distribution center in La Mirada, California. Net investments in the U.S. Retail segment were primarily to upgrade and remodel certain existing stores. Additionally, we continued implementing radio frequency identification (RFID) tracking systems at our stores. As of the end of February 2013, we had implemented RFID systems at approximately 213 stores worldwide.

Cash provided by financing activities was $4,214. This consisted primarily of proceeds from borrowings of $28,451 under the new revolving credit facility and $29,987 for a term loan, both under the Crystal Credit Agreement, partially offset by the repayment of the previous revolving credit facility for $48,324 with BofA. Borrowings are primarily used to fund our operating and working capital needs.

Year Ended December 31, 2011

Cash provided by operating activities was $2,305. This was a result of non-cash expenses of $43,278 offset by a net loss of $39,314 and an increase in working capital requirements of $1,659.

Non-cash expenses include depreciation, amortization, loss on disposal of property and equipment, foreign exchange transaction gain, allowance forinventory shrinkage and obsolescence, change in fair value of warrant liability, loss on extinguishment of debt, accrued interest-in-kind, impairment charges, stock-based compensation, bad debt expense, deferred income taxes, and deferred rent.

The increase in working capital was due primarily to an increase in inventory of $6,771. Although our unit inventory levels declined 7% at December 31, 2011 compared to December 31, 2010, the increase in yarn and fabric prices beginning in 2010, and continuing throughout the first half of 2011, resulted in an increase to the cost of our inventory, despite overall reductions to the other direct costs in our manufacturing processes. In addition, our production planning and scheduling methodology calls for maintaining normal production levels throughout the year, regardless of seasonality in demand. This approach allows us to have efficient inventory levels in stock and to be well positioned in anticipation of key selling seasons.

Cash used by investing activities was $10,759 and related primarily to capital expenditures. Net investments in property and equipment were $3,638 for the U.S. Wholesale segment, $4,889 for the U.S. Retail segment, $407 for the Canada segment and $2,136 for the International segment. During this period, four new retail stores were opened in the International segment. Investments in the U.S. Wholesale segment consisted mostly of expenditures for manufacturing equipment, computer hardware and software. Investments in the U.S. Retail segment were primarily to upgrade and remodel certain existing stores.

Cash provided by financing activitieswas $12,582. This consisted primarily of proceeds of $21,710 from the sale of common stock and purchase rights and $3,100 in proceeds from a sale-leaseback financing transaction for manufacturing equipment, partially offset by the repayment of $6,874 under our revolving credit facilities.

Debt Agreements and Other Capital Resources

Capital One Credit Facility - On April 4, 2013, we replaced our credit facility with Crystal with a new $35,000 asset-based revolving facility with Capital One. Subsequently, on July 5, 2013, we entered into an amendment to the credit agreement with Capital One, pursuant to which the total commitment under the credit facility was raised to $50,000. The additional commitment was made under substantially the same terms as the existing facility. The Capital One Credit Facility matures on April 4, 2018, subject to a January 15, 2018 maturity if excess availability is less than $15,000 at the time of notice to Capital One of a determination by the Company that an Applicable High Yield Discount Obligation ("AHYDO") redemption will be required pursuant to Section 3.01(e) of the indenture governing the Notes. Borrowings under the Capital One Credit Facility bore interest equal to LIBOR plus 3.5% or the bank's prime rate plus 2.5% (at the Company's option) and were subject to maintenance of specified borrowing base requirements and covenants.

Under the Capital One Credit Facility, we were in violation of certain covenants for the twelve consecutive fiscal months ended September 30, 2013 and December 31, 2013, and we anticipated a violation for the twelve months ended March 31, 2014.

On November 14, 2013, we entered into a third amendment to the Capital One Credit Facility, which among other things, waived the obligation to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio for the twelve consecutive fiscal month period ending September 30, 2013. As a condition to the waiver, we agreed to a one percentage point increase in the interest rate to either LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at our option) and limitations on amounts available to be borrowed, consisting of the imposition of a reserve against the line that gradually reduced the total borrowing capacity to $47,500 and certain amendments to the borrowing base calculation. In addition, we paid a waiver fee of $75.

On March 25, 2014, we entered into a fifth amendment to the Capital One Credit Facility which, effective upon its receipt of at least $25,000 of net proceeds from a financing prior to April 15, 2014, among other things: waives the obligation to maintain

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the minimum fixed charge coverage and maximum leverage ratios for the three month periods ended December 31, 2013 and March 31, 2014; resets for future periods the fixed charge coverage ratio, the maximum leverage ratio and the maximum capital expenditures allowed; adds a minimum EBITDA covenant; increases the interest rate payable under the credit agreement by 0.5% per annum to either LIBOR plus 5.0% or the bank's prime rate plus 4.0% (at our option); and increases the fees payable upon early termination.

The Capital One Credit Facility is secured by a lien on substantially all of the assets of our domestic subsidiaries and equity interests in certain of our foreign subsidiaries, subject to some exceptions. The amount available for additional borrowings on December 31, 2013 was $4,179. See Financial Covenants below and Note 7, Revolving Credit Facilities and Current Portion of Long-Term Debt to our consolidated financial statements under Part II, Item 8.

Bank of Montreal Credit Facility - On December 31, 2013, our wholly-owned Canadian subsidiaries, entered into a fourth amendment to the Bank of Montreal Credit Agreement that reduced the existing revolving credit facility amount from C$11,000 (Canadian dollars) to C$5,000 (Canadian dollars) and extended the maturity date to February 28, 2014. On February 28, 2014, the revolving credit facility commitment was further reduced to C$2,000 (Canadian dollars) and the maturity set to March 31, 2014. Amounts outstanding under the Bank of Montreal Credit Agreement were repaid, and on March 31, 2014 expired by its terms.

The Bank of Montreal Credit Agreement bore interest at 7.0% (the bank's prime rate at 3.0% as of December 31, 2013 plus 4.0% per annum) payable monthly. This line of credit was secured by a lien on the accounts receivable, inventory and certain other tangible assets of the CI Companies. Our available borrowing capacity was $2,089 on December 31, 2013. See Financial Covenants below and Note 7, Revolving Credit Facilities and Current Portion of Long-Term Debt to our consolidated financial statements under Part II, Item 8.

Senior Secured Notes due 2020 - On April 4, 2013, we issued the Notes in an aggregate principal amount of $206,000. The Notes will mature on April 15, 2020. The Notes were issued at 97% of par value with an interest rate at issuance of 13% per annum, subject to adjustment. Interest on the Notes approximating $13,500 per payment period (in 2014), is payable semi-annually, in arrears, on April 15 and October 15 of each year, beginning on October 15, 2013.

A "special interest trigger event" is deemed to have occurred under the indenture governing the Notes if our net leverage ratio for the year ended December 31, 2013 is greater than 4.50 to 1.00. Upon the occurrence of a special interest trigger event, interest on the Notes accrues at the rate of 15% per annum, retroactive to April 4, 2013, with the interest in excess of 13% per annum payable (i) in the case of any interest payment date prior to April 15, 2018, by adding such excess interest to the principal amount of the Notes on the interest payment date, and (ii) for any interest payment date on or after April 15, 2018, in cash.

During the third quarter of 2013, we determined it was probable that a special interest trigger event under the indenture governing the Notes would occur as of December 31, 2013, and we accrued interest on the Notes at 15% retroactive to April 4, 2013, representing an additional 2% interest, which is payable-in kind until April 15, 2018 and in cash on subsequent interest payment dates. We recorded $3,044 in additional interest expense for the special interest trigger event for the year ended December 31, 2013. We will pay in-kind the additional 2% interest retroactive to the issue date of the Notes on the next interest payment date, April 15, 2014.

On or after April 15, 2017, we may redeem some or all of the Notes at a premium decreasing ratably to zero as specified in the indenture, plus accrued and unpaid interest to, but not including, the redemption date. Prior to April 15, 2017, we may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of certain equity offerings at a redemption price of 113% of the aggregate principal amount of the redeemed notes plus accrued and unpaid interest to, but not including, the redemption date. In addition, at any time prior to April 15, 2017 we may redeem some or all of the Notes by paying a premium, plus accrued and unpaid interest to, but not including, the redemption date. If we experience certain change of control events, the holders of the Notes will have the right to require us to purchase all or a portion of the Notes at a price in cash equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest to, but not including, the date of purchase. In addition, we are required to use the net proceeds of certain asset sales, if not used for specified purposes, to purchase some of the Notes at 100% of the principal amount, plus accrued and unpaid interest to, but not including, the date of purchase. On each interest payment date after April 4, 2018, we will be required to redeem, for cash, a portion of each Note then outstanding equal to the amount necessary to prevent such Note from being treated as an “applicable high yield discount obligation” within the meaning of the Internal Revenue Code. The redemption price will be 100% of the principal amount plus accrued and unpaid interest thereon on the date of redemption.

The Notes are guaranteed, jointly and severally, on a senior secured basis by our existing and future domestic restricted subsidiaries. See Financial Covenants below and Note 8, Long-Term Debt to our consolidated financial statements under Part II, Item 8.

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Crystal Credit Facility - On April 4, 2013, we replaced our existing revolving credit facility and term loan with Crystal Financial LLC ("Crystal" and the "Crystal Credit Agreement", respectively), with a new asset-based revolving credit agreement with Capital One.

All amounts owed under the Crystal credit facility were repaid with the net proceeds from the offering of the Notes and the new credit facility.

The difference between the net carrying amount of the Crystal loans of $60,533 (which includes the outstanding balance, accrued but unpaid interest, and unamortized financing cost immediately prior to the date of the extinguishment) and the cash paid to Crystal of $66,411 (which includes a $2,400 early termination fee) was recorded as a $5,878 loss on early extinguishment of debt in our statement of operations for the year ended December 31, 2013. See Note 7, Revolving Credit Facilities and Current Portion of Long-Term Debt to our consolidated financial statements under Part II, Item 8.

Lion Loan Agreement - On May 22, 2013 we entered into the Lion Loan Agreement in a principal amount of $4,500. On November 29, 2013, the Lion Loan Agreement was amended to increase the amount we borrowed by $5,000 and to make certain other technical amendments. The term loans under the Lion Loan Agreement mature on October 4, 2018 and bear interest at an initial interest rate of 18% per annum, which interest rate increased to 20% per annum due to the occurrence of a special interest trigger event under our Notes. Interest under the loan agreement is payable in cash or, to the extent permitted by our other debt agreements, in-kind.

Lion Credit Agreement - On April 4, 2013, we repaid and terminated the outstanding obligations under the Lion Credit Agreement with a portion of the proceeds of the issuance of the Notes and entry into the Capital One Credit Facility. The difference between the net carrying amount of the Lion debt of $117,926 (which includes the principal, accrued but unpaid interest, unamortized discount and unamortized financing cost immediately prior to the date of extinguishment) and the cash paid to Lion of $144,149 was recorded in our statement of operations for the year ended December 31, 2013 as a $26,223 loss on the early extinguishment of this debt. See Note 8, Long-Term Debt to our consolidated financial statements under Part II, Item 8.

Lion Warrants - As of December 31, 2013, Lion held warrants to purchase 21,606 shares of our common stock, with an exercise price of $0.75 per share. These warrants expire on February 18, 2022. The estimated fair value of $20,954 at December 31, 2013 is recorded as a current liability in our consolidated balance sheets under Part II, Item 8.

The Lion Warrants also contain certain anti-dilution protections in favor of Lion providing for proportional adjustment of the warrant price and, under certain circumstances, the number of shares of our common stock issuable upon exercise of the Lion Warrant, in connection with, among other things, stock dividends, subdivisions and combinations and the issuance of additional equity securities at less than fair market value, as well as providing for the issuance of additional warrants to Lion in the event of certain equity sales or debt for equity exchanges. See Note 13, Stockholders' Equity to our consolidated financial statements under Part II, Item 8.

On March 31, 2014, as a result of the public offering of our common shares as discussed below, we estimate that Lion received the right to purchase approximately 2,900 shares of our common stock under their existing warrants and the exercise price of all of Lion's warrants will be adjusted to approximately $0.66 per share. Such adjustments were required by the terms of the existing Lion warrants.

Sale of Common Shares - On March 31, 2014, we completed a public offering of approximately 61,645 shares of our common stock at $0.50 per share for net proceeds of approximately $28,500. As a result of this offering, our common stock issued and outstanding were 175,109 and 173,377 shares. Additionally, our underwriters have a 30 day option to acquire up to an additional 8,500 shares of our common stock at $0.50 per share.

Investor Purchase Rights - On April 26, 2011 and in connection with the February 18, 2011 amendment to the Lion Credit Agreement, we entered into a purchase and investment agreement with a group of investors ("Investors") and sold approximately 15,777 shares of common stock at a price of $0.90 per share and purchase rights to acquire additional shares of common stock for the aggregate net cash purchase price of approximately $12,417. The purchase rights gave the Investors the right to purchase up to an aggregate of approximately 27,443 additional shares of common stock at a price of $0.90 per share.

We also entered into a purchase agreement with Dov Charney that, among other things, allowed Mr. Charney to purchase 778 initial shares and up to 1,556 additional shares of common stock on the same terms as the purchase agreement with the Investors ("Charney Purchase Rights").

In July 2011, the Investors exercised their purchase rights and acquired 8,407 shares of our common stock for $0.90 per share. These transactions resulted in $6,593 in aggregate proceeds, net of transaction costs.

In October 2011, the remaining 19,036 Investor Purchase Rights and the 1,556 Charney Purchase Rights expired without being exercised. See Note 13, Stockholders' Equity to our consolidated financial statements under Part II, Item 8.

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Related Party Debt and Sale of Stock to CEO

Related-Party Debt - On March 24, 2011, we entered into an agreement with Mr. Charney, which canceled our $4,688 promissory notes payable to Mr. Charney in exchange for 4,223 shares of our common stock at a price of $1.11 per share, with 50% of these shares issued at closing and the remaining shares issuable to Mr. Charney only if prior to March 24, 2014, the closing sale price of our common stock exceeds $3.50 for 30 consecutive trading days or there is a change of control of American Apparel.

Sale of Common Stock to CEO - On July 7, 2011, we sold 778 shares of our common stock to Dov Charney, pursuant to his purchase agreement described above, at $0.90 per share, for total proceeds of $700. On March 24, 2011, we entered into an agreement to sell to Mr. Charney approximately 1,802 shares of our common stock at a price of $1.11 per share for proceeds of $2,000.

See Notes 12 and 13, Related Party Transactions and Stockholders' Equity to our consolidated financial statements under Part II, Item 8.

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Summary of Debt

The following is an overview of our total debt as of December 31, 2013 (dollars in thousands):

Description of Debt	Lender Name	Interest Rate	December 31, 2013		Covenant Violations
Revolving credit facility	Capital One Leverage Finance Corp.	(1) 30-day LIBOR of 0.167% plus 4.5% plus unused facility fee of 0.5%; or (2) bank's prime rate of 3.25% plus 3.5% plus unused facility fee of 0.5%;	$	43,526	Yes (1)
Revolving credit facility (Canada)	Bank of Montreal	Bank's prime rate of 3% plus 4%;	443		No
Senior Secured Notes, net of discount and including 2% interest paid in kind		15.0%	203,265		No
Term loan including interest paid-in-kind	Lion	20.0%	9,865		No
Other			411
Capital lease obligations	25 individual leases ranging between $2-$3,832	from 0.4% to 23.5%	7,162		N/A
Cash overdraft			3,993		N/A
Total debt including cash overdraft			$	268,665

⁽¹⁾ Violations were waived in connection with Amendment No. 5 to the Capital One Credit Facility. See Note 7, Revolving Credit Facilities and Current Portion of Long-Term Debt to our consolidated financial statements under Part II, Item 8.

Financial Covenants

Our credit agreements, the Lion Loan Agreement and the indenture under which our Notes were issued contain certain restrictive covenants. Significant covenants are summarized below.

Capital One Credit Facility - We are required to maintain a minimum fixed charge coverage ratio of not less than 1.00 to 1.00 and we are also required to not exceed certain maximum leverage ratio thresholds, both determined at the end of each fiscal quarter. Additionally, our domestic subsidiaries are subject to an annual limitation of certain specified capital expenditure amounts as determined at the end of each fiscal year.

Among other provisions, the Capital One Credit Facility requires that we maintain a lockbox arrangement and contains certain subjective acceleration clauses. In addition, Capital One may at its discretion, adjust the advance restriction and criteria for eligible inventory and accounts receivable. The Capital One Credit Facility contains cross-default provisions whereby an event of default under the Bank of Montreal Credit Agreement, the indenture governing the Notes or other indebtedness, in each case of an amount greater than a specified threshold, would cause an event of default under the Capital One Credit Facility.

On November 14, 2013, we entered into a third amendment to the Capital One Credit Facility, which among other things, waived the obligation to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio for the twelve consecutive fiscal month period ending September 30, 2013. As a condition to the waiver, we agreed to a one percentage point increase in the interest rate to either LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at our option) and limitations on amounts available to be borrowed, consisting of the imposition of a reserve against the line that gradually reduced the total borrowing capacity to $47,500 and certain amendments to the borrowing base calculation. In addition, we paid a waiver fee of $75.

On March 25, 2014, we entered into a fifth amendment to the Capital One Credit Facility which, effective upon our receipt of at least $25,000 of net proceeds from a financing prior to April 15, 2014, among other things: waives the obligation to maintain the minimum fixed charge coverage and maximum leverage ratios for the three month periods ended December 31, 2013 and March 31, 2014; resets for future periods the fixed charge coverage ratio, the maximum leverage ratio and the maximum capital expenditures allowed; adds a minimum EBITDA covenant; increases the interest rate payable under the credit agreement by 0.5% per annum; and increases the fees payable upon early termination.

Bank of Montreal Credit Agreement - Significant covenants in the Bank of Montreal Credit Agreement include a fixed charge coverage ratio and a restriction on our Canadian subsidiaries from entering into operating leases that would lead to payments

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under such leases totaling more than C$8,500 (Canadian dollars) in any fiscal year. The credit agreement also requires our Canadian subsidiaries to maintain minimum excess availability of 5% of the revolving credit commitment under the facility. As of December 31, 2013, we were in compliance with the required financial covenants of the Bank of Montreal Credit Agreement. Outstanding amounts under the Bank of Montreal Credit Agreement was repaid and on March 31, 2014 expired by its terms.

Senior Secured Notes due 2020 - The indenture governing our Notes imposes certain limitations on our ability to, among other things and subject to a number of important qualifications and exceptions, incur additional indebtedness or issue disqualified capital stock or preferred stock (with respect to restricted subsidiaries), grant liens, make payments in respect of our capital stock or certain indebtedness, enter into transactions with affiliates, create dividend and other payment restrictions affecting subsidiaries, merge or consolidate with any other person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets or adopt a plan of liquidation. We must annually report to the trustee on compliance with such limitations. The indenture also contains cross-default provisions whereby a payment default or acceleration of any indebtedness in an aggregate amount greater than a specified threshold would cause an event of default with respect to the Notes. As of December 31, 2013, we were in compliance with the required covenants of the Senior Notes Indenture.

Lion Loan Agreement - The Lion Loan Agreement contains restrictive covenants that incorporate by reference several of the covenants contained in the indenture governing our Notes, including covenants restricting our ability to incur additional indebtedness or issue disqualified capital stock or preferred stock (with respect to restricted subsidiaries), grant liens, make payments in respect of our capital stock or certain indebtedness, enter into transactions with affiliates, create dividend and other payment restrictions affecting subsidiaries, merge or consolidate with any other person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets or adopt a plan of liquidation. The Lion Loan Agreement also contains cross-default provisions whereby a payment default or acceleration of any indebtedness in an aggregate amount greater than a specified threshold would cause an event of default. As of December 31, 2013, we were in compliance with the required covenants of the Lion Loan Agreement.

Off-Balance Sheet Arrangements and Contractual Obligations

Our material off-balance sheet contractual commitments are operating lease obligations and certain letters of credit. These items were excluded from the balance sheet in accordance with GAAP.

Operating lease commitments consist principally of leases for our retail stores, manufacturing facilities, distribution center and corporate office. These leases frequently include options, which permit us to extend the terms beyond the initial fixed lease term. As appropriate, we intend to negotiate lease renewals as the leases approach expiration.

Issued and outstanding letters of credit were $1,230 at December 31, 2013, related primarily to workers’ compensation insurance and store leases. We also have capital lease obligations, which consist principally of leases for our manufacturing equipment.

Contractual Obligations Summary

The following table summarizes our contractual commitments as of December 31, 2013, which relate to future minimum payments due under non-cancelable licenses, leases, revolving credit facilities, long-term debt and advertising commitments. Future minimum rental payment on operating lease obligations presented below do not include any related property insurance, taxes, maintenance or other related costs required by operating leases. Operating lease rent expenses, including some related real estate taxes and maintenance costs, are included in the cost of sales and general and administrative expenses in our consolidated financial statements and amounted to approximately $79,794 for the year ended December 31, 2013.

	Total		Payments due by period
Contractual Obligations			Less than 1 year		1-3 years		4-5 years		More than 5 years
Long-term debt (1)	$	219,320	$	—	$	—	$	—	$	219,320
Current debt	44,042		44,042		—		—		—
Capital lease obligations, including interest	8,755		2,616		6,121		18		—
Operating lease obligations	291,277		74,161		115,494		69,690		31,932
Advertising commitments	2,450		2,450		—		—		—
Self-insurance reserves	18,412		6,494		6,027		3,195		2,696
Total contractual obligations	$	584,256	$	129,763	$	127,642	$	72,903	$	253,948

(1) Excludes unamortized discount of $5,779 at December 31, 2013 and estimates of future cash and paid-in-kind interest related to the Notes and Lion Loan Agreement.

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Seasonality

We experience seasonality in our operations. Historically, sales during the third and fourth fiscal quarters have generally been the highest, with sales during the first fiscal quarter the lowest. This reflects the combined impact of the seasonality of our wholesale and retail sales channels.

Critical Accounting Estimates and Policies

Complete descriptions of our significant accounting policies are outlined in Note 2, Summary of Significant Accounting Policies to our consolidated financial statements under Item 8—Financial Statements and Supplementary Data. The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Our critical estimates and policies include:

• revenue recognition;

• inventory valuation, obsolescence;

• fair value calculations including, derivative liabilities such as the Lion warrants;

• valuation and recoverability of long-lived assets including the values assigned to acquired intangible assets, goodwill, and property and equipment;

• income taxes;

• accruals for the outcome of current litigation; and

• self-insurance liabilities.

In general, estimates are based on historical experience, on information from third party professionals and on various other sources and assumptions that are believed to be reasonable under the facts and circumstances at the time such estimates are made. On a continual basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted. Actual results may vary from these estimates and assumptions under different and/or future circumstances. Our management considers an accounting estimate to be critical if:

• it requires assumptions to be made that were uncertain at the time the estimate was made; and

• changes in the estimate, or the use of different estimating methods that could have been selected, could have a material impact on our consolidated results of operations or financial condition.

Revenue Recognition

We recognize product sales when title and risk of loss have transferred to the customer, there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collectability is reasonably assured. Wholesale product sales are recorded at the time the product is either picked up by or shipped to the customer. Online product sales are recorded at the time the products are received by the customers. Retail store sales are recorded as revenue upon the sale of product to retail customers. Our net sales represent gross sales invoiced to customers, less certain related charges for discounts, returns, and other promotional allowances and are recorded net of sales or value added tax. Allowances provided for these items are presented in the consolidated financial statements primarily as reductions to sales and cost of sales (see Sales Returns and Allowances discussed below for further information).

We recognize revenues from gift cards, gift certificates and store credits as they are redeemed for product. Prior to redemption, we maintain an unearned revenue liability for gift cards, gift certificates and store credits until we are released from such liability or when we determine that some portion of gift cards will not be redeemed. See Gift Cards below.

Sales Returns and Allowances

We analyze sales returns in order to make reasonable estimates of product returns based upon historical experience. Estimates for sales returns are based on a variety of factors including actual returns based on expected return data communicated to us by our customers. Accordingly, we believe that our historical returns analysis is an accurate basis for our allowance for sales returns. We regularly review the factors that influence our estimates and, if necessary, make adjustments when we believe that actual product returns and credits may differ from established reserves. If actual or expected future returns and claims are

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significantly greater or lower than the allowance for sales returns established, we would record a reduction or increase to net revenues in the period in which we made such determination.

Shipping and Handling Costs

Shipping and handling costs consist primarily of freight expenses incurred to transport products to our retail stores and distribution center, and to our wholesale and online retail customers. These costs are included in cost of sales. Amounts billed to customers for shipping are included in net sales.

Gift Cards

Upon issuance of a gift card a liability is established for the cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Over time, some portion of gift cards is not redeemed ("breakage"). We determine breakage income for gift cards based on historical redemption patterns. Breakage income is recorded as a credit to selling expenses, which is a component of operating expenses in the consolidated statements of operations. Currently, we record breakage when gift cards remain unredeemed after two years. Our gift cards, gift certificates and store credits do not have expiration dates.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate breakage.

Trade Receivables and Allowance for Doubtful Accounts

Accounts receivable primarily consists of trade receivables, including amounts due from credit card companies, net of allowances. On a periodic basis, we evaluate our trade receivables and establish an allowance for doubtful accounts.

We perform on-going credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current credit worthiness, as determined by our review of their current credit information. Payments from customers are continuously monitored. We maintain an allowance for doubtful accounts, which is based upon historical experience as well as specific customer collection issues that have been identified. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories

Inventories are stated at the lower of cost or market. Cost is primarily determined on the first-in, first-out (“FIFO”) method. We identify potential excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences.

We have evaluated the current level of inventories considering historical sales and other factors and, based on this evaluation, we record adjustments to cost of goods sold to reflect inventories at net realizable value. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions, customer demand or competition differ from expectations.

Long-Lived Assets

We follow the provisions of ASC 360 “Property, Plant and Equipment”, which requires evaluation of the need for an impairment charge relating to long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if a write down to a new depreciable basis is required. If required, an impairment charge is recorded based on an estimate of future discounted cash flows.

We consider the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of retail stores relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of the assets or in our overall strategy with respect to the manner or use of the acquired assets or changes in our overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in our stock price for a sustained period of time; and (vi) regulatory changes.

We evaluate acquired assets and our retail stores for potential impairment indicators at least annually and more frequently upon the occurrence of events that could impact prior conclusions. Judgment regarding the existence of impairment indicators is based on market conditions and operational performance of our businesses. Future events could cause us to conclude that impairment indicators exist, and therefore long lived assets could be impaired. Such evaluations are significantly impacted by estimates of future revenues, costs and expenses and other factors. A significant change in cash flows in the future could result in an impairment of long lived assets.

Income Taxes

We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are determined based on the differences between the financial

55

statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. During the years ended December 31, 2013 and 2012, we recorded a valuation allowance against deferred tax assets of $120,694 and $77,578. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations. In the event we were to determine that we would be able to realize our deferred income tax assets in the future in excess of their net recorded amount, we would make an adjustment to the valuation allowance.

Contingencies

Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss but which will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings or governmental assessments that are pending against us or unasserted claims that may result in such proceedings, we evaluate the perceived merits of these matters as well as the merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in our consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, is disclosed. Associated legal fees are expensed as incurred.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees are disclosed.

There can be no assurance that such matters will not materially and adversely affect our business, financial position, and results of operations or cash flows.

In making these determinations, we assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. We determine the amount of reserves needed, if any, for each individual issue based on our knowledge and experience and discussions with legal counsel. The required reserves may change in the future due to new developments in each matter, the ultimate resolution of each matter, or changes in approach, such as a change in settlement strategy. There is no assurance that such matters will not materially and adversely affect our business, financial position, and results of operations or cash flows. See Notes 15 and 18, Commitments and Contingencies and Litigation to our consolidated financial statements under Part II, Item 8.

Self-Insurance Liabilities

We maintain self-insurance programs for our estimated commercial general liability, workers’ compensation, and employees medical risks. Under these programs, we maintain insurance coverage for losses in excess of specified per-occurrence amounts. Estimated costs under these programs, including incurred but not reported claims, are recorded as expense based upon historical experience, trends of paid and incurred claims, deductibles, and other actuarial assumptions. If actual claim trends under these programs, including the severity or frequency of claims, differ from our estimates, our financial results may be significantly impacted.

Other Matters

Accounting Standards Updates

Accounting standards updates effective after December 31, 2013, are not expected to have a material effect on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risks (amounts in thousands)

Our exposure to market risk is limited to interest rate risk associated with our credit facilities and foreign currency exchange risk associated with our foreign operations.

Interest Rate Risk

Based on our interest rate exposure on variable rate borrowings at December 31, 2013, a 1% increase in average interest rates on our borrowings would increase future interest expense by approximately $37 per month. We determined this amount based on approximately $43,969 of variable rate borrowings at December 31, 2013. We are currently not using any interest rate collars or hedges to manage or reduce interest rate risk. As a result, any increase in interest rates on the variable rate

56

borrowings would increase interest expense and reduce net income. Our primary exposure to variable interest rates is through the effect of fluctuations in LIBOR on the interest rate under the Capital One Credit Agreement.

Foreign Currency Risk

The majority of our operating activities are conducted in U.S. dollars. Approximately 36.1% of our net sales for the year ended December 31, 2013 were denominated in foreign currencies. Nearly all of our production costs and material costs are denominated in U.S. dollars although the majority of the yarn is sourced from outside the United States. If the U.S. dollar were to appreciate by 10% against other currencies it could have a significant adverse impact on our earnings. Since an appreciated U.S. dollar makes goods produced in the United States relatively more expensive to overseas customers, other things being equal, we would have to lower our retail margin in order to maintain sales volume overseas. A lower retail margin overseas would adversely affect net income assuming sales volume remains the same. Functional currencies of our foreign operations consist of the Canadian dollar for operations in Canada, the Australian dollar for operations in Australia, the pound Sterling for operations in the U.K., the Euro for operations in the European Union, the Franc for operations in Switzerland, the New Israeli Shekel for operations in Israel, the Yen for the operations in Japan, the Won for operations in South Korea, the Renminbi or Hong Kong dollar for operations in China, the Real for operations in Brazil and the Peso for operations in Mexico, as well as other local currencies for other foreign operations.

Inflation

Inflation affects the cost of raw materials, goods and services used in our operations. The largest of these are the cost of yarn and fabric. In addition, high oil costs can affect the cost of all raw materials and components. The competitive environment can limit our ability to recover higher costs resulting from inflation by raising prices. Although we cannot precisely determine the effects of inflation on our business, we believe that the effects on revenues and operating results have not been significant, except for the impact of the dramatic increase in yarn prices in 2010 and part of 2011. We do not believe that inflation has had a material impact on our results of operations for the periods presented, except for the higher prices we paid for yarn and fabrics in the first part of 2011. We are unable to predict if we will be able to successfully pass on the added cost of any future raw material cost increases by further increasing the price of our products to our wholesale and retail customers.

57

American Apparel, Inc.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

	Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	59
Consolidated Balance Sheets as of December 31, 2013 and 2012	60
Consolidated Statements of Operations and Comprehensive Loss For the Years ended December 31, 2013, 2012 and 2011	61
Consolidated Statements of Stockholders’(Deficit) Equity For the Years Ended December 31, 2013, 2012 and 2011	62
Consolidated Statements of Cash Flows For the Years Ended December 31, 2013, 2012 and 2011	63
Notes to Consolidated Financial Statements For the Years Ended December 31, 2013, 2012, and 2011	65
Financial Statement Schedule
Schedule II—Valuation and Qualifying Accounts	103
Report of Independent Registered Public Accounting Firm on Internal Controls over Financial Reporting	105

58

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Audit Committee of the

Board of Directors and Stockholders of

American Apparel, Inc.

We have audited the accompanying consolidatedbalance sheets of American Apparel, Inc. and Subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the relatedconsolidated statements operations and comprehensive loss, stockholders’ (deficit) equity and cash flows for the years ended December 31, 2013, 2012, and 2011. Our audits also included the financial statement schedule as of and for the years listed in the index at Item 15. These consolidated financial statements and financial statement scheduleare the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Apparel, Inc. and Subsidiaries as of December 31, 2013 and 2012, and the consolidatedresults of its operations and its cash flows for the years ended December 31, 2013, 2012, and 2011in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), American Apparel, Inc. and Subsidiaries internal control over financial reporting as of December 31, 2013, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 1, 2014 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Very truly yours,

/s/ Marcum LLP

Marcum LLP

Melville, NY

April 1, 2014

59

Item 8. Financial Statements and Supplementary Data

American Apparel, Inc. and Subsidiaries

Consolidated Balance Sheets

(Amounts and shares in thousands, except per share amounts)

	December 31,
	2013			2012
ASSETS
CURRENT ASSETS
Cash	$	8,676		$	12,853
Trade accounts receivable, net of allowances of $2,229 and $2,085 at December 31, 2013 and 2012, respectively	20,701			22,962
Restricted cash	—			3,733
Prepaid expenses and other current assets	15,636			9,589
Inventories, net	169,378			174,229
Income taxes receivable and prepaid income taxes	306			530
Deferred income taxes, net of valuation allowance	599			494
Total current assets	215,296			224,390
PROPERTY AND EQUIPMENT, net	69,303			67,778
DEFERRED INCOME TAXES, net of valuation allowance	2,426			1,261
OTHER ASSETS, net	46,727			34,783
TOTAL ASSETS	$	333,752		$	328,212
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
CURRENT LIABILITIES
Cash overdraft	$	3,993		$	—
Revolving credit facilities and current portion of long-term debt	44,042			60,556
Accounts payable	38,290			38,160
Accrued expenses and other current liabilities	50,018			41,516
Fair value of warrant liability	20,954			17,241
Income taxes payable	1,742			2,137
Deferred income tax liability, current	1,241			296
Current portion of capital lease obligations	1,709			1,703
Total current liabilities	161,989			161,609
LONG-TERM DEBT, net of unamortized discount of $5,779 and $27,929 at December 31, 2013 and 2012, respectively	213,468			110,012
CAPITAL LEASE OBLIGATIONS, net of current portion	5,453			2,844
DEFERRED TAX LIABILITY	536			262
DEFERRED RENT, net of current portion	18,225			20,706
OTHER LONG-TERM LIABILITIES	11,485			10,695
TOTAL LIABILITIES	411,156			306,128
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ (DEFICIT) EQUITY
Preferred stock, $0.0001 par value per share, authorized 1,000 shares; none issued	—			—
Common stock, $0.0001 par value per share, authorized 230,000 shares; 113,469 shares issued and 111,330 shares outstanding at December 31, 2013 and 110,111 shares issued and 107,181 shares outstanding at December 31, 2012	11			11
Additional paid-in capital	185,472			177,081
Accumulated other comprehensive loss	(4,306		)	(2,725		)
Accumulated deficit	(256,424		)	(150,126		)
Less: Treasury stock, 304 shares at cost	(2,157		)	(2,157		)
TOTAL STOCKHOLDERS’ (DEFICIT) EQUITY	(77,404		)	22,084
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	333,752		$	328,212

See accompanying notes to consolidated financial statements.

60

American Apparel, Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

(Amounts and shares in thousands, except per share amounts)

	Years Ended December 31,
	2013			2012			2011
Net sales	$	633,941		$	617,310		$	547,336
Cost of sales	313,056			289,927			252,436
Gross profit	320,885			327,383			294,900
Selling expenses	241,683			227,447			209,841
General and administrative expenses (including related party charges of $1,016, $1,090 and $919 for the years ended December 31, 2013, 2012 and 2011, respectively)	106,957			97,327			104,085
Retail store impairment	1,540			1,647			4,267
(Loss) income from operations	(29,295		)	962			(23,293		)
Interest expense	39,286			41,559			33,167
Foreign currency transaction loss	1			120			1,679
Unrealized loss (gain) on change in fair value of warrants and purchase rights	3,713			4,126			(23,467		)
Loss (gain) on extinguishment of debt	32,101			(11,588		)	3,114
Other expense (income)	131			204			(193		)
Loss before income taxes	(104,527		)	(33,459		)	(37,593		)
Income tax provision	1,771			3,813			1,721
Net loss	$	(106,298	)	$	(37,272	)	$	(39,314	)
Basic and diluted loss per share	$	(0.96	)	$	(0.35	)	$	(0.42	)
Weighted average basic and diluted shares outstanding	110,326			105,980			92,599
Net loss (from above)	$	(106,298	)	$	(37,272	)	$	(39,314	)
Other comprehensive (loss) income item:
Foreign currency translation, net of tax	(1,581		)	631			(188		)
Other comprehensive (loss) income, net of tax	(1,581		)	631			(188		)
Comprehensive loss	$	(107,879	)	$	(36,641	)	$	(39,502	)

See accompanying notes to consolidated financial statements.

61

American Apparel, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ (Deficit) Equity

(Amounts in thousands)

	Number of Common Shares Issued	Par Value Amount		Treasury Stock			Additional Paid-in Capital			Accumulated Other Comprehensive (Loss) Income			Accumulated Deficit			Total Stockholders’ (Deficit) Equity
BALANCE, January 1, 2011	79,192	$	8	$	(2,157	)	$	153,881		$	(3,168	)	$	(73,540	)	$	75,024
Share-based compensation, net	801	—		—			7,107			—			—			7,107
Conversion of debt to equity	2,113	—		—			4,688			—			—			4,688
Sale of common stock, net of fees	26,764	3		—			9,292			—			—			9,295
Reclassification of warrants from equity to debt	—	—		—			(11,339		)	—			—			(11,339		)
Reclassification of purchase rights upon exercise	—	—		—			2,857			—			—			2,857
Net loss	—	—		—			—			—			(39,314		)	(39,314		)
Foreign currency translation, net of tax	—	—		—			—			(188		)	—			(188		)
BALANCE, December 31, 2011	108,870	11		(2,157		)	166,486			(3,356		)	(112,854		)	48,130
Share-based compensation, net	1,241	—		—			10,595			—			—			10,595
Net loss	—	—		—			—			—			(37,272		)	(37,272		)
Foreign currency translation, net of tax	—	—		—			—			631			—			631
BALANCE, December 31, 2012	110,111	11		(2,157		)	177,081			(2,725		)	(150,126		)	22,084
Share-based compensation, net	3,358	—		—			8,391			—			—			8,391
Net loss	—	—		—			—			—			(106,298		)	(106,298		)
Foreign currency translation, net of tax	—	—		—			—			(1,581		)	—			(1,581		)
BALANCE, December 31, 2013	113,469	$	11	$	(2,157	)	$	185,472		$	(4,306	)	$	(256,424	)	$	(77,404	)

See accompanying notes to consolidated financial statements.

62

American Apparel, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Amounts in thousands)

	For the Years ended December 31,
	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers	$	636,049		$	615,342		$	542,930
Cash paid to suppliers, employees and others	(627,910		)	(580,685		)	(534,497		)
Income taxes paid	(2,033		)	(10		)	(866		)
Interest paid	(18,948		)	(10,954		)	(5,535		)
Other	119			(104		)	273
Net cash (used in) provided by operating activities	(12,723		)	23,589			2,305
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(27,054		)	(21,607		)	(11,070		)
Proceeds from sale of fixed assets	173			474			311
Restricted cash	1,734			(3,720		)	—
Net cash used in investing activities	(25,147		)	(24,853		)	(10,759		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	3,993			(1,921		)	(1,407		)
Repayments of expired revolving credit facilities, net	(28,513		)	(48,324		)	(6,874		)
Borrowings under current revolving credit facilities, net	39,794			28,451			—
(Repayments) borrowings of term loans and notes payable	(20,466		)	29,987			(13		)
Repayment of Lion term loan	(144,149		)	—			—
Issuance of Senior Secured Notes	199,820			—			—
Payment of debt issuance costs	(11,909		)	(5,226		)	(1,881		)
Net proceeds from issuance of common stock and purchase rights	—			—			21,710
Payment of payroll statutory tax withholding on share-based compensation associated with issuance of common stock	(2,623		)	(393		)	(759		)
Proceeds from equipment lease financing	—			4,533			3,100
Repayment of capital lease obligations	(1,719		)	(2,893		)	(1,294		)
Net cash provided by financing activities	34,228			4,214			12,582
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	(535		)	(390		)	(1,491		)
NET (DECREASE) INCREASE IN CASH	(4,177		)	2,560			2,637
CASH, beginning of period	12,853			10,293			7,656
CASH, end of period	$	8,676		$	12,853		$	10,293

See accompanying notes to consolidated financial statements.

63

	Years Ended December 31,
	2013			2012			2011
RECONCILIATION OF NET LOSS TO NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
Net loss	$	(106,298	)	$	(37,272	)	$	(39,314	)
Depreciation and amortization of property and equipment and other assets	26,076			22,989			24,980
Retail store impairment	1,540			1,647			4,267
Loss on disposal of property and equipment	241			102			80
Share-based compensation expense	8,451			10,580			6,814
Unrealized loss (gain) on change in fair value of warrants and purchase rights	3,713			4,126			(23,467		)
Amortization of debt discount and deferred financing costs	4,325			10,261			9,024
Loss (gain) on extinguishment of debt	32,101			(11,588		)	3,114
Accrued interest paid-in-kind	9,949			20,344			18,711
Foreign currency transaction loss	1			120			1,679
Allowance for inventory shrinkage and obsolescence	116			(1,331		)	(1,652		)
Bad debt expense	1,512			99			996
Deferred income taxes	(168		)	154			701
Deferred rent	(2,093		)	(895		)	(1,969		)
Changes in cash due to changes in operating assets and liabilities:
Trade accounts receivables	596			(2,067		)	(5,402		)
Inventories	3,715			13,949			(6,771		)
Prepaid expenses and other current assets	(6,063		)	(1,829		)	1,770
Other assets	(4,393		)	(8,455		)	(5,075		)
Accounts payable	2,287			1,779			3,944
Accrued expenses and other liabilities	11,764			(4,223		)	9,701
Income taxes receivable / payable	(95		)	5,099			174
Net cash (used in) provided by operating activities	$	(12,723	)	$	23,589		$	2,305
NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired and included in accounts payable	$	1,576		$	3,778		$	1,323
Property and equipment acquired under capital lease	4,213			—			—
Reclassification of Lion Warrant from equity to debt	—			—			11,339
Conversion of debt to equity	—			—			4,688
Issuance of warrants and purchase rights at fair value	—			—			6,387
Exercise of purchase rights	$	—		$	—		$	2,857

See accompanying notes to consolidated financial statements.

64

American Apparel, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Amounts and Shares in thousands, except per share amounts)

For the Years Ended December 31, 2013, 2012 and 2011

Note 1. Organization and Business

American Apparel, Inc. and its subsidiaries (collectively “the Company”) is a vertically-integrated manufacturer, distributor, and retailer of branded fashion basic apparel products and designs, manufactures and sells clothing and accessories for women, men, children and babies. The Company sells its products through the wholesale distribution channel supplying t-shirts and other casual wear to distributors and screen printers, as well as direct to customers through its retail stores located in the United States, and internationally. In addition, the Company operates an online retail e-commerce website. At December 31, 2013, the Company operated a total of 248 retail stores in 20 countries: the United States, Canada and 18 other countries.

Liquidity and Management's Plan

As of December 31, 2013, the Company had approximately $8,676 in cash and $6,268 of availability for additional borrowings under the credit facility with Capital One Business Credit Corp. ("Capital One" and such facility the "Capital One Credit Facility") and the Company's credit agreement with Bank of Montreal ("the Bank of Montreal Credit Agreement") (as defined in Note 7). Additionally, the Company had $43,526 outstanding on a $50,000 asset-backed revolving credit facility (increased from $35,000 to $50,000 on July 5, 2013) under the Capital One Credit Facility and $443 outstanding on the C$5,000 (Canadian dollars) revolving credit facility under the Bank of Montreal Credit Agreement. On February 28, 2014 the Bank of Montreal Credit Agreement was reduced to C$2,000. Amounts outstanding were repaid, and the agreement expired by its own terms on March 31, 2014.

On February 28, 2014, the Company had approximately $4,878 in cash and $3,299 of availability for additional borrowings under the Capital One Credit Facility and Bank of Montreal Credit Agreement.

On April 4, 2013, the Company closed a private offering of $206,000 aggregate principal amount of its Senior Secured Notes due April 15, 2020 (the "Notes") at 97% of par and also entered into a new $35,000 asset-backed revolving credit facility with Capital One maturing on April 4, 2018, subject to a January 15, 2018 maturity under certain circumstances. Subsequently, on July 5, 2013, the Company entered into an amendment to the Capital One Credit Facility, pursuant to which the total commitment under the credit facility was raised to $50,000. Interest on the Notes approximating $13,500 per payment period (in 2014), is payable semi-annually, in arrears, on April 15 and October 15 of each year, beginning on October 15, 2013. The Company used the net proceeds from the offering of the Notes, together with borrowings under the new credit facility, to repay and terminate its credit agreement with Crystal Financial LLC ("Crystal") and its loan agreement with Lion Capital LLP ("Lion"). The notes and the new credit facility are the Company's senior secured obligations and are guaranteed, on a senior secured basis, by the Company's domestic restricted subsidiaries, subject to some exceptions.

During the third quarter of 2013, the Company determined it was probable that a special interest trigger event under the indenture governing the Notes would occur as of December 31, 2013 and accrued interest on the Notes at 15% retroactive to April 4, 2013 representing an additional 2% interest, which additional interest is payable in-kind until April 15, 2018 and in cash on subsequent interest dates. The Company recorded $3,044 in additional interest expense for the special interest trigger event for the year ended December 31, 2013. The company will pay in-kind the additional 2% interest retroactive to the issue date of the Notes on the next interest payment date, April 15, 2014.

Under the Capital One Credit Facility, the Company was in violation of certain covenants for the twelve consecutive fiscal months ended September 30, 2013 and December 31, 2013, and anticipated a violation for the twelve months ended March 31, 2014.

On November 14, 2013, the Company entered into a third amendment to the Capital One Credit Facility, which among other things, waived the obligation to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio for the twelve consecutive fiscal month period ending September 30, 2013. As a condition to the waiver, the Company agreed to a one percentage point increase in the interest rate to either LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at the Company's option) and limitations on amounts available to be borrowed, consisting of the imposition of a reserve against the line that gradually reduced the total borrowing capacity to $47,500 and certain amendments to the borrowing base calculation.  In addition, the Company paid a waiver fee of $75.

On March 25, 2014, the Company entered into a fifth amendment to the Capital One Credit Facility which, effective upon its receipt of at least $25,000 of net proceeds from a financing prior to April 15, 2014, among other things: waives the obligation to maintain the minimum fixed charge coverage and maximum leverage ratios for the three month periods ended December 31, 2013 and March 31, 2014; resets for future periods the fixed charge coverage ratio, the maximum leverage ratio and the maximum capital expenditures allowed; adds a minimum EBITDA covenant; increases the interest rate payable under the credit

65

agreement by 0.5% per annum to either LIBOR plus 5.0% or the bank's prime rate plus 4.0% (at the Company's option); and increases the fees payable upon early termination.

On May 22, 2013 the Company entered into a loan agreement with Lion (the “Lion Loan Agreement”) in a principal amount of $4,500. On November 29, 2013, the Lion Loan Agreement was amended to increase the amount we borrowed by $5,000 and to make certain other technical amendments. The term loans under the Lion Loan Agreement mature on October 4, 2018 and bear interest at an initial interest rate of 18% per annum, which interest rate increased to 20% per annum due to the occurrence of a special interest trigger event under the Notes. Interest under the loan agreement is payable in cash or, to the extent permitted by the Company’s other debt agreements, in-kind.

On March 31, 2014, the Company completed a public offering of approximately 61,645 shares of its common stock at $0.50 per share for net proceeds of approximately $28,500. As a result of this offering, common stock issued and outstanding were 175,109 and 173,377 shares, respectively. Additionally, the underwriters have a 30 day option to acquire up to an additional 8,500 shares of the Company's common stock at $0.50 per share.

The Company believes that it has sufficient financing commitments to meet funding requirements for the next twelve months.

The Company's transition to its new distribution center in La Mirada, California has had a significant negative impact on the Company's earnings and cash flow in 2013. For the yearended December 31, 2013, the Company incurred incremental distribution costs associated with these transition activities of approximately $14,874. All such costs have been charged to cost of sales and operating expense in the accompanying statements of operations. The issues surrounding the transition primarily relate to improper system design and integration and inadequate training and staffing. These issues caused processing inefficiencies that required the Company to employ additional staffing, among other things, in order to meet customer demand. The transition was successfully completed during the fourth quarter of 2013. The center is now fully operational and labor costs have been reduced.

The Company continues to develop other initiatives intended to either increase sales, reduce costs or improve liquidity. In the fourth quarter of 2013 and continuing into January of 2014, significant reductions were made in payroll and related costs associated with manufacturing and administrative overheads. The Company also instituted a program in the first quarter of 2014 to limit capital expenditures. Additionally, the Company intends to continue to drive productivity improvements from its new distribution center, reduce inventories, reduce store labor costs, and evaluate further consolidation of administrative and manufacturing functions. Efforts to identify additional ways to reduce costs and improve productivity are ongoing.

Although the Company has made significant improvements under this plan, the Company's cash flows are dependent upon meeting future sales growth projections and reducing certain expenses. There can be no assurance that planned improvements will be successful.

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of American Apparel, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. Certain reclassifications have been made to the prior year consolidated financial statements and related footnotes to conform them to the 2013 presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most complex and subjective estimates include: inventory valuation and obsolescence; valuation and recoverability of long-lived assets, including the values assigned to goodwill and property and equipment; fair value calculations, including derivative liabilities such as warrants; contingencies, including accruals for the outcome of current litigation and assessments and self-insurance; income taxes, including uncertain tax positions and recoverability of deferred income taxes; and cash flow projections in assessing future performance related to financial standards requiring a prospective analysis in valuing and classifying assets and liabilities.

On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted. Actual results could differ from the estimates.

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Restricted Cash

Restricted cash primarily represented cash collateral on standby letters of credit. The standby letters of credit are predominantly used as collateral for the Company's workers' compensation program. See Note 16.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to credit risk consist primarily of cash (the amounts of which may, at times, exceed Federal Deposit Insurance Corporation limits on insurable amounts) and trade accounts receivable, relating substantially to the Company’s U.S. Wholesale segment. The Company mitigates its cash risk by investing through major financial institutions. The Company had approximately $7,374 and $8,265 held in foreign banks at December 31, 2013, and 2012, respectively.

The Company mitigates its risks related to trade receivables by performing on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information. The Company also maintains an insurance policy for certain customers based on a customer’s credit rating and established limits. Collections and payments from customers are continuously monitored. One customer, in the U.S. Wholesale segment, accounted for 14.2% and 15.1% of the Company’s total accounts receivables as of December 31, 2013 and 2012, respectively. The Company maintains an allowance for doubtful accounts, which is based upon historical experience and specific customer collection issues that have been identified. While bad debt expenses have historically been within expectations and allowances established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past.

Fair Value Measurements

The Company’s financial instruments are primarily composed of cash, restricted cash, accounts receivable (including credit card receivables), accounts payable, revolving credit borrowings, its senior secured notes, term loans and warrants. The fair value of cash, restricted cash, accounts receivable and accounts payable closely approximates their carrying value due to their short maturities and variable rates. The fair value of fixed-rate borrowings not based on quoted prices is estimated using a discounted cash flow analysis.

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related asset or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities.

Wherever possible, the Company utilizes observable market inputs (quoted market prices) when measuring fair value.

For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company's accounting and finance department determine valuation policies and procedures. Their determinations are approved by the Chief Financial Officer.

As of December 31, 2013, there were no transfers in or out of Level 2 and Level 3 from other levels.

The fair value of fixed rate borrowings not based on quoted prices are estimated using a projected discounted cash flow analysis based on unobservable inputs including interest payments, principal payments and discount rate, and is classified within Level 3 of the valuation hierarchy. An increase or decrease in the stock price and the discount rate assumption can significantly decrease or increase the fair value of the fixed rate borrowings. See Note 9.

The fair value of each warrant was estimated using the Binomial Lattice option valuation model. Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and were classified within Level 3 of the valuation hierarchy. An increase or decrease in these inputs could significantly increase or decrease the fair value of the warrant. See Notes 9 and 13.

The fair value of indefinite-lived assets, which consists exclusively of goodwill, is measured in connection with the Company’s annual goodwill impairment test.  The fair value of the reporting unit to which goodwill has been assigned, is determined using a projected discounted cash flow analysis based on unobservable inputs including gross profit, discount rate, working capital requirements, capital expenditures, depreciation and terminal value assumptions, and are classified within Level 3 of the valuation hierarchy. An increase or decrease in the discount rate assumption and/or the terminal value assumption, in isolation, can have a significant effect on the fair value of the reporting unit. See Goodwill and Other Intangible Assets below.

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Retail stores that have indicators of impairment and whose carrying value of assets are greater than their related projected undiscounted future cash flows, are measured for impairment by comparing the fair value of the assets against their carrying value. Fair value of the assets is estimated using a projected discounted cash flow analysis based on unobservable inputs including gross profit and discount rate, and is classified within Level 3 of the valuation hierarchy.  The key assumptions used in the estimates of projected cash flows were sales, gross margin and payroll costs. These forecasts are based on historical trends and take into account recent developments, as well as the Company's plans and intentions. An increase or decrease in the discount rate assumption and/or projected cash flows, in isolation, can significantly decrease or increase the fair value of the assets, which would have an effect on the impairment recorded. See Impairment of Long-Lived Assets below.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of companies acquired. Goodwill and other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but are instead tested for impairment at least annually. The Company’s annual impairment test date is December 31.

Based on the qualitative assessment provisions of ASC 350 "Intangibles-Goodwill and Other", the Company determined that based on an analysis of qualitative factors, the fair value of the reporting unit was more likely than not greater than its carrying amount, and therefore, a quantitative calculation of the reporting unit's fair value was not be needed. The Company has not historically had any goodwill impairment.

Other intangible assets consist of deferred financing costs (amortized over the term of the applicable debt facility) and key money, broker and finder fees and lease rights (amortized over the life of the respective lease).

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if a write down to a new depreciable basis is required. If required, an impairment charge is measured by the difference between the carrying value and the estimated fair value of the assets, with such estimated fair values generally determined using the discounted future cash flows of the assets using a rate that approximates the Company’s weighted average cost of capital. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of retail stores relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of the assets or in the Company's overall strategy with respect to the manner or use of the acquired assets or changes in the Company's overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company's stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets and its retail stores for potential impairment indicators at least annually and more frequently upon the occurrence of events that could impact prior conclusions.

The key assumptions used in management's estimates of projected cash flow at its retail stores deal largely with forecasts of sales levels, gross margins, and payroll costs. These forecasts are typically based on historical trends and take into account recent developments as well as management's plans and intentions. Any material change in manufacturing costs or a raw material costs could significantly impact projected future cash flows of retail stores and these factors are considered in evaluating impairment. Other factors, such as increased competition or a decrease in the desirability of the Company's products, could lead to lower projected sales levels, which would adversely impact cash flows. A significant change in cash flows in the future could result in an impairment of long lived assets.

Web Site Development

The Company capitalizes applicable costs incurred during the application and infrastructure website development stage and expenses costs incurred during the planning and operating stage. As of December 31, 2013 and 2012, the carrying value of the Company's capitalized website development costs were $2,805 and $2,242, respectively, and were included in property and equipment in the accompanying consolidated balance sheets.

Self-Insurance Liabilities

The Company self-insures a significant portion of expected losses under workers’ compensation and healthcare benefits programs. Estimated costs under the workers’ compensation program, including incurred but not reported claims, are recorded as expense based upon historical experience, trends of paid and incurred claims, and other actuarial assumptions. If actual claim trends under these programs, including the severity or frequency of claims, differ from the Company's estimates, its financial results may be significantly impacted. The Company's estimated self-insurance liabilities are classified in its balance sheets as accrued expenses or other long-term liabilities based upon whether they are expected to be paid during or beyond the Company's normal operating cycle of 12 months from the date of its consolidated financial statements. Estimated costs under

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the Company's healthcare program are based on estimated losses for claims incurred, but not paid at the end of the period. Funding is made directly to the providers and/or claimants by the insurance company.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. For the years ended December 31, 2013, 2012 and 2011, the Company recorded a valuation allowance against deferred tax assets of $120,694, $77,578 and $73,773. For all years presented, the Company recorded a valuation allowance against substantially all deferred tax assets. In the event the Company determines that it will be able to realize deferred income tax assets in the future, it will make an adjustment to the valuation allowance.

The Company records net deferred tax assets to the extent it believes these assets will be realized using a more likely than not standard. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.

Management makes judgments as to the interpretation of tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management's opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

The Company accounts for uncertain tax positions in accordance with ASC 740-“Income Taxes”. Gross unrecognized tax benefits are included in other long-term liabilities in the accompanying consolidated balance sheets. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying consolidated statements of operations.

Contingencies

Certain conditions may exist at the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings or governmental assessments that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of these matters as well as the merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company's consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, is disclosed. Associated legal fees are expensed as incurred.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

In making these determinations, the Company assesses the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. Management determines the amount of reserves needed, if any, for each individual issue based on its knowledge and experience and discussions with legal counsel. The required reserves may change in the future due to new developments in each matter, the ultimate resolution of each matter, or changes in approach, such as a change in settlement strategy. The Company currently does not believe, based upon information available, that these matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows. There can be no assurance that such matters will not materially and adversely affect the Company's business, financial position, and results of operations or cash flows. See Notes 15 and 18, Commitments and Contingencies and Litigation.

Revenue Recognition

The Company recognizes product sales when title and risk of loss have transferred to the customer, there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collectability is reasonably assured. Wholesale product sales are recorded at the time the product is either picked up by or shipped to the customer. Online product sales are recorded at the time the product is received by the customer. Retail store sales are recorded as revenue upon the sale of product to retail customers.

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The Company’s net sales represent gross sales invoiced to customers, less certain related charges for discounts, returns, and other promotional allowances, and are recorded net of sales or value added tax. Allowances provided for these items are presented in the consolidated financial statements primarily as reductions to sales and cost of sales (see Sales Returns and Allowances below for further information).

The Company recognizes revenue from gift cards, gift certificates and store credits as they are redeemed for product or when it is determined that some portion of gift cards will not be redeemed. See Gift Cards below.

Sales Returns and Allowances

The Company analyzes sales returns in order to make reasonable estimates of product returns for its wholesale, online and retail store sales based upon historical experience. Estimates for sales returns are based on a variety of factors including actual returns based on expected return data communicated to the Company by its customers. Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns. The Company regularly reviews the factors that influence its estimates and, if necessary, makes adjustments when it believes that actual product returns and credits may differ from established reserves. If actual or expected future returns and claims are significantly greater or lower than the allowance for sales returns established, the Company would record a reduction or increase to net revenues in the period in which it made such determination.

Shipping and Handling Costs

Shipping and handling costs consist primarily of freight expenses incurred to transport products to the Company's retail stores and distribution center, and to its wholesale and online retail customers. These costs are included in cost of sales. Amounts billed to customers for shipping are included in net sales.

Gift Cards

Upon issuance of a gift card a liability is established for the cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Over time, some portion of gift cards is not redeemed ("breakage"). The Company determines breakage income for gift cards based on historical redemption patterns. Breakage income is recorded as a credit to selling expenses, which is a component of operating expenses in the consolidated statements of operations. Currently, the Company records breakage when gift cards remain unredeemed after two-years. The Company's gift cards, gift certificates and store credits do not have expiration dates. See Note 6.

The Company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate breakage.

Trade Receivables and Allowance for Doubtful Accounts

Accounts receivable primarily consists of trade receivables, including amounts due from credit card companies, net of allowances. On a periodic basis, the Company evaluates its trade receivables and establishes an allowance for doubtful accounts.

The Company performs on-going credit evaluations of its customers and adjust credit limits based upon payment history and the customer’s current credit worthiness, as determined by its review of current credit information. Payments from customers are continuously monitored. The Company maintains an allowance for doubtful accounts, which is based upon historical experience as well as specific customer collection issues that have been identified. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Deferred Rent, Rent Expense and Tenant Allowances

The Company occupies its retail stores, corporate office, manufacturing, and distribution center under operating leases generally with terms of one to ten years. Some leases contain renewal options for periods ranging from five to fifteen years under substantially the same terms and conditions as the original leases but with rent adjustments based on various factors specific to each agreement. Many of the store leases require payment of a specified minimum rent, a contingent rent based on a percentage of the store’s net sales in excess of a specified threshold, plus defined escalating rent provisions. The Company recognizes its minimum rent expense on a straight-line basis over the term of the lease (including probable lease renewals), plus the construction period prior to occupancy of the retail location, using a mid-month convention. Also included in rent expense are payments of real estate taxes, insurance and certain common area and maintenance costs in addition to the future minimum operating lease payments. Certain lease agreements provide for the Company to receive lease inducements or tenant allowances from landlords to assist in the financing of certain property. These inducements are recorded as a component of deferred rent and amortized as a reduction of rent expense over the term of the related lease.

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Advertising, Promotion and Catalog

The Company expenses the production costs of advertising the first time the advertising takes place. Advertising, promotion and catalog expenses for the years ended December 31, 2013, 2012 and 2011 amounted to $19,814, $22,114, and $15,194 respectively, and are included in selling expenses in the accompanying consolidated statements of operations. The Company has cooperative advertising arrangements with certain vendors in its U.S. wholesale segment. For the years ended December 31, 2013, 2012 and 2011, cooperative advertising expenses were not significant.

Share-Based Compensation

The Company recognizes compensation expense on a straight-line basis net of forfeitures over the vesting period for all share-based awards granted. The Company determines the fair value of restricted stock awards based on the market value at the grant date. The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards at the grant date. The Company calculates the expected volatility using the historical volatility over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. Due to the lack of historical information, the Company determines the expected term of its stock option awards by using the simplified method, which assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires. Estimated forfeitures are zero, as to date, actual forfeitures have been insignificant. The expected dividend yield is zero as the Company has not paid or declared any cash dividends on its Common Stock. Based on these valuations, the Company recognized share-based compensation expense of $8,451, $10,580, and $6,814 for the years ended December 31, 2013, 2012 and 2011, respectively.

Preferred Stock

At December 31, 2013 and 2012, the Company was authorized to issue 1,000 shares of preferred stock with a par value of $0.0001 with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. There were no shares issued or outstanding at December 31, 2013 and 2012. Shares may be issued in one or more series.

Earnings per Share

The Company presents earnings per share (“EPS”) utilizing a dual presentation of basic and diluted EPS. Basic EPS includes no dilution and is computed by dividing net (loss) income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The Company had common stock under various options, warrants and other agreements at December 31, 2013, 2012 and 2011. The weighted average effects of 46,684, 53,478 and 49,270 shares at December 31, 2013, 2012 and 2011, respectively, were excluded from the calculations of net loss per share for the years ended December 31, 2013, 2012 and 2011, because their impact would have been anti-dilutive. See Note 13.

Comprehensive Loss

Comprehensive loss represents the change in stockholders’ equity resulting from transactions other than stockholder investments and distributions. Accumulated other comprehensive loss includes changes in equity that are excluded from the Company’s net loss, specifically, unrealized gains and losses on foreign currency translation adjustments and is presented in the consolidated statements of stockholders' equity. The Company presents the components of comprehensive loss within the consolidated statements of operations and comprehensive loss.

Accounting Standards Updates

Accounting standards updates effective after December 31, 2013, are not expected to have a material effect on the Company's consolidated financial statements.

Subsequent Events

The Company has evaluated events that occurred subsequent to December 31, 2013 and through the date the financial statements were issued.

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Note 3. Inventories

The following table presents the components of inventories at December 31, 2013 and 2012:

	2013			2012
Raw materials	$	23,199		$	22,301
Work in process	2,596			2,197
Finished goods	146,361			152,384
	172,156			176,882
Less: Reserve for inventory shrinkage and obsolescence	(2,778		)	(2,653		)
	$	169,378		$	174,229

Inventories are stated at the lower of cost or market. Cost is primarily determined on the first-in, first-out (FIFO) method. The cost elements of inventories include materials, labor and overhead. For the years ended December 31, 2013, 2012 and 2011, no one supplier provided more than 10% of the Company’s raw material purchases.

The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors and provides reserves for lower of cost or market reserves for such identified excess and slow-moving inventories. At December 31, 2013 and 2012, the Company had a lower of cost or market reserve for excess and slow-moving inventories of $1,951 and $2,140, respectively.

The Company establishes a reserve for inventory shrinkage for each of its retail locations and its warehouse. The reserve is based on the historical results of physical inventory cycle counts. The Company has a reserve for inventory shrinkage in the amount of $827 and $513 at December 31, 2013 and 2012, respectively.

Note 4. Property and Equipment

The following table presents the components of property and equipment at December 31, 2013 and 2012:

	2013			2012
Machinery and equipment	$	58,069		$	50,180
Furniture and fixtures	46,749			42,430
Computers and software	45,402			37,556
Automobiles and light trucks	1,334			1,167
Leasehold improvements	95,886			86,623
Buildings	547			587
Construction in progress	1,353			5,293
	249,340			223,836
Less: Accumulated depreciation and amortization	(180,037		)	(156,058		)
Total	$	69,303		$	67,778

Property and equipment is recorded on the basis of cost and is depreciated over the estimated used useful lives of fixed assets. The useful lives of the Company's major classes of assets are as follows:

Machinery and equipment	5 to 7 years
Furniture and fixtures	3 to 5 years
Computers and software	3 to 5 years
Automobiles and light trucks	3 to 5 years
Leasehold improvements	Shorter of lease term or useful life
Buildings	25 years

Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets. The costs of normal maintenance and repairs are charged to expense in the year incurred. Expenditures which significantly improve or extend the life of an asset are capitalized and depreciated over the asset’s remaining useful life. Amortization of leasehold improvements

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is computed using the straight-line method over the shorter of the estimated useful lives of the related assets or the lease term. Upon sale or disposition, the related cost and accumulated depreciation are removed from the Company’s financial statements and the resulting gain or loss, if any, is reflected in income from operations. Property plant and equipment acquired are recorded as construction in progress until placed in-service, at which time the asset is reclassified to the appropriate asset category and depreciation commences. For the years ended December 31, 2013, 2012, and 2011, depreciation and amortization expense relating to property and equipment was $26,076, $22,989 and $24,980, respectively. At December 31, 2013 and 2012, property and equipment includes $15,115 and $16,415, for machinery and equipment held under capital leases, respectively. Accumulated amortization for these capital leases at December 31, 2013 and 2012 was $12,252 and $12,093.

The Company identified indicators of impairment present at certain retail stores within its U.S. Retail, Canadian and International segments, specifically related to under-performance or operating losses relative to expected historical or projected future operating results. The Company performed a recoverability test on these stores, and for the stores which failed the test, measured and recorded an impairment charge as applicable. The key assumptions used in the estimates of projected cash flows utilized in both the test and measurement steps of the impairment analysis were sales, gross margins, and payroll costs. These forecasts were based on historical trends and take into account recent developments as well as the Company's plans and intentions. Based upon the results of the discounted cash flow analysis, the Company recorded an impairment charge, primarily on certain retail store leasehold improvements, of $1,540, $1,647 and $4,267 for the years ended December 31, 2013, 2012, and 2011, respectively.

Note 5. Goodwill, Intangible Assets and Other Assets

Goodwill of $1,906 is assigned to the U.S. Wholesale segment and is related to the acquisition of American Apparel Dyeing & Finishing, Inc. on June 2, 2005 and American Apparel Garment and Dyeing, Inc. on May 9, 2008.

Based on the quantitative assessment provisions of ASC 350 "Intangibles-Goodwill and Other", the Company determined that the fair value of the reporting unit was more likely than not greater than its carrying amount. For the years ended December 31, 2013, 2012 and 2011, the Company had no goodwill impairment.

The following table presents the net carrying amounts of definite and indefinite lived intangible assets and other assets at December 31, 2013 and 2012:

	2013			2012
Deferred financing costs	$	10,275		$	4,101
Broker and finder fees	1,779			1,486
Lease rights	187			213
Key money on store leases	1,652			2,244
Gross amortizable intangible assets	13,893			8,044
Accumulated amortization	(2,361		)	(2,048		)
Total net amortizable intangible assets	11,532			5,996
Goodwill	1,906			1,906
Workers compensation deposit	16,124			14,624
Lease security deposits	9,013			8,117
Restricted cash	2,078			—
Other	6,074			4,140
Total	$	46,727		$	34,783

Deferred financing costs represent costs incurred in connection with the issuance of certain indebtedness and were capitalized as deferred costs and are being amortized over the term of the related indebtedness. The Company incurred related amortization expense of $1,895, $2,287, and $1,634, for the years ended December 31, 2013, 2012 and 2011, respectively, which is recorded to interest expense.

Lease rights are costs incurred to acquire the right to lease a specific property. A majority of the Company's lease rights are related to premiums paid to landlords. Lease rights are recorded at cost and are amortized over the term of the respective leases.

Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease for a certain property. Key money represents the “right to lease” with an automatic right of renewal. This right can be subsequently sold by the Company or can be recovered should the landlord refuse to allow the automatic right of renewal to be exercised. Key money is amortized over the respective lease terms.

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Aggregate amortization expense of intangible assets and other assets (excluding deferred financing costs) is included in operating expenses in the consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011 and was approximately $456, $472, and $752, respectively.

The following table presents the estimated amortization expense of deferred financing costs, broker and finder fees, lease rights and key money for each of the five succeeding years as of December 31, 2013:

	Amount
2014	$	2,119
2015	2,013
2016	1,901
2017	1,877
2018 and thereafter	3,622

Note 6. Accrued Expenses and Other Current Liabilities

The following table presents the components of accrued expenses and other current liabilities as of December 31, 2013 and 2012:

	2013		2012
Compensation, bonuses and related taxes	$	10,170	$	11,524
Accrued interest	6,064		520
Workers’ compensation and other self-insurance reserves (Note 16)	6,383		5,288
Sales, value and property taxes	3,868		4,751
Gift cards and store credits	7,391		5,964
Loss contingencies	1,177		752
Accrued vacation	1,603		1,055
Deferred revenue	1,258		590
Deferred rent	3,363		2,997
Other	8,741		8,075
Total accrued expenses	$	50,018	$	41,516

Note 7. Revolving Credit Facilities and Current Portion of Long-Term Debt

The following table presents revolving credit facilities and current portion of long-term debt as of December 31, 2013 and 2012:

	2013		2012
Revolving credit facility (Capital One), maturing April 2018	$	43,526	$	—
Revolving credit facility (Crystal), replaced in April 2013	—		26,113
Term loan (Crystal), replaced in April 2013	—		30,000
Revolving credit facility (Bank of Montreal), maturing March 2014	443		4,387
Current portion of long-term debt (Note 8)	73		56
Total revolving credit facilities and current portion of long-term debt	$	44,042	$	60,556

The Company incurred interest charges of $39,286, $41,559 and $33,167 for the years ended December 31, 2013, 2012 and 2011, respectively, for all outstanding borrowings. The interest charges subject to capitalization for the years ended December 31, 2013, 2012 and 2011 were not significant.

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Revolving Credit Facility - Capital One

On April 4, 2013, the Company and its domestic subsidiaries replaced the credit facility with Crystal with a new $35,000 asset-based revolving facility with Capital One. On July 5, 2013, the Company entered into an amendment to the credit agreement with Capital One, pursuant to which the total commitment under the credit facility was raised to $50,000. The additional commitment was made under substantially the same terms as the existing facility.

The Capital One Credit Facility matures on April 4, 2018, subject to a January 15, 2018 maturity if excess availability is less than $15,000 at the time of notice to Capital One of a determination by the Company that an Applicable High Yield Discount Obligation ("AHYDO") redemption will be required pursuant to Section 3.01(e) of the indenture governing the Notes. See Note 8, Long-Term Debt. Borrowings under the Capital One Credit Facility bear interest equal to LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at the Company's option) and are subject to maintenance of specified borrowing base requirements and covenants. The Capital One Credit Facility is secured by a lien on substantially all of the assets of the Company's domestic subsidiaries and equity interests in certain of the Company's foreign subsidiaries, subject to some exceptions. As of December 31, 2013, the Company had $1,230 of outstanding letters of credit secured against the Capital One Credit Facility. The amount available for additional borrowings on December 31, 2013 was $4,179.

Among other provisions, the Capital One Credit Facility requires that the Company maintain a lockbox arrangement and contains certain subjective acceleration clauses. In addition, Capital One may at its discretion, adjust the advance restriction and criteria for eligible inventory and accounts receivable. The Capital One Credit Facility contains cross-default provisions whereby an event of default under the Bank of Montreal Credit Agreement, under the indenture governing the Notes or other indebtedness, in each case of an amount greater than a specified threshold, would cause an event of default under the Capital One Credit Facility.

The Company is required to maintain a minimum fixed charge coverage ratio of not less than 1.00 to 1.00 and is also required to not exceed certain maximum leverage ratio thresholds, both determined as at the end of each fiscal quarter. Additionally, the Company's domestic subsidiaries are subject to an annual limitation of certain specified capital expenditure amounts as determined at the end of each fiscal year.

Under the Capital One Credit Facility, the Company was in violation of certain covenants for the twelve consecutive fiscal months ended September 30, 2013 and December 31, 2013, and anticipated a violation for the twelve months ended March 31, 2014.

On November 14, 2013, the Company entered into a third amendment to the Capital One Credit Facility, which among other things, waived the obligation to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio for the twelve consecutive fiscal month period ending September 30, 2013. As a condition to the waiver, the Company agreed to a one percentage point increase in the interest rate to either LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at the Company's option) and limitations on amounts available to be borrowed, consisting of the imposition of a reserve against the line that gradually reduced the total borrowing capacity to $47,500 and certain amendments to the borrowing base calculation.  In addition, the Company paid a waiver fee of $75 .

On March 25, 2014, the Company entered into a fifth amendment to the Capital One Credit Facility which, effective upon its receipt of at least $25,000 of net proceeds from a financing prior to April 15, 2014, among other things: waives the obligation to maintain the minimum fixed charge coverage and maximum leverage ratios for the three month periods ended December 31, 2013 and March 31, 2014; resets for future periods the fixed charge coverage ratio, the maximum leverage ratio and the maximum capital expenditures allowed; adds a minimum EBITDA covenant; increases the interest rate payable under the credit agreement by 0.5% per annum to either LIBOR plus 5.0% or the bank's prime rate plus 4.0% (at the Company's option); and increases the fees payable upon early termination.

Revolving Credit Facility - Bank of Montreal

On December 31, 2013, the Company's wholly-owned Canadian subsidiaries, entered into a fourth amendment to the Bank of Montreal Credit Agreement that reduced the existing revolving credit facility amount from C$11,000 (Canadian dollars) to C$5,000 (Canadian dollars) and extended the maturity date to February 28, 2014. On February 28, 2014, the revolving credit facility commitment was further reduced to C$2,000 (Canadian dollars) and the maturity set to March 31, 2014. Additionally, the Company paid an extension fee of $10 plus certain legal fees. Outstanding amounts under the Bank of Montreal Credit Agreement was repaid, and on March 31, 2014 expired by its terms.

The Bank of Montreal Credit Agreement bore interest at 7.0% (the bank's prime rate at 3.0% as of December 31, 2013 plus 4.0% per annum) payable monthly. This line of credit was secured by a lien on the Canadian subsidiaries' accounts receivable, inventory and certain other tangible assets. Available borrowing capacity at December 31, 2013 was $2,089.

The Bank of Montreal Credit Agreement contained a fixed charge coverage ratio and restricts the Company's Canadian subsidiaries from entering into operating leases above a specified threshold. Additionally, the Bank of Montreal Credit

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Agreement imposed a minimum excess availability covenant, which required the Company's Canadian subsidiaries to maintain at all times minimum excess availability of 5.0% of the revolving credit commitment under the facility.

The Bank of Montreal Credit Agreement contained cross-default provisions with the Capital One Credit Facility and the Notes, whereby an event of default occurring thereunder would cause an event of default under the Bank of Montreal Credit Agreement.

As of December 31, 2013, the Company was in compliance with all required financial covenants of the Bank of Montreal Credit Agreement.

Revolving Credit Facility and Term Loan - Crystal

On April 4, 2013, the Company replaced its existing revolving credit facility and term loan with Crystal (the "Crystal Credit Agreement"), with a new asset-based revolving credit agreement with Capital One.

In connection with the termination of the Crystal Credit Agreement, the Company paid an early termination fee of $2,400 . The difference between the net carrying amount of the Crystal loans of $60,533 (which includes the outstanding balance, accrued but unpaid interest, and unamortized financing cost immediately prior to the date of the extinguishment) and the cash paid to Crystal of $66,411 , which includes the early termination fee, was recorded as a $5,878 loss on early extinguishment of debt in the statement of operations for the year ended December 31, 2013.

On March 13, 2012, the Company replaced its revolving credit facility of $75,000 with Bank of America with an $80,000 senior credit facility with Crystal and other lenders. The Crystal Credit Agreement called for the $80,000 to be allocated between an asset based revolving credit facility of $50,000 and term loan of $30,000. In connection with the financing from Crystal, the Company entered into an amendment to the Lion Credit Agreement. See Notes 8 and 13.

Note 8. Long-Term Debt

The following table presents the components of long-term debt as of December 31, 2013 and 2012:

	2013				2012
Senior secured notes due 2020	$	203,265		(a)	$	—
Long-term debt with Lion, replaced in April 2013	—				109,680			(b)
Long-term debt with Lion, maturing October 2018	9,865			(c)	—
Other	411				388
Total long-term debt	213,541				110,068
Current portion of debt	(73		)		(56		)
Long-term debt, net of current portion	$	213,468			$	110,012

(a)Includes accrued interest paid-in-kind of $3,044 of and net of unamortized discount of $5,779 at December 31, 2013.

(b)Includes accrued interest paid-in-kind of $16,469 and net of unamortized discount of $27,929 at December 31, 2012.

(c)Includes accrued interest paid-in-kind of $365 at December 31, 2013.

Senior Secured Notes due 2020

On April 4, 2013, the Company issued the Notes in an aggregate principal amount of $206,000. The Notes mature on April 15, 2020. The Notes were issued at 97% of par value with an interest rate at issuance of 13% per annum, subject to adjustment. Interest on the Notes approximating $13,500 per payment period (in 2014), is payable semi-annually, in arrears, on April 15 and October 15 of each year, beginning on October 15, 2013.

A "special interest trigger event" is deemed to have occurred under the indenture governing the Notes if the Company's net leverage ratio for the year ended December 31, 2013 is greater than 4.50 to 1.00. Upon the occurrence of a special interest trigger event, interest on the Notes accrues at the rate of 15% per annum, retroactive to April 4, 2013, with the interest in excess of 13% per annum payable (i) in the case of any interest payment date prior to April 15, 2018, by adding such excess interest to the principal amount of the Notes on the interest payment date, and (ii) for any interest payment date on or after April 15, 2018, in cash.

During the third quarter of 2013, the Company determined it was probable that a special interest trigger event under the indenture governing the Notes would occur as of December 31, 2013 and accrued interest on the Notes at 15% retroactive to April 4, 2013 representing an additional 2% interest, which additional interest is payable in kind until April 15, 2018 and in cash on subsequent interest dates. The Company recorded $3,044 in additional interest expense for the special interest trigger

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event for the year ended December 31, 2013. The company will pay in-kind the additional 2% interest retroactive to the issue date of the notes on the next interest payment date, April 15, 2014.

On or after April 15, 2017, the Company may, at its option, redeem some or all of the Notes at a premium decreasing ratably to zero as specified in the indenture, plus accrued and unpaid interest to, but not including, the redemption date. Prior to April 15, 2017, the Company may, at its option, redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of certain equity offerings at a redemption price of 113% of the aggregate principal amount of the redeemed notes plus accrued and unpaid interest to, but not including, the redemption date. In addition, at any time prior to April 15, 2017 the Company may, at its option, redeem some or all of the Notes by paying a "make whole" premium, plus accrued and unpaid interest to, but not including, the redemption date. If the Company experiences certain change of control events, the holders of the Notes will have the right to require the Company to purchase all or a portion of the Notes at a price in cash equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest to, but not including, the date of purchase. In addition, the Company is required to use the net proceeds of certain asset sales, if not used for specified purposes, to purchase some of the Notes at 100% of the principal amount, plus accrued and unpaid interest to, but not including, the date of purchase. On each interest payment date after April 4, 2018, the Company will be required to redeem, for cash, a portion of each Note then outstanding equal to the amount necessary to prevent such Note from being treated as an “applicable high yield discount obligation” within the meaning of the Internal Revenue Code. The redemption price will be 100% of the principal amount plus accrued and unpaid interest thereon on the date of redemption.

The Notes are guaranteed, jointly and severally, on a senior secured basis by the Company's existing and future domestic subsidiaries. The Notes and the related guarantees are secured by a first-priority lien on the Company's and its domestic subsidiaries' assets (other than the Credit Facility Priority Collateral, as defined below, subject to some exceptions and permitted liens). The Notes and the related guarantees also are secured by a second-priority lien on all of Company's and its domestic subsidiaries' accounts receivable, inventory, cash, and certain other assets (collectively, the "Credit Facility Priority Collateral"), subject to certain exceptions and permitted liens. The Notes and the guarantees, respectively, rank equal in right of payment with the Company's and its domestic subsidiaries' senior indebtedness, including indebtedness under the Capital One Credit Facility, before giving effect to collateral arrangements.

The Notes impose certain limitations on the ability of the Company and its domestic subsidiaries to, among other things, and subject to a number of important qualifications and exceptions, incur additional indebtedness or issue disqualified capital stock or preferred stock (with respect to restricted subsidiaries), grant liens, make payments in respect of their capital stock or certain indebtedness, enter into transactions with affiliates, create dividend or other payment restrictions affecting subsidiaries, merge or consolidate with any other person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. The Company must annually report to the trustee on compliance with such limitations. The Notes also contain cross-default provisions whereby a payment default or acceleration of any indebtedness in an aggregate amount greater than a specified threshold would cause an event of default with respect to the Notes. As of December 31, 2013, the Company was in compliance with the required covenants of the Notes.

Lion Loan Agreement

On May 22, 2013 the Company entered into a loan agreement with Lion (the “Lion Loan Agreement”) in a principal amount of $4,500. On November 29, 2013, the Lion Loan Agreement was amended to increase the amount we borrowed by $5,000 and to make certain other technical amendments. The term loans under the Lion Loan Agreement mature on October 4, 2018 and bear interest at an initial interest rate of 18% per annum, which interest rate increased to 20% per annum due to the occurrence of a special interest trigger event under the Notes. Interest under the loan agreement is payable in cash or, to the extent permitted by the Company’s other debt agreements, in-kind.

Lion Credit Agreement

On April 4, 2013, the Company repaid and terminated its previous outstanding obligations with Lion Capital LLP with a portion of the proceeds of the financing transactions. The difference between the net carrying amount of the Lion debt of $117,926 (which includes the principal, accrued but unpaid interest, unamortized discount and unamortized financing cost immediately prior to the date of extinguishment) and the cash paid to Lion of $144,149 was recorded in the statement of operations for the year ended December 31, 2013 as a $26,223 loss on the early extinguishment of debt.

Note 9. Fair Value of Financial Instruments

The fair value of the Company's financial instruments are measured on a recurring basis. The carrying amount reported in the accompanying consolidated balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximates fair value because of the short-term maturity of those instruments. The carrying amount for borrowings from Capital One and Bank of Montreal approximates fair value because of the variable market interest rate charged to the Company for these borrowings. The fair value of the Notes was calculated based on the quoted market price of the Notes. The fair value of the

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Lion Loan Agreement was estimated using a discounted cash flow analysis and a yield rate that was estimated using yield rates for publicly traded debt instruments of comparable companies with similar features. The fair value of each warrant was estimated using the Binomial Lattice option valuation model.  

The Company did not have any assets or liabilities categorized as Level 1 as of December 31, 2013.

The following table presents carrying amounts and fair values of the Company's financial instruments as of December 31, 2013 and 2012:

		December 31, 2013
		Carrying Amount			Fair Value
Senior Secured Notes due 2020, net of discount of $5,779 and including interest paid-in-kind of $3,044	Level 2 Liability	$	203,265		$	191,065
Lion Loan due 2018 including interest paid-in-kind of $365	Level 3 Liability	9,865			9,773
Lion Warrant	Level 3 Liability	—		(a)	20,954
		$	213,130		$	221,792
		December 31, 2012
		Carrying Amount			Fair Value
Long-term debt with Lion, net of discount of $27,929 and including interest paid-in-kind of $16,469	Level 3 Liability	$	109,680		$	105,792
Lion Warrant	Level 3 Liability	—		(a)	17,222
SOF Warrant	Level 3 Liability	—		(a)	19
		$	109,680		$	123,033

(a) No cost is associated with these liabilities (see Note 13).

The following summarizes the activity of Level 3 inputs measured on a recurring basis for the years ended December 31, 2013, 2012 and 2011:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Warrants			Purchase Rights			Total
Balance at January 1, 2011	$	993		$	—		$	993
Additions (see Note 13)	22,547			15,605			38,152
Exercises	—			(2,857		)	(2,857		)
Realized loss	—			(3,188		)	(3,188		)
Adjustment resulting from change in fair value recognized in earnings	(13,907		)	(9,560		)	(23,467		)
Balance at January 1, 2012	9,633			—			9,633
Adjustment resulting from change in fair value recognized in earnings	4,126			—			4,126
Gain on extinguishment of debt (see Note 8)	3,482			—			3,482
Balance at January 1, 2013	17,241			—			17,241
Adjustment resulting from change in fair value recognized in earnings	3,713			—			3,713
Balance at December 31, 2013	$	20,954		$	—		$	20,954

Realized loss is the difference between the net proceeds received and the fair value of the purchase rights acquired related to the April 26, 2011 Investor Purchase Agreement (see Note 13). The realized loss is recorded in unrealized (gain) loss on change in fair value of warrants and purchase rights in the accompanying consolidated statements of operations.

Adjustment resulting from change in fair value is the amount of total gains or losses for the period attributable to the change in unrealized gains or losses relating to liabilities held at the reporting date. The unrealized gain or loss is recorded in unrealized (gain) loss on change in fair value of warrants and purchase rights in the accompanying consolidated statements of operations.

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Note 10. Capital Lease Obligations

The Company leases certain equipment under capital lease arrangements expiring at various times through 2017. The assets and liabilities under capital leases are recorded at the lower of the present values of the minimum lease payments or the fair values of the assets. The interest rates pertaining to these capital leases range from 0.4% to 23.5% (average interest rate is 14.1%).

Minimum future payments under these capital leases at December 31, 2013 are:

Year Ending December 31,
2014	$	2,616
2015	3,097
2016	3,024
2017	18
2018 and thereafter	—
Total future minimum lease payments	8,755
Less: Amount representing interest	(1,593		)
Net minimum lease payments	7,162
Current portion	1,709
Long-term portion	$	5,453

Note 11. Income Taxes

The Company's net loss before income taxes includes the following components for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
United States	$	(107,637	)	$	(38,365	)	$	(37,876	)
Foreign	3,110			4,906			283
	$	(104,527	)	$	(33,459	)	$	(37,593	)

The following table presents the federal and state income tax provision (benefit) for the years ended December 31, 2013, 2012 and 2011:

	2013			2012		2011
Current:
Federal	$	—		$	—	$	—
State	200			134		228
Foreign	2,024			3,446		879
	2,224			3,580		1,107
Deferred:
Federal	(402		)	—		—
State	—			—		—
Foreign	(51		)	233		614
	(453		)	233		614
Income tax provision	$	1,771		$	3,813	$	1,721

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The following table presents a reconciliation of taxes at the U.S. federal statutory rate and the effective tax rate for the years ended December 31:

	2013		2012		2011
Taxes at the statutory federal tax rate of 35%	(36,585	)	(11,711	)	(13,158	)
State tax, net of federal benefit	(4,059	)	4,913		(18	)
Change in valuation allowance	42,771		5,123		21,794
Foreign taxes	10		(618	)	533
Unrealized loss (gain) on warrants and purchase rights	1,299		4,809		(8,213	)
Other	(1,665	)	1,297		783
Total income tax provision	1,771		3,813		1,721

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and b) operating losses and tax credit carryforwards.

The following table presents the tax effects of significant items comprising the Company's deferred taxes as of December 31:

	2013			2012
Deferred tax assets:
Allowance for doubtful accounts	$	831		$	778
Deferred rent	7,295			7,773
Accrued liabilities and workers’ compensation	16,134			12,409
Inventories	6,877			6,731
Federal and California tax credits	12,067			12,067
Net operating loss carryforward	62,052			36,111
Deferred gift card income	2,379			1,866
Fixed assets	5,723			870
Foreign tax credits	9,296			8,335
Other comprehensive income	—			29
Other	1,833			848
Total gross deferred tax assets	124,487			87,817
Less valuation allowance	(120,694		)	(77,578		)
Net deferred tax assets	3,793			10,239
Deferred tax liabilities:
Prepaid expenses	(1,432		)	(1,004		)
Unrealized (gain) loss on warrants and purchase rights	—			(8,003		)
Other	(1,113		)	(35		)
Total gross deferred tax liabilities	(2,545		)	(9,042		)
Net deferred tax assets and liabilities	$	1,248		$	1,197

At December 31, 2013, the Company had net operating loss carryforwards of approximately $163,455 expiring beginning in 2030, state net operating loss carryforwards of approximately $113,747, expiring beginning in 2020 and foreign net operating loss carryforwards of $8,000 with expiration dates starting in 2014 (certain foreign loss carryforwards do not expire). The Company performed an analysis and determined it is more likely than not that an ownership change has not occurred through December 31, 2013 pursuant to §382 of the I.R.C. and, accordingly, the federal net operating loss carryfowards through such date are not subject to an annual Section 382 limitation. As a result of the March 31, 2014 public offering of the Company's common shares, there may have been an ownership change pursuant to §382 of the I.R.C.; however, an analysis has not yet been completed. See Note 13.

The California state tax credits of $11,800 carryover for ten years. Management determined that it is more likely than not that the state tax credits are not realizable due to the Company’s inability to generate future tax liabilities and accordingly has provided a full valuation allowance against the unused California credit carryforwards.

The Company accounts for its uncertain tax positions in accordance with ASC 740-10.

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The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits:

	2013		2012			2011
Gross unrecognized tax benefits at January 1	$	—	$	2,163		$	1,311
Increases for tax positions in prior periods	—		—			852
Decreases for tax positions in prior period	—		(2,163		)	—
Gross unrecognized tax benefits at December 31	$	—	$	—		$	2,163

Included in the balance of unrecognized tax benefits at December 31, 2013, 2012 and 2011 are $0, $0, and $1,329, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service ("IRS") for the calendar years ended December 31, 2010 through December 31, 2013. The IRS is currently auditing the Company's tax return for the year ended December 31, 2011. The Company completed an audit with the IRS through December 31, 2010. The Company's state and foreign tax returns are open to audit under similar statute of limitations for the calendar years ended December 31, 2008 through 2013.

The Company agreed to a settlement with the Canadian Revenue Agency (“CRA”) for audit of the years ended December 31, 2005 through December 31, 2007 representing $830 in additional tax interest and penalty. As a result, the Company's unrecognized tax benefits were decreased by $552 for the year ended December 31, 2012.

The Company does not provide for U.S. Federal income taxes on the undistributed earnings ($34,075 at December 31, 2013) of its controlled foreign corporations which are considered permanently invested outside of the United States. Undistributed cash at controlled foreign corporations, which remains permanently reinvested at December 31, 2013 was $3,109. Determination of the amount of U.S. income tax liability that would be incurred is not practicable because of the complexities associated with its hypothetical calculation, but would be substantially eliminated as the Company has U.S. net operating losses of approximately $163,455 at December 31, 2013 and U.S. tax credits of approximately $9,296 available to utilize to offset the tax effect of repatriation. 

Note 12. Related Party Transactions

See Note 8, Long-Term Debt for a description of loans made by Lion to the Company and Note 13, Stockholders' Equity for a description of the warrants issued by the Company to Lion and a purchase agreement, dated April 27, 2011, between Mr. Charney and the Company.

Personal Guarantees by the Company’s CEO

As of December 31, 2013, the CEO of the Company has personally guaranteed the obligations of American Apparel under seven property leases aggregating $17,465 in obligations. Additionally, the CEO of the Company has personally guaranteed the obligations of the Company with two vendor aggregating $1,000.

Lease Agreement Between the Company and Related Parties

The Company is party to an operating lease, expiring in November 2016 for its knitting facility with a related company (“American Central Plaza, LLC”), which is partially owned by the CEO and the Chief Manufacturing Officer (“CMO”) of the Company. The Company’s CEO holds an 18.75% ownership interest in American Central Plaza, LLC, while the CMO holds a 6.25% interest. The remaining members of American Central Plaza, LLC are not affiliated with the Company. Rent expense (including property taxes and insurance payments) related to this lease was $778, $830 and $622 for the years ended December 31, 2013, 2012 and 2011, respectively.

Payments to Morris Charney

Morris Charney, (“Mr. M. Charney”), is the father of the Company's CEO and serves as a director of American Apparel Canada Wholesale Inc. and a director of American Apparel Canada Retail Inc. Day to day operations of these two Canadian subsidiaries are handled by management and other employees of these subsidiaries, none of whom performs any policy making functions for the Company. Management of American Apparel sets the policies for American Apparel and its subsidiaries as a whole. Mr. M. Charney does not perform any policy making functions for the Company or any of its subsidiaries. Instead, Mr. M. Charney only provides architectural consulting services primarily for stores located in Canada and, in limited cases, in the U.S. Mr. M. Charney was paid architectural consulting and director fees amounting to $238, $260 and $297 for the years ended December 31, 2013, 2012 and 2011, respectively.

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Registration Rights

Pursuant to a registration rights agreement between the Company and Dov Charney, entered into in connection with the 2006 reverse merger between American Apparel, Inc. and Endeavor Acquisition Corp, Mr. Charney has both demand and piggyback registration rights relating to the shares of the Company's common stock that he received from that transaction.

Employment Agreement with the Company's CEO

In March 2012 the Company's Board of Directors approved a three-year employment agreement with Mr. Charney commencing on April 1, 2012 that will automatically extend for successive one-year periods unless earlier terminated by the Company. The agreement provides for, among other things, a minimum annual base compensation of $800 plus performance bonuses and the right to receive 7,500 shares of the Company's common stock, subject to performance hurdles and other terms, and conditions as described in the agreement. See Note 13.

Bonus to the Company's CEO

For the years ended December 31, 2013, 2012 and 2011, the Company recorded $406, $1,003 and $754, respectively, in CEO bonus in operating expenses in the consolidated statements of operations.

Note 13. Stockholders' (Deficit) Equity

Authorization of Common Stock

On June 21, 2011 the Company's stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Common Stock from 120,000 to 230,000.

On March 31, 2014, the Company completed a public offering of approximately 61,645 shares of its common stock at $0.50 per share for net proceeds of approximately $28,500. As a result of this offering, common stock issued and outstanding were 175,109 and 173,377 shares. Additionally, the underwriters have a 30 day option to acquire up to an additional 8,500 shares of the Company's common stock at $0.50 per share.

Common Stock Warrants

Lion Warrants

As of December 31, 2013, Lion held warrants (the "Lion Warrants") to purchase 21,606 shares of the Company's common stock, with an exercise price of $0.75 per share. These warrants expire on February 18, 2022.

The Lion Warrants, as amended, contain certain anti-dilution protections in favor of Lion providing for proportional adjustment of the warrant price and, under certain circumstances, the number of shares of the Company's common stock issuable upon exercise of the Lion Warrant, in connection with, among other things, stock dividends, subdivisions and combinations and the issuance of additional equity securities at less than fair market value, as well as providing for the issuance of additional warrants to Lion in the event of certain equity sales or debt for equity exchanges.

The fair value for the warrants at December 31, 2013 and 2012 were estimated using the Binomial Lattice option valuation model. The fair value of the warrants at December 31, 2011 was estimated using the Monte Carlo simulation valuation model. The calculations as of December 31, 2013 assumed a contractual remaining term of 8.25 years, exercise price of $0.75, stock price of $1.23, interest rate of 2.7%, volatility of 70.84% and no dividends. As of December 31, 2013 and 2012, the fair value of the Lion Warrants were estimated to be $20,954 and $17,222, respectively, and in accordance with ASC 815-40 "Derivatives and Hedging - Contracts in Entity's Own Equity", was recorded as a liability in the accompanying consolidated balance sheets.

On March 13, 2012, in connection with the new credit agreement with Crystal Financial, LLC, the Company entered into an amendment to the Lion Credit Agreement (see Note 8), which required that the warrants issued to Lion be amended to, among other things, extend the term of the warrants to February 18, 2022 and add a provision pursuant to which, if American Apparel did not meet a certain quarterly EBITDA amount, the exercise price of the warrants would be reduced by $0.25 (a one-time adjustment for the first violation of such covenant; subsequent violations would not result in further adjustment). As of March 31, 2012, the Company did not meet the EBITDA requirement, and, as a result, the exercise price of the existing Lion warrants was reduced by $0.25 to $0.75 per share.

On March 31, 2014, as a result of the public offering of the Company's common shares as discussed above, the Company estimated that Lion received the right to purchase approximately 2,900 shares of the Company's common stock under their existing warrants and the exercise price of all of Lion's warrants will be adjusted to approximately $0.66 per share. Such adjustments were required by the terms of the existing Lion warrants.

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SOF Warrants

On December 19, 2013, warrants held by SOF Investments, L.P. ("SOF") to purchase 1,000 of the Company's shares with the exercise price of $2.148 per share expired.

The fair value for the warrants at December 31, 2012 was estimated using the Binomial Lattice option valuation model. The calculations as of December 31, 2012 assumed a contractual remaining term of 1.0 year, exercise price of $2.148, stock price of $1.01, interest rate of 0.16%, volatility of 50.82% and no dividends. As of December 31, 2012, the fair value of the warrants were estimated to be $19, respectively, and in accordance with ASC 815-40, was recorded as a liability in the accompanying consolidated balance sheets.

The following table summarizes common stock warrants issued, forfeited, expired and outstanding (shares in thousands):

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Life (Years)
Outstanding - January 1, 2011	17,000			$	2.05	5.1
Issued (1)	41,366			1.14		—
Forfeited (2)	(35,760		)	1.63		—
Expired	—			—		—
Outstanding - December 31, 2011	22,606			1.05		6.0
Issued (1)	44,212			0.90		—
Forfeited (2)	(44,212		)	1.03		—
Expired	—			—		—
Outstanding - December 31, 2012	22,606			0.81		8.8
Issued (1)	—			—		—
Forfeited (2)	—			—		—
Expired	(1,000		)	2.15		—
Outstanding - December 31, 2013	21,606			$	0.75	8.2
Fair value - December 31, 2013	$	20,954

(1) Issued shares at December 31, 2011 include issuances and repriced shares.

(2) Represents repriced shares.

Common Stock and Purchase Rights

On April 26, 2011 and in connection with the February 18, 2011 amendment to the Lion Credit Agreement, the Company entered into a purchase and investment agreement with a group of investors ("Investors") and sold approximately 15,777 shares of common stock at a price of $0.90 per share and purchase rights to acquire additional shares of common stock for the aggregate net cash purchase price of approximately $12,417. The purchase rights gave the Investors the right to purchase up to approximately 27,443 additional shares of common stock at a price of $0.90 per share.

In connection with the purchase agreement with the Investors, the Company entered into a purchase agreement with Mr. Charney that, among other things, allowed Mr. Charney to purchase from the Company 778 shares of common stock at $0.90 per share, generating net proceeds of $700, and granted to Mr. Charney a right to purchase up to 1,556 additional shares of common stock on substantially the same terms as the purchase agreement with the Investors (the "Charney Purchase Rights").

The Investor Purchase Rights and Charney Purchase Rights (collectively, the "Purchase Rights") had a fair value of $15,605 at the date of the agreement. The Company recorded the Purchase Rights as a liability since they met the classification requirements for liability accounting in accordance with the ASC 815-40. The fair value was calculated using the Monte Carlo simulation pricing model, and assumed a stock price of $1.58, exercise price of $0.90, volatility of 99.08%, annual risk free rate of 0.11% and a term of 0.5 years. Net proceeds of $12,417 were allocated entirely to the Purchase Rights. The difference between the net proceeds received and the fair value of the purchase rights aggregating $3,188 were recorded in unrealized (gain) loss on change in fair value of warrants and purchase rights in the consolidated statements of operations.

In July 2011, the Investors exercised their purchase rights and acquired 8,407 shares of the Company's common stock for $0.90 per share, generating net proceeds of $6,593. The fair value of these exercised rights aggregated $2,857, which was reclassified in accordance with ASC 815-40 from a liability to stockholders' equity. As a result of the exercise of their purchase rights, the Investors have one remaining demand registration right with respect to their shares, subject to the terms and conditions of the relevant purchase agreement.

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In October 2011, the remaining 19,036 Investor Purchase Rights and the 1,556 Charney Purchase Rights expired without being exercised.

The following table summarizes Purchase Rights issued, forfeited and expired (shares in thousands):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Life (Years)
Outstanding - January 1, 2011	—		$	—	—
Issued	28,999		0.90		0.5
Forfeited	—		—		—
Exercised	(8,407	)	0.90		—
Expired	(20,592	)	0.90		—
Outstanding - December 31, 2011	—		$	—	—

The Company's CEO Anti-Dilution Rights

As a condition to the Investors purchasing the shares and as a result of the July 2011 exercises of the Investor Purchase Rights, the Company provided Mr. Charney with certain anti-dilution rights (the ''Charney Anti-Dilution Rights"). The Charney Anti-Dilution Rights provided that Mr. Charney has a right to receive from the Company, subject to the satisfaction of certain average volume weighted closing price targets, and other terms and conditions set forth in the agreement, up to approximately 20,416 shares of the Company's common stock as anti-dilution protection.

On October 16, 2012, the Company and Mr. Charney entered into an amendment to the anti-dilution provisions contained in the Purchase Agreement with Mr. Charney dated as of April 27, 2011. The amendment extended by one year the measurement periods for Mr. Charney’s anti-dilution protection provisions and reduced the length of the corresponding stock price target periods from 60 days to 30 days. The fair value of these awards of $13,192 was determined under the Monte Carlo simulation pricing model. The calculation was based on the exercise price of $0, the stock price of $1.3, annual risk free rate of 0.45%, volatility of 90.46% and a term of 3.5 years.

As amended, each of the shares associated with the anti-dilution provision is issuable in three equal installments, one per each measurement period set forth below, subject to meeting the applicable average volume weighted closing price (“VWAP ”) for 30 consecutive trading days, calculated as set forth in the purchase agreement with Mr. Charney as follows: (i) for the measurement period from April 16, 2012 to and including April 15, 2014, if the VWAP of the common stock during a period of 30 consecutive trading days exceeds $3.25 per share; (ii) for the measurement period from but not including April 16, 2014 to and including April 15, 2015, if the VWAP of the common stock during a period of 30 consecutive trading days exceeds $4.25 per share; and (iii) for the measurement period from but not including April 16, 2015 to and including April 15, 2016, the VWAP of the common stock during a period of 30 consecutive trading days exceeds $5.25 per share.

The Company considered the shares to be awards with market conditions under ASC 718 "Stock Based Compensation," (“ASC 718”). The related service and amortization period for the shares occurs in three probability-weighted terms of 0.9, 1.8 and 2.7 years corresponding to the three measurement periods above. These awards expire after completion of each respective measurement period. See Note 14.

Sale of Common Stock to the Company's CEO

On July 7, 2011, the Company sold 778 shares of the Company's common stock to Mr. Charney at $0.90 per share for total proceeds of $700.

On March 24, 2011, the Company sold to Mr. Charney 1,802 shares of common stock at a price of $1.11 per share in cash, for approximately $2,000.

Also on March 24, 2011, the three promissory notes issued by two subsidiaries of the Company to Mr. Charney, which as of March 24, 2011 had an aggregate outstanding balance of $4,688, including principal and accrued and unpaid interest (to but not including March 24, 2011), were canceled in exchange for an issuance by the Company to Mr. Charney of an aggregate of 4,223 shares of common stock at a price of $1.11 per share, with 50% of such shares being issued on March 24, 2011 and the remaining shares issuable to Mr. Charney only if prior to March 24, 2014, (1) the closing sale price of common stock exceeds $3.50 for 30 consecutive trading days or (2) there is a change of control of the Company. On March 24, 2014, the Company determined that it did not meet the closing share price target and the remaining shares expired unissued.

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Earnings Per Share

The Company presents earnings per share (“EPS”) utilizing a dual presentation of basic and diluted EPS. Basic EPS includes no dilution and is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The Company had common stock under various options, warrants and other agreements at December 31, 2013, 2012 and 2011. The weighted average effects of 46,684, 53,478 and 49,270 shares at December 31, 2013, 2012 and 2011, respectively, were excluded from the calculations of net loss per share for the years ended December 31, 2013 and 2012, because their impact would have been anti-dilutive.

A summary of the potential stock issuances under various options, warrants and other agreements that could have a dilutive effect on the shares outstanding as of December 31, 2013 and 2012 are as follows:

	2013	2012	2011
SOF Warrants	—	1,000	1,000
Lion Warrants	21,606	21,606	21,606
Shares issuable to Mr. Charney based on market conditions (1)	20,416	20,416	20,416
Contingent shares issuable to Mr. Charney based on market conditions (2)	2,112	2,112	2,112
Contingent shares issuable to Mr. Charney based on performance factors (3)	—	5,000	—
Employee options & restricted shares	2,550	3,344	4,136
	46,684	53,478	49,270

(1) Included Charney Anti-Dilution Rights pursuant to the April 26, 2011 Investor Purchase Agreement

(2) Pursuant to the March 24, 2011 conversion of debt to equity

(3) Pursuant to Mr. Charney's employment agreement commencing April 1, 2012

The table above does not include additional warrants that may be issuable to Lion pursuant to the anti-dilution provisions under the Lion Credit Agreement such as in the event anti-dilutive shares are issued to Mr. Charney pursuant to the Charney Anti-Dilution Rights.

Note 14. Share-Based Compensation

Plan Description - On June 21, 2011 the Company's Board of Directors and stockholders approved the American Apparel, Inc. 2011 Omnibus Stock Incentive Plan (the “2011 Plan”). The 2011 Plan authorizes the granting of a variety of incentive awards, the exercise or vesting of which would allow up to an aggregate of 10,000 shares of the Company's common stock to be acquired by the holders of such awards. The Board amended the 2007 Performance Equity Plan ("2007 Plan") to provide that as of the July 11, 2011 effective date of registration of the 2011 Plan shares, no new awards shall be made under the 2007 Plan, and any and all shares that would otherwise become available for issuance under the terms of the 2007 Plan by reason of the expiration, cancellation, forfeiture or termination of an outstanding award under such plan shall again be available for grant under the 2011 Plan as of the date of such expiration, cancellation, forfeiture or termination.

On June 25, 2013, the Company's Board of Directors and stockholders approved amendments to the 2011 Plan to increase the maximum number of shares reserved under the 2011 Plan to 17,500 shares and increase the number of shares that may be awarded to any one participant during any calendar year to 3,000 shares. The purpose of the 2011 Plan is to provide an incentive to selected employees, directors, independent contractors, and consultants of the Company or its affiliates, and provides that the Company may grant options, stock appreciation rights, restricted stock, and other stock-based and cash-based awards. As of December 31, 2013, there were approximately 13,416 shares available for future grants under the 2011 Plan.

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Restricted Share Awards - The following table summarizes shares of restricted stock that were granted, vested, forfeited and outstanding (shares in thousands):

	Number of Restricted Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Vesting Period (in years)
Non-vested - January 1, 2011	5,050		$	1.53	3.9
Granted	1,006		0.88
Vested	(2,668	)	1.38
Forfeited	(202	)	1.53
Non-vested - December 31, 2011	3,186		$	1.45	2.7
Granted	1,418		0.93
Vested	(1,783	)	1.23
Forfeited	(177	)	1.13
Non-vested - December 31, 2012	2,644		$	1.33	1.3
Granted	963		1.75
Vested	(1,650	)	1.42
Forfeited	(107	)	1.60
Non-vested - December 31, 2013	1,850		$	1.46	0.9

Vesting of the restricted share awards to employees may be either immediately upon grant or over a period of three to five years of continued service by the employee in equal annual installments. Vesting is immediate in the case of members of the Board of Directors. Share-based compensation is recognized over the vesting period based on the grant-date fair value. As of December 31, 2013, the weighted average remaining amortization period was 0.9 years.

Stock Option Awards - The following table summarizes stock options granted, forfeited, expired and outstanding (shares in thousands):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Remaining Life (Years)	Aggregate Intrinsic Value
Outstanding - January 1, 2011	1,000		$	1.75	9.8
Granted	700		0.82
Forfeited	(750	)	1.75
Expired	—		—
Outstanding - December 31, 2011	950		$	1.06	9.5
Granted	—		—
Forfeited	—		—
Expired	(250	)	1.75
Outstanding - December 31, 2012	700		$	0.82	8.8
Granted	—		—
Forfeited	—		—
Expired	—		—
Outstanding - December 31, 2013	700		$	0.82	7.8
Vested (exercisable) - December 31, 2013	525		$	0.82	7.8	$	—
Non-vested - December 31, 2013	175		$	0.82	7.8	$	—

Share-Based Compensation Expense - During the years ended December 31, 2013, 2012 and 2011, the Company recorded share-based compensation expense of $8,451, $10,580 and $6,814, respectively, related to its share-based compensation awards that are expected to vest. No amounts have been capitalized. As of December 31, 2013, unrecorded compensation cost related to non-vested awards was $5,062, which is expected to be recognized through 2016.

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CEO Anti-Dilution Rights - On October 16, 2012, the Company and Mr. Charney entered into an amendment to Mr. Charney's anti-dilution rights (see Note 13). As the amendment lengthened the requisite service period, the Company will recognize the unrecorded compensation cost from the original award of $2,738 over its remaining service period and recognize the incremental compensation cost as a result of the modification of $6,854 over the requisite service period of the modified award. During the year ended December 31, 2013, 2012 and 2011, the Company recorded share-based compensation expense (included in the above) associated with Mr. Charney's certain anti-dilution rights of $6,459, $5,440 and $3,055, respectively. As of December 31, 2013, unrecorded compensation cost was $1,984, which is expected to be recognized through 2015.

CEO Performance-Based Award - Pursuant to an employment agreement with Mr. Charney commencing on April 1, 2012, the Company provided to the CEO rights to 7,500 shares of the Company's stock (see Note 12). The shares vest in three equal installments, one per each measurement period, only upon the achievement of certain EBITDA targets for each of fiscal 2012, 2013 and 2014. For the fiscal 2012 measurement period, the Company achieved the target EBITDA and Mr. Charney received 2,500 shares on June 25, 2013. For the fiscal 2013 measurement period, the Company did not achieve the target EBITDA and as a result, the Company recorded an adjustment of $703 to reverse previously recorded share-based compensation related to unvested shares. For the fiscal 2014 measurement period, based on currently available information, the Company does not believe that the target EBITDA will be achieved and as a result, the Company recorded an adjustment of $469 to reverse previously recorded share-based compensation related to unvested shares. As of December 31, 2013, there was no unrecorded compensation cost related to this grant.

The grant date fair value of the award was based on the share price of $0.75. During the year ended December 31, 2013 and 2012, the Company recorded share-based compensation expense of $(703) and $2,578, respectively.

Non-Employee Directors

On January 2, 2014, October 1, 2013, July 1, 2013 and April 1, 2013, the Company issued a quarterly stock grant to each non-employee director for services performed of approximately 8, 8, 5 and 5 shares of common stock, based on grant date fair values of $1.21, $1.28, $1.88 and $2.10 per share, respectively. Additionally, Messrs. Danzinger and Igelman each received an additional 23 shares for services performed during the second half of 2011. For the yearended December 31, 2011, a $75 cash award was paid to five non-employee directors in lieu of the annual stock grant. The share-based compensation is reflected in operating expenses in the accompanying consolidated statements of operations.

Note 15. Commitments and Contingencies

Operating Leases

The Company conducts retail operations under operating leases, which expire at various dates through November 2023. The Company’s primary manufacturing facilities and executive offices are currently under a long-term lease which expires on July 31, 2019. Future minimum rental payments (excluding real estate tax and maintenance costs) for retail locations and other leases that have initial or non-cancelable lease terms in excess of one year at December 31, 2013 are as follows:

	Amount
2014	$	74,161
2015	63,599
2016	51,895
2017	41,293
2018	28,397
Thereafter	31,932
Total	$	291,277

Operating lease rent expense (including some real estate taxes and maintenance costs) and leases on a month to month basis were approximately $79,794, $77,390, and $78,138, for the years ended December 31, 2013, 2012, and 2011, respectively. The Company did not incur any significant contingent rent during the same periods. Rent expense is allocated to cost of sales (for production-related activities) and selling expenses (primarily for retail stores) in the accompanying consolidated statements of operations.

Sales Tax

The Company sells its products through its wholesale business, retail stores and the internet. The Company operates these channels separately and accounts for sales and use tax accordingly. The Company is periodically audited by state taxing authorities and it is possible they may disagree with the Company’s method of assessing and remitting these taxes. The

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Company believes that it properly assesses and remits all applicable state sales taxes in the applicable jurisdictions and has accrued $0 and $289 as of December 31, 2013 and 2012, respectively, for state sales tax contingencies.

Customs and duties

The Company is being audited by German customs authorities for the years ended December 31, 2009 through December 31, 2011. In connection with the audit, German customs authorities have issued retroactive assessments on the Company's imports totaling $5,003 at the December 31, 2013 exchange rates (assessment was issued in Euros). The size of the retroactive assessments are largely due to member countries of the European Union (“E.U.”) limited right to impose retaliatory duties on certain imports of U.S. origin goods into the E.U., based upon the World Trade Organization's (“WTO”) Dispute Settlement procedures and the related WTO arbitrator rulings brought into place as a result of EU complaint against the U.S. "Continued Dumping and Subsidy Offset Act of 2000" (the "CDSOA") usually referred to as "the Byrd Amendment". Consequently, German customs authorities are attempting to impose a substantially higher tariff rate than the original rate that the Company had paid on the imports, approximately doubling the amount of the tariff that the Company would have to pay.

The Company believes that it has valid arguments to challenge the merit of the German customs assessment and has filed litigation in German courts to contest such assessment. However, as the appeals as to the assessment are not decided, the Company is unable to reasonably estimate the financial outcome of the matter at this time and it cannot predict whether the outcome will be favorable or unfavorable to the Company, or if the Company will be required to advance material amounts during the pendancy of the litigation, and accordingly has not recorded a provision for this matter. No assurance can be made that this matter will not result in a material financial exposure in connection with the audit, which could have a material effect on the Company's financial condition, results of operations or cash flows.

New York Stock Exchange Compliance

The common stock is currently traded on the NYSE MKT. On February 28, 2014, the Company received a letter from NYSE MKT indicating that it was not in compliance with the continued listing standards of NYSE MKT set forth in Section 1003(a)(iv) of the NYSE MKT LLC Company Guide. In order to maintain its listing, the Company has submitted a plan of compliance by addressing how it intends to regain compliance with Section 1003(a)(iv) of the Company Guide by April 15, 2014. If the plan is accepted, the Company may be able to continue its listing but will be subject to periodic review by NYSE MKT. If the plan is not accepted or if the Company does not make progress consistent with the plan by April 15, 2014, NYSE MKT will initiate delisting proceedings as appropriate. No assurance can be given that the Company will regain compliance with those listing requirements or that it will continue to meet the listing requirements of NYSE MKT in the future.

Advertising

At December 31, 2013 the Company had approximately $2,450, in open advertising commitments, which primarily relate to print advertisements in various newspapers, magazines, as well as outdoor advertising and other advertisements. The majority of these commitments are expected to be paid during the remainder of 2014.

Note 16. Workers’ Compensation and Other Self-Insurance Reserves

The Company uses a combination of third-party insurance and/or self-insurance for a number of risks including workers’ compensation, medical benefits provided to employees, and general liability claims. General liability costs relate primarily to litigation that arises from store operations. Self-insurance reserves include estimates of both filed claims carried at their expected ultimate settlement value and claims incurred but not yet reported. The Company’s estimated claim amounts are discounted using a rate of 1.03% with a duration that approximates the duration of the Company’s self-insurance reserve portfolio. As of December 31, 2013 the undiscounted liability amount was $15,809. The Company’s liability reflected on the accompanying consolidated balance sheets represents an estimate of the ultimate cost of claims incurred as of the balance sheet dates. In estimating this liability, the Company utilizes loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claim settlements and reported claims. These projections are subject to a high degree of variability based upon future inflation rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. Although the Company does not expect the amounts ultimately paid to differ significantly from its estimates, self-insurance reserves could be affected if future claim experience differs significantly from the historical trends and the assumptions applied.

The workers’ compensation liability is based on estimate of losses for claims incurred, but not paid at the end of the period. Funding is made directly to the providers and/or claimants by the insurance company. To guarantee performance under the workers' compensation program, as of the both December 31, 2013 and 2012, the Company had issued standby letters of credit in the amounts of $450 with insurance companies being the beneficiaries, through a bank, and cash deposits of $16,124 and $14,624, respectively, in favor of insurance company beneficiaries. At December 31, 2013, the Company recorded a total reserve of $15,356, of which $3,871 is included in accrued expenses and $11,485 is included in other long-term liabilities on

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the accompanying consolidated balance sheets. At December 31, 2012, the Company recorded a total reserve of $14,472, of which, $3,778 is included in accrued expenses and $10,694 is included in other long-term liabilities on the accompanying consolidated balance sheets. These reserves for potential losses on existing claims are believed to be for potential losses which are probable and reasonably estimable.

The Company self-insures its health insurance benefit obligations while the claims are administered through a third party administrator. The medical benefit liability is based on estimated losses for claims incurred, but not paid at the end of the period. Funding is made directly to the providers and/or claimants by the insurance company. At December 31, 2013 and 2012, the Company’s total reserve of $2,512 and $1,510 was included in accrued expenses in the accompanying consolidated balance sheets.

Note 17. Business Segment and Geographic Area Information

The Company reports the following four operating segments: U.S. Wholesale, U.S. Retail, Canada, and International. The Company believes this method of segment reporting reflects both the way its business segments are managed and the way the performance of each segment is evaluated. U.S. Wholesale segment consists of the Company's wholesale operations of sales of undecorated apparel products to distributors and third party screen printers in the United States, as well as the Company's online consumer sales to U.S. customers. U.S. Retail segment consists of the Company's retail operations in the United States, which comprised 139 retail stores operating in the United States as of December 31, 2013. Canada segment includes retail, wholesale and online consumer operations in Canada. As of December 31, 2013, the retail operations in the Canada segment comprised 32 retail stores. The International segment includes retail, wholesale and online consumer operations outside of the United States and Canada. As of December 31, 2013, the retail operations in the International segment comprised 77 retail stores operating in 18 countries outside of the United States and Canada. All of the Company's retail stores sell the Company's apparel products directly to consumers.

The Company's management evaluates performance based on a number of factors; however, the primary measures of performance are net sales and income or loss from operations of each business segment, as these are the key performance indicators reviewed by management. Operating income or loss for each segment does not include unallocated corporate general and administrative expenses, interest expense and other miscellaneous income/expense items. Corporate general and administrative expenses include, but are not limited to: human resources, legal, finance, information technology, accounting, executive compensation and various other corporate level expenses.

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The following table represents key financial information of the Company’s reportable segments before unallocated corporate expenses:

	For the Year Ended December 31, 2013
	U.S. Wholesale		U.S. Retail			Canada			International			Consolidated
Wholesale net sales	159,682		—			12,092			8,893			180,667
Retail net sales	—		205,011			45,163			141,517			391,691
Online consumer net sales	41,569		—			2,879			17,135			61,583
Total net sales to external customers	201,251		205,011			60,134			167,545			633,941
Gross profit	49,877		131,912			34,720			104,376			320,885
Income (loss) from segment operations	11,981		(2,731		)	3,684			3,916			16,850
Depreciation and amortization	7,418		12,420			1,853			4,385			26,076
Capital expenditures	10,115		11,204			1,167			4,568			27,054
Retail store impairment	—		642			144			754			1,540
Deferred rent expense (benefit)	81		(1,678		)	(375		)	(121		)	(2,093		)
	For the Year Ended December 31, 2012
	U.S. Wholesale		U.S. Retail			Canada			International			Consolidated
Wholesale net sales	$	149,611	$	—		$	13,006		$	10,278		$	172,895
Retail net sales	—		198,886			48,499			141,738			389,123
Online consumer net sales	35,744		—			2,164			17,384			55,292
Total net sales to external customers	185,355		198,886			63,669			169,400			617,310
Gross profit	53,195		130,498			37,500			106,190			327,383
Income (loss) from segment operations	27,893		4,197			(57		)	10,670			42,703
Depreciation and amortization	6,322		10,909			1,543			4,215			22,989
Capital expenditures	9,791		6,626			1,607			3,583			21,607
Retail store impairment	—		243			130			1,274			1,647
Deferred rent expense (benefit)	523		(706		)	(197		)	(515		)	(895		)
	For the Year Ended December 31, 2011
	U.S. Wholesale		U.S. Retail			Canada			International			Consolidated
Wholesale net sales	$	132,135	$	—		$	11,492		$	10,406		$	154,033
Retail net sales	—		174,837			48,527			126,868			350,232
Online consumer net sales	26,493		—			1,846			14,732			43,071
Total net sales to external customers	158,628		174,837			61,865			152,006			547,336
Gross profit	44,000		117,228			35,799			97,873			294,900
Income (loss) from segment operations	23,500		(4,659		)	(3,695		)	7,340			22,486
Depreciation and amortization	7,757		10,492			1,567			5,164			24,980
Capital expenditures	3,638		4,889			407			2,136			11,070
Retail store impairment	—		558			808			2,901			4,267
Deferred rent expense (benefit)	257		(1,662		)	(121		)	(443		)	(1,969		)

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Reconciliation of reportable segments consolidated income (loss) from operations for the years ended December 31, 2013, 2012 and 2011 to the consolidated loss before income taxes is as follows:

	2013			2012			2011
Income from operations of reportable segments	$	16,850		$	42,703		$	22,486
Unallocated corporate expenses	(46,145		)	(41,741		)	(45,779		)
Interest expense	39,286			41,559			33,167
Foreign currency transaction loss	1			120			1,679
Unrealized loss (gain) on change in fair value of warrant and purchase rights	3,713			4,126			(23,467		)
Loss (gain) on extinguishment of debt	32,101			(11,588		)	3,114
Other expense (income)	131			204			(193		)
Consolidated loss before income taxes	$	(104,527	)	$	(33,459	)	$	(37,593	)

Net sales by each reportable segment’s class of customer and geographic location of customer for the years ended December 31, 2013, 2012, and 2011 consist of the following:

	Years Ended December 31,
	2013		2012		2011
Net sales by geographic location of customer:
United States	$	406,262	$	384,241	$	333,464
Canada	60,134		63,669		61,865
Europe (excluding United Kingdom)	70,347		66,861		68,130
United Kingdom	44,153		47,694		40,039
South Korea	10,380		10,732		9,749
China	6,894		5,317		3,857
Japan	18,119		20,336		14,176
Australia	10,218		11,458		9,383
Other foreign countries	7,434		7,002		6,673
Total consolidated net sales	$	633,941	$	617,310	$	547,336

Long-lived assets—property and equipment, net by geographic location, is summarized as follows as of December 31,:

	2013		2012
United States	$	53,424	$	50,551
Canada	3,913		5,079
Europe (excluding the United Kingdom)	4,741		3,987
United Kingdom	4,434		4,500
South Korea	344		433
China	291		358
Japan	750		1,097
Australia	846		1,057
Other foreign countries	560		716
Total consolidated long-lived assets	$	69,303	$	67,778
Identifiable assets by reportable segment:
U.S. Wholesale	$	169,474	$	153,856
U.S. Retail	77,150		76,709
Canada	17,761		28,586
International	69,367		69,061
Total	$	333,752	$	328,212

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Foreign subsidiaries accounted for the following percentages of total assets and total liabilities as of December 31,:

	2013		2012
Total assets	26.1	%	29.8	%
Total liabilities	6.8	%	10.9	%

Note 18. Litigation

The Company is subject to various claims and contingencies in the ordinary course of business, including those related to litigation, business transactions, employee-related matters and taxes, and others. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. There is no assurance that such matters will not materially and adversely affect the Company's business, financial position, and results of operations or cash flows.

Individual Actions

On February 7, 2006, Sylvia Hsu, a former employee of American Apparel, filed a Charge of Discrimination with the Los Angeles District Office of the Equal Employment Opportunity Commission (“EEOC”) (Hsu v. American Apparel: Charge No. 480- 2006-00418), alleging that she was subjected to sexual harassment by a co-worker and constructively discharged as a result of the sexual harassment and a hostile working environment. On March 9, 2007, the EEOC expanded the scope of its investigation to other employees of American Apparel who may have been sexually harassed. On August 9, 2010, the EEOC issued a written determination finding that reasonable cause exists to believe the Company discriminated against Ms. Hsu and women, as a class, on the basis of their female gender, by subjecting them to sexual harassment. No finding was made on the issue of Ms. Hsu's alleged constructive discharge. In August 2013 the parties entered into a Conciliation Agreement providing for an immaterial compensatory payment to Ms. Hsu and the Company's agreement to comply with the Company's Policy on Sexual Harassment and Sexual Discrimination, which Policy was reviewed by the EEOC, and take certain administrative measures relating thereto. The Conciliation Agreement remains in effect for three years.

On November 5, 2009, Guillermo Ruiz, a former employee of American Apparel, filed suit against the Company on behalf of putative classes of all current and former non-exempt California employees (Guillermo Ruiz, on behalf of himself and all others similarly situated v. American Apparel, Inc., Case Number BC425487) in the Superior Court of the State of California for the County of Los Angeles, alleging the Company failed to pay certain wages due for hours worked, to provide meal and rest periods or compensation in lieu thereof and to pay wages due upon termination to certain of the Company's employees. The complaint further alleges that the Company failed to comply with certain itemized employee wage statement provisions and violations of unfair competition law.  The plaintiff is seeking compensatory damages and economic and/or special damages in an unspecified amount, premium pay, wages and penalties, injunctive relief and restitution, and reimbursement for attorneys' fees, interest and the costs of the suit.

On June 21, 2010, Antonio Partida, a former employee of American Apparel, filed suit against the Company on behalf of putative classes of current and former non-exempt California employees (Antonio Partida, on behalf of himself and all others similarly situated v. American Apparel (USA), LLC, Case No. 30-2010-00382719-CU-OE-CXC) in the Superior Court of the State of California for the County of Orange, alleging the Company failed to pay certain wages for hours worked, to provide meal and rest periods or compensation in lieu thereof, and to pay wages due upon separation. The complaint further alleges that the Company failed to timely pay wages, unlawfully deducted wages and failed to comply with certain itemized employee wage statement provisions and violations of unfair competition law. The plaintiff is seeking compensatory damages and economic and/or special damages in an unspecified amount, premium pay, wages and penalties, injunctive relief and restitution, and reimbursement of attorneys' fees, interest and the costs of the suit.

On or about December 2, 2010, Emilie Truong, a former employee of American Apparel, filed suit against the Company on behalf of putative classes of current and former non-exempt California employees (Emilie Truong, individually and on behalf of all others similarly situated v. American Apparel, Inc. and American Apparel LLC, Case No. BC450505) in the Superior Court of the State of California for the County of Los Angeles, alleging the Company failed to timely provide final paychecks upon separation.  Plaintiff is seeking unspecified premium wages, attorneys' fees and costs, disgorgement of profits, and an injunction against the alleged unlawful practices.

On or about February 9, 2011, Jessica Heupel, a former retail employee filed suit on behalf of putative classes of current and former non-exempt California employees (Jessica Heupel, individually and on behalf of all others similarly situated v. American Apparel Retail, Inc., Case No. 37-2011-00085578-CU-OE-CTL) in the Superior Court of the State of California for the County of San Diego, alleging the Company failed to pay certain wages for hours worked, to provide meal and rest periods or compensation in lieu thereof, and to pay wages due upon separation.  The plaintiff is seeking monetary damages as follows:

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(1) for alleged meal and rest period violations; (2) for alleged failure to timely pay final wages, as well as for punitive damages for the same; and (3) unspecified damages for unpaid minimum wage and overtime.  In addition, Plaintiff seeks premium pay, wages and penalties, injunctive relief and restitution, and reimbursement of attorneys' fees, interest and the costs of the suit. This matter is now proceeding in arbitration. On or about September 9, 2011, Anthony Heupel, a former retail employee initiated arbitration proceedings on behalf of putative classes of current and former non-exempt California employees, alleging the Company failed to pay certain wages for hours worked, to provide meal and rest periods or compensation in lieu thereof, and to pay wages due upon separation.  The plaintiff is seeking monetary damages in an amount in excess of $3,600, as follows: (1) for alleged meal and rest period violations; (2) for alleged failure to timely pay final wages, as well as for punitive damages for the same; and (3) unspecified damages for unpaid minimum wage and overtime.  In addition, Plaintiff seeks premium pay, wages and penalties, injunctive relief and restitution, and reimbursement of attorneys' fees, interest and the costs of the suit.

The Company does not have insurance coverage for the above matters. Each of the aforementioned wage and hour cases have been proceeding in arbitration. All of these cases have been settled on an aggregate and class-wide basis for a payment by the Company in the total amount of $875, most of which will be paid to class members and to their attorneys. Certain class members have opted out of the settlement and so may proceed with individual claims. Also, the settlement is subject to and conditional upon approval of the arbitrator, and if the arbitrator approves, one or more of the California Superior Courts. There is no guarantee that such approvals will be obtained.

Additionally, the Company is currently engaged in other employment-related claims and other matters incidental to the Company's business.  The Company believes that all such claims against the Company are without merit or not material, and the Company intends to vigorously dispute the validity of the plaintiffs' claims. While the ultimate resolution of such claims cannot be determined, based on information at this time, the Company believes, but the Company cannot provide assurance that, the amount, and ultimate liability, if any, with respect to these actions will not materially affect the Company's business, financial position, results of operations, or cash flows. Should any of these matters be decided against the Company, the Company could not only incur liability but also experience an increase in similar suits and suffer reputational harm.

Derivative Matters

Two shareholder derivative lawsuits (Case No. CV106576 GAF (JCx) and Case No. CV107518 RSWL (FFMx)) were filed in the United States District Court for the Central District of California which were subsequently consolidated for all purposes into a case entitled In re American Apparel, Inc. Shareholder Derivative Litigation, Lead Case No. CV106576 (the “Federal Derivative Action”).  Plaintiffs in the Federal Derivative Action allege a cause of action for breach of fiduciary duty arising out of (i) the Company's alleged failure to maintain adequate accounting and internal control policies and procedures; (ii) the Company's alleged violation of state and federal immigration laws in connection with the previously disclosed termination of over 1,500 employees following an Immigration and Customs Enforcement inspection; and (iii) the Company's alleged failure to implement controls sufficient to prevent a sexually hostile and discriminatory work environment.  The Company does not maintain any direct exposure to loss in connection with these shareholder derivative lawsuits. The Company's status as a “Nominal Defendant” in the actions reflects the fact that the lawsuits are maintained by the named plaintiffs on behalf of American Apparel and that plaintiffs seek damages on the Company's behalf. The Company filed a motion to dismiss the Federal Derivative Action which was granted with leave to amend on July 31, 2012. Plaintiffs did not amend the complaint and subsequently filed a motion to dismiss each of their claims, with prejudice, for the stated purpose of taking an immediate appeal of the Court's July 31, 2012 order. On October 16, 2012, the Court granted the Plaintiffs' motion to dismiss and entered judgment accordingly. On November 12, 2012, Plaintiffs filed a Notice of Appeal to the Ninth Circuit Court of Appeals where the case is currently pending.

Four shareholder derivative lawsuits (Case No. BC 443763, Case No. BC 443902, Case No. BC 445094, and Case No. BC 447890) were filed in fall of 2010 in the Superior Court of the State of California for the County of Los Angeles which were subsequently consolidated for all purposes into a case entitled In re American Apparel, Inc. Shareholder Derivative Litigation, Lead Case No. BC 443763 (the "State Derivative Action"). 

Three of the matters comprising the State Derivative Action allege causes of action for breach of fiduciary duty arising out of (i) the Company's alleged failure to maintain adequate accounting and internal control policies and procedures; and (ii) the Company's alleged violation of state and federal immigration laws in connection with the previously disclosed termination of over 1,500 employees following an Immigration and Customs Enforcement inspection.  The fourth matter alleges seven causes of action for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets also arising out of the same allegations.  On April 12, 2011, the Court issued an order granting a stay (which currently remains in place) of the State Derivative Action on the grounds that the case is duplicative of the Federal Derivative Action, as well as the Federal Securities Action currently pending in the United States District Court for the Central District of California (see below).

93

Both the Federal Derivative Action and State Derivative Actions are covered under the Company's Directors and Officers Liability insurance policy, subject to a deductible and a reservation of rights.

Other Proceedings

Four putative class action lawsuits, (Case No. CV106352 MMM (RCx), Case No. CV106513 MMM (RCx), Case No. CV106516 MMM (RCx), and Case No. CV106680 GW (JCGx)) were filed in the United States District Court for the Central District of California in the Fall of 2010 against American Apparel and certain of the Company's officers and executives on behalf of American Apparel shareholders. On December 3, 2010, the four lawsuits were consolidated for all purposes into a case entitled In re American Apparel, Inc. Shareholder Litigation, Lead Case No. CV106352 MMM (JCGx) (the “Federal Securities Action”). The lead plaintiff filed a consolidated class action complaint on April 29, 2011 on behalf of shareholders who purchased the Company's common stock between November 28, 2007 and August 17, 2010. The lead plaintiff alleges two causes of action for violations of Section 10(b) and 20(a) of the 1934 Act, and Rule 10b-5 promulgated under Section 10(b), arising out of alleged misrepresentations contained in the Company's press releases, public filings with the SEC, and other public statements relating to (i) the adequacy of the Company's internal and financial control policies and procedures; (ii) the Company's employment practices; and (iii) the effect that the dismissal of over 1,500 employees following an Immigration and Customs Enforcement inspection would have on the Company. Plaintiff seeks damages in an unspecified amount, reasonable attorneys' fees and costs, and equitable relief as the Court may deem proper.  The Company filed two motions to dismiss the Federal Securities Action which the court granted with leave to amend. Plaintiffs filed a Second Amended Complaint on February 15, 2013. The Company filed a motion to dismiss the complaint on March 15, 2013. The hearing on the motion was held on June 3, 2013, at which time, the Court took the matter under submission. On August 8, 2013, the court issued its final order granting the motion to dismiss in regards to certain claims. Defendants answered the complaint's remaining claims on September 27, 2013. On November 6, 2013, the Court issued an order staying the case pending ongoing settlement discussions between the parties. Plaintiff filed an unopposed Motion for Preliminary Approval of the settlement on December 16, 2013. The settlement, if approved, would result in a payment by the Company's insurance carrier of $4,800. The Federal Securities Action is covered under the Company's Directors and Officers Liability insurance policy, subject to a deductible and a reservation of rights.

Should any of the above matters (i.e., the Federal Derivative Action, the State Derivative Action, or the Federal Securities Action) be decided against the Company in an amount that exceeds the Company's insurance coverage, or if liability is imposed on grounds which fall outside the scope of the Company's insurance coverage, the Company could not only incur a substantial liability, but also experience an increase in similar suits and suffer reputational harm.  The Company is unable to predict the financial outcome of these matters at this time, and any views formed as to the viability of these claims or the financial exposure which could result may change from time to time as the matters proceed through their course. However, no assurance can be made that these matters, either individually or together with the potential for similar suits and reputational harm, will not result in a material financial exposure, which could have a material adverse effect upon the Company's financial condition, results of operations, or cash flows.

The Company has previously disclosed an arbitration filed by the Company on February 17, 2011, related to cases filed in the Supreme Court of New York, County of Kings (Case No. 5018-1) and Superior Court of the State of California for the County of Los Angeles (Case Nos. BC457920 and BC460331) against American Apparel, Dov Charney and certain members of the Board of Directors asserting claims of sexual harassment, assault and battery, impersonation through the internet, defamation and other related claims.  The Company settled one of these cases with no monetary liability to the Company.  In another case, the arbitrator ruled that both American Apparel and the plaintiff had established certain claims and damages against one another resulting in a net inconsequential amount awarded to the plaintiff. The Company is awaiting the arbitrator’s ruling on the outstanding attorney’s fees issue in this case.  The Company cannot provide assurances that, the amount and ultimate liability, if any, with respect to the remaining actions will not materially affect the Company's business, financial position, results of operations, or cash flows. 

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Note 19. Condensed Consolidating Financial Information

On April 4, 2013, American Apparel Inc. ("Parent") issued $206,000 aggregate principal amount of its 13% Senior Secured Notes due 2020 (the "Notes") with a maturity date of April 15, 2020. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the Company's existing and future owned direct and indirect domestic subsidiaries, subject to certain customary automatic release provisions, including release of the subsidiary guarantor's guarantee upon the sale of all of such guarantor's equity interest or all or substantially all of its assets, designation of such guarantor as an unrestricted or immaterial subsidiary for purposes of the indenture and satisfaction of the defeasance or discharge provisions of the indenture. The following presents the condensed consolidating balance sheets as of December 31, 2013 and 2012, the condensed consolidating statements of operations for the years ended December 31, 2013, 2012 and 2011 and the condensed consolidating statements of cash flows for the years ended December 31, 2013, 2012 and 2011 of the Parent, the Company's material guarantor subsidiaries and the non-guarantor subsidiaries, and the elimination entries necessary to present the Company's financial statements on a consolidated basis. This condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements of the Company.

95

Condensed Consolidating Balance Sheets

December 31, 2013

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
ASSETS
CURRENT ASSETS
Cash	$	—		$	512		$	8,164		$	—		$	8,676
Trade accounts receivable, net	—			15,109			5,592			—			20,701
Intercompany accounts receivable, net	247,414			(224,181		)	(23,233		)	—			—
Inventories, net	—			129,716			39,736			(74		)	169,378
Other current assets	97			10,442			6,002			—			16,541
Total current assets	247,511			(68,402		)	36,261			(74		)	215,296
PROPERTY AND EQUIPMENT, net	—			53,424			15,879			—			69,303
INVESTMENTS IN SUBSIDIARIES	(94,161		)	18,158			—			76,003			—
OTHER ASSETS, net	9,282			27,934			11,937			—			49,153
TOTAL ASSETS	$	162,632		$	31,114		$	64,077		$	75,929		$	333,752
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Revolving credit facilities and current portion of long-term debt	$	—		$	43,586		$	456		$	—		$	44,042
Accounts payable	—			34,738			3,552			—			38,290
Accrued expenses and other current liabilities	5,952			28,344			15,722			—			50,018
Fair value of warrant liability	20,954			—			—			—			20,954
Other current liabilities	—			6,830			1,855			—			8,685
Total current liabilities	26,906			113,498			21,585			—			161,989
LONG-TERM DEBT, net	213,130			47			291			—			213,468
OTHER LONG-TERM LIABILITIES	—			29,711			5,988			—			35,699
TOTAL LIABILITIES	240,036			143,256			27,864			—			411,156
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock	11			100			492			(592		)	11
Additional paid-in capital	185,472			6,726			7,685			(14,411		)	185,472
Accumulated other comprehensive (loss) income	(4,306		)	(543		)	(671		)	1,214			(4,306		)
(Accumulated deficit) retained earnings	(256,424		)	(118,425		)	28,707			89,718			(256,424		)
Less: Treasury stock	(2,157		)	—			—			—			(2,157		)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY	(77,404		)	(112,142		)	36,213			75,929			(77,404		)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	162,632		$	31,114		$	64,077		$	75,929		$	333,752

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Condensed Consolidating Balance Sheets

December 31, 2012

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
ASSETS
CURRENT ASSETS
Cash	$	—		$	3,796		$	9,057		$	—		$	12,853
Trade accounts receivable, net	—			15,697			7,265			—			22,962
Intercompany accounts receivable, net	200,529			(169,818		)	(30,711		)	—			—
Inventories, net	—			125,988			49,493			(1,252		)	174,229
Other current assets	438			8,200			5,708			—			14,346
Total current assets	200,967			(16,137		)	40,812			(1,252		)	224,390
PROPERTY AND EQUIPMENT, net	—			50,551			17,227			—			67,778
INVESTMENTS IN SUBSIDIARIES	(50,773		)	17,766			—			33,007			—
OTHER ASSETS, net	204			25,607			10,233			—			36,044
TOTAL ASSETS	$	150,398		$	77,787		$	68,272		$	31,755		$	328,212
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Revolving credit facilities and current portion of long-term debt	$	—		$	56,156		$	4,400		$	—		$	60,556
Accounts payable	—			34,120			4,040			—			38,160
Accrued expenses and other current liabilities	1,679			24,137			15,700			—			41,516
Fair value of warrant liability	17,241			—			—			—			17,241
Other current liabilities	(286		)	1,778			2,644			—			4,136
Total current liabilities	18,634			116,191			26,784			—			161,609
LONG-TERM DEBT, net	109,680			6			326			—			110,012
OTHER LONG-TERM LIABILITIES	—			28,230			6,277			—			34,507
TOTAL LIABILITIES	128,314			144,427			33,387			—			306,128
STOCKHOLDERS' EQUITY (EQUITY)
Common stock	11			100			492			(592		)	11
Additional paid-in capital	177,081			6,726			7,223			(13,949		)	177,081
Accumulated other comprehensive (loss) income	(2,725		)	(381		)	736			(355		)	(2,725		)
(Accumulated deficit) retained earnings	(150,126		)	(73,085		)	26,434			46,651			(150,126		)
Less: Treasury stock	(2,157		)	—			—			—			(2,157		)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY	22,084			(66,640		)	34,885			31,755			22,084
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	150,398		$	77,787		$	68,272		$	31,755		$	328,212

97

Condensed Consolidating Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2013

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
Net sales	$	—		$	462,732		$	227,680		$	(56,471	)	$	633,941
Cost of sales	—			285,947			84,938			(57,829		)	313,056
Gross profit	—			176,785			142,742			1,358			320,885
Selling expenses	—			143,379			98,304			—			241,683
General and administrative expenses	502			67,779			38,676			—			106,957
Retail store impairment	—			642			898			—			1,540
(Loss) income from operations	(502		)	(35,015		)	4,864			1,358			(29,295		)
Interest expense and other expense	63,992			10,622			618			—			75,232
Equity in loss (earnings) of subsidiaries	41,804			(95		)	—			(41,709		)	—
(Loss) income before income taxes	(106,298		)	(45,542		)	4,246			43,067			(104,527		)
Income tax provision	—			(202		)	1,973			—			1,771
Net (loss) income	$	(106,298	)	$	(45,340	)	$	2,273		$	43,067		$	(106,298	)
Other comprehensive (loss) income, net of tax	(1,581		)	(162		)	(1,407		)	1,569			(1,581		)
Comprehensive (loss) income	$	(107,879	)	$	(45,502	)	$	866		$	44,636		$	(107,879	)

Condensed Consolidating Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2012

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		Elimination Entries			Consolidated
Net sales	$	—		$	452,234		$	233,069	$	(67,993	)	$	617,310
Cost of sales	—			271,809			85,958		(67,840		)	289,927
Gross profit	—			180,425			147,111		(153		)	327,383
Selling expenses	—			126,492			100,955		—			227,447
General and administrative expenses	1,276			59,420			36,518		113			97,327
Retail store impairment	—			243			1,404		—			1,647
(Loss) income from operations	(1,276		)	(5,730		)	8,234		(266		)	962
Interest expense and other expense	23,975			9,629			817		—			34,421
Equity in loss (earnings) of subsidiaries	12,021			(1,057		)	—		(10,964		)	—
(Loss) income before income taxes	(37,272		)	(14,302		)	7,417		10,698			(33,459		)
Income tax provisions	—			133			3,680		—			3,813
Net (loss) income	$	(37,272	)	$	(14,435	)	$	3,737	$	10,698		$	(37,272	)
Other comprehensive income, net of tax	631			164			498		(662		)	631
Comprehensive (loss) income	$	(36,641	)	$	(14,271	)	$	4,235	$	10,036		$	(36,641	)

98

Condensed Consolidating Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2011

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
Net sales	$	—		$	396,303		$	213,872		$	(62,839	)	$	547,336
Cost of sales	—			234,755			82,445			(64,764		)	252,436
Gross profit	—			161,548			131,427			1,925			294,900
Selling expenses	—			115,319			94,522			—			209,841
General and administrative expenses	2,668			69,624			31,793			—			104,085
Retail store impairment	—			558			3,709			—			4,267
(Loss) income from operations	(2,668		)	(23,953		)	1,403			1,925			(23,293		)
Interest and other expense	7,202			4,896			2,214			(12		)	14,300
Equity in loss (earnings) of subsidiaries	29,444			1,543			—			(30,987		)	—
(Loss) income before income taxes	(39,314		)	(30,392		)	(811		)	32,924			(37,593		)
Income tax provision	—			228			1,493			—			1,721
Net loss	$	(39,314	)	$	(30,620	)	$	(2,304	)	$	32,924		$	(39,314	)
Other comprehensive (loss) income, net of tax	(188		)	214			(53		)	(161		)	(188		)
Comprehensive loss	$	(39,502	)	$	(30,406	)	$	(2,357	)	$	32,763		$	(39,502	)

99

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2013

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(13,825	)	$	(16,811	)	$	17,913		$	—	$	(12,723	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			(21,319		)	(5,735		)	—		(27,054		)
Proceeds from sale of fixed assets	—			109			64			—		173
Restricted cash	—			3,265			(1,531		)	—		1,734
Net cash used in investing activities	—			(17,945		)	(7,202		)	—		(25,147		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	—			3,993			—			—		3,993
Repayments of expired revolving credit facilities, net	—			(28,513		)	—			—		(28,513		)
Borrowings (repayments) under current revolving credit facilities, net	—			43,579			(3,785		)	—		39,794
Repayments of term loans and notes payable	9,500			(29,953		)	(13		)	—		(20,466		)
Repayment of Lion term loan	(144,149		)	—			—			—		(144,149		)
Issuance of Senior Secured Notes	199,820			—			—			—		199,820
Payments of debt issuance costs	(10,540		)	(1,369		)	—			—		(11,909		)
Payment of statutory payroll tax withholding on stock-based compensation associated with issuance of common stock	(2,623		)	—			—			—		(2,623		)
Repayments of capital lease obligations	—			(1,662		)	(57		)	—		(1,719		)
Advances to/from affiliates	(38,183		)	45,397			(7,214		)	—		—
Net cash provided by (used in) financing activities	13,825			31,472			(11,069		)	—		34,228
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	—			—			(535		)	—		(535		)
NET DECREASE IN CASH	—			(3,284		)	(893		)	—		(4,177		)
CASH, beginning of period	—			3,796			9,057			—		12,853
CASH, end of period	$	—		$	512		$	8,164		$	—	$	8,676
NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired, and included in accounts payable	$	—		$	818		$	758		$	—	$	1,576
Property and equipment acquired under capital lease	—			4,213			—			—		4,213

100

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2012

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(584	)	$	15,181		$	8,992		$	—	$	23,589
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			(16,418		)	(5,189		)	—		(21,607		)
Proceeds from sale of fixed assets	—			414			60			—		474
Restricted cash	—			(3,265		)	(455		)	—		(3,720		)
Net cash used in investing activities	—			(19,269		)	(5,584		)	—		(24,853		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	—			(1,921		)	—			—		(1,921		)
Repayments of expired revolving credit facilities, net	—			(48,324		)	—			—		(48,324		)
Borrowings under current revolving credit facilities, net	—			26,113			2,338			—		28,451
Borrowings (repayments) of term loans and notes payable, net	—			30,000			(13		)	—		29,987
Payments of debt issuance costs	(231		)	(4,995		)	—			—		(5,226		)
Payment of statutory payroll tax withholding on stock-based compensation associated with issuance of common stock	(393		)	—			—			—		(393		)
Proceeds from equipment lease financing	—			4,533			—			—		4,533
(Repayments) proceeds of capital lease obligations	—			(2,979		)	86			—		(2,893		)
Advances to/from affiliates	1,208			5,167			(6,375		)	—		—
Net cash provided by (used in) financing activities	584			7,594			(3,964		)	—		4,214
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	—			—			(390		)	—		(390		)
NET INCREASE (DECREASE) IN CASH	—			3,506			(946		)	—		2,560
CASH, beginning of period	—			290			10,003			—		10,293
CASH, end of period	$	—		$	3,796		$	9,057		$	—	$	12,853
NON-CASH INVESTING ACTIVITIES
Property and equipment acquired, and included in accounts payable	$	—		$	3,160		$	618		$	—	$	3,778

101

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2011

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities	$	(3,949	)	$	(7,139	)	$	13,393		$	—	$	2,305
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			(8,527		)	(2,543		)	—		(11,070		)
Proceeds from sale of fixed assets	—			249			62			—		311
Restricted cash	—			—			—			—		—
Net cash used in investing activities	—			(8,278		)	(2,481		)	—		(10,759		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	—			(1,407		)	—			—		(1,407		)
Repayments of expired revolving credit facilities, net	—			(5,089		)	(1,785		)	—		(6,874		)
Borrowings (repayments) of term loans and notes payable	—			—			(13		)	—		(13		)
Payments of debt issuance costs	(903		)	(978		)	—			—		(1,881		)
Net proceeds from issuance of common stock and purchase rights	21,710			—			—			—		21,710
Payment of statutory payroll tax withholding on stock-based compensation associated with issuance of common stock	(759		)	—			—			—		(759		)
Proceeds from equipment lease financing	—			3,100			—			—		3,100
(Repayments) proceeds of capital lease obligations	—			(1,314		)	20			—		(1,294		)
Advances to/from affiliates	(16,099		)	20,777			(4,678		)	—		—
Net cash provided by (used in) financing activities	3,949			15,089			(6,456		)	—		12,582
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	—			—			(1,491		)	—		(1,491		)
NET INCREASE (DECREASE) IN CASH	—			(328		)	2,965			—		2,637
CASH, beginning of period	—			618			7,038			—		7,656
CASH, end of period	$	—		$	290		$	10,003		$	—	$	10,293
NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired, and included in accounts payable	$	—		$	1,255		$	68		$	—	$	1,323
Reclassification of Lion Warrant from equity to debt	11,339			—			—			—		11,339
Conversion of debt to equity	4,688			—			—			—		4,688
Issuance of warrants and purchase rights at fair value	6,387			—			—			—		6,387
Exercise of purchase rights	2,857			—			—			—		2,857

102

Schedule II

American Apparel, Inc. and Subsidiaries

Valuation and Qualifying Accounts

(Amounts in thousands)

Description	Balance at Beginning of Year		Charged to Costs and Expenses		Deductions (Recoveries)		Other			Balance at End of Year
Allowance for trade accounts receivable:
For the year ended December 31, 2013	$	2,085	$	1,512	$	—	$	(1,368	)	$	2,229
For the year ended December 31, 2012	$	2,195	$	99	$	—	$	(209	)	$	2,085
For the year ended December 31, 2011	$	2,630	$	996	$	—	$	(1,431	)	$	2,195

Description	Balance at Beginning of Year		Charged to Costs and Expenses			Deductions (Recoveries)		Other			Balance at End of Year
Reserve for inventory shrinkage and obsolescence:
For the year ended December 31, 2013	$	2,653	$	912		$	—	$	(787	)	$	2,778
For the year ended December 31, 2012	$	3,932	$	690		$	—	$	(1,969	)	$	2,653
For the year ended December 31, 2011	$	5,853	$	(1,652	)	$	—	$	(269	)	$	3,932

Description	Balance at Beginning of Year		Increase in Allowance		Deductions to Allowance			Other		Balance at End of Year
Valuation allowance of deferred tax assets:
For the year ended December 31, 2013	$	77,578	$	43,116	$	—		$	—	$	120,694
For the year ended December 31, 2012	$	73,773	$	4,720	$	(915	)	$	—	$	77,578
For the year ended December 31, 2011	$	51,979	$	21,794	$	—		$	—	$	73,773

103

Supplementary Financial Information

The following quarterly data are derived from the Company’s consolidated statements of operations.

QUARTERLY INFORMATION (unaudited)

(Amounts in thousands except per share amounts)

	Quarter Ended December 31,  2013			Quarter Ended September 30,  2013			Quarter Ended June 30, 2013			Quarter Ended March 31,  2013			Year Ended December 31,  2013
Fiscal 2013
Net sales	$	169,102		$	164,543		$	162,236		$	138,060		$	633,941
Gross profit	$	79,507		$	84,640		$	83,870		$	72,868		$	320,885
Net loss	$	(20,770	)	$	(1,513	)	$	(37,504	)	$	(46,511	)	$	(106,298	)
Loss per share-basic and diluted	$	(0.19	)	$	(0.01	)	$	(0.34	)	$	(0.42	)	$	(0.96	)
	Quarter Ended December 31,  2012			Quarter Ended September 30,  2012			Quarter Ended June 30, 2012			Quarter Ended March 31,  2012			Year Ended December 31,  2012
Fiscal 2012
Net sales	$	173,028		$	162,160		$	149,462		$	132,660		$	617,310
Gross profit	$	93,091		$	85,200		$	79,036		$	70,056		$	327,383
Net loss	$	4,903		$	(19,012	)	$	(15,272	)	$	(7,891	)	$	(37,272	)
Loss per share-basic and diluted	$	0.05		$	(0.18	)	$	(0.14	)	$	(0.07	)	$	(0.35	)

Seasonality

The Company experiences seasonality in its operations. Historically, sales during the third and fourth fiscal quarters have generally been the highest, with sales during the first fiscal quarter the lowest. This reflects the combined impact of the seasonality of the wholesale and retail segments. Generally, the Company’s retail segment has not experienced the same pronounced sales seasonality as other retailers.

104

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, we performed an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, of the design and effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this Annual Report that our disclosure controls and procedures were effective.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as is defined in the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as is defined in the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992. Based on this evaluation, and the opinion expressed by our external auditor's attestation report, our management concluded that our internal controls over financial reporting were operating effectively as of December 31, 2013.

Based on the COSO criteria, management did not note control deficiencies that constituted a material weakness in our prior reported financial statements. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is more than a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the most recent fiscal quarter ended December 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

105

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Audit Committee of the

Board of Directors and Shareholders of

American Apparel, Inc.

We have audited American Apparel, Inc. and Subsidiaries' (the “Company”) internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992. The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

In our opinion, American Apparel, Inc. and Subsidiaries'maintained, in all material aspects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2013 and 2012 and the related consolidated statements of operations and comprehensive loss, shareholders’ (deficit) equity, and cash flows and the related financial statement schedule for the years ended December 31, 2013, 2012, and 2011 of the Company and our report dated April 1, 2014 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ Marcum LLP

Marcum LLP

Melville, NY

April 1, 2014

106

Item 9B. Other Information

Not applicable.

107

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item will be included under the following captions in the 2014 Proxy Statement and is incorporated herein by reference: “Directors and Executive Officers,” “Corporate Governance and Board Matters” and “Section 16(a) Beneficial Ownership Reporting Compliance.”

Item 11. Executive Compensation

The information required by this item will be included under the following captions in the 2014 Proxy Statement and is incorporated herein by reference: “Process and Procedures for Determination of Executive and Director Compensation,” “Compensation of Directors,” “Director Compensation—Fiscal 2013,” “Compensation Discussion and Analysis,” “Compensation Committee Report on Executive Compensation,” “Compensation Committee Interlocks and Insider Participation,” “Summary Compensation Table,” and “Grants of Plan-Based Awards Table."

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item will be included under the following captions in the 2014 Proxy Statement and is incorporated herein by reference: “Equity Compensation Plan Information” and “Beneficial Ownership of Shares.”

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by this item will be included under the following captions in the 2014 Proxy Statement and is incorporated herein by reference: “Certain Relationships and Related Transactions” and “Corporate Governance and Board Matters.” 

Item 14. Principal Accountant Fees and Services

The information required by this item will be included under the caption “Relationship with Independent Auditors” in the 2014 Proxy Statement and is incorporated herein by reference.

108

PART IV

Item 15. Exhibits, Financial Statement Schedules

a. Documents filed as part of this Annual Report on Form 10-K:

1. Financial Statements: See “Index to Consolidated Financial Statements” in Part II, Item 8 of this Form 10-K.

2. Financial Statement Schedule: The following consolidated financial statement schedule of American Apparel, Inc. and its subsidiaries is included in Part II, Item 8:

Schedule II—Valuation and Qualifying Accounts

Schedules other than those listed above are omitted because of an absence of the conditions under which they are required or because the required information is shown in the consolidated financial statements and/or notes thereto.

b. Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K.

In reviewing the agreements included as exhibits to this Annual Report on Form 10-K, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about our or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

• should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

• have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

• may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

• were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about our may be found elsewhere in this Annual Report on Form 10-K and in our other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

109

Exhibit No.	Description
2.1	Acquisition Agreement, dated as of December 18, 2006 and amended and restated on November 7, 2007, by and among American Apparel, Inc., AAI Acquisition LLC, American Apparel, Inc., a California corporation, American Apparel, LLC, each of American Apparel Canada Wholesale Inc. and American Apparel Canada Retail Inc. (together the “CI companies”), Dov Charney, Sam Lim, and the stockholders of each of the CI companies (included as Annex A of the Definitive Proxy Statement (File No. 001-32697) filed November 28, 2007 and incorporated by reference herein).
3.1	Amended and Restated Certificate of Incorporation of American Apparel, Inc. (included as Exhibit 3.1 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
3.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of American Apparel, Inc. (included as Exhibit 3.1 of the Current Report on Form 8-K (File No. 001-32697) filed June 27, 2011 and incorporated by reference herein).
3.3	Bylaws of American Apparel, Inc. (included as Exhibit 4.1 of the Registration Statement on Form S-8 (File No. 333-175430) filed July 7, 2011 and incorporated by reference herein).
3.4	Certificate of Amendment to Certificate of Formation of American Apparel (USA), LLC (included as Exhibit 3.3 to Form 10-K (File No 001-32697) filed March 17, 2008 and incorporated by reference herein).
4.1	Specimen Common Stock Certificate (included as Exhibit 4.2 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
4.2	Registration Rights Agreement, dated December 12, 2007, by and among American Apparel, Inc. and the stockholders listed on the signature page therein (included as Annex H of the Definitive Proxy Statement (File No. 001-32697) filed November 28, 2007 and incorporated by reference herein).
4.3	Lock-Up Agreement, dated December 12, 2007, between American Apparel, Inc. and Dov Charney (included as Annex D of the Definitive Proxy Statement (File No. 001-32697), filed November 28, 2007 and incorporated by reference herein).
4.4	Letter Agreement Re: Extension of Lock-Up Agreement, dated March 13, 2009, among Dov Charney, Lion Capital (Guernsey) II Limited and American Apparel, Inc. (included as Exhibit 10.5 of the Current Report on Form 8-K (File No 001-32697) filed March 16, 2009 and incorporated by reference herein).
4.5	Warrants to Purchase Shares of Common Stock of American Apparel, Inc., dated March 13, 2009, issued to Lion Capital (Guernsey) II Limited (included as Exhibit 10.3 of the Current Report on Form 8-K (File No 001-32697) filed March 13, 2009 and incorporated by reference herein).
4.6	Investment Agreement, dated March 13, 2009, between American Apparel, Inc. and Lion Capital (Guernsey) II Limited (included as Exhibit 10.2 of the Current Report on Form 8-K (File No 001-32697) filed March 16, 2009 and incorporated by reference herein).
4.7	Investment Voting Agreement, dated March 13, 2009, between American Apparel, Inc. and Lion Capital (Guernsey) II Limited (included as Exhibit 10.4 of the Current Report on Form 8-K (File No 001-32697) filed March 16, 2009 and incorporated by reference herein).
4.8	Voting Agreement, dated as of February 18, 2011, between Dov Charney, an individual, and Lion/Hollywood L.L.C., in its capacity as a lender under the Lion Credit Agreement (included as Exhibit 10.2 of the Current Report on Form 8-K filed on February 22, 2011 and incorporated by reference herein).
4.9	Warrant to Purchase Shares of Common Stock of American Apparel, Inc., dated March 24, 2011, issued to Lion/Hollywood L.L.C (included as Exhibit 10.2 of the Current Report on Form 8-K filed on March 28, 2011 and incorporated by reference herein).
4.10	Amendment No. 1, dated March 24, 2011, to the Warrant to Purchase Shares of Common Stock of American Apparel, Inc., dated March 13, 2009 (included as Exhibit 10.3 of the Current Report on Form 8-K filed on March 28, 2011 and incorporated by reference herein).
4.11	Form of Voting Agreement, dated as of April 26, 2011, between Dov Charney and the other persons signatory thereto (included as Exhibit 10.3 of the Current Report on Form 8-K filed on April 28, 2011 and incorporated by reference herein).

110

Exhibit No.	Description
4.12	Warrant to Purchase Shares of Common Stock of American Apparel, Inc., dated April 26, 2011, issued to Lion/Hollywood L.L.C. (included as Exhibit 10.6 of the Current Report on Form 8-K filed on April 28, 2011 and incorporated by reference herein).
4.13	Amendment No. 1, dated April 26, 2011, to the Warrant to Purchase Shares of Common Stock of American Apparel, Inc., dated March 24, 2011, issued to Lion/Hollywood L.L.C. (included as Exhibit 10.7 of the Current Report on Form 8-K filed on April 28, 2011 and incorporated by reference herein).
4.14	Amendment No. 2, dated April 26, 2011, to the Warrant to Purchase Shares of Common Stock of American Apparel, Inc., dated March 13, 2009, issued to Lion/Hollywood L.L.C. (included as Exhibit 10.8 of the Current Report on Form 8-K filed on April 28, 2011 and incorporated by reference herein).
4.15	Warrant to Purchase Shares of Common Stock of American Apparel, Inc., dated July 7, 2011, issued to Lion/Hollywood L.L.C. (included as exhibit 10.1 of the Current Report on Form 8-K (File No. 001-32697) filed July 13, 2011 and incorporated by reference herein).
4.16	Warrant to Purchase Shares of Common Stock of American Apparel, Inc., dated July 12, 2011, issued to Lion/Hollywood L.L.C. (included as exhibit 10.2 of the Current Report on Form 8-K (File No. 001-32697) filed July 13, 2011 and incorporated by reference herein).
4.17	Amendment No. 1, dated March 13, 2012, to the Warrant to Purchase Shares of Common Stock of of American Apparel, Inc., dated July 12, 2011 (included as exhibit 10.5 of the Current Report on Form 8-K (File No. 001-32697) filed March 19, 2012 and incorporated by reference herein).
4.18	Amendment No. 1, dated March 13, 2012, to the Warrant to Purchase Shares of Common Stock of of American Apparel, Inc., dated July 7, 2011 (included as exhibit 10.6 of the Current Report on Form 8-K (File No. 001-32697) filed March 19, 2012 and incorporated by reference herein).
4.19	Amendment No. 1, dated March 13, 2012, to the Warrant to Purchase Shares of Common Stock of of American Apparel, Inc., dated April 26, 2011 (included as exhibit 10.7 of the Current Report on Form 8-K (File No. 001-32697) filed March 19, 2012 and incorporated by reference herein).
4.20	Amendment No. 2, dated March 13, 2012, to the Warrant to Purchase Shares of Common Stock of of American Apparel, Inc., dated March 24, 2011 (included as exhibit 10.8 of the Current Report on Form 8-K (File No. 001-32697) filed March 19, 2012 and incorporated by reference herein).
4.21	Amendment No. 3, dated March 13, 2012, to the Warrant to Purchase Shares of Common Stock of of American Apparel, Inc., dated March 13, 2009 (included as exhibit 10.7 of the Current Report on Form 8-K (File No. 001-32697) filed March 19, 2012 and incorporated by reference herein).
4.22	Indenture, dated as of April 4, 2013, by and among the Company, the Guarantors and U.S. Bank National Association (included as exhibit 4.1 of the Current Report on Form 8-K (File No. 001-32697) filed April 9, 2013 and incorporated by reference herein).
4.23	Form of Note (included as exhibit 4.2 of the Current Report on Form 8-K (File No. 001-32697) filed April 9, 2013 and incorporated by reference herein).
4.24	Registration Rights Agreement, dated as of April 4, 2013, by and among the Company, the Guarantors and Cowen and Company, LLC and Sea Port Group Securities, LLC, as representatives of the initial purchasers (included as exhibit 4.3 of the Current Report on Form 8-K (File No. 001-32697) filed April 9, 2013 and incorporated by reference herein).
10.1 +	American Apparel, Inc. 2011 Omnibus Stock Incentive Plan, as amended and restated as of June 25, 2013 (included as Annex A of the Definitive Proxy Statement (File No. 001-32697) filed on April 30, 2013 and incorporated by reference herein).
10.2 +	Employment Agreement, dated March 22, 2012, between American Apparel, Inc. and Dov Charney (included as Exhibit 10.1 of Current Report on Form 8-K (File No. 001-32697) filed March 27, 2012 and incorporated by reference herein).
10.3 +	Employment Agreement, dated January 27, 2009, by and between Glenn A. Weinman and American Apparel, Inc. (included as Exhibit 10.1 of Current Report on Form 8-K (File No. 001-32697) filed February 2, 2009 and incorporated by reference herein).
10.4 +	Employment Agreement, dated February 7, 2011 by and between John Luttrell and American Apparel, Inc. (included as Exhibit 10.1 of the Current Report on Form 8-K filed on February 3, 2011 and incorporated by reference herein).

111

Exhibit No.	Description
10.5	Lease, dated as of January 1, 2004, by and between Alameda Produce Market, Inc. and AAI (included as Exhibit 10.21 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
10.6	Lease, dated as of May 12, 2004, by and between Alameda Produce Market, Inc. and AAI (included as Exhibit 10.22 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
10.7	Lease, dated June 9, 2004, by and between Titan Real Estate Investment Group, Inc., and Textile Unlimited Corp., E&J Textile Group, Inc., and Johnester Knitting, Inc. (jointly and severally) (included as Exhibit 10.15 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
10.8	Assignment of Lessee's Interest in Lease and Assumption Agreement, dated as of June 2, 2005, by and between Textile Unlimited Corp., E&J Textile Group, Inc., and Johnester Knitting, Inc. (jointly and severally) and American Apparel Dyeing and Finishing, Inc. (included as Exhibit 10.16 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
10.9	Lease, dated December 13, 2005, by and between American Central Plaza and AAI (included as Exhibit 10.17 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
10.10	Lease Amendment, effective as of November 15, 2006, by and between American Central Plaza and AAI (included as Exhibit 10.18 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
10.11	Lease Amendment, effective as of March 22, 2007, by and between American Central Plaza and AAI (included as Exhibit 10.19 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
10.12	Lease, dated as of July 30, 2009, by and between Alameda Produce Market, LLC and AAI (included as Exhibit 10.21 of the Current Report on Form 8-K (File No. 00l-32697) filed December 18, 2007 and incorporated by reference herein).
10.13	Form of Purchase and Investment Agreement, dated as of April 21, 2011, by and among American Apparel, Inc. and the purchasers signatory thereto (included as Exhibit 10.1 of the Current Report on Form 8-K (File No. 00l-32697) filed on April 28, 2011 and incorporated by reference herein).
10.14	Purchase Agreement, dated as of April 27, 2011, between American Apparel, Inc. and Dov Charney (included as Exhibit 10.2 of the Current Report on Form 8-K/A (File No. 00l-32697) filed on April 28, 2011 and incorporated by reference herein).
10.15	Amendment to Purchase Agreement, dated as of October 16, 2012, by and between American Apparel, Inc. and Dov Charney (included as Exhibit 10.1 of the Current Report on Form 8-K (File No. 00l-32697) filed on October 22, 2012 and incorporated by reference herein).
10.16	Asset Purchase Agreement, dated as of December 1, 2007, by and between PNS Apparel, Inc., Blue Man Group, Inc., Allen S. Yi and American Apparel, Inc. (included as Exhibit 10.24 of Amendment No. 1 to the Annual Report on Form 10-K/A (File No. 001-32697) filed March 28, 2008 and incorporated by reference herein).
10.17	Letter Agreement Re: Extension of Non-Competition and Non-Solicitation Covenants in Section 5.27(a) of the Merger Agreement, dated March 13, 2009, among Dov Charney, Lion Capital (Guernesey) II Limited and American Apparel, Inc. (included as Exhibit 10.6 of the Current Report on Form 8-K (File No 001-32697) filed March 16, 2009 and incorporated by reference herein).
10.18	Amendment and Agreement, dated as of April 10, 2009, by and between American Apparel, Inc. and Lion/Hollywood L.L.C. (included as Exhibit 10.1 of Current Report on Form 8-K (File No 001-32697) filed April 16, 2009 and incorporated by reference herein).
10.19	Second Amendment and Agreement, dated as of June 17, 2009, by and between American Apparel, Inc. and Lion/Hollywood L.L.C. (included as Exhibit 10.1 of Current Report on Form 8-K (File No 001-32697) filed June 19, 2009 and incorporated by reference herein).
10.20	Third Amendment and Agreement, dated as of August 18, 2009, by and between American Apparel, Inc. and Lion/Hollywood L.L.C. (included as Exhibit 10.1 of Current Report on Form 8-K (File No 001-32697) filed August 20, 2009 and incorporated by reference herein).

112

Exhibit No.	Description
10.21	Letter Agreement Re: Pledging of Restricted Securities, dated October 28, 2009, among Dov Charney, Lion/Hollywood L.L.C. and American Apparel, Inc. (included as Exhibit 10.1 of Current Report on Form 8-K (File No. 001-32697) filed November 3, 2009 and incorporated by reference herein).
10.22	Credit Agreement, dated as of December 30, 2009, between American Apparel Canada Wholesale Inc. and American Apparel Canada Retail Inc. and Bank of Montreal (included as Exhibit 10.1 of Current Report on Form 8-K (File No. 001-32697) filed January 6, 2010 and incorporated by reference herein).
10.23	Credit Agreement, dated as of March 13, 2009, among American Apparel, Inc., in its capacity as Borrower, certain subsidiaries of American Apparel, Inc., in their capacity as Facility Guarantors, Lion Capital LLP, in its capacity as administrative agent and collateral agent, Lion Capital (Guernsey) II Limited, as Initial Lender, and the other lenders from time to time party thereto (included as Exhibit 10.1 of the Current Report on Form 8-K (File No 001-32697) filed March 16, 2009 and incorporated by reference herein).
10.24	Waiver to Credit Agreement, dated as of September 30, 2009, among American Apparel, Inc., the facility guarantors from time to time party thereto, Wilmington Trust FSB, as the administrative agent and the collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.1 of Current Report on Form 8-K (File No. 001-32697) filed October 6, 2009 and incorporated by reference herein).
10.25	First Amendment to Credit Agreement, dated as of December 30, 2009, among American Apparel, Inc., the facility guarantors from time to time party thereto, Wilmington Trust FSB, as the administrative agent and collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.3 of Current Report on Form 8-K (File No. 001-32697) filed January 6, 2010 and incorporated by reference herein).
10.26	Second Amendment to Credit Agreement, dated as of March 31, 2010, among American Apparel, Inc., the facility guarantors from time to time party thereto, Wilmington Trust FSB, as the administrative agent and collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.1 of Current Report on Form 8-K (File No. 001-32697) filed April 1, 2010 and incorporated by reference herein).
10.27	Third Amendment to Credit Agreement, dated as of June 23, 2010, among American Apparel, Inc., the facility guarantors from time to time party thereto, Wilmington Trust FSB, as the administrative agent and collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.1 of Current Report on Form 8-K (File No. 001-32697) filed June 24, 2010 and incorporated by reference herein).
10.28	Fourth Amendment to Credit Agreement, dated as of September 30, 2010, among American Apparel, Inc., the facility guarantors from time to time party thereto, Wilmington Trust FSB, as the administrative agent and collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.1 of Current Report on Form 8-K (File No. 001-32697) filed October 1, 2010 and incorporated by reference herein).
10.29	Waiver to Credit Agreement, dated as of January 31, 2011, among American Apparel, Inc., the facility guarantors from time to time party thereto, Wilmington Trust FSB, as the administrative agent and the collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.1 of the Current Report on Form 8-K (File No. 001-32697) filed on February 1, 2011 and incorporated by reference herein).
10.30	Fifth Amendment to Credit Agreement, dated as of February 18, 2011, among American Apparel, Inc., the facility guarantors from time to time party thereto, Wilmington Trust FSB, as the administrative agent and the collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.1 of the Current Report on Form 8-K (File No. 001-32697) filed on February 22, 2011 and incorporated by reference herein).
10.31	Waiver and Sixth Amendment to Credit Agreement, dated as of April 26, 2011, among American Apparel, Inc., the facility guarantors from time to time party thereto, Wilmington Trust FSB, as the administrative agent and the collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.5 of the Current Report on Form 8-K (File No. 001-32697) filed on April 28, 2011 and incorporated by reference herein).
10.32	Seventh Amendment to Credit Agreement, dated as of March 13, 2012, among American Apparel, Inc. and the other Credit Parties as the facility guarantors from time to time party thereto, Wilmington Trust N.A., as the administrative agent and the collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.3 of the Amendment filed on June 21, 2012 to the Current Report on Form 8-K (File No. 001-32697) filed on March 19, 2012 and incorporated by reference herein).

113

Exhibit No.	Description
10.33	Eighth Amendment to Credit Agreement, dated August 30, 2012, among American Apparel, Inc. and the other Credit Parties as the facility guarantors from time to time party thereto, Wilmington Trust N.A., as the administrative agent and the collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.3 of the Current Report on Form 8-K (File No. 001-32697) filed on September 11, 2012 and incorporated by reference herein).
10.34	Ninth Amendment and Waiver to Credit Agreement, dated September 28, 2012, among American Apparel, Inc. and the other Credit Parties as the facility guarantors from time to time party thereto, Wilmington Trust N.A., as the administrative agent and the collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.3 of the Quarterly Report on Form 10-Q (File No. 001-32697) filed on November 14, 2012 and incorporated by reference herein).
10.35	Tenth Amendment to Credit Agreement, dated November 12, 2012, among American Apparel, Inc. and the other Credit Parties as the facility guarantors from time to time party thereto, Wilmington Trust N.A., as the administrative agent and the collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.5 of the Quarterly Report on Form 10-Q (File No. 001-32697) filed on November 14, 2012 and incorporated by reference herein).
10.36	Eleventh Amendment to Credit Agreement, dated February 6, 2013, among American Apparel, Inc. and the other Credit Parties as the facility guarantors from time to time party thereto, Wilmington Trust N.A., as the administrative agent and the collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto (included as Exhibit 10.2 of the Current Report on Form 8-K (File No. 001-32697) filed on February 11, 2013 and incorporated by reference herein).
10.37	Intercreditor Agreement, dated as of April 4, 2013, by and among U.S. Bank National Association and Capital One Leverage Finance Corp. (included as Exhibit 10.2 of the Current Report on Form 8-K (File No. 001-32697) filed April 9, 2013 and incorporated by reference herein).
10.38	Creditor Agreement, dated as of April 4, 2013, by and among the Credit Parties, Capital One Leverage Finance Corp., as administrative agent, swing line lender, and lender, Capital One, N.A., as L/C issuer and the other lenders party thereto (included as Exhibit 10.1 of the Current Report on Form 8-K (File No. 001-32697) filed April 9, 2013 and incorporated by reference herein).
10.39*	Amendment No. 1 to Credit Agreement, dated as of May 22, 2013, by and among the Borrowers, the Guarantors, Capital One Leverage Finance Corp., as administrative agent, and the Lenders party thereto.
10.40	Amendment No. 2 to Credit Agreement, dated as of July 5, 2013, by and among the Borrowers, the Guarantors, Capital One Leverage Finance Corp., as administrative agent, and the Lenders party thereto (included as Exhibit 10.1 of the Current Report on Form 8-K (File No. 001-32697) filed July 9, 2013 and incorporated by reference herein).
10.41*	Amendment No. 3 to Credit Agreement and Limited Waiver, dated as of November 14, 2013, by and among the Company, the Borrowers, Fresh Air Freight, Inc., Capital One Business Credit Corp. (f/k/a Capital One Leverage Finance Corp.), as Administrative Agent, and the Lenders party thereto.
10.42*	Amendment No. 4 to Credit Agreement and Limited Consent, dated as of November 29, 2013, by and among the Company, the Borrowers, Fresh Air Freight, Inc., Capital One Business Credit Corp. (f/k/a Capital One Leverage Finance Corp.), as Administrative Agent, and the Lenders party thereto.
10.43	Amendment No. 5 to Credit Agreement and Limited Waiver, dated as of March 25, 2014, by and among the Company, the Borrowers, Fresh Air Freight, Inc., Capital One Business Credit Corp. (f/k/a Capital One Leverage Finance Corp.), as Administrative Agent, and the Lenders party thereto (included as Exhibit 10.1 of the Current Report on Form 8-K (File No. 001-32697) filed March 25, 2014 and incorporated by reference herein).
10.44*	Credit Agreement, dated as of May 22, 2013, by and among American Apparel, Inc., the facility guarantors party thereto, and Lion/Hollywood L.L.C.
10.45*	Amendment No. 1 to Credit Agreement, dated as of November 29, 2013, by and among American Apparel, Inc., the facility guarantors party thereto, and Lion/Hollywood L.L.C.
14.1	American Apparel, Inc. Code of Ethics (included as Exhibit 14.1 of the Current Report for 8-K (File No. 001-32697) filed December 18, 2007 and incorporated by reference herein).
21.1*	List of subsidiaries as of December 31, 2013
23.1*	Consent of Independent Registered Public Accounting Firm
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

114

Exhibit No.	Description
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

___________________________

* Filed herewith.

+ Management contract or compensatory plan or arrangement.

115

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AMERICAN APPAREL, INC.
April 1, 2014	By:	/s/ DOV CHARNEY
		Dov Charney
		Chief Executive Officer
		(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ DOV CHARNEY	Chief Executive Officer and Director (Principal Executive Officer)	April 1, 2014
Dov Charney
/s/ JOHN LUTTRELL	Chief Financial Officer and Principal Accounting Officer	April 1, 2014
John Luttrell
/s/ ALBERTO CHEHEBAR	Director	April 1, 2014
Alberto Chehebar
/s/ DAVID DANZIGER	Director	April 1, 2014
David Danziger
/s/ ROBERT GREENE	Director	April 1, 2014
Robert Greene
/s/ MARVIN IGELMAN	Director	April 1, 2014
Marvin Igelman
/s/ WILLIAM MAUER	Director	April 1, 2014
William Mauer
/s/ ALLAN MAYER	Director	April 1, 2014
Allan Mayer

116

EX-10.39

Exhibit 10.39

AMENDMENT NO. 1 TO CREDIT AGREEMENT

THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT dated as of May 22, 2013 (this “Amendment”), is among AMERICAN APPAREL (USA), LLC, a California limited liability company (“AA USA”), AMERICAN APPAREL RETAIL, INC., a California corporation (“AA Retail”), AMERICAN APPAREL DYEING & FINISHING, INC., a California corporation (“AA Dyeing & Finishing”), KCL KNITTING, LLC, a California limited liability company(“KCL” and, together with AA USA, AA Retail and AA Dyeing & Finishing, collectively, the “Borrowers” and each, individually, a “Borrower”), AMERICAN APPAREL, INC., a Delaware corporation (“Holdings”), FRESH AIR FREIGHT, INC., a California corporation (“Fresh Air” and, together with Holdings, collectively, the “Guarantors” and each, individually, a “Guarantor”), CAPITAL ONE LEVERAGE FINANCE CORP., as administrative agent (in such capacity, the “Administrative Agent”), and each of the Lenders party hereto.

RECITALS:

A.The Borrowers, the other borrowers from time to time party thereto, the Guarantors, the other guarantors from time to time party thereto, the lenders from time to time party thereto (collectively, “Lenders”) and the Administrative Agent have entered into that certain Credit Agreement dated as of April 4, 2013 (the “Credit Agreement”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

B.The Guarantors have entered into that certain Guaranty dated as of April 4, 2013, in favor of the Administrative Agent.

C.The Borrowers have requested that the Administrative Agent and Lenders amend certain provisions of the Credit Agreement.

D.Subject to the terms and conditions set forth below, the Administrative Agent and Lenders party hereto are willing to so amend the Credit Agreement.

In furtherance of the foregoing, the parties agree as follows:

Section 1.AMENDMENTS. Subject to the covenants, terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, the Credit Agreement is amended as follows:

(a)The following new definitions are added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order:

“Lion Credit Agreement” means that certain Credit Agreementdated as of May 22, 2013, among Holdings, the other Credit Parties party thereto as facility guarantors, Lion/Hollywood L.L.C., as the initial lender, and the other lenders from time to time party thereto.

“Lion Debt” means all Indebtedness and all other obligations incurred by any Credit Party or any of its Subsidiaries under the Lion Debt Documents.

“Lion Debt Documents” means the Lion Credit Agreement and any other related material documents or instruments from time to time executed in favor of Lion/Hollywood L.L.C. and its successors and assigns.

(b)The existing definitions in Section 1.01 of the Credit Agreement for the terms “Material Agreementsand “Senior Notes Lien” are deleted in their entirety and the following new definitions for such terms are added in lieu thereof:

“Material Agreements” means each of the (i) Senior Notes Documents, (ii) the Lion Debt Documents and (iii) any lease entered into by any Credit Party for (a) its chief executive office or (b) any warehouse, any distribution center, any plant, any shipping center, or any other single location, in each case, containing

Inventory with a book value representing 10% or more of the aggregate book value of all Inventory of the Credit Parties.

“Senior Notes Lien” means, collectively (a) all Liens that secure the Senior Notes and all other obligations under the Senior Notes Documents and (b) at any time that the Lion Debt is secured to the extent permitted by Section 7.02(p) and Section 7.03(a)(v), all Liens that secure the Lion Debt and all other obligations under the Lion Debt Documents.

(c)The existing Section 5.24 of the Credit Agreement is amended by inserting the following sentence at the end thereof:

No Credit Party is in violation of any provision of any Lion Debt Document, and the Loans and the Loan Documents and the transactions contemplated hereby and thereby do not violate and/or conflict with any provision of the Lion Debt Documents.

(d)The existing Section 6.04(i) of the Credit Agreement is deleted in its entirety and the following is inserted in lieu thereof:

(i)promptly after delivery or receipt thereof, copies of all notices, reports and other communications delivered or received by any Credit Party in connection with the Senior Notes Documents, the Lion Debt Documents or the Subordinated Debt Documents and not later than five (5) Business Days following the effectiveness thereof, copies of any new Senior Notes Documents or Lion Debt Documents or any amendment, supplement, waiver, or other modification, replacement or renewal with respect to any Senior Notes Document or Lion Debt Document;

(e)The existing Section 7.01(n) of the Credit Agreement is deleted in its entirety and the following is inserted in lieu thereof:

(n)Investments consisting of any Credit Party Guaranteeing (i) pursuant to the Senior Notes Documents, the Indebtedness evidenced by the Senior Notes incurred by another Credit Party to the extent such incurrence is permitted by Section 7.02(c) or (ii) pursuant to the Lion Debt Documents, the Indebtedness evidenced by the Lion Credit Agreement incurred by another Credit Party to the extent such incurrence is permitted by Section 7.02(p);

(f)The existing Section 7.02(p) of the Credit Agreement is deleted in its entirety and the following is inserted in lieu thereof:

(p)Indebtedness incurred pursuant to the Lion Debt Documents in an aggregate principal amount not to exceed $4,500,000plus the amount of any increase in principal for the purpose of paying interest in kind pursuant to the Lion Credit Agreement as in effect on May 22, 2013; provided that (i) the maturity date of such Indebtedness shall be at least one hundred and eighty (180) days following the Maturity Date (after taking into account any extension thereof); and (ii) to the extent such Indebtedness is secured, (A) AA USA has delivered an Additional Secured Debt Designation (as defined in the Senior Notes Intercreditor Agreement) to the Administrative Agent duly executed by AA USA and U.S. Bank National Association, (B) Lion/Hollywood L.L.C. and each other lender under the Lion Credit Agreement has delivered an Intercreditor Joinder (as defined in the Senior Notes Intercreditor Agreement) to the Administrative Agent duly executed by Lion/Hollywood L.L.C., each such other lender and U.S. Bank National Association, and (C) such Indebtedness is at all times subject to the Senior Notes Intercreditor Agreement.

(g)The existing Section 7.03(a)(v) of the Credit Agreement is deleted in its entirety and the following is inserted in lieu thereof:

(v)Senior Notes Liens subject to the Senior Notes Intercreditor Agreement; provided that, with respect to any Senior Notes Liens securing the Lion Debt, the Consolidated Senior Secured Debt Ratio (as

defined in and calculated as set forth in the Senior Notes Indenture), on a pro forma basis after giving effect to the Lion Debt Documents, is not greater than 3.25 to 1.00 at the time of the grant of the Senior Notes Liens to secure the Lion Debt and such Senior Notes Liens securing the Lion Debt are otherwise permitted under the Senior Notes Indenture;

(h)The existing Section 7.03(b)(i) of the Credit Agreement is deleted in its entirety and the following is inserted in lieu thereof:

(i) prohibitions and restrictions contained in this Agreement, the other Loan Documents, the Senior Notes Documents and the Lion Debt Documents,

(i)The existing Section 7.04(b) of the Credit Agreement is amended by (i) deleting the “or” after “the Canadian Documents” and prior to “the Subordinated Debt Documents” in the third line thereof and inserting a “,” in lieu thereof, (ii) inserting “or the Lion Debt Documents” after “the Subordinated Debt Documents” and before “other than” in the third and fourth lines thereof, (iii) deleting the “.” at the end of clause (iii) and inserting “; and” in lieu thereof, and (iv) adding the following new clause (iv):

(iv)With respect to Indebtedness under the Lion Debt Documents, (A) regularly scheduled payments of interest and fees when due; (B) payment of principal on the scheduled maturity date thereof;(C) mandatory repurchase of the Lion Debt pursuant to Section 2.08 of the Lion Credit Agreement (as in effect on the Closing Date) and solely to the extent required thereby; (D) at anytime the Revolving Credit Facility is $50,000,000 or, if the Revolving Credit Facility is not $50,000,000, at anytime after the first anniversary of the incurrence of the Indebtedness under the Lion Debt Documents, to the extent not prohibited by the Senior Notes Intercreditor Agreement, prepayments, redemptions, repurchases, defeasances or acquisition or retirement of the Lion Debt if (x) the Fixed Charge Coverage Ratio for the Reference Period most recently ended prior to such prepayment (and for which the financial statements required by Section 6.04(b) have been delivered to the Administrative Agent) is at least 1.00 to 1.00 (which such calculation, for the avoidance of doubt, shall exclude such prepayment), (y) average daily Overall Excess Availability is at least $3,500,000 on the date of such prepayment (on a pro forma basis giving effect to such prepayment) and for each day during the 30-day period after such prepayment, and (z) no Default or Event of Default exists before or immediately after giving effect to such prepayment and not less than 10 Business Days (or such shorter period as agreed by the Administrative Agent in its discretion) prior to such prepayment, the Borrower Representative has delivered a certificate to the Administrative Agent demonstrating compliance with this clause (D);

(j)The existing Section 7.10(b) of the Credit Agreement is deleted in its entirety and the following is inserted in lieu thereof:

(b)Senior Notes Documents or Lion Debt Documents, except to the extent permitted by the Senior Notes Intercreditor Agreement; provided that, without the prior written consent of the Administrative Agent, no such amendment, modification, supplement or waiver shall (i) increase the aggregate principal amount of the Senior Notes or Lion Debt or interest, premiums or fees owing thereon, except to the extent permitted under Section 7.02(c) or 7.02(p), as applicable, (ii) shorten the weighted average life, (iii) change the amortization (other than to extend the same), (iv) amend the maturity date (other than to extend the same), (v) increase the overall interest rate, or (v) otherwise amend the covenants and defaults under the Senior Notes Documents or Lion Debt Documents if such amendment would result in such covenants and defaults being materially less favorable to the Credit Parties, taken as a whole, or materially more adverse to the interests of the Lenders;

(k)The existing Section 8.01(o) of the Credit Agreement is deleted in its entirety and the following is inserted in lieu thereof:

(o)Senior Notes Documents; Lion Debt Documents. (i) Any “Event of Default” under any Senior Notes Document or Lion Debt Document shall occur or (ii) the holders of the Senior Notes or the lenders under the Lion Credit Agreement shall accelerate the maturity of all or any part of the obligations under the

Senior Notes Documents or the Lion Debt Documents, as applicable, or (iii) other than in accordance with the express terms of Section 7.04, an offer to prepay, redeem or repurchase all or any portion of the Senior Notes or Lion Debt shall be required; or

(l)The first sentence of the existing Section 8.01(q) of the Credit Agreement is deleted in its entirety and the following is inserted in lieu thereof:

The provisions in the Senior Notes Intercreditor Agreement shall cease, in whole or in part, to be effective or cease to be legally valid, binding and enforceable against (i) the Indenture Agent (as defined in the Senior Notes Intercreditor Agreement) or any Person party to any Senior Notes Document, (ii) if Lion/Hollywood L.L.C. and/or any other lender party to the Lion Credit Agreement is a party thereto, Lion/Hollywood L.L.C. or any Person party to any Lion Debt Document or such other lender party to the Lion Credit Agreement or (iii) the Credit Parties identified therein.

The amendments to the Credit Agreement are limited to the extent specifically set forth above and no other terms, covenants or provisions of the Credit Agreement are intended to be affected hereby.

Section 2.CONDITIONS PRECEDENT. The parties hereto agree that the amendments set forth in Section 1 above shall not be effective until the satisfaction of each of the following conditions precedent:

(a)Documentation. The Administrative Agent shall have received (i) a counterpart of this Amendment, duly executed and delivered by each Borrower, each Guarantor and each Lender, and (ii) a certificate of a member of the Senior Management of Holdings certifying and attaching true, correct and complete copies of the Credit Agreementdated as of the date hereof, among Holdings, the other Credit Parties party thereto as facility guarantors, Lion/Hollywood L.L.C., as the initial lender, and the other lenders from time to time party thereto, and each other related material document or instrument executed in connection therewith.

(b)Fees and Expenses. All fees and expenses of counsel to the Administrative Agent estimated to date shall have been paid in full (without prejudice to final settling of accounts for such fees and expenses), in each case to the extent invoiced.

Section 4.REPRESENTATIONS AND WARRANTIES.

(a)In order to induce the Administrative Agent and Lenders to enter into this Amendment, each Credit Party represents and warrants to the Administrative Agent and Lenders as follows:

(i)The representations and warranties made by such Credit Party contained in Article V of the Credit Agreement are true and correct in all material respects (but without any duplication of any materiality qualifications) on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date in which case such representations and warranties are true and correct in all material respects (but without any duplication of any materiality qualifications) on and as of such earlier date.

(ii)Since the Balance Sheet Date, no act, event, condition or circumstance has occurred or arisen which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

(iii)No Default or Event of Defaulthas occurred and is continuing or will exist after giving effect to this Amendment.

(b)In order to induce the Administrative Agent and Lenders to enter into this Amendment, each Credit Party represents and warrants to the Administrative Agent and Lenders that this Amendment has been duly authorized, executed and delivered by such Credit Party and constitutes its legal, valid and binding obligation.

Section 5.MISCELLANEOUS

(a)Ratification and Confirmation of Loan Documents. Each Credit Party hereby consents, acknowledges and agrees to the amendments set forth herein and hereby confirms and ratifies in all respects the Loan Documents to which such Person is a party (including, without limitation, with respect to each Guarantor, the continuation of its payment and performance obligations under the Guaranty upon and after the effectiveness of the amendments contemplated hereby and, with respect to each Credit Party, the continuation and existence of the liens granted under the Security Documents to secure the Obligations).

(b)Fees and Expenses. The Borrowers, jointly and severally, shall promptly pay on demand (and, in any event, within 10 Business Days after demand therefor) all reasonable costs and expenses of the Administrative Agent in connection with the preparation, reproduction, execution, and delivery of this Amendment and any other documents prepared in connection herewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent.

(c)Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

(d)Governing Law; Waiver of Jury Trial. This Amendment shall be governed by and construed in accordance with the laws of the State of New York, and shall be further subject to the provisions of Section 10.14 of the Credit Agreement.

(e)Counterparts. This Amendment may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic transmission (including .pdf file) shall be effective as delivery of a manually executed counterpart hereof.

(f)Entire Agreement. This Amendment, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise except in a writing signed by the parties hereto for such purpose.

(g)Enforceability. Should any one or more of the provisions of this Amendment be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

(h)Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of each Borrower, each Guarantor, the Administrative Agent, each Lender and their respective successors and assigns (subject to Section 10.06 of the Credit Agreement).

[Remainder of page intentionally left blank; signatures begin on following page]

AMENDMENT NO. 1 TO CREDIT AGREEMENT

Signature Page

47694041

The following parties have caused this Amendment No. 1 to Credit Agreement to be executed as of the date first written above.

BORROWERS:

AMERICAN APPAREL (USA), LLC

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

AMERICAN APPAREL RETAIL, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

AMERICAN APPAREL DYEING &FINISHING, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

KCL KNITTING, LLC

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

GUARANTORS:

AMERICAN APPAREL, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

FRESH AIR FREIGHT, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

ADMINISTRATIVE AGENT AND LENDERS:

CAPITAL ONE LEVERAGE FINANCE CORP.,

as Administrative Agent and Lender

By: /s/ Julianne Low

Name:Julianne Low

Title:Vice President

EX-10.41

Exhibit 10.41

AMENDMENT NO. 3 TO CREDIT AGREEMENT AND LIMITED WAIVER

THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT AND LIMITED WAIVER dated as of November 14, 2013 (this "Amendment"), is among AMERICAN APPAREL (USA), LLC, a California limited liability company ("AA USA"), AMERICAN APPAREL RETAIL, INC., a California corporation ("AA Retail"), AMERICAN APPAREL DYEING & FINISHING, INC., a California corporation ("AA Dyeing & Finishing"), KCL KNITTING, LLC, a California limited liability company ("KCL" and, together with AA USA, AA Retail and AA Dyeing & Finishing, collectively, the "Borrowers" and each, individually, a "Borrower"), AMERICAN APPAREL, INC., a Delaware corporation ("Holdings"), FRESH AIR FREIGHT, INC., a California corporation ("Fresh Air" and, together with Holdings, collectively, the "Guarantors" and each, individually, a "Guarantor"), CAPITAL ONE BUSINESS CREDIT CORP. (f/k/a Capital One Leverage Finance Corp.), as administrative agent (in such capacity, the "Administrative Agent"), and each of the Lenders party hereto.

RECITALS:

A.The Borrowers, the other borrowers from time to time party thereto, the

B.Guarantors, the other guarantors from time to time party thereto, the lenders from time to time party thereto (collectively, "Lenders") and the Administrative Agent have entered into that certain Credit Agreement dated as of April 4, 2013 (as amended by that certain Amendment No. 1 to Credit Agreement dated as of May 22, 2013 and that certain Amendment No. 2 to Credit Agreement dated as of July 5, 2013, the "Credit Agreement"). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

C.The Guarantors have entered into that certain Guaranty dated as of April 4, 2013, in favor of the Administrative Agent.

D.The Borrowers have requested that the Administrative Agent and Lenders amend certain provisions of the Credit Agreement and grant the waivers set forth below.

E.Subject to the terms and conditions set forth below, the Administrative Agent and Lenders party hereto are willing to so amend the Credit Agreement and grant such waivers.

In furtherance of the foregoing, the parties agree as follows:

Section 1.AMENDMENTS

. Subject to the covenants, terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, the Credit Agreement is amended as follows:

(a)The existing definition in Section 1.01 of the Credit Agreement for the term "Applicable Rate" is deleted in its entirety and the following new definition for such term is added in lieu thereof:

"Applicable Rate" means:

(a)with respect to the Revolving Credit Loans, 3.50% per annum with respect to Base Rate Loans and 4.50% per annum with respect to Eurodollar Rate Loans; and

(b)with respect to Swing Line Loans, 3.50% per annum.

(b)The existing definition in Section 1.01 of the Credit Agreement for the term "Borrowing Base" is deleted in its entirety and the following new definition for such term is added in lieu thereof:

"Borrowing Base" means, as of any date of determination by the Administrative Agent from time to time, an amount in Dollars equal to (I) the lesser of (x) the Revolving Credit Facility minus the Line Reserve and (y) the sum of:

(a)90% of the Value of Eligible Credit Card Receivables outstanding at such date; plus

(b)85% of the Value of Eligible Wholesale Receivables outstanding at such date; plus

(c)the lesser of (i) 55% of the Value of Eligible Wholesale Finished Goods Inventory and (ii) 85% of the Net Orderly Liquidation Value of Eligible Wholesale Finished Goods Inventory at such date; plus

(d)the lesser of (i) 85% of the Value of Eligible Retail Inventory and (ii) 85% of the Net Orderly Liquidation Value of Eligible Retail Inventory at such date; plus

(e)the lesser of (i) 35% of the Value of Eligible Raw Materials Inventory and (ii) 85% of the Net Orderly Liquidation Value of Eligible Raw Materials Inventory at such date; provided that Loans against Eligible Raw Materials Inventory shall not exceed $14,000,000 at any time outstanding; minus

(f)$2,500,000;

minus (II) Reserves established by the Administrative Agent from time to time in its Permitted Discretion in accordance with this Agreement.

(c)The following new definition is inserted in Section 1.01 of the Credit Agreement in the appropriate alphabetical position therein:

"Line Reserve" means a building reserve not to exceed $2,500,000, which shall be imposed by the Administrative Agent at a rate of $350,000 per week commencing with the week ending November 22, 2013.

(d)The existing Section 2.03(h) of the Credit Agreement is amended by deleting the reference to "3.50%" therein and inserting a reference to "4.50%" in lieu thereof.

The amendments to the Credit Agreement are limited to the extent specifically set forth above and no other terms, covenants or provisions of the Credit Agreement are intended to be affected hereby.

Section 2.LIMITED WAIVER

. Subject to the covenants, terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, the Administrative Agent and the Lenders party hereto hereby waive any Default or Event of Default arising from any failure of the Credit Parties to comply with the financial covenants set forth in Sections 7.13 and 7.15 of the Credit Agreement, in each case, solely for the Reference Period ended September 30, 2013.

The waivers set forth in this Section 2 are limited to the extent and time period specifically set forth above and no other terms, covenants or provisions of the Credit Agreement (nor compliance for any other applicable time period) are intended to be waived or affected hereby.

Section 3.CONDITIONS PRECEDENT

. The parties hereto agree that the amendments set forth in Section 1 above and the waivers set forth in Section 2 above shall not be effective until the satisfaction of each of the following conditions precedent (the date on which such conditions precedent are satisfied or waived, the "Amendment Effective Date"):

(a)Documentation. The Administrative Agent shall have received (i) a counterpart of this Amendment, duly executed and delivered by each Borrower, each Guarantor and each Lender, and (ii) such other documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Credit Party, the authorization of this Amendment and any other legal matters relating to the Credit Parties or the transactions contemplated hereby.

(b)Amendment and Waiver Fee. The Borrowers shall have paid to the Administrative Agent, for the account of each Lender in accordance with its Applicable Percentage, a fee in an amount equal to $75,000, which fee shall be deemed fully earned and due on the Amendment Effective Date and shall be nonrefundable.

(c)Fees and Expenses. All fees and expenses of counsel to the Administrative Agent estimated to date shall have been paid in full (without prejudice to final settling of accounts for such fees and expenses), in each case to the extent invoiced.

Section 4.REPRESENTATIONS AND WARRANTIES

.

(a)In order to induce the Administrative Agent and Lenders to enter into this Amendment, each Credit Party represents and warrants to the Administrative Agent and Lenders as follows:

(i)The representations and warranties made by such Credit Party contained in Article V of the Credit Agreement are true and correct in all material respects (but without any duplication of any materiality qualifications) on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date in which case such representations and warranties are true and correct in all material respects (but without any duplication of any materiality qualifications) on and as of such earlier date.

(ii)Since the Balance Sheet Date, no act, event, condition or circumstance has occurred or arisen which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

(iii)No Default or Event of Default (other than the Default(s) or Event(s) of Default waived in Section 2 above) has occurred and is continuing or will exist after giving effect to this Amendment.

(b)In order to induce the Administrative Agent and Lenders to enter into this Amendment, each Credit Party represents and warrants to the Administrative Agent and Lenders that this Amendment has been duly authorized, executed and delivered by such Credit Party and constitutes its legal, valid and binding obligation.

Section 5.MISCELLANEOUS

.

(a)Ratification and Confirmation of Loan Documents. Each Credit Party hereby consents, acknowledges and agrees to the amendments and waivers set forth herein and hereby confirms and ratifies in all respects the Loan Documents to which such Person is a party (including, without limitation, with respect to each Guarantor, the continuation of its payment and performance obligations under the Guaranty upon and after the effectiveness of the amendments and waivers contemplated hereby and, with respect to each Credit Party, the continuation and existence of the liens granted under the Security Documents to secure the Obligations).

(b)Fees and Expenses. The Borrowers, jointly and severally, shall promptly pay on demand (and, in any event, within 10 Business Days after demand therefor) all reasonable costs and expenses of the Administrative Agent in connection with the preparation, reproduction, execution, and delivery of this

Amendment and any other documents prepared in connection herewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent.

(c)Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

(d)Governing Law; Waiver of Jury Trial. This Amendment shall be governed by and construed in accordance with the laws of the State of New York, and shall be further subject to the provisions of Section 10.14 of the Credit Agreement.

(e)Counterparts. This Amendment may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic transmission (including .pdf file) shall be effective as delivery of a manually executed counterpart hereof.

(f)Entire Agreement. This Amendment, together with all the Loan Documents (collectively, the "Relevant Documents"), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise except in a writing signed by the parties hereto for such purpose.

(g)Enforceability. Should any one or more of the provisions of this Amendment be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

(h)Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of each Borrower, each Guarantor, the Administrative Agent, each Lender and their respective successors and assigns (subject to Section 10.06 of the Credit Agreement).

[Remainder of page intentionally left blank; signatures begin on following page]

AMENDMENT NO. 3 TO CREDIT AGREEMENT AND LIMITED WAIVER

Signature Page

The following parties have caused this Amendment No. 3 to Credit Agreement and Limited Waiver to be executed as of the date first written above.

BORROWERS:

AMERICAN APPAREL (USA), LLC

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

AMERICAN APPAREL RETAIL, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

AMERICAN APPAREL DYEING &FINISHING, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

KCL KNITTING, LLC

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

GUARANTORS:

AMERICAN APPAREL, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

FRESH AIR FREIGHT, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

ADMINISTRATIVE AGENT AND LENDERS:

CAPITAL ONE BUSINESS CREDIT CORP., as Administrative Agent and Lender

By: /s/ Julianne Low

Name:Julianne Low

Title:Vice President

BANK OF MONTREAL, CHICAGO BRANCH, as Lender

By: /s/ Larry Allen Swiniarski

Name: Larry Allen Swiniarski

Title: Director

EX-10.42

Exhibit 10.42

AMENDMENT NO. 4 TO CREDIT AGREEMENT AND LIMITED CONSENT

THIS AMENDMENT NO. 4 TO CREDIT AGREEMENT AND LIMITED CONSENT dated as of November 29, 2013 (this “Amendment”), is among AMERICAN APPAREL (USA), LLC, a California limited liability company (“AA USA”), AMERICAN APPAREL RETAIL, INC., a California corporation (“AA Retail”), AMERICAN APPAREL DYEING & FINISHING, INC., a California corporation (“AA Dyeing & Finishing”), KCL KNITTING, LLC, a California limited liability company (“KCL” and, together with AA USA, AA Retail and AA Dyeing & Finishing, collectively, the “Borrowers” and each, individually, a “Borrower”), AMERICAN APPAREL, INC., a Delaware corporation (“Holdings”), FRESH AIR FREIGHT, INC., a California corporation (“Fresh Air” and, together with Holdings, collectively, the “Guarantors” and each, individually, a “Guarantor”), CAPITAL ONE BUSINESS CREDIT CORP. (f/k/a Capital One Leverage Finance Corp.), as administrative agent (in such capacity, the “Administrative Agent”), and each of the Lenders party hereto.

RECITALS:

A.The Borrowers, the other borrowers from time to time party thereto, the

B.Guarantors, the other guarantors from time to time party thereto, the lenders from time to time party thereto (collectively, “Lenders”) and the Administrative Agent have entered into that certain Credit Agreement dated as of April 4, 2013 (as amended by that certain Amendment No. 1 to Credit Agreement dated as of May 22, 2013, that certain Amendment No. 2 to Credit Agreement dated as of July 5, 2013 and that certain Amendment No. 3 to Credit Agreement and Limited Waiver dated as of November 14, 2013, the “Credit Agreement”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

C.The Guarantors have entered into that certain Guaranty dated as of April 4, 2013, in favor of the Administrative Agent.

D.The Borrowers have requested that the Administrative Agent and Lenders amend certain provisions of the Credit Agreement and grant the consent set forth below.

E.Subject to the terms and conditions set forth below, the Administrative Agent and Lenders party hereto are willing to so amend the Credit Agreement and grant such consent.

In furtherance of the foregoing, the parties agree as follows:

Section 1.AMENDMENTS

. Subject to the covenants, terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, the Credit Agreement is amended as follows:

(a)The existing Section 7.02(p) of the Credit Agreement is amended by (i) deleting the reference to “$4,500,000” therein and inserting a reference to “9,500,000” in lieu thereof and (ii) adding “and as amended on November 29, 2013” after “May 22, 2013” therein.

(b)The existing Section 7.04(b)(iv)(C) of the Credit Agreement is deleted in its entirety and the following is inserted in lieu thereof:

(C) mandatory repurchase of the Lion Debt pursuant to Section 2.08 of the Lion Credit Agreement (as in effect on the Amendment No. 1 Effective Date (as defined in the Lion Credit Agreement)) and solely to the extent required thereby;

The amendments to the Credit Agreement are limited to the extent specifically set forth above and no other terms, covenants or provisions of the Credit Agreement are intended to be affected hereby.

Section 2.LIMITED CONSENT

. Subject to the covenants, terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, the Administrative Agent and the Lenders party hereto hereby consent to the increase in the aggregate principal amount of the Lion Debt and to the increase in the premiums owing thereon, in each case, as set forth in that certain Amendment No. 1 to Credit Agreement dated as of the date hereof (the “Lion Amendment”), among Holdings, the other Credit Parties party thereto as facility guarantors and Lion/Hollywood L.L.C., as initial lender and as 2013 lender.

The consent set forth in this Section 2 is limited to the extent specifically set forth above and no other terms, covenants or provisions of the Credit Agreement are intended to be affected hereby.

Section 3.CONDITIONS PRECEDENT

. The parties hereto agree that the amendments set forth in Section 1 above and the consent set forth in Section 2 above shall not be effective until the satisfaction of each of the following conditions precedent (the date on which such conditions precedent are satisfied or waived, the “Amendment Effective Date”):

(a)Documentation. The Administrative Agent shall have received (i) a counterpart of this Amendment, duly executed and delivered by each Borrower, each Guarantor and each Lender, (ii) a certificate of a member of the Senior Management of Holdings certifying and attaching a true, correct and complete copy of the Lion Amendment, and (iii) such other documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of each Credit Party, the authorization of this Amendment and any other legal matters relating to the Credit Parties or the transactions contemplated hereby.

(b)Fees and Expenses. All fees and expenses of counsel to the Administrative Agent estimated to date shall have been paid in full (without prejudice to final settling of accounts for such fees and expenses), in each case to the extent invoiced.

Section 4.REPRESENTATIONS AND WARRANTIES

.

(a)In order to induce the Administrative Agent and Lenders to enter into this Amendment, each Credit Party represents and warrants to the Administrative Agent and Lenders as follows:

(i)The representations and warranties made by such Credit Party contained in Article V of the Credit Agreement are true and correct in all material respects (but without any duplication of any materiality qualifications) on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date in which case such representations and warranties are true and correct in all material respects (but without any duplication of any materiality qualifications) on and as of such earlier date.

(ii)Since the Balance Sheet Date, no act, event, condition or circumstance has occurred or arisen which, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect.

(iii)No Default or Event of Default has occurred and is continuing or will exist after giving effect to this Amendment.

(b)In order to induce the Administrative Agent and Lenders to enter into this Amendment, each Credit Party represents and warrants to the Administrative Agent and Lenders that this Amendment

has been duly authorized, executed and delivered by such Credit Party and constitutes its legal, valid and binding obligation.

Section 5.MISCELLANEOUS

.

(a)Ratification and Confirmation of Loan Documents. Each Credit Party hereby consents, acknowledges and agrees to the amendments and consent set forth herein and hereby confirms and ratifies in all respects the Loan Documents to which such Person is a party (including, without limitation, with respect to each Guarantor, the continuation of its payment and performance obligations under the Guaranty upon and after the effectiveness of the amendments and consent contemplated hereby and, with respect to each Credit Party, the continuation and existence of the liens granted under the Security Documents to secure the Obligations).

(b)Fees and Expenses. The Borrowers, jointly and severally, shall promptly pay on demand (and, in any event, within 10 Business Days after demand therefor) all reasonable costs and expenses of the Administrative Agent in connection with the preparation, reproduction, execution, and delivery of this Amendment and any other documents prepared in connection herewith, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent.

(c)Headings. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

(d)Governing Law; Waiver of Jury Trial. This Amendment shall be governed by and construed in accordance with the laws of the State of New York, and shall be further subject to the provisions of Section 10.14 of the Credit Agreement.

(e)Counterparts. This Amendment may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic transmission (including .pdf file) shall be effective as delivery of a manually executed counterpart hereof.

(f)Entire Agreement. This Amendment, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Amendment may be changed, modified, waived or canceled orally or otherwise except in a writing signed by the parties hereto for such purpose.

(g)Enforceability. Should any one or more of the provisions of this Amendment be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

(h)Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of each Borrower, each Guarantor, the Administrative Agent, each Lender and their respective successors and assigns (subject to Section 10.06 of the Credit Agreement).

[Remainder of page intentionally left blank; signatures begin on following page]

AMENDMENT NO. 4 TO CREDIT AGREEMENT AND LIMITED CONSENT

Signature Page

The following parties have caused this Amendment No. 4 to Credit Agreement and Limited Consent to be executed as of the date first written above.

BORROWERS:

AMERICAN APPAREL (USA), LLC

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

AMERICAN APPAREL RETAIL, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

AMERICAN APPAREL DYEING &FINISHING, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

KCL KNITTING, LLC

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

GUARANTORS:

AMERICAN APPAREL, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

FRESH AIR FREIGHT, INC.

By: /s/ John Luttrell

Name: John Luttrell

Title: CFO

ADMINISTRATIVE AGENT AND LENDERS:

CAPITAL ONE BUSINESS CREDIT CORP., as Administrative Agent and Lender

By: /s/ Julianne Low

Name:Julianne Low

Title:Vice President

BANK OF MONTREAL, CHICAGO BRANCH, as Lender

By: /s/ Larry Allen Swiniarski

Name: Larry Allen Swiniarski

Title: Director

EX-10.44

Exhibit 10.44

EXECUTION VERSION

CREDIT AGREEMENT

dated as of

May 22, 2013

among

AMERICAN APPAREL, INC.,

THE FACILITY GUARANTORS PARTY HERETO,

LION/HOLLYWOOD L.L.C., AS INITIAL LENDER

and

THE OTHER LENDERS FROM TIME TO TIME PARTY HERETO

TABLE OF CONTENTS

Page

ARTICLE I Definitions 1

SECTION 1.01 Definitions1

SECTION 1.02 Terms Generally.11

SECTION 1.03 Accounting Terms; GAAP.11

ARTICLE II Amount and Terms of Credit 12

SECTION 2.01 Loans.12

SECTION 2.02 Making of Loans.12

SECTION 2.03 Notes.12

SECTION 2.04 Mandatory Principal and Interest Payments on Loans.13

SECTION 2.05 Default Interest.14

SECTION 2.06 Increased Costs.14

SECTION 2.07 Optional Prepayment of Loans; Reimbursement of Lenders.15

SECTION 2.08 Mandatory Prepayment; Commitment Termination.16

SECTION 2.09 Maintenance of Loan Account; Statements of Account.16

SECTION 2.10 Payments.16

SECTION 2.11 Settlement Amongst Lenders.17

SECTION 2.12 Taxes.17

SECTION 2.13 Mitigation Obligations; Replacement of Lenders.20

ARTICLE III Representations and Warranties 21

SECTION 3.01 Organization; Powers.22

SECTION 3.02 Authorization; Enforceability.22

SECTION 3.03 Governmental Approvals; No Conflicts.22

SECTION 3.04 First Lien Credit Agreement Representations.22

ARTICLE IV Conditions 23

SECTION 4.01 Closing Date.23

ARTICLE V Covenants 25

SECTION 5.01 Senior Notes Indenture.25

SECTION 5.02 Notices.25

SECTION 5.03 Use of Proceeds.26

SECTION 5.04 Additional Subsidiaries.26

SECTION 5.05 Security.27

SECTION 5.06 Designation of Restricted and Unrestricted Subsidiaries.28

ARTICLE VI Events of Default 28

SECTION 6.01 Events of Default.28

SECTION 6.02 Remedies on Default.31

SECTION 6.03 Application of Proceeds.31

ARTICLE VII Guarantee 32

SECTION 7.01 Guarantee.32

SECTION 7.02 Release of a Guarantor.33

SECTION 7.03 Limitation of Facility Guarantor’s Liability.34

SECTION 7.04 Contribution.34

SECTION 7.05 Waiver of Subrogation.34

SECTION 7.06 Waiver of Stay, Extension or Usury Laws.34

ARTICLE VIII Miscellaneous 35

SECTION 8.01 Notices.35

SECTION 8.02 Waivers; Amendments.35

SECTION 8.03 Expenses; Indemnity; Damage Waiver.37

SECTION 8.04 Successors and Assigns.39

SECTION 8.05 Survival.42

SECTION 8.06 Counterparts; Integration; Effectiveness.42

SECTION 8.07 Severability.42

SECTION 8.08 Right of Setoff.43

SECTION 8.09 Governing Law; Jurisdiction; Consent to Service of Process.43

SECTION 8.10 WAIVER OF JURY TRIAL.44

SECTION 8.11 Press Releases and Related Matters.44

SECTION 8.12 Headings.45

SECTION 8.13 Interest Rate Limitation.45

SECTION 8.14 Additional Waivers.45

SECTION 8.15 Confidentiality.47

SECTION 8.16 Patriot Act.48

SECTION 8.17 Foreign Asset Control Regulations.49

EXHIBITS

Exhibit A:Form of Assignment and Acceptance

Exhibit B:Form of Note

Exhibit C:Form of Joinder

Exhibit D-1Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships)

Exhibit D-2Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships)

Exhibit D-3Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships)

Exhibit D-4Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships)

SCHEDULES

Schedule 1.01(a):Lenders and Commitments

Schedule 3.01:Organization Information

CREDIT AGREEMENT, dated as of May 22, 2013, among:

(a)AMERICAN APPAREL, INC., a corporation organized under the laws of the State of Delaware, with its principal executive offices at 747 Warehouse Street, Los Angeles, California, for itself and as agent (in such capacity, the “Borrower”);

(b)the FACILITY GUARANTORS now or hereafter party hereto;

(d)LION/HOLLYWOOD L.L.C., as the initial lender hereunder; and

(d)the other LENDERS from time to time party hereto;

in consideration of the mutual covenants herein contained and benefits to be derived herefrom, the parties hereto agree as follows:

ARTICLE I

ARTICLE IIDefinitions

SECTION .Definitions

.

As used in this Agreement, the following terms have the meanings specified below:

“Affiliate” means, with respect to a specified Person, any Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with the Person specified.

“Aggregate Exposure” means, with respect to any Lender at any time, an amount equal to (i) until the Closing Date, the aggregate amount of such Lender’s Commitments then in effect and (ii) thereafter, the aggregate then unpaid principal amount of such Lender’s Loans, including PIK Interest added to the principal amount of such Loans, if any.

“Aggregate Exposure Percentage” means, with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender’s Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at such time.

“Agreement” means this Credit Agreement, as amended, restated, supplemented or otherwise modified and in effect from time to time.

“American Apparel (USA)” means American Apparel (USA), LLC, a California limited liability company.

“Applicable Law” means as to any Person: (i) all laws, statutes, rules, regulations, orders, codes, ordinances or other requirements having the force of law and (ii) all court orders, decrees, judgments, injunctions, notices, binding agreements and/or rulings, in each case of or by any Governmental Authority which has jurisdiction over such Person, or any property of such Person.

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an affiliate of a Lender or (c) an entity or an affiliate of an entity that administers or manages a Lender.

“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and

an assignee (with, if applicable, the consent of any party whose consent is required by Section 8.04), in the form of Exhibit A.

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as amended, and codified as 11 U.S.C. §101 etseq.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” has the meaning set forth in the Preamble to this Agreement.

“Borrowing” means the incurrence of Loans on the Closing Date.

“Borrowing Notice” means a request by the Borrower for a borrowing of Loans delivered in accordance with Section 2.02(a).

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York are authorized or required by law to remain closed.

“Capital Stock” means, as to any Person that is a corporation, the authorized shares of such Person’s capital stock, including all classes of common, preferred, voting and nonvoting capital stock, and, as to any Person that is not a corporation or an individual, the membership or other ownership interests in such Person, including, without limitation, the right to share in profits and losses, the right to receive distributions of cash and other property, and the right to receive allocations of items of income, gain, loss, deduction and credit and similar items from such Person, whether or not such interests include voting or similar rights entitling the holder thereof to exercise control over such Person, collectively with, in any such case, all warrants, options and other rights to purchase or otherwise acquire, and all other instruments convertible into or exchangeable for, any of the foregoing; provided that, notwithstanding the foregoing, Capital Stock shall not include Indebtedness convertible into or exchangeable for Capital Stock.

“Cash Interest” has the meaning provided in Section 2.04(a).

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601 etseq.

“Change in Law” means (i) the adoption of any law, rule or regulation after the Closing Date, (ii) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (iii) compliance by any Credit Party with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the Closing Date. Notwithstanding anything herein to the contrary, (x) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or by United States or foreign regulatory authorities, in each case pursuant to Basel III, and (y) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder or issued in connection therewith or in implementation thereof, shall in each case be deemed to be a Change in Law, regardless of the date enacted, adopted, issued or implemented.

“Change of Control” has the meaning provided in the Senior Notes Indenture.

“Change of Control Offer” has the meaning provided therefor in Section 2.08(a).

“Change of Control Payment” has the meaning provided therefor in Section 2.08(a).

“Change of Control Payment Date” has the meaning provided therefor in Section 2.08(a).

“Charges” has the meaning provided therefor in Section 8.13.

“Charter Document” means as to any Person, its partnership agreement, certificate of incorporation, operating agreement, membership agreement or similar constitutive document or agreement, its by-laws and all shareholder or other equity holder agreements, voting trusts and similar arrangements to which such Person is a party or which is applicable to its Capital Stock, and all other arrangements relating to the Control or management of such Person.

“Closing Date” means May 22, 2013.

“Code” means the Internal Revenue Code of 1986 and the Treasury regulations promulgated thereunder, as amended from time to time.

“Collateral” means any and all “Collateral” or words of similar intent as defined in any applicable Security Document (if any).

“Collateral Agent” means any collateral agent appointed pursuant to the Security Documents.

“Commitment” means, with respect to each Lender, the aggregate commitment(s) of such Lender hereunder to make Loans to the Borrower in an amount not to exceed the amount set forth opposite its name on Schedule 1.01(a) hereto. As of the Closing Date, the aggregate amount of the Commitments is $4,500,000.

“Consolidated” means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries.

“Control” means the possession, directly or indirectly, of the power (i) to vote 25% or more of the securities having ordinary voting power for the election of directors (or any similar governing body) of a Person, or (ii) to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.

“Credit Party” means (i) the Lenders, (ii) any Collateral Agent, (iii) the beneficiaries of each indemnification obligation undertaken by the Borrower and the other Loan Parties under any Loan Document, (iv) any other Person to whom Obligations under this Agreement and other Loan Documents are owing and (v) the successors and assigns of each of the foregoing.

“Credit Party Expenses” means, without limitation, (i) all reasonable out-of-pocket expenses incurred by any Collateral Agent, such Collateral Agent’s Affiliates, the Initial Lender, the Initial Lender’s Affiliates and any other Lender, including the reasonable fees, charges and disbursements of counsel for the Initial Lender, the Lenders and such Collateral Agent, outside consultants for the Initial Lender and any Collateral Agent (including, without limitation, commercial finance examiners), in connection with the negotiation, preparation and administration of the Loan Documents or any amendments, modifications, supplements or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), including the reasonable out-of-pocket expenses

incurred by the Initial Lender and its Affiliates in connection with the monitoring and oversight of the Lenders’ Loans (including expenses of counsel and costs associated with tax advice, structuring and reporting) and (ii) all reasonable out-of-pocket expenses incurred by the Initial Lender, any Lender and any Collateral Agent, including the reasonable fees, charges and disbursements of counsel and outside consultants for each of the Initial Lender, such Lender and such Collateral Agent (including, without limitation, commercial finance examiners), in connection with the enforcement or protection of their rights in connection with the Loan Documents, or in connection with the Loans made hereunder, including all reasonable out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Obligations; provided that the Lenders who are not the Initial Lender and any Collateral Agent shall be entitled to reimbursement for no more than one counsel representing all such Lenders (absent a conflict of interest in which case the Lenders may engage and be reimbursed for additional counsel).

“Custodian” means any receiver, trustee, assignee, liquidator, sequestrator or similar official under the Bankruptcy Code.

“Default” means any event or condition that constitutes an Event of Default or that upon notice, lapse of time or both would become an Event of Default.

“Default Rate” has the meaning provided in Section 2.05.

“dollars” or “$” refers to lawful money of the United States of America.

“Eligible Assignee” means any assignee permitted by and consented to in accordance with Section 8.04(b); provided that in no event shall the Borrower or any of its Affiliates (other than the Initial Lender and its Affiliates) be Eligible Assignees.

“Environmental Laws” means all Applicable Laws issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the protection of human health or the environment, to the preservation or reclamation of natural resources, to the handling, treatment, storage, disposal of Hazardous Materials or to the assessment or remediation of any Release or threatened Release of any Hazardous Material or to the environment.

“Environmental Liability” means any liability, contingent or otherwise (including, without limitation, any liability for damages, natural resource damage, costs of environmental remediation, administrative oversight costs, fines, penalties or indemnities), of any Loan Party or one of their Subsidiaries directly or indirectly resulting from or based upon (i) violation of any Environmental Law, (ii) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (iii) exposure to any Hazardous Materials, (iv) the Release or threatened Release of any Hazardous Materials into the environment or (v) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Events of Default” has the meaning assigned to such term in Section 6.01.

“Excluded Taxes” means, with respect to any Collateral Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (i) income or franchise Taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (ii) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which the Borrower is

located, (iii) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.13(b)), any withholding Tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.12(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Tax pursuant to Section 2.12(a) and (iv) any United States withholding Taxes imposed under FATCA.

“Facility Guarantors” means each of the Subsidiaries of the Borrower from time to time party hereto.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

“Fair Market Value” means, with respect to any asset or property, the price which could be negotiated in an arm’s length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value shall be determined by the board of directors of the Borrower acting in good faith and shall be evidenced by board resolutions delivered to the Lenders; provided, that with respect to any price less than $7,500,000 only the good faith determination by the Chief Executive Officer, the President, the Chief Financial Officer, the Controller, the General Counsel, any Vice President or any Secretary of the Borrower shall be required.

“First Lien Credit Agreement” means the Credit Agreement, dated as of April 4, 2013, by and among American Apparel (USA) as borrower and the other borrowers and credit parties party thereto, the lenders party thereto, Capital One Leverage Finance Corp., as administrative agent and the other parties party thereto.

“First Lien Loan Documents” means the First Lien Credit Agreement and the other Loan Documents (as defined in the First Lien Credit Agreement).

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall generally end on the last day of each March, June, September or December of such Fiscal Year in accordance with the fiscal accounting calendar of the Borrower.

“Fiscal Year” means any period of twelve consecutive months ending on December 31 of any calendar year.

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia.

“GAAP” means accounting principles generally accepted in the United States set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect from time to time.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to

government.

“Guarantee” has the meaning provided in Section 7.01.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes, mold, fungi or similar bacteria, and all other substances or wastes of any nature regulated pursuant to any Environmental Law, including any material listed as a hazardous substance under Section 101(14) of CERCLA.

“Indebtedness” has the meaning provided in the Senior Notes Indenture.

“Indemnified Taxes” means Taxes other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document.

“Indemnitee” has the meaning provided in Section 8.03(b).

“Information” has the meaning provided in Section 8.15(a).

“Initial Lender” means Lion/Hollywood L.L.C. or any Affiliate thereof to whom its Loans are assigned within the first three months after the Closing Date.

“Intercreditor Agreement” means the Intercreditor Agreement among Capital One Leverage Finance Corp., as administrative agent under the First Lien Credit Agreement, U.S. Bank National Association, as collateral agent and trustee under the Senior Notes Indenture, the Borrower and the Facility Guarantors, dated as of April 4, 2013, as the same may be amended, supplemented or modified from time to time.

“Interest Election” has the meaning provided in Section 2.04(a).

“Interest Payment Date” means the last day of each of March, June, September and December.

“Interest Rate” means a per annum rate equal to 18%; provided, however, that if a Special Interest Trigger Event occurs, the Interest Rate means a per annum rate equal to 20%. Any change in the Interest Rate resulting from such Special Interest Trigger Event shall become effective retroactive to the Closing Date.

“Joinder Agreement” means an agreement, in the form attached hereto as Exhibit C, pursuant to which, among other things, a Person becomes a party to, and bound by the terms of, this Agreement and/or the other Loan Documents in the same capacity and to the same extent as a Facility Guarantor.

“Lenders” means the Initial Lender, the other Persons identified on Schedule 1.01(a) hereto and each assignee that becomes a party to this Agreement as set forth in Section 8.04(b).

“Lien” has the meaning provided in the Senior Notes Indenture.

“Loan Account” has the meaning provided in Section 2.09(a).

“Loan Documents” means this Agreement, the Notes, the Security Documents, if any, any intercreditor arrangement entered into pursuant to Section 5.05 and any other instrument or agreement now or hereafter executed and delivered in connection herewith, each as amended, restated, supplemented

or otherwise modified from time to time in accordance with the terms hereof and thereof.

“Loan Party” or “Loan Parties” means the Borrower and the Facility Guarantors.

“Loans” means all loans made pursuant to this Agreement pursuant to Section 2.01, all PIK Interest, if any, that has been added to the principal balance of the Loans on any Interest Payment Date pursuant to Section 2.04.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, assets, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Loan Parties, taken as a whole; (b) a material impairment of the rights and remedies of any Lender under any Loan Document, or of the ability of the Loan Parties, taken as a whole, to pay any Obligations under the Loan Documents, when due; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Documents to which it is a party.

“Material Indebtedness” means Indebtedness (other than the Obligations) of the Loan Parties and their Subsidiaries in an aggregate principal amount exceeding $2,500,000.

“Maturity Date” means October 4, 2018, and if such date is not a Business Day, the next succeeding Business Day.

“Maximum Rate” has the meaning provided therefor in Section 8.13.

“Minority Lenders” has the meaning provided therefor in Section 8.02(c).

“Notes” means the notes in substantially the form as attached hereto as Exhibit B, as may be amended, supplemented or modified from time to time.

“Obligations” means (a) the due and punctual payment of (i) the principal of, and interest (including all interest that accrues after the commencement of any case or proceeding by or against the Borrower or any Facility Guarantor under the Bankruptcy Code or any state, federal or provincial bankruptcy, insolvency, receivership or similar law, whether or not allowed in such case or proceeding) on the Loans and Facility Guaranties as and when due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise, of the Loan Parties to the Credit Parties under this Agreement and the other Loan Documents, and (b) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to this Agreement and the other Loan Documents.

“Other Taxes” means any and all current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

“Participant” has the meaning provided therefor in Section 8.04(e).

“Participation Register” has the meaning provided therefor in Section 8.04(e).

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“PIK Interest” has the meaning provided in Section 2.04(a).

“Real Estate” has the meaning ascribed to “Premises” in the Senior Notes Indenture.

“Register” has the meaning provided in Section 8.04(c).

“Regulation U” means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Regulation X” means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Release” has the meaning provided in Section 101(22) of CERCLA.

“Required Lenders” means (i) if there are two or fewer Lenders, all Lenders or (ii) if there are three or more Lenders, at any time, Lenders holding more than 50% of the aggregate unpaid principal amount of the Loans outstanding, including PIK Interest, if any, added to the principal amount of the Loans.

“Restricted Subsidiary” means any “Restricted Subsidiary” under the Senior Notes Indenture or, if the Senior Notes Indenture is no longer in effect, any Subsidiary of the Borrower which at the time of determination is not an Unrestricted Subsidiary.

“Security Documents” means each security agreement or other instrument or document executed and delivered pursuant to Section 5.05 of this Agreement or any other Loan Document to secure any of the Obligations, which shall be in form and substance substantially similar to those securing the “Obligations” (as defined in the Senior Notes Indenture), and shall be modified to give effect to the lien priority as contemplated by Section 5.05.

“Senior Notes” means the 13.0% senior secured notes due 2020 issued pursuant to the Senior Notes Indenture

“Senior Notes Documents” means the Senior Notes Indenture and the other Indenture Documents (as defined in the Senior Notes Indenture), in each case as in effect on the Closing Date without giving effect to any amendment, supplement or modification thereto.

“Senior Notes Indenture” means the Indenture dated April 4, 2013, by and among the Borrower, the guarantors party thereto and U.S. Bank National Association, as trustee and collateral agent, as such Indenture is in effect on the Closing Date without giving effect to any amendment, supplement or modification thereto.

“Settlement Date” has the meaning provided in Section 2.11.

“Significant Subsidiaries” means each Restricted Subsidiary that satisfies the criteria for a “significant subsidiary” set forth in Rule 1-02(w) of Regulation S-X under the Exchange Act.

“Solvent” means, with respect to any Person on a particular date, that on such date (i) at fair valuations, all of the properties and assets of such Person are greater than the sum of the debts, including contingent liabilities, of such Person, (ii) the present fair saleable value of the properties and assets of such Person is not less than the amount that would be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person is able to realize upon its properties and assets and pay its debts and other liabilities, contingent obligations and other commitments as they

mature in the normal course of business, (iv) such Person does not intend to, and does not believe that it will, incur debts beyond such Person’s ability to pay as such debts mature, and (v) such Person is not engaged in a business or a transaction, and is not about to engage in a business or transaction, for which such Person’s properties and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in which such Person is engaged.

“Special Interest Trigger Event” has the meaning provided in the Senior Notes Indenture.

“Specified Financing Documentation” means, collectively, the First Lien Credit Agreement, the other First Lien Loan Documents, the Senior Notes Indenture, the other Senior Notes Documents and all amendments, exhibits and schedules relating thereto.

“Subsidiary” means with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s Consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (i) of which Capital Stock representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (ii) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless the context otherwise requires, “Subsidiary” or “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Taxes” means any and all current or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Total Commitment” means $4,500,000.

“Unrestricted Subsidiary” means any “Unrestricted Subsidiary” under the Senior Notes Indenture or, if the Senior Notes Indenture is no longer in effect, (i) any Subsidiary of the Borrower that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the board of directors of the Borrower in the manner provided in Section 5.06 and (ii) any Subsidiary of an Unrestricted Subsidiary.

SECTION .Terms Generally.

The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in the other Loan Documents), (b) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets

and properties, including cash, securities, accounts and contract rights and (f) all financial statements and other financial information provided by the Borrower to any Lender shall be provided with reference to dollars, (g) all references to “$” or “dollars” or to amounts of money shall be deemed to be references to the lawful currency of the United States of America, and (h) this Agreement and the other Loan Documents are the result of negotiation among, and have been reviewed by counsel to, among others, the Borrower and the Initial Lender and are the product of discussions and negotiations among all parties. Accordingly, this Agreement and the other Loan Documents are not intended to be construed against any of the Lenders merely on account of any Lender’s involvement in the preparation of such documents.

SECTION .Accounting Terms; GAAP.

Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP.

ARTICLE III

ARTICLE IV

ARTICLE VAmount and Terms of Credit

SECTION .Loans.

Subject to the terms and conditions set forth herein, the Initial Lender agrees to make Loans on the Closing Date in an amount equal to $4,500,000. Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed.

SECTION .Making of Loans.

(a)The Borrower shall give the Initial Lender irrevocable notice (which notice must be received by the Initial Lender prior to 6:00 p.m., New York City time, at least one Business Day prior to the Closing Date) requesting that the Initial Lender make the Loans on such dates and specifying the amount to be borrowed. Not later than 1:30 p.m., New York City time, on the Closing Date, the Initial Lender shall fund the amount of its Loans (as determined in accordance with Section 2.01) in immediately available funds to the Borrower by wire transfer of such funds in accordance with instructions provided to (and reasonably acceptable to) the Initial Lender.

(b)Each Lender may fulfill its Commitment with respect to any Loan by causing any lending office of such Lender to make such Loan; provided, however, that any such use of a lending office shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of the applicable Note. Each Lender shall, subject to its overall policy considerations, use reasonable efforts (but shall not be obligated) to select a lending office which will not result in the payment of increased costs by the Borrower pursuant to Section 2.06.

SECTION .Notes.

(a)The Loans made by each Lender shall be evidenced by Notes, upon request by such Lender, duly executed on behalf of the Borrower, dated the Closing Date, payable to the order of such Lender in an aggregate principal amount equal to such Lender’s Commitment.

(b)Each Lender is hereby authorized by the Borrower to endorse on a schedule attached to each Note delivered to such Lender (or on a continuation of such schedule attached to such Note and made a part thereof), or otherwise to record in such Lender’s internal records, an appropriate notation evidencing the date and amount of each Loan from such Lender, each payment and prepayment of principal of any such Loan, each payment of interest on any such Loan and the other information provided for on such schedule; provided, however, that the failure of any Lender to make such a notation or any error therein shall not affect the obligation of the Borrower to repay the Loans made by such Lender in accordance with the terms of this Agreement and the applicable Notes.

(c)Upon receipt of an affidavit of a Lender as to the loss, theft, destruction or mutilation of such Lender’s Note and upon cancellation of such Note, the Borrower will issue, in lieu

thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor.

SECTION .Mandatory Principal and Interest Payments on Loans.

The Borrower may, at its option (an “Interest Election”), elect to pay interest on the Loans on each Interest Payment Date (i) in cash (“Cash Interest”), (ii) by increasing the outstanding principal amount of the Loans on the relevant Interest Payment Date by the amount of interest accrued from the effective date of any such Interest Election until such Interest Payment Date (“PIK Interest”), with such increases to the principal amount of the Loans allocated on a pro rata basis to the outstanding Loans of the Lenders in accordance with such Lenders Aggregate Exposure Percentages immediately prior to such allocation and/or (iii) at the Borrower’s discretion, partially in PIK Interest and partially in Cash Interest. Unless the context otherwise requires, for all purposes hereof, references to “principal amount” of the Loans refers to the face amount of the Loans and not gross proceeds funded hereunder and includes any interest so capitalized and added to the principal amount of the Loans from the date on which such interest has been so added.

(a)The Borrower must make an Interest Election by delivering a notice to each of the Lenders no later than ten (10) Business Days prior to the effective date of any Interest Election, which notice shall specify (x) whether such Interest Election is made under clause (i) and/or (ii) of the immediately preceding paragraph and (y) the effective date of such Interest Election, which effective date must be the next succeeding Interest Payment Date to occur after the date of the giving of such notice, or, if not a Business Day, the first Business Day to occur thereafter. An Interest Election shall remain in effect until the earlier of (i) next Interest Payment Date following the effective date of such Interest Election and (ii) the Maturity Date; provided that no more than one Interest Election may be given by the Borrower in any three-month period. In the absence of such an election for any interest period, interest on the Loans shall be payable as PIK Interest.

(b)Subject to Section 2.05, each Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 (or 366 days, if applicable) at a rate per annum that shall be equal to the Interest Rate compounding quarterly to the extent provided in Section 2.04(c).

(c)Cash Interest accrued on each Loan shall be payable on the Interest Payment Dates applicable to such Loan, except as otherwise provided in this Agreement. PIK Interest accrued on each Loan shall be payable by increasing the outstanding principal amount of the Loans by the amount of PIK Interest on the Interest Payment Date applicable to such Loan for such period and in such amounts as required by the relevant Interest Election(s). Any interest so added to the principal amount of the Loans shall bear interest as provided in this Section 2.04 from the date on which such interest has been so added. The obligation of the Borrower to pay PIK Interest shall be automatically evidenced by this Agreement or, if applicable, any Notes issued pursuant to this Agreement. Any additional interest accrued on each Loan as a result of the occurrence of a Special Interest Trigger Event shall be payable by increasing the outstanding principal amount of the Loans by the amount of PIK Interest on such immediately succeeding Interest Payment Date applicable to such Loan for such period and in such amounts as required by the relevant Interest Election(s) made pursuant to Section 2.04(a).

(d)All accrued and unpaid interest shall be paid in cash at maturity (whether by acceleration or otherwise), after such maturity on demand and upon any repayment or prepayment thereof (on the amount prepaid).

(e)In addition to interest payments required to be made hereunder, and subject to the rights of acceleration hereunder, the full unpaid principal balance of the Loans, including PIK Interest, if any, that has been added to the principal balance of the Loans, shall be payable in full on the Maturity Date.

(f)In computing interest on any Loan, the date on which such interest is paid shall not be included and the first date of the interest period applicable to such Loan shall be included.

SECTION .Default Interest.

After the occurrence of any Default which remains unremedied for twenty (20) days and at all times thereafter while such Default remains unremedied, interest shall accrue on all outstanding Loans including on PIK Interest, if any, that has been added to the principal amount of the Loan (after as well as before judgment, as and to the extent permitted by law) at a rate per annum (the “Default Rate”) equal to the Interest Rate in effect from time to time plus 2% per annum and such interest shall be payable in cash on each Interest Payment Date (or any earlier maturity of the Loans).

SECTION .Increased Costs.

(a)If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any holding company of any Lender; or

(ii)impose on any Lender any other condition affecting this Agreement or Loans made by such Lender;

and the result of any of the foregoing shall be to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

(b)If any Lender determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or liquidity or on the capital or liquidity of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

(c)A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section 2.06 and setting forth in reasonable detail the manner in which such amount or amounts were determined shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within fifteen (15) Business Days after receipt thereof.

(d)Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.06 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that no compensation will be paid to any Lender with respect to any Change in Law that has occurred 180 days before such Lender has demanded compensation under this Section 2.06.

SECTION .Optional Prepayment of Loans; Reimbursement of Lenders.

(a)The Borrower shall have the right to prepay any outstanding Loans, in whole or part, upon at least two (2) Business Day’s prior written notice or facsimile notice to each Lender, prior to 5:00 p.m., New York City time.

(b)[Reserved.]

(c)Any prepayment made pursuant to this Section 2.07 shall be subject to the following limitations:

(i)All prepayments shall be paid to all Lenders for application to the prepayment of outstanding Loans, including PIK Interest, if any, together with any accrued and unpaid interest, ratably in accordance with each Lender’s Aggregate Exposure Percentage; and

(ii)Each notice of prepayment shall specify the prepayment date and the principal amount of the Loans to be prepaid. Each notice of prepayment shall be irrevocable and shall commit the Borrower to prepay such Loan by the amount and on the date stated therein; provided that if a notice of prepayment is expressly conditioned upon the effectiveness of an acquisition, debt incurrence or equity issuance, then such notice of prepayment may be revoked (by notice to the each Lender on or prior to the specified prepayment date) if such condition is not satisfied.

(d)In the event the Borrower fails to prepay the Loans on the date specified in any prepayment notice delivered pursuant to Section 2.07(a), the Borrower, on demand by any Lender, shall pay to such Lender, any amounts required to compensate such Lender for any loss incurred by such Lender as a result of such failure to prepay. Any Lender demanding such payment shall deliver to the Borrower from time to time one or more certificates setting forth the amount of such loss as determined by such Lender and setting forth in reasonable detail the manner in which such amount was determined.

SECTION .Mandatory Prepayment; Commitment Termination.

(a)Upon the occurrence of a Change of Control, the Borrower will make an offer (a “Change of Control Offer”) to the Lenders to repurchase the Loans at a purchase price in cash equal to one hundred and six percent (106%) of (x) the aggregate principal amount of such Loans outstanding, including PIK Interest, if any, plus (y) accrued and unpaid interest (the “Change of Control Payment”). Within five (5) Business Days following any Change of Control, the Borrower will provide irrevocable notice to each Lender describing the transaction or transactions that constitute the Change of Control and stating the purchase price and the purchase date, which shall be no later than five (5) Business Days from the date such notice is given (the “Change of Control Payment Date”). On the Change of Control Payment Date, the Borrower will deposit with the applicable Lenders an amount equal to the Change of Control Payment in respect of the Loans of each Lender that has accepted the Change of Control Offer.

(b)The Commitments shall terminate at 5:00 p.m., New York City time, on May 22, 2013.

SECTION .Maintenance of Loan Account; Statements of Account.

(a)Each Lender shall maintain an account on its books in the name of the Borrower (each a “Loan Account”) which will reflect (i) all Loans made by such Lender to the Borrower, (ii) all increases in the outstanding principal amount of the Loans resulting from the payment of PIK Interest and (iii) any and all other monetary Obligations that have become payable.

(b)Each Loan Account will be credited with all amounts received from the Borrower or from others for the Borrower’s account. At the reasonable request of the Borrower, each Lender shall send the Borrower a statement accounting for its Loan Account during such Fiscal Quarter. Any such quarterly statements shall, absent manifest error, be an account stated, which is final, conclusive and binding on the Borrower.

SECTION .Payments.

(a)The Borrower shall make each payment required to be made hereunder or under any other Loan Document (whether of principal, interest or fees, of amounts payable under Section 2.06, Section 2.07(d) or Section 2.12, or otherwise) prior to 2:00 p.m., New York City time, on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date shall be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars.

(b)All funds received by any Person entitled thereto shall be applied in accordance with the provisions of Section 6.03 hereof, as applicable, ratably among the Persons entitled thereto in accordance with the amounts of principal, interest, and fees then due to such respective parties.

SECTION .Settlement Amongst Lenders.

The amount of each Lender’s applicable Aggregate Exposure Percentage of outstanding Loans shall be computed quarterly and shall be adjusted based on all Loans, all increases in the outstanding principal amount of the Loans resulting from the payment of interest in kind and repayments of Loans received by the Lenders as of 2:00 p.m., New York City time, on the first Business Day (such date, the “Settlement Date”) following the end of each Fiscal Quarter.

SECTION .Taxes.

(a)Any and all payments by or on account of any obligation of the Loan Parties hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, however, that if a Loan Party shall be required to deduct, or a Collateral Agent or a Lender shall be required to remit, any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions or remittances for Taxes (including deductions applicable to additional sums payable under this Section 2.12) the applicable Credit Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Loan Party shall make such deductions and (iii) the Loan Party shall pay the full amount deducted to the relevant Governmental Authority in accordance with Applicable Law.

(b)In addition, the Loan Parties shall pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law.

(c)Without duplicating the provisions of Section 2.12(a) above, the Loan Parties shall indemnify each Credit Party, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by such Credit Party on or with respect to any payment by or on account of any obligation of the Loan Parties hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.12) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Credit Party, setting forth in reasonable detail the manner in which such amount was determined, shall be conclusive absent manifest error.

(d)As soon as practicable after any payment of Taxes pursuant to this Section 2.12 by a Loan Party to a Governmental Authority, the Borrower shall deliver to each Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Required Lenders.

(e)(i) Any Foreign Lender that is entitled to an exemption from or reduction in withholding Tax shall deliver to the Borrower two (2) copies of:

(A) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of Internal Revenue Service (“IRS”) Form W-8BEN (or any substantively comparable subsequent versions thereof or successors thereto) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN (or any substantively comparable subsequent versions thereof or successors thereto) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(B) executed originals of IRS Form W-8ECI (or any substantively comparable subsequent versions thereof or successors thereto);

(C) in the case of a Foreign Lender claiming the benefits of the exemption for “portfolio interest” under Section 871(h) or 881(c) of the Code, a certificate substantially in the form of Exhibit D-1 to the effect that such Foreign Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, a "10 percent shareholder" of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a "controlled foreign corporation" described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”), and duly executed originals of IRS Form W-8BEN (or any substantively comparable subsequent versions thereof or successors thereto); or

(D) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY (or any substantively comparable subsequent versions thereof or successors thereto), accompanied by IRS Form W-8ECI, IRS Form W-8BEN (or any substantively comparable subsequent versions thereof or successors thereto), a U.S. Tax Compliance Certificate substantially in the form of Exhibit D-2 or Exhibit D-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit D-4 on behalf of each such direct and indirect partner.

Such forms shall be delivered by each Foreign Lender on or before the date it becomes a party to this Agreement (or, in the case of a transferee that is a Participant, on or before the date such Participant becomes a transferee hereunder) and on or before the date, if any, such Foreign Lender changes its applicable lending office by designating a different lending office. In addition, each Foreign Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender. Notwithstanding any other provision of this Section 2.12(e)(i), a Foreign Lender shall not be required to deliver any form pursuant to this Section 2.12(e)(i) that such Foreign Lender is not legally able to deliver.

(ii) If a payment made to a Lender under any Loan Document would be subject to U.S. Federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower at the time or times prescribed by law and at such time or times reasonably requested by the Borrower such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower as may be necessary for the Borrower to comply with its obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause 2.12(e)(ii), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

(f)The Borrower shall not be required to indemnify any Lender or to pay any additional amounts to any Lender in respect of U.S. Federal withholding or backup withholding Tax pursuant to paragraph (a) or (c) above to the extent that the obligation to pay such additional amounts would not have arisen but for a failure by such Lender to comply with the provisions of paragraph (e) or (g) hereof, as the case may be. Should a Lender become subject to Taxes because of its failure to deliver a form required hereunder, the Loan Parties shall, at such Lender’s expense, take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes.

(g)Each Lender that is organized in the United States of America or any state thereof or the District of Columbia shall (i) on or before the date such Lender becomes a Lender hereunder (or, in the case of a transferee that is a Participant, on or before the date such Participant becomes a transferee hereunder), (ii) on or before the date on which any such form or certification expires or becomes obsolete and (iii) after the occurrence of any event requiring a change in the most recent form or certification previously delivered by it pursuant to this Section 2.12(g), deliver to the Borrower two (2) copies of properly completed and duly executed IRS Form W-9 (certifying that such Lender is entitled to an exemption from U.S. backup withholding Tax) or any subsequent versions thereof or successors thereto.

(h)If any Loan Party shall be required pursuant to this Section 2.12 to pay any additional amount to, or to indemnify, any Credit Party to the extent that such Credit Party becomes subject to Taxes subsequent to the Closing Date (or, if applicable, subsequent to the date such Person becomes a party to this Agreement) as a result of any change in the circumstances of such Credit Party (other than a change in Applicable Law), including without limitation a change in the residence, place of incorporation, principal place of business of such Credit Party or a change in the branch or lending office of such Credit Party, as the case may be, such Credit Party shall use reasonable efforts to avoid or minimize any amounts which might otherwise be payable pursuant to this Section 2.12(h); providedhowever, that such efforts shall not include the taking of any actions by such Credit Party that would result in any tax, costs or other expense to such Credit Party (other than a tax, cost or other expense for which such Credit Party shall have been reimbursed or indemnified by the Loan Parties pursuant to this Agreement or otherwise) or any action which would or might in the reasonable opinion of such Credit Party have an adverse effect upon its business, operations or financial condition or otherwise be disadvantageous to such Credit Party.

(i)If any Credit Party reasonably determines that it has received a refund of any Indemnified Taxes or Other Taxes paid or reimbursed by the Loan Parties pursuant to subsection (a) or (c) above in respect of payments under the Loan Documents, such Credit Party shall pay to the Borrower, with reasonable promptness following the date upon which it receives the refund an amount equal to the refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.12 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out of pocket expenses incurred in securing such refund by the Credit Party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Borrower, upon the request of the Credit Party, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Credit Party in the event the Credit Party is required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require the Credit Party to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrower or any other Person.

(j)For purposes of this Section 2.12, the term Applicable Law includes FATCA.

SECTION .Mitigation Obligations; Replacement of Lenders.

(a)If any Lender requests compensation under Section 2.06, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.12, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.06 or Section 2.12, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment; provided, however, that the Borrower shall not be liable for such costs and expenses of a Lender requesting compensation if (i) such Lender becomes a party to this Agreement

on a date after the Closing Date and (ii) the relevant Change in Law occurs on a date prior to the date such Lender becomes a party hereto.

(b)If any Lender requests compensation under Section 2.06, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.12, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 8.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided, however, that (i) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, including PIK Interest, if any, accrued interest on the Loans, accrued fees and all other amounts payable to it hereunder from the assignee (to the extent of such outstanding principal, including PIK Interest, if any, accrued interest and fees) or the Borrower (in the case of all other amounts) and (ii) in the case of any such assignment resulting from a claim for compensation under Section 2.06 or payments required to be made pursuant to Section 2.12, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

ARTICLE VI

ARTICLE VII

ARTICLE VIIIRepresentations and Warranties

To induce the Credit Parties to make the Loans, the Loan Parties executing this Agreement, jointly and severally, make, on the Closing Date, the following representations and warranties to each Credit Party, all of which shall survive the execution and delivery of this Agreement and the making of the Loans:

SECTION .Organization; Powers.

Each Loan Party and each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to own its property and assets and to carry on its business as now conducted and each Loan Party has all requisite power and authority to execute and deliver and perform all its obligations under all Loan Documents to which such Loan Party is a party. Each Loan Party and each Subsidiary is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required, except where the failure to do so individually or in the aggregate could not reasonably be expected to result in a Material Adverse Effect. Schedule 3.01 annexed hereto sets forth, as of the Closing Date, each Loan Party’s name as it appears in official filings in its state of incorporation or organization, its state of incorporation or organization, organization type, organization number, if any, issued by its state of incorporation or organization, and its federal employer identification number.

SECTION .Authorization; Enforceability.

The transactions contemplated hereby and by the other Loan Documents to be entered into by each Loan Party are within such Loan Party’s corporate or other organizational powers and have been duly authorized by all necessary corporate, membership, partnership or other necessary action. This Agreement has been duly executed and delivered by each Loan Party that is a party hereto or thereto and constitutes, and each other Loan Document to which any Loan Party is a party, when executed and delivered by such Loan Party will constitute, a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION .Governmental Approvals; No Conflicts.

The transactions to be entered into and contemplated by the Loan Documents (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for such as have been obtained or made and are in full force and effect and except filings and recordings necessary to perfect Liens created under the Loan Documents, (b) will not violate any material Applicable Law or the Charter Documents of any Loan Party, (c) will not violate or result in a default under any indenture or any other agreement, instrument or other evidence of Material Indebtedness, or any other material instrument binding upon any Loan Party or its assets, or give rise to a right thereunder to require any payment to be made by any Loan Party, and (d) will not result in the creation or imposition of any Lien on any asset of any Loan Party, except Liens created under the Loan Documents.

SECTION .First Lien Credit Agreement Representations.

The representations and warranties of each Loan Party contained in Article V of the First Lien Credit Agreement, except for those representations and warranties contained in Section 5.25 thereof, shall be true and correct in all material respects as if such representations and warranties (and all related definitions to the extent not defined herein) were set forth in full herein, mutatis mutandis (provided that any such representation and warranty that is qualified as to materiality or “Material Adverse Effect” or similar language shall be true and correct in all respects) on and as of the Closing Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (but without any duplication of any materiality qualifications) as of such earlier date, and the representations and warranties contained in Section 5.02 thereof shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b) respectively, of Section 6.04 thereof .

ARTICLE IX

ARTICLE X

ARTICLE XIConditions

SECTION .Closing Date.

The obligation of the Initial Lender to make the Loans on the Closing Date is subject to the following conditions precedent:

(a)The Initial Lender (or its counsel) shall have received a counterpart of this Agreement signed on behalf of each party hereto.

(b)The Initial Lender shall have received a favorable written opinion (addressed to the Initial Lender and dated the Closing Date) of counsel for the Loan Parties covering such matters relating to the Loan Parties, the Loan Documents or the transactions contemplated thereby as the Initial Lender shall reasonably request. The Loan Parties hereby request such counsel to deliver such opinions.

(c)The Initial Lender shall have received Charter Documents and such other documents and certificates as the Initial Lender or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the transactions contemplated by the Loan Documents and any other legal matters relating to the Loan Parties, the Loan Documents or the transactions contemplated thereby, all in form and substance satisfactory to the Initial Lender and its counsel.

(d)The Initial Lender shall have received a certificate, reasonably satisfactory in form and substance to the Initial Lender, (i) certifying the Loan Parties and their Subsidiaries, taken as a whole, are Solvent as of the Closing Date and (ii) certifying that, as of the Closing Date, the representations and warranties made by the Loan Parties in the Loan Documents, or which are contained in any document furnished in connection herewith and therewith, are true and correct in all material respects; provided that any representation and warranty that is qualified as to

materiality or “Material Adverse Effect” or similar language and the representation and warranty contained in Section 3.04 shall be true and correct in all respects; and that no Default or Event of Default exists.

(e)After giving effect to the consummation of the transactions contemplated under this Agreement and the other Loan Documents on the Closing Date (including any Loans made hereunder), no Default or Event of Default shall exist.

(f)All fees due at or immediately after the Closing Date and all Credit Party Expenses incurred in connection with the establishment of the credit facility contemplated hereby (including the reasonable fees and expenses of counsel to the Initial Lender), shall have been paid in full on or before the Closing Date. All such amounts will be paid with the proceeds of the Loans made on the Closing Date and will be reflected in the funding instructions given by the Borrower to the Initial Lender on or before the Closing Date.

(g)All necessary consents and approvals to the transactions contemplated hereby shall have been obtained and shall be reasonably satisfactory to the Initial Lender.

(h)There shall have been delivered to the Initial Lender such additional instruments and documents as the Initial Lender or its counsel reasonably may require or request.

(i)The Initial Lender shall have received a notice with respect to such Borrowing as required by Section 2.02(a).

(j)The Initial Lender shall have received a true, correct and complete copy, certified as such by the Borrower, of (1) the First Lien Credit Agreement, (2) the Security Agreement, dated April 4, 2013, entered into in connection with the First Lien Credit Agreement, (3) the Intellectual Property Security Agreement, dated April 4, 2013, entered into in connection with the First Lien Credit Agreement, (4) the U.S. Pledge Agreement (as defined in the First Lien Credit Agreement), (5) the Guaranty, dated April 4, 2013, entered into in connection with the First Lien Credit Agreement, (6) the Deposit Account Control Agreement, dated April 4, 2013, among Capital One, N.A., American Apparel (USA), LLC, American Apparel Retail, Inc., Capital One Leverage Finance Corp., and U.S. Bank National Association, (7) the Security Agreement (as defined in the Senior Notes Indenture), (8) the IP Security Agreement (as defined in the Senior Notes Indenture), (9) the Pledge Agreement (as defined in the Senior Notes Indenture), (10) the Senior Notes Indenture, (11) the Intercreditor Agreement (as defined in the Senior Notes Indenture), (12) the Canadian Intercreditor Agreement (as defined in the Senior Notes Indenture), in each case, in effect as of the Closing Date, and (13) an amendment to the First Lien Credit Agreement and any loan documents related thereto, explicitly permitting all of the transactions contemplated hereby and by the other Loan Documents, and such amendment shall be in form and substance reasonably satisfactory to the Initial Lender and be in full force and effect on or prior to the Closing Date.

Notwithstanding the foregoing, the obligations of the Lenders to make Loans hereunder shall not become effective unless all of the foregoing conditions are satisfied (or waived as provided in Section 4.01 hereof) at or prior to 12:00 noon, New York City time, on May 22, 2013 (and, in the event such conditions are not so satisfied or waived, this Agreement shall terminate at such time). The conditions set forth in this Section 4.01 are for the sole benefit of each Credit Party and may be waived by the Initial Lender, in whole or in part, without prejudice to any other Credit Party.

ARTICLE XII

ARTICLE XIII

ARTICLE XIVCovenants

SECTION .Senior Notes Indenture.

The Borrower shall comply with each covenant contained in Article IV and Article V of the Senior Notes Indenture, except for those covenants contained in Sections 4.01, 4.02, 4.06, 4.07, 4.10, 4.17 and

4.23 thereof, as if such covenant (and all related definitions to the extent not defined herein) were set forth herein, mutatis mutandis (and for the avoidance of doubt, the Borrower shall continue to comply with each such covenant irrespective of whether the Senior Notes Indenture has been terminated) (it being understood that (x) any requirement that the Borrower provide notice or information to the Lenders pursuant to the covenants incorporated herein shall be deemed satisfied if the Borrower provides such notice or information to the Lenders pursuant to, and in accordance with Section 5.02(c) hereof and (y) to the extent applicable, any reference in the covenants in the Senior Notes Indenture that are incorporated herein by reference pursuant to this Section 5.01 (A) to “Trustee” or “Holder” shall be deemed to be a reference to the Lenders and (B) to “Guarantors” shall be deemed to be a reference to the Facility Guarantors); provided that the covenants contained in Sections 4.18, 4.25 and 4.26 of the Senior Notes Indenture shall only be incorporated herein if, and at such time and for so long as, the Obligations are secured pursuant to the terms of Section 5.05 hereof; provided further that any reference in Section 4.11(b)-(d) to “Trustee” or “Holder” shall not be deemed to be a reference to the Lenders and the provisions of Section 4.11(b)-(d) of the Senior Notes Indenture shall not apply to the Lenders or to the Obligations. For the avoidance of doubt, for purposes of compliance with the foregoing covenants, clause (1) of the definition of “Permitted Indebtedness” in the Senior Notes shall be deemed to permit no more than $206,000,000 in aggregate principal amount of Notes and Exchange Notes, plus in each case, any increase in the principal amount of the Notes and Exchange Notes in connection with the payment of Special Interest (as defined in the Senior Notes Indenture).

SECTION .Notices.

The Borrower will furnish to each Lender:

(a)to the extent reasonably practical, immediately prior to the effectiveness of, but in any event, no later than five Business Days following the effectiveness thereof, copies of any material amendment, supplement, waiver, or other modification, replacement or renewal with respect to any Specified Financing Documentation;

(b)upon the request of any Lender, copies of all financial statements and reports that the Borrower sends to the holders of any class of its debt securities or public Capital Stock;

(c)within five days after the same are sent, copies of all notices that the Borrower or any Facility Guarantor sends to the trustee or the holders under the Senior Notes Indenture or any other Senior Notes Document;

(d)promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of any Loan Party or any Subsidiary thereof, or compliance with the terms of any Loan Document, as any Lender may reasonably request;

(e)prompt written notice of a Default or Event of Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto.

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and, if applicable, any action taken or proposed to be taken with respect thereto.

SECTION .Use of Proceeds.

The proceeds of the Loans made hereunder on the Closing Date will be used only to pay fees and expenses related to the financing contemplated hereby, including but not limited to the attorney’s fees for the Initial Lender and the Borrower and for general corporate purposes. No part of the proceeds of the Loans will be used, whether directly or indirectly, for any purpose that entails a violation of any of the regulations of the Board, including Regulations U and X.

SECTION .Additional Subsidiaries.

If any Loan Party shall form or acquire a Subsidiary after the Closing Date, the Borrower will

notify each of the Lenders thereof and if such Subsidiary is required to become a “Guarantor” under the Senior Notes Indenture or any amendment, amendment and replacement, supplement, modification or refinancing thereof, the Borrower will cause such Subsidiary to become a Loan Party hereunder by executing a Joinder Agreement and under each applicable Loan Document (including any Security Documents, to the extent applicable), in the manner provided therein within ten (10) Business Days after such Subsidiary is formed or acquired and, if the Obligations are permitted to be secured pursuant to the Senior Notes Indenture, within ten (10) Business Days after such permission, promptly take such actions to create and perfect Liens on such Subsidiary’s assets to secure the Obligations as the Required Lenders shall reasonably request.

SECTION .Security.

(a)If and to the extent that the entire amount of the Obligations is permitted to be secured pursuant to clause (27) of the definition of “Permitted Liens” set forth in the Senior Notes Indenture (it being understood and agreed that such permission may depend on the ability of the Obligations to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Notes Indenture) provisions of Section 4.08(a) of the Senior Notes Indenture on such date of determination), the Borrower shall promptly, and in any event no later than ten (10) Business Days after such determination is made, enter into Security Documents to cause the Obligations hereunder to be secured on a junior priority basis to the Liens securing the “Obligations” (as defined in the First Lien Credit Agreement) of American Apparel (USA), LLC and the other “Loan Parties” under the First Lien Loan Documents and the “Obligations” (as defined in the Senior Notes Indenture) of the Borrower and the other “Guarantors” under the Senior Notes Indenture and the other Senior Notes Documents, and the Loan Parties shall not have any liens on their property or assets other than “Permitted Liens” (as defined in the Senior Notes Indenture) and the Borrower shall not be permitted to secure any other Indebtedness pursuant to clause (27) of the definition of “Permitted Liens” set forth in the Senior Notes Indenture unless and until the Obligations hereunder are so secured. Each Loan Party shall deliver such certificates, legal opinions and other information and documentation as reasonably requested by the Required Lenders pursuant to this Section 5.05.

(b)Neither the Borrower nor any of its Restricted Subsidiaries will take or knowingly omit to take any action that would materially impair the Liens in favor of the Lenders with respect to any material portion of the Collateral. The Borrower shall, and shall cause each Facility Guarantor to, at their sole cost and expense, (i) execute and deliver all such agreements and instruments as the Required Lenders shall reasonably request to more fully or accurately describe the property intended to be Collateral or the obligations intended to be secured by the Security Documents and (ii) file any such notice filings or other agreements or instruments as may be reasonably necessary under Applicable Law to perfect (and maintain the perfection and priority of) the Liens created by the Security Documents, subject to Permitted Liens, at such times and at such places as the Required Lenders may reasonably request, in each case subject to the terms of the Security Documents.

(c)Notwithstanding anything to the contrary herein or in any other Loan Document, (i) neither the Borrower nor any Loan Party shall be required to enter into Security Documents or otherwise grant any security interest to the Lenders until and unless the Lenders enter into an Intercreditor Joinder (as defined in the Intercreditor Agreement) and (ii) no more than 65% of the voting Capital Stock of any Foreign Subsidiary (as defined in the Senior Notes Indenture) shall be required to be subject to a security interest of the Lenders; provided that the Borrower shall use commercially reasonable efforts to cause U.S. Bank National Association, as trustee and collateral agent under the Senior Notes Indenture and Capital One Leverage Finance Corp., as administrative agent under the First Lien Credit Agreement, to enter into such Intercreditor Joinder with the Lenders in order to effectuate the foregoing.

SECTION .Designation of Restricted and Unrestricted Subsidiaries.

After the termination of the Senior Notes Indenture:

(a)The Borrower’s board of directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary or a Person becoming a Subsidiary through merger, consolidation or other business combination transaction, or “Investment” (as defined in the Senior Notes Indenture) therein) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Borrower or any other Restricted Subsidiary of the Borrower that is not a Subsidiary of the Subsidiary to be so designated, provided that (i) the Borrower certifies to each Lender that such designation would comply with Section 4.09 (as incorporated herein pursuant to Section 5.01 hereof) and (ii) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Borrower or any of its Restricted Subsidiaries.

(b)The Borrower’s board of directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (i) immediately after giving effect to such designation, the Borrower is able to incur at least $1.00 of additional Indebtedness (other than “Permitted Indebtedness” (as defined in the Senior Notes Indenture)) in compliance with Section 4.08 of the Senior Notes Indenture if such Senior Notes Indenture were in full force and effect; and (ii) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing.

Any such designation by such board of directors shall be evidenced to each Lender by promptly filing with each Lender a copy of the board resolution giving effect to such designation and an officers’ certificate certifying that such designation complied with the foregoing provisions.

ARTICLE XV

ARTICLE XVI

ARTICLE XVIIEvents of Default

SECTION .Events of Default.

If any of the following events (“Events of Default”) shall occur:

(a)any Loan Party shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b)any Loan Party shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in Section 6.01(a)) payable under this Agreement or any other Loan Document and such failure shall continue for a period of five (5) consecutive days;

(c)any representation or warranty of any Loan Party in, or in connection with, any Loan Document (including pursuant to Section 3.04 hereof) or any amendment, supplement or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been materially incorrect when made;

(d)a default in the observance or performance of any other covenant or agreement contained in this Agreement or any other Loan Document which default continues for a period of sixty (60) days after the Borrower receives written notice specifying the default (and demanding that such default be remedied) from the Required Lenders (except in the case of a default with respect to Section 5.01 hereof relating to a default under Section 5.01 of the Senior Notes Indenture, for which such period shall be thirty (30) days);

(e)the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Borrower or

any Restricted Subsidiary of the Borrower, or the acceleration of the final stated maturity of any such Indebtedness, in each case, if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated, aggregates $10,000,000 or more at any time;

(f)one or more judgments in an aggregate amount in excess of $10,000,000 shall have been rendered against the Borrower or any of its Restricted Subsidiaries (other than any judgment or portion thereof as to which a reputable and solvent third party insurer has not disclaimed coverage) and such judgments remain undischarged, unpaid or unstayed for a period of sixty (60) days after such judgment or judgments become final and non-appealable;

(g)the Borrower, any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary (i) commences a voluntary case or proceeding under the Bankruptcy Code with respect to itself, (ii) consents to the entry of an order for relief against it in an involuntary case under the Bankruptcy Code, (iii) consents to the appointment of a Custodian of it or for substantially all of its property, (iv) makes a general assignment for the benefit of its creditors; or (v) takes any corporate action to authorize or effect any of the foregoing;

(h)a court of competent jurisdiction enters a judgment, decree or order for relief in respect of the Borrower, any of its Significant Subsidiaries or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary in an involuntary case or proceeding under the Bankruptcy Code, which shall (i) approve as properly filed a petition seeking reorganization, arrangement, adjustment or composition in respect of the Borrower, such Significant Subsidiary or group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, (ii) appoint a Custodian of the Borrower, such Significant Subsidiary or group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, or for substantially all of its property or (iii) order the winding up or liquidation of its affairs; and such judgment, decree or order shall remain unstayed and in effect for a period of sixty (60) days;

(i)(i) any Security Document of a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, as of the last audited consolidated financial statements of the Borrower and its Restricted Subsidiaries would constitute a Significant Subsidiary at any time for any reason shall cease to be in full force and effect in all material respects, or ceases to give the Lenders (or any Collateral Agent on behalf of the Lenders) the Liens, rights, powers and privileges purported to be created thereby with respect to any of the Collateral related thereto, subject to no other Liens other than Permitted Liens (as defined in the Senior Notes Indenture on the Closing Date) and except as expressly permitted by the applicable Security Document; or (ii) the Borrower or any of the Facility Guarantors, directly or indirectly, contest in any manner the effectiveness, validity, binding nature or enforceability of any Security Document (other than by reason of (A) a release of such obligation or Lien related thereto in accordance with this Agreement or the Security Documents or (B) the failure of a Lender or a Collateral Agent appointed by the Required Lenders to maintain possession of certificates, instruments or other documents actually delivered to it representing securities or other possessory collateral pledged under the Security Documents), which default, repudiation or disaffirmation event results in Collateral having an aggregate Fair Market Value in excess of $10,000,000 not being subject to a valid, perfected security interest in favor of such Collateral Agent or the Lenders under any Applicable Law (other than the law of any foreign jurisdiction) (to the extent required under the Security Documents), or a determination in a judicial proceeding that the Security Documents are unenforceable or invalid against the Borrower or any of the Facility Guarantors for any reason with respect to Collateral having an aggregate Fair Market Value of $10,000,000 or more; provided that such default, repudiation, disaffirmation or determination is not rescinded, stayed, or waived by the Persons having such authority pursuant to the Security Documents or otherwise

cured within sixty (60) days after the Borrower receives written notice thereof specifying such occurrence from the Required Lenders demanding that such default be remedied; or

(j)(i) any Guarantee of a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, as of the last audited consolidated financial statements of the Borrower and its Restricted Subsidiaries would constitute a Significant Subsidiary (A) ceases to be in full force and effect, (B) is declared by a court of competent jurisdiction to be null and void and unenforceable or (C) is found by a court of competent jurisdiction to be invalid or (ii) any Facility Guarantor that is a Significant Subsidiary denies its liability under its Guarantee, in each case other than in accordance with the terms thereof or by reason of release of a Facility Guarantor in accordance with the terms of this Agreement; or

(k)Dov Charney ceases to be chief executive officer of the Borrower;

then, and in every such event (other than an event described in Section 6.01(g) or Section 6.01(h) with respect to any Loan Party), and at any time thereafter during the continuance of such event, the Required Lenders may, by notice to the Borrower, declare the Obligations then outstanding to be due and payable in whole, and thereupon the principal of the Loans, including any interest paid-in-kind, and all other Obligations so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Loan Parties accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Loan Parties. In case of any event with respect to any Loan Party described in Section 6.01(g) or Section 6.01(h), the Commitments shall automatically and irrevocably terminate and the principal of the Loans, including any interest paid-in-kind, and other Obligations then outstanding, together with accrued interest thereon and all fees and other obligations of the Loan Parties accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Loan Parties.

SECTION .Remedies on Default.

In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the maturity of the Obligations shall have been accelerated pursuant hereto, the Required Lenders may proceed to protect and enforce their rights and remedies under this Agreement or any of the other Loan Documents by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Credit Parties. No remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law.

SECTION .Application of Proceeds.

After the occurrence of an Event of Default and acceleration of the Obligations, all proceeds realized from any Loan Party or on account of any Collateral, if applicable, shall be applied in the following order:

(a)FIRST, ratably to pay any Credit Party Expenses, indemnities and fees then due to the Lenders until paid in full;

(b)SECOND, ratably to pay interest accrued in respect of the Obligations until paid in full;

(c)THIRD, ratably to pay principal due, including interest paid-in-kind, in respect of the Loans to the Borrower until paid in full;

(d)FOURTH, ratably to pay any other Obligations; and

(e)FIFTH, to the Borrower or such other Person entitled thereto under Applicable Law.

ARTICLE XVIII

ARTICLE XIX

ARTICLE XXGuarantee

SECTION .Guarantee.

Subject to this Article VII, each Facility Guarantor hereby fully and unconditionally, jointly and severally guarantees (such guarantee, as amended or supplemented from time to time, to be referred to herein as the “Guarantee”), to each of the Lenders and their respective successors and assigns that (i) the principal of, premium, if any and interest on the Loans shall be promptly paid in full when due, subject to any applicable grace period, whether upon redemption pursuant to the terms of the Loans, by acceleration or otherwise, and interest on the overdue principal (including interest accruing at the then applicable rate provided in this Agreement after the occurrence of any Event of Default set forth in Section 6.01(g) or (h), whether or not a claim for post-filing or post-petition interest is allowed under Applicable Law following the institution of a proceeding under bankruptcy, insolvency or similar laws), if any, and interest on any interest, to the extent lawful, of the Loans and all other obligations of the Borrower to the Lenders hereunder, thereunder or under any other Loan Document shall be promptly paid in full or performed, all in accordance with the terms hereof, thereof and of the other Loan Documents; and (ii) in case of any extension of time of payment or renewal of any of the Loans or of any such other obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in this Section 7.01 and Section 7.03. Each Facility Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Loans, this Agreement, or any other Loan Document, the absence of any action to enforce the same, any waiver or consent by any of the Lenders with respect to any provisions hereof or thereof, any release of any other Facility Guarantor, the recovery of any judgment against the Borrower, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Facility Guarantor. Each Facility Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Borrower, any right to require a proceeding first against the Borrower, protest, notice and all demands whatsoever and covenants that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Loans, this Agreement and in this Guarantee.

The obligations of each Facility Guarantor are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Facility Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Facility Guarantor in respect of the obligations of such other Facility Guarantor under its Guarantee or pursuant to its contribution obligations under this Agreement, shall result in the obligations of such Facility Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. The net worth of any Facility Guarantor for such purpose shall include any claim of such Facility Guarantor against the Borrower for reimbursement and any claim against any other Facility Guarantor for contribution. Each Facility Guarantor may consolidate with or merge into or sell its assets to the Borrower or a Restricted Subsidiary without limitation in accordance with Section 5.01. If any Lender is required by any court or otherwise to return to the Borrower, any Facility Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Borrower or any Facility Guarantor, any amount paid by the Borrower or any Facility Guarantor to the such Lender, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Facility Guarantor further agrees that, as between each Facility Guarantor, on the one hand, and the Lenders on the other hand, (x) the maturity of

the obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of this Guarantee notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any acceleration of such obligations as provided in Article VI, such obligations (whether or not due and payable) shall forthwith become due and payable by each Facility Guarantor for the purpose of this Guarantee.

SECTION .Release of a Guarantor.

(a)A Facility Guarantor will be automatically and unconditionally released from its Guarantee without any action required on the part of any Lender:

(i)if such Facility Guarantor shall have been released from its guarantee under the Senior Notes Indenture; or

(ii)upon payment in full in cash of the principal of, premium, if any, accrued and unpaid interest on the Loans and all other Obligations under this Agreement that are then due and payable.

At the Borrower’s request and expense, the Lenders will promptly execute and deliver an instrument evidencing such release. A Facility Guarantor may also be released from its obligations under its Guarantee in connection with a permitted amendment of this Agreement.

SECTION .Limitation of Facility Guarantor’s Liability.

Each Facility Guarantor and, by its acceptance hereof, each of the Lenders hereby confirms that it is the intention of all such parties that the guarantee by such Facility Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the foregoing intention, the Lenders and such Facility Guarantor hereby irrevocably agree that the obligations of such Facility Guarantor under the Guarantee shall be limited to the maximum amount as shall, after giving effect to all other contingent and fixed liabilities of such Facility Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Facility Guarantor in respect of the obligations of such other Facility Guarantor under its Guarantee or pursuant to Section 7.04, result in the obligations of such Facility Guarantor under the Guarantee not constituting such fraudulent transfer or conveyance.

SECTION .Contribution.

In order to provide for just and equitable contribution among the Facility Guarantors, the Facility Guarantors agree, between or among themselves, that each Facility Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a pro rata contribution from each other Facility Guarantor hereunder based on the net assets of each other Facility Guarantor and the Borrower. The preceding sentence shall in no way affect the rights of the Lenders to the benefits of this Agreement, the Loans or the Guarantees.

SECTION .Waiver of Subrogation.

Each Facility Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Lenders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.

SECTION .Waiver of Stay, Extension or Usury Laws.

Each Facility Guarantor covenants to the extent permitted by law that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law that would prohibit or forgive such Facility Guarantor from performing its Guarantee as contemplated herein, wherever enacted, now or at any time hereafter in force; and each Facility Guarantor hereby expressly waives to the extent permitted by law all benefit or advantage of any

such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Lenders, but shall suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE XXI

ARTICLE XXII

ARTICLE XXIIIMiscellaneous

SECTION .Notices.

Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or e-mail, as follows:

(a)if to any Loan Party, to it at American Apparel, Inc. 747 Warehouse St., Los Angeles, CA 90021, Attention: Glenn Weinman (Telecopy No. (213) 201-3048), (E-Mail glenn@americanapparel.net), with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, Attention: David Reamer (Telecopy No. (213) 621-5052); E-Mail dreamer@skadden.com);

(b)if to the Initial Lender, to it at the following address:

Lion/Hollywood L.L.C.

100 Wilshire Boulevard

Los Angeles, CA 90401

Attention: Jeff Chang

E-Mail Address: chang@lioncapital.com

(c)if to any Credit Party, to it at its address (or facsimile number or e-mail address) as set forth on Schedule 1.01(a) hereto or on any Assignment and Acceptance.

Notwithstanding the foregoing, any notice hereunder sent by e-mail shall be solely for the distribution of (i) routine communications such as financial statements and (ii) documents and signature pages for execution by the parties hereto, and for no other purpose. Any party hereto may change its address, facsimile number or email address for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given three (3) days after mailing or otherwise upon delivery.

SECTION .Waivers; Amendments.

(a)No failure or delay by any Credit Party in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Credit Parties hereunder and under the other Loan Documents are cumulative and are not exclusive of any other rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by Section 8.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default or Event of Default, regardless of whether any Credit Party may have had notice or knowledge of such Default or Event of Default at the time.

(b)Except as otherwise specifically provided herein, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Loan

Parties and the Required Lenders; providedhowever, that no such waiver, amendment, modification or other agreement shall:

(i)Increase the Commitment of any Lender without the prior written consent of such Lender;

(ii)Reduce the principal amount of any Obligation or reduce the rate of interest thereon, or reduce any fees payable under the Loan Documents without the consent of the Lenders adversely affected thereby;

(iii)Postpone the scheduled date of payment of the principal amount of any Obligation, or any interest thereon, or any fees payable under the Loan Documents, or reduce the amount of, waive or excuse any such payment, or postpone the expiration of the Commitments or postpone the Maturity Date without the consent of the Lenders adversely affected thereby;

(iv)change Section 2.08(a) without the prior written consent of each Lender adversely affect thereby;

(v)Without prior written consent of all Lenders:

(A)release all or substantially all of the Facility Guarantors under the Guarantee (except in accordance with Section 7.02) or, if applicable, release all or substantially all of the Collateral (except as provided in the Security Documents or in accordance with Section 7.02) under the Security Documents (to the extent in effect);

(B)subordinate the Obligations hereunder or, if applicable, the Liens granted hereunder or under the other Loan Documents to any other Indebtedness or Lien, as the case may be, other than the Liens securing the “Obligations” (as defined in the First Lien Credit Agreement) of American Apparel (USA), LLC and the other “Loan Parties” under the First Lien Loan Documents or the “Obligations” (as defined in the Senior Notes Indenture) of American Apparel, Inc. and the “Guarantors” under the Senior Notes Indenture and the other Senior Notes Documents;

(C)change any of the provisions of this Section 8.02 or the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder; or

(D)change Section 8.04(a).

(c)Notwithstanding anything to the contrary contained in this Section 8.02, in the event that the Borrower shall request that this Agreement or any other Loan Document be modified, amended or waived in a manner which would require the consent of the Lenders pursuant to Section 8.02(b) and such amendment is approved by the Required Lenders, but not by the requisite percentage of all of the Lenders, the Borrower and such Required Lenders shall be permitted to amend this Agreement without the consent of the Lender or Lenders which did not agree to the modification or amendment requested by the Borrower (such Lender or Lenders, collectively the “Minority Lenders”) subject to their providing for (i) the termination of each Commitment of each of the Minority Lenders, (ii) the addition to this Agreement of one or more other Eligible Assignees, or an increase in the Commitment of one or more of the Required Lenders, so that the Total Commitments after giving effect to such amendment shall be in the same amount as the aggregate Commitments immediately before giving effect to such amendment, (iii) if any Loans are outstanding at the time of such amendment, the making of such additional Loans by such new or increasing Lender or Lenders, as the case may be, as may be necessary to repay in full the outstanding Loans (including principal, interest, fees and other amounts) of the

Minority Lenders immediately before giving effect to such amendment and (iv) such other modifications to this Agreement or the Loan Documents as may be appropriate and incidental to the foregoing.

(d)No notice to or demand on any Loan Party shall entitle any Loan Party to any other or further notice or demand in the same, similar or other circumstances. Each holder of a Note shall be bound by any amendment, modification, waiver or consent authorized as provided herein, whether or not a Note shall have been marked to indicate such amendment, modification, waiver or consent and any consent by a Lender, or any holder of a Note, shall bind any Person subsequently acquiring a Note, whether or not a Note is so marked. No amendment to this Agreement or any other Loan Document shall be effective against the Borrower or any other Loan Party unless signed by the Borrower or other applicable Loan Party.

SECTION .Expenses; Indemnity; Damage Waiver.

(a)The Loan Parties shall be jointly and severally obligated pay all Credit Party Expenses.

(b)The Loan Parties shall, jointly and severally, indemnify the Credit Parties and each of their Subsidiaries and Affiliates, and each of their respective stockholders, directors, officers, employees, agents, attorneys, and advisors of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all damages, actual out-of-pocket losses, claims, actions, causes of action, settlement payments, obligations, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred, suffered, sustained or required to be paid by, or asserted against, any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the transactions contemplated by the Loan Documents or any other transactions contemplated hereby, (ii) any Loans or the use of the proceeds therefrom, (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property currently or formerly owned, leased or operated by any Loan Party or any Subsidiary, or any Environmental Liability related in any way to any Loan Party or any Subsidiary, (iv) any actual or prospective claim, litigation, investigation or proceeding relating to or arising from any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto or (v) any documentary taxes, assessments or similar charges made by any Governmental Authority by reason of the execution and delivery of this Agreement or any other Loan Document; provided, however, that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee or any Affiliate of such Indemnitee (or any officer, director, employee, advisor or agent of such Indemnitee or any such Indemnitee’s Affiliates). In connection with any indemnified claim hereunder, the Indemnitee shall be entitled to select its own counsel and the Loan Parties shall promptly pay the reasonable fees and expenses of such counsel.

(c)No Loan Party shall assert and, to the extent permitted by Applicable Law, each Loan Party hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the transactions contemplated by the Loan Documents, any Loans or the use of the proceeds thereof.

(d)The provisions of this Section 8.03 shall remain operative and in full force and effect regardless of the termination of this Agreement, the consummation of the transactions contemplated hereby, the repayment of any of the Obligations, the invalidity or unenforceability of any term or provision of any Loan Document, or any investigation made by or on behalf of any Credit Party.

All amounts due under this Section 8.03 shall be payable no later than ten (10) days after written demand therefor.

SECTION .Successors and Assigns.

(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any such attempted assignment or transfer without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, Indemnitees), any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)Any Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of the Loans at the time owing to it); provided, however, that each assignment shall be subject to the following conditions: (i) except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Loans, the amount of the Loans of the assigning Lender subject to an assignment shall not be less than $1,000,000, or, if less, the entire remaining amount of the assigning Lender’s Loans; (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under all of the Loans; and (iii) the parties to each assignment shall execute and deliver to the Borrower and the other Lenders an Assignment and Acceptance. Subject to acceptance and recording thereof pursuant to Section 8.04(d), from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 8.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 8.04(b) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 8.04(e). The Loan Parties hereby acknowledge and agree that any assignment shall give rise to a direct obligation of the Loan Parties to the assignee and that the assignee shall be considered to be a “Credit Party” for all purposes under this Agreement and the other Loan Documents.

(c)The Borrower and each Lender, acting for this purpose as an agent of the Loan Parties, shall maintain a copy of each Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the principal amount (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time. The entries in the Register shall be conclusive and the Loan Parties and Credit Parties may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(d)Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee and any written consent to such assignment required by Section 8.04(b), the Borrower and each Lender shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this Section 8.04(d).

(e)Any Lender may, without the consent of the Loan Parties or any other Person, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of the Loans owing to it), subject to the following:

(i)such Lender’s obligations under this Agreement and the other Loan Documents shall remain unchanged;

(ii)such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations;

(iii)the Loan Parties and other Credit Parties shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement;

(iv)any agreement or instrument pursuant to which a Lender sells a participation in the Loans shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided, however, that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the proviso to Section 8.02(b) that adversely affects such Participant;

(v)subject to clauses (viii) and (ix) of this Section 8.04(e), the Loan Parties agree that each Participant shall be entitled to the benefits of Section 2.06 and Section 2.12 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 8.04(b);

(vi)to the extent permitted by law, each Participant also shall be entitled to the benefits of Section 8.08 as though it were a Lender;

(vii)each Lender, acting for this purpose as an agent of the Loan Parties, shall maintain at its offices a record of each agreement or instrument effecting any participation and a register (each a “Participation Register”) meeting the requirements of 26 CFR §5f.103-1(c) for the recordation of the names and addresses of its Participants and their rights with respect to principal amounts (and stated interest) and other Obligations from time to time. The entries in each Participation Register shall be conclusive and the Loan Parties and the Credit Parties may treat each Person whose name is recorded in a Participation Register as a Participant for all purposes of this Agreement (including, for the avoidance of doubt, for purposes of entitlement to benefits under Section 2.06, Section 2.12, and Section 8.08). The Participation Register shall be available for inspection by the Borrower and any Credit Party at any reasonable time and from time to time upon reasonable prior notice;

(viii)a Participant shall not be entitled to receive any greater payment under Section 2.06 or Section 2.12 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent; and

(ix)a Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.12 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Loan Parties, to comply with Section 2.12(e) as though it were a Lender; provided, however, that a Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.12 with respect to any withholding Tax that is imposed on amounts payable to such Participant at the time it acquires its participation except to the extent that the Lender from which it acquired its participation was entitled at such time to receive

additional amounts from the Borrower with respect to such withholding Tax pursuant to Section 2.12.

(f)Any Credit Party may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Credit Party, including any pledge or assignment to secure obligations to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341, and this Section 8.04 shall not apply to any such pledge or assignment of a security interest; provided, however, that no such pledge or assignment of a security interest shall release a Credit Party from any of its obligations hereunder or substitute any such pledgee or assignee for such Credit Party as a party hereto.

(g)The Loan Parties authorize each Credit Party to disclose to any Participant or assignee and any prospective Participant or assignee, subject to the provisions of Section 8.15, any and all financial information in such Credit Party’s possession concerning the Loan Parties which has been delivered to such Credit Party by or on behalf of the Loan Parties pursuant to this Agreement or which has been delivered to such Credit Party by or on behalf of the Loan Parties in connection with such Credit Party’s credit evaluation of the Loan Parties prior to becoming a party to this Agreement.

SECTION .Survival.

All covenants, agreements, indemnities, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Credit Party may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other Obligation is outstanding and unpaid and so long as the Commitments have not expired or been irrevocably terminated. The provisions of Section 2.06, Section 2.12 and Section 8.03 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Obligations, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. In connection with the termination of this Agreement and the release and termination of the security interests, if any, in the Collateral, the Credit Parties, may require such assurances and indemnities as it shall reasonably deem necessary or appropriate to protect the Credit Parties against loss on account of such release and termination, including, without limitation, with respect to credits previously applied to the Obligations that may subsequently be reversed or revoked.

SECTION .Counterparts; Integration; Effectiveness.

This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all contemporaneous or previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the applicable Loan Parties and when the Initial Lender shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or e-mail shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION .Severability.

Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof, and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION .Right of Setoff.

If an Event of Default shall have occurred and be continuing, each Credit Party, each Participant, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Credit Party, Participant, or Affiliate to or for the credit or the account of the Loan Parties against any of and all the obligations of the Loan Parties now or hereafter existing under this Agreement or other Loan Document held by a Credit Party, irrespective of whether or not such Credit Party shall have made any demand under this Agreement or other Loan Document and although such obligations may be matured or unmatured or otherwise fully secured. The applicable Lender shall provide the Borrower with written notice promptly after any exercise of the right of setoff. The rights of each Credit Party under this Section 8.08 are in addition to other rights and remedies (including other rights of setoff) that such Credit Party may have. Notwithstanding the foregoing, no Credit Party will, or will permit its Participant to, exercise its rights under this Section 8.08 without the consent of the Required Lenders. ANY AND ALL RIGHTS TO REQUIRE ANY CREDIT PARTY TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES ANY OF THE OBLIGATIONS PRIOR TO THE EXERCISE BY ANY CREDIT PARTY OF ITS RIGHT OF SETOFF UNDER THIS SECTION ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

SECTION .Governing Law; Jurisdiction; Consent to Service of Process.

(a)THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

(b)Each Loan Party agrees that any suit for the enforcement of this Agreement or any other Loan Document shall be brought in the federal or state courts of the State of New York and consents to the exclusive jurisdiction of such courts. Each party to this Agreement hereby waives any objection which it may now or hereafter have to the venue of any such suit or any such court or that such suit is brought in an inconvenient forum and agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that any Credit Party may otherwise have to bring any action or proceeding relating to this Agreement against a Loan Party or its properties in the courts of any jurisdiction.

(c)Each Loan Party agrees that any action commenced by any Loan Party asserting any claim or counterclaim arising under or in connection with this Agreement or any other Loan Document shall be brought solely in the federal or state courts of the State of New York and consents to the exclusive jurisdiction of such courts with respect to any such action.

(d)Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION .WAIVER OF JURY TRIAL.

EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS

AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY) AND WAIVES THE RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM IN RESPECT OF, AND ALL STATUTES OF LIMITATIONS WHICH MAY BE RELEVANT TO, SUCH ACTION OR PROCEEDING; AND WAIVES DUE DILIGENCE, DEMAND, PRESENTMENT AND PROTEST AND ANY NOTICES THEREOF AS WELL AS NOTICE OF NONPAYMENT. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION .Press Releases and Related Matters.

Each Credit Party executing this Agreement agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of the Initial Lender or its Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to the Initial Lender and without the prior written consent of the Initial Lender unless (and only to the extent that) such Credit Party or Affiliate is required to do so under law and then, in any event, such Credit Party or Affiliate will consult with the Initial Lender before issuing such press release or other public disclosure. The Borrower consents to the publication by the Initial Lender or any Lender of advertising material relating to the financing transactions contemplated by this Agreement using the Borrower’s name, product photographs, logo or trademark. The Initial Lender reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

SECTION .Headings.

Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION .Interest Rate Limitation.

Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under Applicable Law (collectively, the “Charges”), shall be found by a court of competent jurisdiction in a final order to exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with Applicable Law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION .Additional Waivers.

(a)To the fullest extent permitted by Applicable Law, the obligations of each Loan Party hereunder shall not be affected by (i) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any other Loan Party under the provisions of this

Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver, amendment or modification of, or any release of any Loan Party from, any of the terms or provisions of, this Agreement, any other Loan Document, or (iii) the failure to perfect any security interest in, or the release of, any of the Collateral or other security held by or on behalf of any Credit Party.

(b)The obligations of each Loan Party, whether set forth hereunder or pursuant to any Guarantee, to pay the Obligations in full hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations after the termination of all Commitments to any Loan Party under any Loan Document), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations, or otherwise. Without limiting the generality of the foregoing, the obligations of each Loan Party shall not be discharged or impaired or otherwise affected by the failure of any Credit Party to assert any claim or demand or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any Loan Party as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations after termination of all Commitments to any Loan Party under any Loan Document).

(c)To the fullest extent permitted by Applicable Law, each Loan Party waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than the indefeasible payment in full in cash of all the Obligations after the termination of all Commitments to any Loan Party under any Loan Document. The Credit Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make any other accommodation with any other Loan Party, or exercise any other right or remedy available to them against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder except to the extent that all the Obligations have been indefeasibly paid in full in cash and performed in full after the termination of Commitments to any Loan Party under any Loan Document. Pursuant to Applicable Law, each Loan Party waives any defense arising out of any such election even though such election operates, pursuant to Applicable Law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party against any other Loan Party, as the case may be, or any security.

(d)Any indebtedness of any Loan Party now or hereafter held by any other Loan Party or any Subsidiary thereof is hereby subordinated in right of payment to the prior indefeasible payment in full of the Obligations and no Loan Party will demand, sue for or otherwise attempt to collect any such indebtedness. If any amount shall erroneously be paid to any Loan Party or any such Subsidiary on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Lenders, to be credited against the payment of the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents.

(e)Without limiting the generality of the foregoing, or of any other waiver or other provision set forth in this Agreement, each Loan Party waives all rights and defenses arising out of an election of remedies by any Credit Party, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed such Credit Party’s rights of subrogation and reimbursement against such Loan Party by the operation of Section 580(d) of the California Code of Civil Procedure or otherwise. To the extent applicable, each Loan Party waives all rights and defenses that such Loan Party may have because the Obligations are secured by Real Estate

which means, among other things: (i) a Credit Party may collect from any Loan Party without first foreclosing on any Real Estate or personal property Collateral pledged by a Loan Party; (ii) if any Credit Party forecloses on any Real Estate pledged by any Loan Party, the amount of the Obligations may be reduced only by the price for which that Real Estate is sold at the foreclosure sale, even if the Real Estate is worth more than the sale price; and (iii) the Credit Parties may collect Obligations from a Loan Party even if a Credit Party, by foreclosing on any such Real Estate, has destroyed any right any Loan Party may have to collect from the other Loan Parties. This is an unconditional and irrevocable waiver of any rights and defenses any Loan Party may have because the Obligations are secured by Real Estate. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. Each Loan Party hereby absolutely, knowingly, unconditionally, and expressly waives any and all claim, defense or benefit arising directly or indirectly under any one or more of Sections 2787 to 2855 inclusive of the California Civil Code or any similar law of California.

(f)Each Loan Party hereby agrees to keep each other Loan Party fully apprised at all times as to the status of its business, affairs, finances, and financial condition, and its ability to perform its Obligations, and in particular as to any adverse developments with respect thereto. Each Loan Party hereby agrees to undertake to keep itself apprised at all times as to the status of the business, affairs, finances, and financial condition of each other Loan Party, and of the ability of each other Loan Party to perform its Obligations, and in particular as to any adverse developments with respect to any thereof. Each Loan Party hereby agrees, in light of the foregoing mutual covenants to inform each other, and to keep themselves and each other informed as to such matters, that the Credit Parties shall have no duty to inform any Loan Party of any information pertaining to the business, affairs, finances, or financial condition of any other Loan Party, or pertaining to the ability of any other Loan Party to perform its Obligations, even if such information is adverse, and even if such information might influence the decision of one or more of the Loan Parties to continue to be jointly and severally liable for, or, to the extent applicable, to provide Collateral for, Obligations of one or more of the other Loan Parties. To the fullest extent permitted by Applicable Law, each Loan Party hereby expressly waives any duty of the Credit Parties to inform any Loan Party of any such information.

SECTION .Confidentiality.

(a)Each of the Credit Parties agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to their Affiliates and their Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by Applicable Law or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement and any actual or prospective counterparty or advisors to any swap or derivative transactions relating to the Loan Parties and the Obligations, (g) with the consent of the Loan Parties or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Credit Party on a nonconfidential basis from a source other than the Loan Parties. For the purposes of this Section, the term “Information,” means all information received from the Loan Parties relating to their business, other than any such information that is available to the Credit Parties on a nonconfidential basis prior to disclosure by the Loan Parties provided that, in the case of information received from the Loan Parties after the Closing Date, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided

in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

(b)Each of the Loans Parties agrees to maintain the confidentiality of the Lender Information (as defined below), except that Lender Information may be disclosed (a) to their Affiliates and their Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by Applicable Law or by any subpoena or similar legal process, (d) to any other party to this Agreement, or (e) with the consent of the Credit Parties. In the event that any Loan Party is permitted to disclose Lender Information pursuant to clause (b) or (c) above, such Loan Party will notify the Credit Parties as early as practicable prior to such disclosure. For the purposes of this Section, the term “Lender Information,” means all information received from the Loan Parties in connection with the Loan Documents or set forth therein, including, without limitation, the identity of the Credit Parties and their Affiliates. Any Person required to maintain the confidentiality of Lender Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

SECTION .Patriot Act.

Each Lender hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower and the other Loan Parties, which information includes the name and address of the Borrower and the other Loan Parties and other information that will allow such Lender to identify the Borrower and the other Loan Parties in accordance with the Act. The Borrower is in compliance, in all material respects, with the Patriot Act. No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

SECTION .Foreign Asset Control Regulations.

Neither the advance of the Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, none of the Borrower or its Affiliates (a) is or will become a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such “blocked person” or in any manner violative of any such order.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

AMERICAN APPAREL, INC.

as Borrower

By:/s/ Glenn A. Weinman

Name: Glenn A. Weinman

Title: Executive Vice President, General Counsel and Secretary

AMERICAN APPAREL (USA), LLC, as Facility Guarantor

By:/s/ Glenn A. Weinman

Name: Glenn A. Weinman

Title: Executive Vice President, General Counsel and Secretary

AMERICAN APPAREL RETAIL, INC., as Facility Guarantor

By:/s/ Glenn A. Weinman

Name: Glenn A. Weinman

Title: Executive Vice President, General Counsel and Secretary

AMERICAN APPAREL DYEING & FINISHING, INC., as Facility Guarantor

By:/s/ Glenn A. Weinman

Name: Glenn A. Weinman

Title: Executive Vice President, General Counsel and Secretary

KCL KNITTING, LLC, as Facility Guarantor

By:/s/ Glenn A. Weinman

Name: Glenn A. Weinman

Title: Executive Vice President, General Counsel and Secretary

FRESH AIR FREIGHT, INC., as Facility Guarantor

By:/s/ Glenn A. Weinman

Name: Glenn A. Weinman

Title: Executive Vice President, General Counsel and Secretary

LION/HOLLYWOOD L.L.C., as Initial Lender

By:/s/ Jacob Capps

Name: Jacob Capps

Title: President

Schedule 1.01(a)

Lenders and Commitments

Lender	Commitment
Lion/Hollywood L.L.C.	$4,500,000
Address for Lion/Hollywood L.L.C.: 100 Wilshire Boulevard Los Angeles, CA 90401

Schedule 3.01

Organization Information

Entity Name (as it appears on such Company’s Certificate)	Entity Type	Jurisdiction of Organization	Org ID No.	Tax ID No.
American Apparel, Inc.	Corporation	Delaware	4004038	20-3200601
American Apparel (USA), LLC	Limited Liability Company	California	200729010015	26-2368940
American Apparel Retail, Inc.	Corporation	California	C2605535	72-1577829
American Apparel Dyeing & Finishing, Inc.	Corporation	California	C2687444	41-2150324
KCL Knitting, LLC	Limited Liability Company	California	200023610152	95-4819518
Fresh Air Freight, Inc.	Corporation	California	C2527267	45-0533870

EX-10.45

Exhibit 10.45

EXECUTION VERSION

AMENDMENT NO. 1 TO CREDIT AGREEMENT

AMENDMENT NO. 1, dated as of November 29, 2013 (this “Amendment”), among American Apparel, Inc., a Delaware corporation (the “Borrower”), the Facility Guarantors party hereto, the existing Lenders (the “Existing Lenders”) under, and as defined in, the Credit Agreement (as hereinafter defined), comprising at least the Required Lenders (excluding, for the avoidance of doubt, the 2013 Lenders) and the 2013 Lenders (as hereinafter defined).

WHEREAS, reference is hereby made to the Credit Agreement, dated as of May 22, 2013 (the “Credit Agreement”), among the Borrower, the Lenders party thereto, the Facility Guarantors party thereto and Lion/Hollywood L.L.C, as Initial Lender;

WHEREAS, as of the date hereof, the Borrower and the Existing Lenders comprising at least the Required Lenders desire to amend the Credit Agreement pursuant to amendments authorized by Section 8.02 of the Credit Agreement to (i) permit the borrowing of the 2013 Loans (as hereinafter defined) pursuant to this Amendment and to designate the 2013 Loans as “Loans” for all purposes under the Credit Agreement; (ii) add call protection provided under Section 2.07 and 2.08 of the Credit Agreement to the two-year anniversary of the Amendment No. 1 Effective Date; and (iii) make the other modifications set forth herein;

WHEREAS, the Borrower desires to obtain the 2013 Loans in an aggregate principal amount of $5,000,000;

WHEREAS, each 2013 Lender has agreed to provide the 2013 Loans in accordance with the terms and conditions set forth in this Amendment and in the Amended Credit Agreement; and

WHEREAS, pursuant to Section 8.02 of the Credit Agreement, the consent of the Required Lenders (excluding, for the avoidance of doubt, the 2013 Lenders) is required for the effectiveness of the amendments to the Credit Agreement set forth in this Amendment, and such Required Lenders have agreed to consent to such amendments.

NOW, THEREFORE, in consideration of the premises and agreements, provisions and covenants herein contained, the parties hereto agree as follows:

Section 1. Defined Terms; References. (a) Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement has the meaning assigned to such term in the Amended Credit Agreement. The rules of construction and other interpretive provisions specified in Section 1.02 of the Amended Credit Agreement shall apply to this Amendment, including terms defined in the preamble and recitals hereto.

(b)As used in this Amendment, the following terms have the meanings specified below:

“2013 Lender”shall mean a Lender with a 2013 Loan Commitment or an outstanding 2013 Loan.

“2013 Loan” shall have the meaning provided in Section 2.

“2013 Loan Commitment” shall mean, in the case of each Lender, the amount set forth opposite such Lender’s name on Schedule 1 to this Amendment as such Lender’s “2013 Loan Commitment”. The aggregate principal amount of all 2013 Loan Commitments as of the Amendment No. 1 Effective Date is $5,000,000.

“Amended Credit Agreement” shall mean the Credit Agreement, as amended by this Amendment.

“Amendment No. 1 Effective Date” shall have the meaning provided in Section 6 hereof.

Section 2. 2013 Loan. On the Amendment No. 1 Effective Date, subject to the terms and conditions set forth herein and in the Amended Credit Agreement, each 2013 Lender, severally and not jointly, shall make a loan or loans (each, a “2013 Loan”) to the Borrower in accordance with this Section 2 by delivering to the Borrower immediately available funds in an amount equal to its 2013 Loan Commitment.

Section 3. Amendment; Borrowings on Amendment No. 1 Effective Date. (a)Each of the parties hereto agrees that, effective on the Amendment No. 1 Effective Date and immediately prior to the borrowing of the 2013 Loans, the Credit Agreement shall be amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the pages of the Credit Agreement attached as Exhibit A hereto

(b)With effect from the effectiveness of this Amendment, each 2013 Loan made on the Amendment No. 1 Effective Date in accordance with Section 2 hereof shall constitute, for all purposes of the Amended Credit Agreement, a Loan made pursuant to the Amended Credit Agreement and this Amendment, and all provisions of the Amended Credit Agreement applicable to Initial Term Loans shall be applicable to such Loans.

(c)The 2013 Loan Commitments provided for hereunder shall terminate on the Amendment No. 1 Effective Date immediately upon the borrowing of the 2013 Loans pursuant to Section 2.

Section 4. Effect of Amendment; Reaffirmation; Etc. Except as expressly set forth herein or in the Amended Credit Agreement, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or under the Credit Agreement or under any other Loan Document and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or of any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Without limiting the foregoing, (i) each Loan Party acknowledges and agrees that each Loan Document to which it is a party is hereby confirmed and ratified and shall remain in full force and effect according to its respective terms (in the case of the Credit Agreement, as amended hereby) and (ii) each Facility Guarantor hereby confirms and ratifies its continuing unconditional obligations as Facility Guarantor under the Guarantee with respect to all of the Obligations (including, for the avoidance of doubt, the 2013 Loans made on the Amendment No. 1 Effective Date). On and as of the Amendment No. 1 Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereof”, “hereunder”, “herein” and “hereby” and each other similar reference, and each reference in any other Loan Document to “the Credit Agreement”, “thereof”, “thereunder”, “therein” or “thereby” or any other similar reference to the Credit Agreement shall refer to the Credit Agreement as amended hereby.

Section 5. Representations of Loan Parties. Each of the Loan Parties hereby represents and warrants that, immediately prior to and immediately after giving effect to the transactions contemplated by this Amendment, including the borrowing of the 2013 Loans provided for herein:

(a)the representations and warranties set forth in Article III of the Amended Credit Agreement and in each other Loan Document shall be true and correct in all material respects on and as of the Amendment No. 1 Effective Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided that any such representation and warranty that is qualified by “materiality”, “material adverse effect” or similar language shall be true and correct in all respects (after giving effect to such qualification therein) on and as of the Amendment No. 1 Effective Date with the same effect as though made on and as of such date or such earlier date, as applicable; and

(b)no Default or Event of Default shall exist or would result from the transactions contemplated by this Amendment, including the borrowing of 2013 Loans; and

(c)on the Amendment No. 1 Effective Date, after giving effect to all of the transactions contemplated hereby (including the incurrence of the 2013 Loans), the Loan Parties and their Subsidiaries on a consolidated basis are Solvent.

Section 6. Effectiveness. This Amendment, and the obligation of the 2013 Lenders to make the 2013 Loans to be made by it pursuant to Section 2 of this Amendment, shall become effective on the date (the “Amendment No. 1 Effective Date”) when each of the following conditions shall have been satisfied:

(a)the 2013 Lenders shall have received counterparts of this Amendment executed and delivered by a duly authorized officer of each of (i) the Loan Parties and (ii) the Existing Lenders constituting at least the Required Lenders.

(b)The 2013 Lenders shall have received a favorable written opinion (addressed to each Lender, including the 2013 Lenders, and dated the Amendment No. 1 Effective Date) of counsel for the Loan Parties covering such matters relating to the Loan Parties, the Loan Documents or the transactions contemplated thereby as the 2013 Lenders shall reasonably request. The Loan Parties hereby request such counsel to deliver such opinions.

(c)The 2013 Lenders shall have received Charter Documents and such other documents and certificates as the 2013 Lenders or its counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of the transactions contemplated by the Loan Documents and any other legal matters relating to the Loan Parties, the Loan Documents or the transactions contemplated thereby, all in form and substance satisfactory to the 2013 Lenders and their counsel (it being understood and agreed that the Loan Parties shall not be required to deliver such Charter Documents if the relevant Loan Party certifies that there have been no changes to such Charter Documents from those delivered to the Initial Lender on the Closing Date).

(d)The 2013 Lenders shall have received a certificate, reasonably satisfactory in form and substance to the 2013 Lenders, (i) certifying the Loan Parties and their Subsidiaries, taken as a whole, are Solvent as of the Amendment No. 1 Effective Date and (ii) certifying that, as of the Amendment No. 1 Effective Date, the representations and warranties made by the Loan Parties in this Amendment and the Loan Documents, or which are contained in any document furnished in connection herewith and therewith, are true and correct in all material respects; provided that any representation and warranty that

is qualified as to materiality or “Material Adverse Effect” or similar language and the representation and warranty contained in Section 3.04 of the Credit Agreement shall be true and correct in all respects; and that no Default or Event of Default exists.

(e)All fees due at or immediately after the Amendment No. 1 Effective Date and all Credit Party Expenses incurred in connection with the establishment of the 2013 Loans contemplated hereby (including the reasonable fees and expenses of counsel to the 2013 Lenders), shall have been paid in full on or before the Amendment No. 1 Effective Date. All such amounts will be paid with the proceeds of the Loans made on the Amendment No. 1 Effective Date and will be reflected in the funding instructions given by the Borrower to the 2013 Lenders on or before the Amendment No. 1 Effective Date.

(f)All necessary consents and approvals to the transactions contemplated hereby shall have been obtained and shall be reasonably satisfactory to the 2013 Lenders.

(g)There shall have been delivered to the 2013 Lenders such additional instruments and documents as the 2013 Lenders or their counsel reasonably may require or request.

(h)The 2013 Lenders shall have received a notice with respect to the borrowing of the 2013 Loans as reasonably requested in a manner consistent with that contemplated by Section 2.02(a) of the Credit Agreement.

(i)The 2013 Lenders shall have received a true, correct and complete copy, certified as such by the Borrower, of (1) the First Lien Credit Agreement, (2) the Security Agreement, dated April 4, 2013, entered into in connection with the First Lien Credit Agreement, (3) the Intellectual Property Security Agreement, dated April 4, 2013, entered into in connection with the First Lien Credit Agreement, (4) the U.S. Pledge Agreement (as defined in the First Lien Credit Agreement), (5) the Guaranty, dated April 4, 2013, entered into in connection with the First Lien Credit Agreement, (6) the Deposit Account Control Agreement, dated April 4, 2013, among Capital One, N.A., American Apparel (USA), LLC, American Apparel Retail, Inc., Capital One Leverage Finance Corp., and U.S. Bank National Association, (7) the Security Agreement (as defined in the Senior Notes Indenture), (8) the IP Security Agreement (as defined in the Senior Notes Indenture), (9) the Pledge Agreement (as defined in the Senior Notes Indenture), (10) the Senior Notes Indenture, (11) the Intercreditor Agreement (as defined in the Senior Notes Indenture) and (12) the Canadian Intercreditor Agreement (as defined in the Senior Notes Indenture), in each case, in effect as of the Amendment No. 1 Effective Date (it being understood and agreed that the Loan Parties shall not be required to deliver any such document if the relevant Borrower certifies that there have been no changes to such document from that delivered to the Initial Lender on the Closing Date).

[(j)The 2013 Lenders shall have received a true, correct and complete copy, certified as such by the Borrower, of an amendment to the First Lien Credit Agreement and any loan documents related thereto, explicitly permitting the incurrence of the 2013 Loans and the other transactions contemplated by this Amendment, and such amendment shall be in form and substance reasonably satisfactory to the 2013 Lenders and be in full force and effect on or prior to the Amendment No. 1 Effective Date].

Section 7. No Other Amendments or Waivers; Confirmation. Except as expressly set forth herein, this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of, or otherwise affect the rights and remedies of the Lenders, the Borrower or any other Loan Party under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the Borrower to any future consent to, or a waiver,

amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. This Amendment shall apply and be effective only with respect to the provisions of the Credit Agreement specifically referred to herein. After the Amendment No. 1 Effective Date, any reference in any Loan Document to the Credit Agreement shall mean the Credit Agreement as modified hereby. As of the Amendment No. 1 Effective Date, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like import, and each reference in the other Loan Documents to the Credit Agreement (including, without limitation, by means of words like “thereunder”, “thereof” and words of like import), shall mean and be a reference to the Credit Agreement as amended hereby, and this Amendment and the Credit Agreement shall be read together and construed as a single instrument. Each of the table of contents and lists of Exhibits and Schedules of the Credit Agreement shall be amended to reflect the changes made in this Amendment as of the Amendment No. 1 Effective Date. This Amendment is a Loan Document.

Section 8. Consent of Facility Guarantors. Each Facility Guarantor hereby consents to this Amendment and agrees that the terms hereof shall not affect in any way its obligations and liabilities under the Loan Documents (as amended and otherwise expressly modified hereby), all of which obligations and liabilities shall remain in full force and effect and each of which is hereby reaffirmed (as amended and otherwise expressly modified hereby).

Section 9. Expenses. The Borrower agrees to reimburse each of the Lenders (including the 2013 Lenders) for their respective outstanding reasonable out-of-pocket expenses (whether or not yet invoiced to the Borrower) incurred in connection with the Credit Agreement, this Amendment and the other Loan Documents (including without limitation, the reasonable fees, disbursements and other charges of Simpson Thacher & Bartlett LLP as counsel to the Lenders). This Amendment constitutes a Loan Document.

Section 10. Governing Law. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.

Section 11. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Amendment may be delivered by facsimile or other electronic transmission of the relevant signature pages hereof.

Section 12. Headings. The Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Amendment.

Section 13. Notices. All communications and notices hereunder shall be given as provided in the Credit Agreement.

Section 14. Severability. The fact that any term or provision of this Amendment is held invalid, illegal or unenforceable as to any person in any situation in any jurisdiction shall not affect the validity, enforceability or legality of the remaining terms or provisions hereof or the validity, enforceability or legality of such offending term or provision in any other situation, or jurisdiction or as applied to any person.

Section 15. Successors. The terms of this Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.

Section 16. Waiver of Jury Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT.

Section 17. Submission to Jurisdiction. Each Loan Party agrees that any suit for the enforcement of this Amendment may be brought in the federal or state courts of the State of New York as the Lenders may elect in their sole discretion and consents to the non-exclusive jurisdiction of such courts. Each party to this Amendment hereby waives any objection which it may now or hereafter have to the venue of any such suit or any such court or that such suit is brought in an inconvenient forum and agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Amendment shall affect any right that any Credit Party may otherwise have to bring any action or proceeding relating to this Amendment against a Loan Party or its properties in the courts of any jurisdiction.

[SIGNATURE PAGES FOLLOW]

[Signature Page to Amendment No. 1 to Credit Agreement]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.

AMERICAN APPAREL, INC.

as Borrower

By:/s/ Glenn A. Weinman

Name: Glenn A. Weinman

Title: Executive Vice President, General Counsel and Secretary

Each of the other Guarantors listed on Annex A hereto:

By:	/s/ Glenn A. Weinman
Name:Glenn A. Weinman
Title:Executive Vice President, General Counsel and Secretary

Annex A

American Apparel (USA), LLC

American Apparel Retail, Inc.

American Apparel Dyeing & Finishing, Inc.

KCL Knitting, LLC

Fresh Air Freight, Inc.

[Signature Page to Amendment No. 1 to First Lien Credit Agreement]

lion/hollywood, l.l.c., as Lender
By
Name: Jeff Chang
	Title: Vice President

2013 Lender:

LION/HOLLYWOOD L.L.C., as 2013 Lender
By	/s/ Jeff Chang
	Name: Jeff Chang
	Title: Vice President

Schedule 1

2013 Loan Commitment

2013 Lender	2013 Loan Commitment
Lion/Hollywood L.L.C. Address for Lion/Hollywood L.L.C.: 100 Wilshire Boulevard Los Angeles, CA 90401	$5,000,000

Exhibit A

[Amendments to Credit Agreement attached]

CREDIT AGREEMENT, dated as of May 22, 2013, among:

(a)AMERICAN APPAREL, INC., a corporation organized under the laws of the State of Delaware, with its principal executive offices at 747 Warehouse Street, Los Angeles, California, for itself and as agent (in such capacity, the “Borrower”);

(b)the FACILITY GUARANTORS now or hereafter party hereto;

(d)LION/HOLLYWOOD L.L.C., as the initial lender hereunder; and

(d)the other LENDERS from time to time party hereto;

in consideration of the mutual covenants herein contained and benefits to be derived herefrom, the parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01Definitions.

As used in this Agreement, the following terms have the meanings specified

below:

“2013 Lender” has the meaning set forth in Section 1(b) of Amendment No. 1.

“2013 Loan” has the meaning set forth in Section 1(b) of Amendment No. 1.

“2013 Loan Commitment” has the meaning set forth in Section 1(b) of

Amendment No. 1.

“Affiliate” means, with respect to a specified Person, any Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with the Person specified.

“Aggregate Exposure” means, with respect to any Lender at any time, an amount equal to(i) until the ClosingDate,theaggregate amountofsuch Lender’sCommitmentsthen ineffect and(ii)thereafter, the aggregate then unpaid principal amount of such Lender’s Loans, including PIK Interest added to the principal amount of such Loans, if any.

“Aggregate Exposure Percentage” means, with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender’s Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at such time.

“Agreement” means this Credit Agreement, as amended, restated, supplemented or otherwise modified and in effect from time to time.

“Amendment No. 1” means Amendment No. 1, dated as of the Amendment No.1 Effective Date, among the Borrower, the Facility Guarantors party thereto, the

Existing Lenders party thereto and the 2013 Lenders.

“Amendment No. 1 Effective Date” has the meaning set forth in Section 1(b) of

Amendment No. 1.

“American Apparel (USA)” means American Apparel (USA), LLC, a California limited liability company.

“Applicable Law” means as to any Person: (i) all laws, statutes, rules, regulations, orders, codes, ordinances or other requirements having the force of law and (ii) all court orders, decrees, judgments, injunctions, notices, binding agreements and/or rulings, in each case of or by any Governmental Authority which has jurisdiction over such Person, or any property of such Person.

“Applicable Premium” means, with respect to Loans, including PIK Interest, to

be prepaid on (i) the date of any optional prepayment pursuant to Section 2.07 or (ii) a

Change of Control Payment Date pursuant to Section 2.08(a) (any such date, a

“Prepayment Date”), the excess of (A) the present value at such Prepayment Date of

(1) the Prepayment Price of such Loans, including PIK Interest to the extent added to

principal, plus (2) all required remaining scheduled interest payments due on such Loans

through the second anniversary of the Amendment No. 1 Effective Date, computed

using a discount rate equal to the Treasury Rate plus 50 basis points over (B) the

principal amount of such Loans, including PIK Interest, to be prepaid on such

Prepayment Date. Calculation of the Applicable Premium will be made by the Borrower

or on behalf of the Borrower by such Person as the Borrower shall designate and shall

be approved by the Required Lenders.

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an affiliate of a Lender or (c) an entity or an affiliate of an entity that administers or manages a Lender.

“Assignment and Acceptance” means an assignment and acceptance entered into by a Lender and an assignee (with, if applicable, the consent of any party whose consent is required by Section 8.04), in the form of Exhibit A.

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as amended, and codified as 11 U.S.C. §101 et seq.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” has the meaning set forth in the Preamble to this Agreement. “Borrowing” means the incurrence of Loans on the Closing Date.

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“Change of Control Payment Date” has the meaning provided therefor in Section 2.08(a).

“Charges” has the meaning provided therefor in Section 8.13.

“Charter Document” means as to any Person, its partnership agreement, certificate of incorporation, operating agreement, membership agreement or similar constitutive document or agreement, its by-laws and all shareholder or other equity holder agreements, voting trusts and similar arrangements to which such Person is a party or which is applicable to its Capital Stock, and all other arrangements relating to the Control or management of such Person.

“Closing Date” means May 22, 2013.

“Code” means the Internal Revenue Code of 1986 and the Treasury regulations promulgated thereunder, as amended from time to time.

“Collateral” means any and all “Collateral” or words of similar intent as defined in any applicable Security Document (if any).

“Collateral Agent” means any collateral agent appointed pursuant to the Security Documents.

“Commitment” means,(a) with respect to each Lenderon the Closing Date, the aggregate commitment(s) of such Lender hereunder to make Loans to the Borroweron the Closing Date in an amount not to exceed the amount set forth opposite its name on Schedule 1.01(a) heretoand (b) and with respect to each 2013 Lender on the Amendment No. 1 Effective Date, the 2013 Loan Commitment of such Lender. As of

the Closing Date, the aggregate amount of the Commitments is $4,500,000. As of the

Amendment No. 1 Effective Date, the aggregate 2013 Loan Commitment is $5,000,000.

“Consolidated” means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries.

“Control” means the possession, directly or indirectly, of the power (i) to vote 25% or more of the securities having ordinary voting power for the election of directors (or any similar governing body) of a Person, or (ii) to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.

“Credit Party” means (i) the Lenders, (ii) any Collateral Agent, (iii) the beneficiaries of each indemnification obligation undertaken by the Borrower and the other Loan Parties under any Loan Document, (iv) any other Person to whom Obligations under this Agreement and other Loan Documents are owing and (v) the

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“Indebtedness” has the meaning provided in the Senior Notes Indenture.

“Indemnified Taxes” means Taxes other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document.

“Indemnitee” has the meaning provided in Section 8.03(b). “Information” has the meaning provided in Section 8.15(a).

“Initial Lender” means Lion/Hollywood L.L.C. or any Affiliate thereof to whom its Loans are assigned within the first three months after the Closing Date.

“Intercreditor Agreement” means the Intercreditor Agreement among Capital One Leverage Finance Corp., as administrative agent under the First Lien Credit Agreement, U.S. Bank National Association, as collateral agent and trustee under the Senior Notes Indenture, the Borrower and the Facility Guarantors, dated as of April 4, 2013, as the same may be amended, supplemented or modified from time to time.

“Interest Election” has the meaning provided in Section 2.04(a).

“Interest Payment Date” means the last day of each of March, June, September and December.

“Interest Rate” means a per annum rate equal to 18%; provided, however, that if a Special Interest Trigger Event occurs, the Interest Rate means a per annum rate equal to 20%. Any change in the Interest Rate resulting from such Special Interest Trigger Event shall become effective retroactive to(x) with respect to the Loans made on the Closing Date,the Closing Date and (y) with respect to the 2013 Loans, theAmendment No. 1 Effective Date.

“Joinder Agreement” means an agreement, in the form attached hereto as Exhibit C, pursuant to which, among other things, a Person becomes a party to, and bound by the terms of, this Agreement and/or the other Loan Documents in the same capacity and to the same extent as a Facility Guarantor.

“Lenders” means the Initial Lender, the other Persons identified on Schedule 1.01(a) hereto,the 2013 Lenders and each assignee that becomes a party to this Agreement as set forth in Section 8.04(b),in each case other than a Person who ceases to hold any Loans and any Commitments.

“Lien” has the meaning provided in the Senior Notes Indenture. “Loan Account” has the meaning provided in Section 2.09(a).

“Loan Documents” means this Agreement, the Notes, the Security Documents, if any, any intercreditor arrangement entered into pursuant to Section 5.05 and any other instrument or agreement now or hereafter executed and delivered in connection

8

herewith, each as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof.

“Loan Party” or “Loan Parties” means the Borrower and the Facility Guarantors.

“Loans” means all loans madeon the Closing Date pursuant to this Agreement pursuant to Section 2.01,all 2013 Loans made on the Amendment No. 1 Effective Date pursuant to Amendment No. 1 and all PIK Interest, if any, that has been added to the principal balance of the Loans on any Interest Payment Date pursuant to Section 2.04.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the operations, business, assets, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Loan Parties, taken as a whole; (b) a material impairment of the rights and remedies of any Lender under any Loan Document, or of the ability of the Loan Parties, taken as a whole, to pay any Obligations under the Loan Documents, when due; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Documents to which it is a party.

“Material Indebtedness” means Indebtedness (other than the Obligations) of the Loan Parties and their Subsidiaries in an aggregate principal amount exceeding $2,500,000.

“Maturity Date” means October 4, 2018, and if such date is not a Business Day, the next succeeding Business Day.

“Maximum Rate” has the meaning provided therefor in Section 8.13.

“Minority Lenders” has the meaning provided therefor in Section 8.02(c).

“Notes” means the notes in substantially the form as attached hereto as Exhibit B, as may be amended, supplemented or modified from time to time.

“Obligations” means (a) the due and punctual payment of (i) the principal of, and interest (including all interest that accrues after the commencement of any case or proceeding by or against the Borrower or any Facility Guarantor under the Bankruptcy Code or any state, federal or provincial bankruptcy, insolvency, receivership or similar law, whether or not allowed in such case or proceeding) on the Loans and Facility Guaranties as and when due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise, of the Loan Parties to the Credit Parties under this Agreement and the other Loan Documents, and (b) the due and punctual payment and performance of all the covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to this Agreement and the other Loan Documents.

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“Other Taxes” means any and all current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

“Participant” has the meaning provided therefor in Section 8.04(e). “Participation Register” has the meaning provided therefor in Section 8.04(e).

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“PIK Interest” has the meaning provided in Section 2.04(a).

“Prepayment Date” has the meaning provided in the definition of “Applicable

Premium”.

“Prepayment Price” means (a) in the case of an optional prepayment pursuant to

Section 2.07, 109.0% of the principal amount of the Loans, including PIK Interest, to

be prepaid and (b) in the case of a Change of Control Payment pursuant to Section

2.08(a), 106.0% of the principal amount of the Loans, including PIK Interest, to be

repurchased.

“Real Estate” has the meaning ascribed to “Premises” in the Senior Notes Indenture.

“Register” has the meaning provided in Section 8.04(c).

“Regulation U” means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Regulation X” means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof.

“Release” has the meaning provided in Section 101(22) of CERCLA.

“Required Lenders” means (i) if there are two or fewer Lenders, all Lenders or (ii) if there are three or more Lenders, at any time, Lenders holding more than 50% of the aggregate unpaid principal amount of the Loans outstanding, including PIK Interest, if any, added to the principal amount of the Loans.

“Restricted Subsidiary” means any “Restricted Subsidiary” under the Senior Notes Indenture or, if the Senior Notes Indenture is no longer in effect, any Subsidiary of the Borrower which at the time of determination is not an Unrestricted Subsidiary.

“Security Documents” means each security agreement or other instrument or document executed and delivered pursuant to Section 5.05 of this Agreement or any

10

corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s Consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (i) of which Capital Stock representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (ii) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. Unless the context otherwise requires, “Subsidiary” or “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

“Taxes” means any and all current or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Total Commitment”means$4,500,000.

“Treasury Rate” means, with respect to a Prepayment Date, the yield to maturity

at the time of computation of United States Treasury securities with a constant maturity

(as compiled and published in the most recent Federal Reserve Statistical Release

H.15(519) (or any successor publication which is published weekly by the Board and

which establishes yields on actively traded United States Treasury securities adjusted to

constant maturity) that has become publicly available at least two (2) Business Days

prior to such Prepayment Date (or, if such Statistical Release (or any successor release)

is no longer published, any publicly available source of similar market data)) most

nearly equal to the period from such Prepayment Date to the second anniversary of the

Amendment No. 1 Effective Date; provided, however, that, if the period from such

Prepayment Date to the second anniversary of the Amendment No. 1 Effective Date is

not equal to the constant maturity of the United States Treasury security for which a

weekly average yield is given, the Treasury Rate shall be obtained by linear

interpolation (calculated to the nearest one-twelfth of a year) from the weekly average

yields of United States Treasury securities for which such yields are given, except that

if the period from such Prepayment Date to the second anniversary of the Amendment

No. 1 Effective Date is less than one year, the weekly average yield on actually traded

United States Treasury securities adjusted to a constant maturity of one year shall be

used.

“Unrestricted Subsidiary” means any “Unrestricted Subsidiary” under the Senior Notes Indenture or, if the Senior Notes Indenture is no longer in effect, (i) any Subsidiary of the Borrower that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the board of directors of the Borrower in the manner provided in Section 5.06 and (ii) any Subsidiary of an Unrestricted Subsidiary.

12

Interest”), (ii) by increasing the outstanding principal amount of the Loans on the relevant Interest Payment Date by the amount of interest accrued from the effective date of any such Interest Election until such Interest Payment Date (“PIK Interest”),with such increases to the principal amount of the Loans allocated on a pro rata basis to the outstanding Loans of the Lenders in accordance with such Lenders Aggregate Exposure Percentages immediately prior to such allocation and/or (iii) at the Borrower’s discretion, partially in PIK Interest and partially in Cash Interest. Unless the context otherwise requires, for all purposes hereof, references to “principal amount” of the Loans refers to the face amount of the Loans and not gross proceeds funded hereunder and includes any interest so capitalized and added to the principal amount of the Loans from the date on which such interest has been so added.

(a)(a) The Borrower must make an Interest Election by delivering a notice to each of the Lenders no later than ten (10) Business Days prior to the effective date of any Interest Election, which notice shall specify (x) whether such Interest Election is made under clause (i) and/or (ii) of the immediately preceding paragraph and (y) the effective date of such Interest Election, which effective date must be the next succeeding Interest Payment Date to occur after the date of the giving of such notice, or, if not a Business Day, the first Business Day to occur thereafter. An Interest Election shall remain in effect until the earlier of (i) next Interest Payment Date following the effective date of such Interest Election and (ii) the Maturity Date; provided that no more than one Interest Election may be given by the Borrower in any three-month period.InSubject to Section 2.04(h), in the absence of such an election for any interest period, interest on the Loans shall be payable as PIK Interest.

(b)(b) Subject to Section 2.05, each Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 (or 366 days, if applicable) at a rate per annum that shall be equal to the Interest Rate compounding quarterly to the extent provided in Section 2.04(cd).

(c)(c) Cash Interest accrued on each Loan shall be payable on the Interest Payment Dates applicable to such Loan, except as otherwise provided in this Agreement. PIK Interest accrued on each Loan shall be payable by increasing the outstanding principal amount of the Loans by the amount of PIK Interest on the Interest Payment Date applicable to such Loan for such period and in such amounts as required by the relevant Interest Election(s). Any interest so added to the principal amount of the Loans shall bear interest as provided in this Section 2.04 from the date on which such interest has been so added. The obligation of the Borrower to pay PIK Interest shall be automatically evidenced by this Agreement or, if applicable, any Notes issued pursuant to this Agreement. Any additional interest accrued on each Loan as a result of the occurrence of a Special Interest Trigger Event shall be payable by increasing the outstanding principal amount of the Loans by the amount of PIK Interest on such immediately succeeding Interest Payment Date applicable to such Loan for such period and in such amounts as required by the relevant Interest Election(s) made pursuant to Section 2.04(a).

15

(a)(d) All accrued and unpaid interest shall be paid in cash at maturity (whether by acceleration or otherwise), after such maturity on demand and upon any repayment or prepayment thereof (on the amount prepaid).

(b)(e) In addition to interest payments required to be made hereunder, and subject to the rights of acceleration hereunder, the full unpaid principal balance of the Loans, including PIK Interest, if any, that has been added to the principal balance of the Loans, shall be payable in full on the Maturity Date.

(c)(f) In computing interest on any Loan, the date on which such interest is paid shall not be included and the first date of the interest period applicable to such Loan shall be included.

(d)Notwithstanding anything to the contrary herein, all interest on

the Loans shall be Cash Interest to the extent that the payment of PIK Interest is not

permitted under the Senior Notes Indenture.

SECTION 2.05 Default Interest.

After the occurrence of any Default which remains unremedied for twenty (20) days and at all times thereafter while such Default remains unremedied, interest shall accrue on all outstanding Loans including on PIK Interest, if any, that has been added to the principal amount of the Loan (after as well as before judgment, as and to the extent permitted by law) at a rate per annum (the “Default Rate”) equal to the Interest Rate in effect from time to time plus 2% per annum and such interest shall be payable in cash on each Interest Payment Date (or any earlier maturity of the Loans).

SECTION 2.06Increased Costs.

(a)If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any holding company of any Lender; or

(ii)impose on any Lender any other condition affecting this Agreement or Loans made by such Lender;

and the result of any of the foregoing shall be to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.

(b)If any Lender determines that any Change in Law regarding

capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or liquidity or on the capital or liquidity of such

16

Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

(a)A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section 2.06 and setting forth in reasonable detail the manner in which such amount or amounts were determined shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within fifteen (15) Business Days after receipt thereof.

(b)Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.06 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that no compensation will be paid to any Lender with respect to any Change in Law that has occurred 180 days before such Lender has demanded compensation under this Section 2.06.

SECTION 2.07Optional Prepayment of Loans; Reimbursement of

Lenders.

(a)The Borrower shall have the right to prepay any outstanding Loans, in whole or part, upon at least two (2) Business Day’s prior written notice or facsimile notice to each Lender, prior to 5:00 p.m., New York City time.

[Reserved.]

(b)Any prepayment made pursuant to this Section 2.07 shall be subject to the following limitations:

(i)Allall prepayments shall be paid to all Lenders for application to the prepayment of outstanding Loans, including PIK Interest, if any, together with any accrued and unpaid interest, ratably in accordance with each Lender’s Aggregate Exposure Percentage; and

(ii)all prepayments on or prior to the second anniversary of the Amendment No. 1 Effective Date shall be accompanied by an amount equal to the Applicable Premium;

(iii)all prepayments after the second anniversary of the Amendment No. 1 Effective Date but on or prior to the third anniversary

of the Amendment No. 1 Effective Date shall be accompanied by a

premium in an amount equal to 9.0% of the principal amount of the

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Loans, including PIK Interest to the extent added to principal, to be

prepaid;

(i)all prepayments after the third anniversary of the

Amendment No. 1 Effective Date but on or prior to the fourth

anniversary of the Amendment No. 1 Effective Date shall be

accompanied by a premium in an amount equal to 4.5% of the principal

amount of the Loans, including PIK Interest to the extent added to

principal, to be prepaid; and

(ii)(ii) Eeach notice of prepayment shall specify the

prepayment date and, the principal amount of the Loans to be prepaid

and the Applicable Premium, if any. Each notice of prepayment shall be irrevocable and shall commit the Borrower to prepay such Loan by the amount and on the date stated therein; provided that if a notice of prepayment is expressly conditioned upon the effectiveness of an acquisition, debt incurrence or equity issuance, then such notice of prepayment may be revoked (by notice to the each Lender on or prior to the specified prepayment date) if such condition is not satisfied.

(d)In the event the Borrower fails to prepay the Loans on the date

specified in any prepayment notice delivered pursuant to Section 2.07(a), the Borrower, on demand by any Lender, shall pay to such Lender, any amounts required to compensate such Lender for any loss incurred by such Lender as a result of such failure to prepay. Any Lender demanding such payment shall deliver to the Borrower from time to time one or more certificates setting forth the amount of such loss as determined by such Lender and setting forth in reasonable detail the manner in which such amount was determined.

SECTION 2.08Mandatory Prepayment; Commitment Termination.

(a)Upon the occurrence of a Change of Control, the Borrower will

make an offer (a “Change of Control Offer”) to the Lenders to repurchase the Loans at a purchase price in cash equal to(i) if the Change of Control Payment Date shall occur on or prior to the second anniversary of the Amendment No. 1 Effective Date,

(x) one hundred percent (100%) of the aggregate principal amount of such Loans

outstanding, including PIK Interest, if any, plus (y) the Applicable Premium, plus (z)

accrued and unpaid interest and (ii) if the Change of Control Payment Date shall occur

after the second anniversary of the Amendment No. 1 Effective Date, one hundred and six percent (106106.0%) of (x) the aggregate principal amount of such Loans outstanding, including PIK Interest, if any, plus (y) accrued and unpaid interest (the “Change of Control Payment”). Within five (5) Business Days following any Change of Control, the Borrower will provide irrevocable notice to each Lender describing the transaction or transactions that constitute the Change of Control and stating the purchase price and the purchase date, which shall be no later than five (5) Business Days from the date such notice is given (the “Change of Control Payment Date”). On the Change of Control Payment Date, the Borrower will deposit with the applicable

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the Borrower or any Facility Guarantor sends to the trustee or the holders under the Senior Notes Indenture or any other Senior Notes Document;

(a)promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of any Loan Party or any Subsidiary thereof, or compliance with the terms of any Loan Document, as any Lender may reasonably request;

(b)prompt written notice of a Default or Event of Default, specifying the nature and extent thereof and the action (if any) which is proposed to be taken with respect thereto.

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and, if applicable, any action taken or proposed to be taken with respect thereto.

SECTION 5.03Use of Proceeds.

The proceeds of the Loans made hereunder on the Closing Date will be used only to pay fees and expenses related to the financing contemplated hereby, including but not limited to the attorney’s fees for the Initial Lender and the Borrower and for general corporate purposes. No part of the proceeds of the Loans will be used, whether directly or indirectly, for any purpose that entails a violation of any of the regulations of the Board, including Regulations U and X.The proceeds of the 2013 Loans made on the Amendment No. 1 Effective Date will be used only to pay fees and

expenses related to the financing contemplated by Amendment No. 1, including but not

limited to the attorney’s fees for the Initial Lender and the Borrower and for general

corporate purposes.SECTION 5.04 Additional Subsidiaries.

If any Loan Party shall form or acquire a Subsidiary after the Closing Date, the Borrower will notify each of the Lenders thereof and if such Subsidiary is required to become a “Guarantor” under the Senior Notes Indenture or any amendment, amendment and replacement, supplement, modification or refinancing thereof, the Borrower will cause such Subsidiary to become a Loan Party hereunder by executing a Joinder Agreement and under each applicable Loan Document (including any Security Documents, to the extent applicable), in the manner provided therein within ten (10) Business Days after such Subsidiary is formed or acquired and, if the Obligations are permitted to be secured pursuant to the Senior Notes Indenture, within ten (10) Business Days after such permission, promptly take such actions to create and perfect Liens on such Subsidiary’s assets to secure the Obligations as the Required Lenders shall reasonably request.

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SECTION 5.05Security.

(a)If and to the extent that the entire amount of the Obligations is

permitted to be secured pursuant to clause (27) of the definition of “Permitted Liens” set forth in the Senior Notes Indenture (it being understood and agreed that such permission may depend on the ability of the Obligations to be incurred pursuant to the Consolidated Fixed Charge Coverage Ratio (as defined in the Senior Notes Indenture) provisions of Section 4.08(a) of the Senior Notes Indenture on such date of determination), the Borrower shall promptly, and in any event no later than ten (10) Business Days after such determination is made, enter into Security Documents to cause the Obligations hereunder to be secured on a junior priority basis to the Liens securing the “Obligations” (as defined in the First Lien Credit Agreement) of American Apparel (USA), LLC and the other “Loan Parties” under the First Lien Loan Documents and the “Obligations” (as defined in the Senior Notes Indenture) of the Borrower and the other “Guarantors” under the Senior Notes Indenture and the other Senior Notes Documents, and the Loan Parties shall not have any liens on their property or assets other than “Permitted Liens” (as defined in the Senior Notes Indenture) and the Borrower shall not be permitted to secure any other Indebtedness pursuant to clause (27) of the definition of “Permitted Liens” set forth in the Senior Notes Indenture unless and until the Obligations hereunder are so secured(it being understood and agreed that such Security Documents shall not secure any PIK Interest

added to principal on an Interest Payment Date after the entry into such Security

Documents if such PIK Interest is not permitted to be secured pursuant to the Senior

Notes Indenture on such Interest Payment Date; provided that such Security

Documents provide that any PIK Interest not so secured shall subsequently be secured

on any date when such PIK Interest is permitted to be secured pursuant to the Senior

Notes Indenture). Each Loan Party shall deliver such certificates, legal opinions and other information and documentation as reasonably requested by the Required Lenders pursuant to this Section 5.05.

(a)Neither the Borrower nor any of its Restricted Subsidiaries will take or knowingly omit to take any action that would materially impair the Liens in favor of the Lenders with respect to any material portion of the Collateral. The Borrower shall, and shall cause each Facility Guarantor to, at their sole cost and expense, (i) execute and deliver all such agreements and instruments as the Required Lenders shall reasonably request to more fully or accurately describe the property intended to be Collateral or the obligations intended to be secured by the Security Documents and (ii) file any such notice filings or other agreements or instruments as may be reasonably necessary under Applicable Law to perfect (and maintain the perfection and priority of) the Liens created by the Security Documents, subject to Permitted Liens, at such times and at such places as the Required Lenders may reasonably request, in each case subject to the terms of the Security Documents.

(b)Notwithstanding anything to the contrary herein or in any other Loan Document, (i) neither the Borrower nor any Loan Party shall be required to enter into Security Documents or otherwise grant any security interest to the Lenders until

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SECTION 7.05Waiver of Subrogation.

Each Facility Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Lenders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.

SECTION 7.06Waiver of Stay, Extension or Usury Laws.

Each Facility Guarantor covenants to the extent permitted by law that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law that would prohibit or forgive such Facility Guarantor from performing its Guarantee as contemplated herein, wherever enacted, now or at any time hereafter in force; and each Facility Guarantor hereby expressly waives to the extent permitted by law all benefit or advantage of any such law, and covenants that it shall not hinder, delay or impede the execution of any power herein granted to the Lenders, but shall suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE VIII

Miscellaneous

SECTION 8.01Notices.

Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or e-mail, as follows:

(a)if to any Loan Party, to it at American Apparel, Inc. 747 Warehouse St., Los Angeles, CA 90021, Attention: Glenn Weinman (Telecopy No. (213) 201-3048), (E-Mail glenn@americanapparel.net), with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, Attention: David Reamer (Telecopy No. (213) 621-5052); E-Mail dreamer@skadden.com);

(b)if to the Initial Lender, to it at the following address:

Lion/Hollywood L.L.C.

100 Wilshire Boulevard

Los Angeles, CA 90401

Attention: Jeff Chang

E-Mail Address: chang@lioncapital.com

(c)if to any Credit Partyother than the Initial Lender, to it at its address (or facsimile number or e-mail address) as set forth on Schedule

38

1.01(a) hereto,on Schedule 1 to Amendment No. 1 or on any Assignment and Acceptance.

Notwithstanding the foregoing, any notice hereunder sent by e-mail shall be solely for the distribution of (i) routine communications such as financial statements and (ii) documents and signature pages for execution by the parties hereto, and for no other purpose. Any party hereto may change its address, facsimile number or email address for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given three (3) days after mailing or otherwise upon delivery.

SECTION 8.02Waivers; Amendments.

(a)No failure or delay by any Credit Party in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Credit Parties hereunder and under the other Loan Documents are cumulative and are not exclusive of any other rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by Section 8.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default or Event of Default, regardless of whether any Credit Party may have had notice or knowledge of such Default or Event of Default at the time.

(b)Except as otherwise specifically provided herein, neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Loan Parties and the Required Lenders; provided however, that no such waiver, amendment, modification or other agreement shall:

(i)Increase the Commitment of any Lender without the prior written consent of such Lender;

(ii)Reduce the principal amount of any Obligation or reduce the rate of interest thereon, or reduce any fees payable under the Loan Documents without the consent of the Lenders adversely affected thereby;

(iii)Postpone the scheduled date of payment of the principal amount of any Obligation, or any interest thereon, or any fees payable under the Loan Documents, or reduce the amount of, waive or

39

excuse any such payment, or postpone the expiration of the Commitments or postpone the Maturity Date without the consent of the Lenders adversely affected thereby;

(i)change Section 2.08(a) without the prior written consent of each Lender adversely affect thereby;

(ii)Without prior written consent of all Lenders:

(A)release all or substantially all of the Facility Guarantors under the Guarantee (except in accordance with Section 7.02) or, if applicable, release all or substantially all of the Collateral (except as provided in the Security Documents or in accordance with Section 7.02) under the Security Documents (to the extent in effect);

(B)subordinate the Obligations hereunder or, if applicable, the Liens granted hereunder or under the other Loan Documents to any other Indebtedness or Lien, as the case may be, other than the Liens securing the “Obligations” (as defined in the First Lien Credit Agreement) of American Apparel (USA), LLC and the other “Loan Parties” under the First Lien Loan Documents or the

“Obligations” (as defined in the Senior Notes Indenture) of American Apparel, Inc. and the “Guarantors” under the Senior Notes Indenture and the other Senior Notes Documents;

(C)change any of the provisions of this Section 8.02 or the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder; or

(D)change Section 8.04(a).

(c)Notwithstanding anything to the contrary contained in this

Section 8.02, in the event that the Borrower shall request that this Agreement or any other Loan Document be modified, amended or waived in a manner which would require the consent of the Lenders pursuant to Section 8.02(b) and such amendment is approved by the Required Lenders, but not by the requisite percentage of all of the Lenders, the Borrower and such Required Lenders shall be permitted to amend this Agreement without the consent of the Lender or Lenders which did not agree to the modification or amendment requested by the Borrower (such Lender or Lenders, collectively the “Minority Lenders”) subject to their providing for (i) the terminationof each Commitmentofeachof the MinorityLenders,(ii) the addition to thisAgreementofone or more otherEligibleAssignees, or an increasein theCommitmentofone or moreof theRequired Lenders, sothat the TotalCommitments aftergivingeffecttosuch amendmentshall be in thesame amount astheaggregate Commitments immediately beforegivingeffecttosuch amendment,(iii) ifany Loans are outstanding

40

at the time ofsuch amendment,the making of such additional Loans by such onew or increasing Lender or Lenders, asthecase maybe,more Eligible Assigneesas may be necessary to repay in full the outstanding Loans (including principal, interest, fees and other amounts) of the Minority Lenders immediately before giving effect to such amendment and (ivii) such other modifications to this Agreement or the Loan Documents as may be appropriate and incidental to the foregoing.

(d)No notice to or demand on any Loan Party shall entitle any

Loan Party to any other or further notice or demand in the same, similar or other circumstances. Each holder of a Note shall be bound by any amendment, modification, waiver or consent authorized as provided herein, whether or not a Note shall have been marked to indicate such amendment, modification, waiver or consent and any consent by a Lender, or any holder of a Note, shall bind any Person subsequently acquiring a Note, whether or not a Note is so marked. No amendment to this Agreement or any other Loan Document shall be effective against the Borrower or any other Loan Party unless signed by the Borrower or other applicable Loan Party.

SECTION 8.03Expenses; Indemnity; Damage Waiver.

(a)The Loan Parties shall be jointly and severally obligated pay all Credit Party Expenses.

(b)The Loan Parties shall, jointly and severally, indemnify the Credit Parties and each of their Subsidiaries and Affiliates, and each of their respective stockholders, directors, officers, employees, agents, attorneys, and advisors of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all damages, actual out-of-pocket losses, claims, actions, causes of action, settlement payments, obligations, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred, suffered, sustained or required to be paid by, or asserted against, any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the transactions

contemplated by the Loan Documents or any other transactions contemplated hereby, (ii) any Loans or the use of the proceeds therefrom, (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property currently or formerly owned, leased or operated by any Loan Party or any Subsidiary, or any Environmental Liability related in any way to any Loan Party or any Subsidiary, (iv) any actual or prospective claim, litigation, investigation or proceeding relating to or arising from any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto or (v) any documentary taxes, assessments or similar charges made by any Governmental Authority by reason of the execution and delivery of this Agreement or any other Loan Document; provided, however, that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the

EX-21.1

Exhibit 21.1

List of Wholly-Owned Subsidiaries American Apparel

as of December 31, 2013

Investment In	Location	Owned By	Percentage Ownership
American Apparel (USA), LLC	California, USA	American Apparel, Inc.	100	%
American Apparel Canada Retail Inc.	Canada	American Apparel, Inc.	100	%
American Apparel Canada Wholesale Inc.	Canada	American Apparel, Inc.	100	%
American Apparel Retail, Inc.	California, USA	American Apparel (USA), LLC	100	%
KCL Knitting, LLC	California, USA	American Apparel (USA), LLC	100	%
American Apparel Dyeing and Finishing, Inc.	California, USA	American Apparel (USA), LLC	100	%
Fresh Air Freight, Inc.	California, USA	American Apparel (USA), LLC	100	%
American Apparel Deutschland GmbH	Germany	American Apparel (USA), LLC	100	%
American Apparel (Carnaby) Limited	United Kingdom	American Apparel (USA), LLC	100	%
American Apparel (UK) Limited	United Kingdom	American Apparel (USA), LLC	100	%
American Apparel Australia Pty Ltd.	Australia	American Apparel Retail, Inc.	100	%
American Apparel do Brasil Comercio de Roupas Ltda.	Brazil	American Apparel Retail, Inc.	99	%
		American Apparel (USA), LLC	1	%
American Apparel New Zealand Limited	New Zealand	American Apparel Retail, Inc.	100	%
American Apparel Mexico, S. de R.L. de C.V.	Mexico	American Apparel Retail, Inc.	50	%
		American Apparel (USA), LLC	50	%
American Apparel Mexico Labor, S. de R.L. de C.V.	Mexico	American Apparel Retail, Inc.	50	%
		American Apparel (USA), LLC	50	%
American Apparel Retail (Israel), Ltd.	Israel	American Apparel Retail, Inc.	100	%
American Apparel Japan Y.K.	Japan	American Apparel Retail, Inc.	100	%
American Apparel Korea Co., Ltd.	Korea	American Apparel Retail, Inc.	100	%

Investment In	Location	Owned By	Percentage Ownership
American Apparel Ireland Limited	Ireland	American Apparel Retail, Inc.	100	%
American Apparel Hong Kong	China	American Apparel Retail, Inc.	100	%
American Apparel Shanghai China Ltd	China	American Apparel Retail, Inc.	100	%
American Apparel (Beijing) Trading Company, Ltd.	China	American Apparel Retail, Inc.	100	%
American Apparel Italia SRL	Italy	American Apparel Deutschland GmbH	100	%
American Apparel Spain, S.L.	Spain	American Apparel Deutschland GmbH	100	%

All our direct and indirect subsidiaries of are wholly owned by their respective parent companies.

EX-23.1

Exhibit 23.1

Independent Registered Public Accounting Firm’s Consent

We consent to the incorporation by reference in the Registration Statements of American Apparel, Inc. on Form S-3 File No. 333-192863 and Forms S-8, File Nos. 333-175430, 333-163322 and 333-150293 of our report dated April 1, 2014, with respect to our audits of the consolidated financial statements and related consolidated financial statement schedules of American Apparel, Inc. as of December 31, 2013, 2012 and 2011 and for the years ended December 31, 2013, 2012 and 2011 and our report dated April 1, 2014 with respect to our audit of the effectiveness of internal control over financial reporting of American Apparel, Inc. as of December 31, 2013, which reports are included in this Annual Report on Form 10-K of American Apparel, Inc. for the year ended December 31, 2013.

/s/ Marcum LLP

Marcum LLP

Melville, New York

April 1, 2014

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Dov Charney, certify that:

1. I have reviewed this annual report on Form 10-K of American Apparel, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	April 1, 2014	By:	/s/ DOV CHARNEY
			Dov Charney
			Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, John Luttrell, certify that:

1. I have reviewed this annual report on Form 10-K of American Apparel, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	April 1, 2014	By:	/s/ JOHN LUTTRELL
			John Luttrell
			Chief Financial Officer (Principal Accounting Officer)

EX-32.1

Exhibit 32.1

Certification of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of American Apparel, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dov Charney, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date:	April 1, 2014	By:	/s/ DOV CHARNEY
			Dov Charney
			Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of American Apparel, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Luttrell, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

Date:	April 1, 2014	By:	/s/ JOHN LUTTRELL
			John Luttrell
			Chief Financial Officer

XML

Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2013

Class of Warrant or Right [Line Items]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

A summary of the potential stock issuances under various options, warrants and other agreements that could have a dilutive effect on the shares outstanding as of December 31, 2013 and 2012 are as follows:

	2013	2012	2011
SOF Warrants	—	1,000	1,000
Lion Warrants	21,606	21,606	21,606
Shares issuable to Mr. Charney based on market conditions (1)	20,416	20,416	20,416
Contingent shares issuable to Mr. Charney based on market conditions (2)	2,112	2,112	2,112
Contingent shares issuable to Mr. Charney based on performance factors (3)	—	5,000	—
Employee options & restricted shares	2,550	3,344	4,136
	46,684	53,478	49,270

Warrant [Member]

Class of Warrant or Right [Line Items]

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

The following table summarizes common stock warrants issued, forfeited, expired and outstanding (shares in thousands):

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Life (Years)
Outstanding - January 1, 2011	17,000			$	2.05	5.1
Issued (1)	41,366			1.14		—
Forfeited (2)	(35,760		)	1.63		—
Expired	—			—		—
Outstanding - December 31, 2011	22,606			1.05		6.0
Issued (1)	44,212			0.90		—
Forfeited (2)	(44,212		)	1.03		—
Expired	—			—		—
Outstanding - December 31, 2012	22,606			0.81		8.8
Issued (1)	—			—		—
Forfeited (2)	—			—		—
Expired	(1,000		)	2.15		—
Outstanding - December 31, 2013	21,606			$	0.75	8.2
Fair value - December 31, 2013	$	20,954

(1) Issued shares at December 31, 2011 include issuances and repriced shares.

(2) Represents repriced shares.

Purchase Rights [Member]

Class of Warrant or Right [Line Items]

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

The following table summarizes Purchase Rights issued, forfeited and expired (shares in thousands):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Life (Years)
Outstanding - January 1, 2011	—		$	—	—
Issued	28,999		0.90		0.5
Forfeited	—		—		—
Exercised	(8,407	)	0.90		—
Expired	(20,592	)	0.90		—
Outstanding - December 31, 2011	—		$	—	—

XML

Goodwill, Intangible Assets and Other Assets (Estimated amortization expense of deferred financing costs, broker and finder fees, lease rights and key money) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Goodwill, Intangible Assets and Other Assets [Abstract]
Restricted Cash and Cash Equivalents, Noncurrent	$ 2,078	$ 0
Amortization expense, deferred financing costs	1,895	2,287	1,634
Amortization Expense, 2014	2,119
Amortization Expense, 2015	2,013
Amortization Expense, 2016	1,901
Amortization Expense, 2017	1,877
Amortization Expense, 2018 and thereafter	$ 3,622

XML

Inventories (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 Rate	Dec. 31, 2011 number_of_suppliers	Dec. 31, 2012
Inventory Disclosure [Abstract]
Raw materials	$ 23,199		$ 22,301
Work in process	2,596		2,197
Finished goods	146,361		152,384
Inventory, Gross	172,156		176,882
Less: Reserve for inventory shrinkage and obsolescence	(2,778)		(2,653)
Inventories, net	169,378		174,229
Concentration Risk Suppliers Number of		0
Concentration Risk Percentage of Raw Material Purchases from Suppliers	10.00%
Lower of cost or market reserve for excess and slow-moving inventory	1,951		2,140
Reserve for inventory shrinkage	$ 827		$ 513

XML

Related Party Transaction (Subordinated Notes Payable to Related Party) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2011	Mar. 31, 2011	Mar. 24, 2011
Subordinated Notes Payable to Related Party [Abstract]
Subordinated Debt, Current		$ 4,688
Common stock issued to CEO, cancellation of subordinated debt		4,223
Common stock purchased by CEO		1,802
Share Price	$ 1.11	$ 3.50	$ 1.11
cash for shares purchased by CEO	$ 2,000

XML

Accrued Expenses and Other Current Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accrued expenses and other current liabilitie [Line Items]
Compensation, bonuses and related taxes	$ 10,170	$ 11,524
Accrued interest	6,064	520
Workers’ compensation and other self-insurance reserves (Note 16)	6,383	5,288
Sales, value and property taxes	3,868	4,751
Gift cards and store credits	7,391	5,964
Loss contingencies	1,177	752
Accrued vacation	1,603	1,055
Deferred revenue	1,258	590
Deferred rent	3,363	2,997
Other	8,741	8,075
Total accrued expenses	$ 50,018	$ 41,516

XML

Stockholders' Equity (Summary of the potential stock issuances under various assumptions) (Details) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	46,684	53,478	49,270
Lion Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		21,606	21,606
SOF Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	1,000	1,000
Contingently Issuable Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,550	3,344	4,136
CEO AntiDilution Rights [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	20,416	20,416	20,416
Debt to Equity Conversion [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,112	2,112	2,112
Employment Agreement 2012 [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	5,000	0

XML

Summary of Significant Accounting Policies (Details) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 customers Rate	Dec. 31, 2012 Rate	Dec. 31, 2011
Deferred Tax Assets, Valuation Allowance	$ 120,694,000	$ 77,578,000	$ 73,773,000
Deposits, Foreign	7,374,000	8,265,000
number of vendors	1
Concentration of credit risk, accounts receivable	14.20%	15.10%
Asset Impairment Charges	1,540,000	1,647,000	4,267,000
Capitalized Computer Software, Net	2,805,000	2,242,000
Marketing and Advertising Expense	19,814,000	22,114,000	15,194,000
estimated forfeitures	0
Preferred Stock, Shares Issued	0	0
Share-Based Compensation Expense	8,451,000	10,580,000	6,814,000
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Payments	0
Preferred Stock, Shares Authorized	1,000	1,000
Preferred Stock, Par or Stated Value Per Share	$ 0.0001	$ 0.0001
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	46,684	53,478	49,270
Employment Agreement 2012 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	2,500
Share-Based Compensation Expense	$ 2,578,000	$ (703,000)

XML

Accrued Expenses and Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2013

Accrued Expenses and Other Current Liabilities [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

The following table presents the components of accrued expenses and other current liabilities as of December 31, 2013 and 2012:

	2013		2012
Compensation, bonuses and related taxes	$	10,170	$	11,524
Accrued interest	6,064		520
Workers’ compensation and other self-insurance reserves (Note 16)	6,383		5,288
Sales, value and property taxes	3,868		4,751
Gift cards and store credits	7,391		5,964
Loss contingencies	1,177		752
Accrued vacation	1,603		1,055
Deferred revenue	1,258		590
Deferred rent	3,363		2,997
Other	8,741		8,075
Total accrued expenses	$	50,018	$	41,516

XML

Shared-Based Compensation (Details) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	12 Months Ended						3 Months Ended	12 Months Ended			3 Months Ended		12 Months Ended			3 Months Ended				6 Months Ended	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Mar. 31, 2011	Mar. 24, 2011	Dec. 31, 2012 CEO AntiDilution Rights [Member]	Dec. 31, 2013 CEO AntiDilution Rights [Member]	Dec. 31, 2012 CEO AntiDilution Rights [Member]	Dec. 31, 2011 CEO AntiDilution Rights [Member]	Dec. 31, 2012 Employment Agreement 2012 [Member]	Jun. 30, 2012 Employment Agreement 2012 [Member]	Dec. 31, 2013 Employment Agreement 2012 [Member]	Dec. 31, 2012 Employment Agreement 2012 [Member]	Apr. 02, 2012 Employment Agreement 2012 [Member]	Dec. 31, 2012 Director [Member] directors	Sep. 30, 2012 Director [Member]	Jun. 30, 2012 Director [Member]	Mar. 31, 2012 Director [Member]	Jun. 30, 2011 Director [Member]	Dec. 31, 2012 Director [Member] directors	Dec. 31, 2013 Director [Member]	Dec. 31, 2013 2011 Plan [Member]	Dec. 31, 2013 Stock Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
AdjustedEmployeeServiceShareBasedCompensationNonvestedAwardsTotalCompansationCostnotyetrecognized							$ 2,738,000
Share based compensation increase											6,854,000
Share-Based Compensation Expense		8,451,000	10,580,000	6,814,000				6,459,000	5,440,000	3,055,000			2,578,000	(703,000)							75,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized																							10,000	17,500
Share-based compensation arrangement by share-based payment award, number of shares authorized per participant, annually																								3,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant																							13,416
Employee Service Share-based Compensation, Allocation of Recognized Period Costs, Capitalized Amount		0
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized		5,062,000						1,984,000					0
Granted, in shares												7,500
Vested, in shares													2,500
Adjustments to Additional Paid in Capital, Share-based Compensation, Restricted Stock Unit or Restricted Stock Award, Requisite Service Period Recognition	$ 469,000	$ 703,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value															$ 0.75
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period																8	8	5	5	23
Share Price				$ 1.11	$ 3.50	$ 1.11											$ 1.28	$ 1.88	$ 2.10			$ 1.21
number of directors, non-employee directors																5					5

XML

Related Party Transaction (M. Charney) (Details) (Immediate Family Member of Management or Principal Owner [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Immediate Family Member of Management or Principal Owner [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Selling, General and Administrative Expenses from Transactions with Related Party	$ 238	$ 260	$ 297

XML

Business Segment and Geographic Area Information (Percentage of total assets and total liabilities - foreign subsidiaries) (Details) (Foreign Subsidiaries [Member])	Dec. 31, 2013 Rate	Dec. 31, 2012 Rate
Foreign Subsidiaries [Member]
Segment Reporting Information [Line Items]
Total Assets	26.10%	29.80%
Total Liabilities	6.80%	10.90%

XML

Long-Term Debt (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended							12 Months Ended			12 Months Ended	0 Months Ended	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Lion Credit Agreement [Member]	Dec. 31, 2013 Senior Notes [Member] Rate	Dec. 31, 2013 Lion Credit Agreement [Member]	Dec. 31, 2012 Lion Credit Agreement [Member]	Dec. 31, 2013 Lion Credit Agreement 2013 [Member] [Domain] Rate	May 22, 2013 Lion Credit Agreement 2013 [Member] [Domain] Rate	Dec. 31, 2012 Lion Credit Agreement 2013 [Member] [Domain]	Dec. 31, 2013 Capital One Credit Agreement [Member] Rate	Mar. 26, 2014 Capital One Credit Agreement [Member] London Interbank Offered Rate (LIBOR) [Member] Rate	Dec. 31, 2013 Capital One Credit Agreement [Member] London Interbank Offered Rate (LIBOR) [Member] Rate
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate												0.00%	0.00%
Long-term Debt				$ 117,926
Early Repayment of Subordinated Debt				144,149
Accrued Interest Paid In Kind					3,044		16,469	365		16,469
Debt Instrument, Unamortized Discount	5,779	27,929			5,779		27,929
Long-term Debt, Percentage Bearing Variable Interest, Percentage Rate					15.00%
Gains (Losses) on Extinguishment of Debt	(32,101)	11,588	(3,114)	26,223		(32,101)
Debt Instrument, Interest Rate, Increase (Decrease)					0.00%						1.00%
Interest expense - additional for long-term debt					3,044
Debt Instrument, Face Amount					206,000				4,500
Debt Instrument, Increase (Decrease), Other, Net								5,000
Debt Instrument, Redemption Price, Percentage					97.00%
Debt Instrument, Interest Rate, Stated Percentage					13.00%			0.00%	0.00%
Debt Instrument, Periodic Payment, Interest					13,500
Debt Instrument, Covenant, Leverage, Minimum					4.50
Redemption Premium					$ 0
Principal amount subject to redemption, percent					35.00%
Redemption price1, percent					113.00%
Redemption price2, percent					101.00%
Principal amount subject to redemption1, percent					100.00%
Redemption price, percent					100.00%

XML

Stockholders' Equity (Common Stock Warrants issued, forfeited, expired and outstanding) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Class of Warrant or Right, Number of Shares [Roll Forward]
Warrants and Rights Outstanding		$ 20,954	$ 17,241
Class of Warrant or Right, Weighted Average Exercise Price [Roll Forward]
Issued, Weighted Average Exercise Price Per Share		$ 0.00	$ 0.90	$ 1.14
Warrant [Member]
Class of Warrant or Right, Number of Shares [Roll Forward]
Outstanding - January 1 (in shares)		22,606	22,606	17,000
Issued (in shares)		0	44,212	41,366
Forfeited (in shares)		0	44,212	35,760
Expired (in shares)		(1,000)	0	0
Outstanding - December 31 (in shares)	17,000	21,606	22,606	22,606
Warrants and Rights Outstanding		$ 20,954
Class of Warrant or Right, Weighted Average Exercise Price [Roll Forward]
Outstanding - January 1		$ 0.81	$ 1.05	$ 2.05
Forfeited, Weighted Average Exercise Price Per Share		$ 0.00	$ 1.03	$ 1.63
Expired, Weighted Average Exercise Price Per Share		$ 2.15	$ 0.00	$ 0.00
Outstanding - December 31	$ 2.05	$ 0.75	$ 0.81	$ 1.05
Weighted Averate Contractual Life (Years) [Roll Forward]
Outstanding - January 1 (in years)	5 years 1 month	8 years 2 months	8 years 9 months 10 days	6 years
Outstanding - December 31 (in years)	5 years 1 month	8 years 2 months	8 years 9 months 10 days	6 years

XML

Business Segment and Geographic Area Information (Reconciliation of reportable segments combined loss from operations to the consolidated loss before income taxes) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Income (loss) from segment operations	$ (29,295)	$ 962	$ (23,293)
Foreign currency transaction gain (loss), before Tax	(1)	(120)	(1,679)
Unrealized gain (loss) on change in fair value of warrants and purchase rights	(3,713)	(4,126)	23,467
Gains (Losses) on Extinguishment of Debt	(32,101)	11,588	(3,114)
Other expense (income)	(131)	(204)	193
Consolidated income (loss) before income taxes	(104,527)	(33,459)	(37,593)
Operating Segments [Member]
Segment Reporting Information [Line Items]
Income (loss) from segment operations	16,850	42,703	22,486
Unallocated Amount to Segment [Member]
Segment Reporting Information [Line Items]
Unallocated corporate expenses	(46,145)	(41,741)	(45,779)
Consolidated Entities [Member]
Segment Reporting Information [Line Items]
Income (loss) from segment operations	16,850	42,703	22,486
Interest expense	39,286	41,559	33,167
Foreign currency transaction gain (loss), before Tax	1	120	1,679
Unrealized gain (loss) on change in fair value of warrants and purchase rights	3,713	4,126	(23,467)
Gains (Losses) on Extinguishment of Debt	32,101	(11,588)	3,114
Other expense (income)	131	204	(193)
Consolidated income (loss) before income taxes	$ (104,527)	$ (33,459)	$ (37,593)

XML

Shared-Based Compensation (Stock Options) (Details) (Stock Options [Member], USD $)	3 Months Ended	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding - January 1		700,000	950,000	1,000,000
Granted, in shares		0	0	700,000
Forfeited, in shares		0	0	(750,000)
Expired, in shares		0	(250,000)	0
Outstanding - December 31	1,000,000	700,000	700,000	950,000
Vested and Expected to Vest, Outstanding, in shares		525,000
Weighted Average Exercise Price, Outstanding - January 1		$ 0.82	$ 1.06	$ 1.75
Weighted Average Grant Date Fair Value, Granted		$ 0.00	$ 0.00	$ 0.82
Weighted Average Exercise Price, Forfeited		$ 0.00	$ 0.00	$ 1.75
Weighted Average Exercise Price, Expired		$ 0.00	$ 1.75	$ 0.00
Weighted Average Exercise Price, Outstanding - December 31	$ 1.75	$ 0.82	$ 0.82	$ 1.06
Weighted Average Exercise Price, Vested and Expected to Vest		$ 0.82
Weighted Average Exercise Price, Vested and Expected to Vest, Oustanding		$ 0.82
Weighted Average Remaining Contractual Term, Exercisable in years	9 years 9 months 19 days		8 years 9 months 18 days	9 years 6 months
Weighted Average Remaining Contractual Term, Outstanding in years		7 years 9 months 18 days
Weighted Average Remaining Contractual Term, Vested and Expected to Vest, Exercisable, in years		7 years 9 months 18 days
Weighted Average Remaining Contractual Term, Vested and Expected to Vest, Outstanding, in years		7 years 9 months 18 days
Aggregate Intrinsic Value		$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Nonvested, Number of Shares		175,000

XML

(Net sales by geographic location of customer) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Entity Location [Line Items]
Net sales	$ 169,102	$ 164,543	$ 162,236	$ 138,060	$ 173,028	$ 162,160	$ 149,462	$ 132,660	$ 633,941	$ 617,310	$ 547,336
United States [Member]
Entity Location [Line Items]
Net sales									406,262	384,241	333,464
Canada [Member]
Entity Location [Line Items]
Net sales									60,134	63,669	61,865
Europe [Member]
Entity Location [Line Items]
Net sales									70,347	66,861	68,130
United Kingdom [Member]
Entity Location [Line Items]
Net sales									44,153	47,694	40,039
South Korea [Member]
Entity Location [Line Items]
Net sales									10,380	10,732	9,749
China [Member]
Entity Location [Line Items]
Net sales									6,894	5,317	3,857
Japan [Member]
Entity Location [Line Items]
Net sales									18,119	20,336	14,176
Australia [Member]
Entity Location [Line Items]
Net sales									10,218	11,458	9,383
Other Foreign Countries [Member]
Entity Location [Line Items]
Net sales									7,434	7,002	6,673
Consolidated Entities [Member]
Entity Location [Line Items]
Net sales									$ 633,941	$ 617,310	$ 547,336

XML

Stockholders' Equity (Summary of Purchase Rights) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended									12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2011 Rights [Member]	Dec. 31, 2011 Investor [Member]	Mar. 31, 2014 Lion Warrants [Member]	Dec. 31, 2013 Lion Warrants [Member]	Dec. 31, 2012 Lion Warrants [Member]	Mar. 31, 2012 Lion Warrants [Member]	Dec. 31, 2011 Charney Rights [Member]
Class of Warrant or Right [Line Items]
Outstanding - January 1 (in shares)				0			20,954	17,222
Outstanding - December 31 (in shares)				0			20,954	17,222
Issued				28,999
Forfeited				0
Exercised				(8,407)
Expired				(20,592)	(19,036)					(1,556)
Outstanding - January 1				$ 0		$ 0.66			$ 0.75
Issued, Weighted Average Exercise Price Per Share	$ 0.00	$ 0.90	$ 1.14	$ 0.90
Outstanding - December 31				$ 0		$ 0.66			$ 0.75
Issued, Weighted Average Remaining Contractual Term (in years)				0 years 6 months

XML

Related Party Transaction (Personal Guarantees by the Company's CEO) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013 number_of_property_leases
Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Property Subject to or Available for Operating Lease, Number of Units	7
Contractual Obligation, Due after Fifth Year	$ 17,465
Contractual Obligation	$ 1,000
Management [Member]
Related Party Transaction [Line Items]
number of vendors	2

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Commitments and Contingencies

Operating Leases

The Company conducts retail operations under operating leases, which expire at various dates through November 2023. The Company’s primary manufacturing facilities and executive offices are currently under a long-term lease which expires on July 31, 2019. Future minimum rental payments (excluding real estate tax and maintenance costs) for retail locations and other leases that have initial or non-cancelable lease terms in excess of one year at December 31, 2013 are as follows:

	Amount
2014	$	74,161
2015	63,599
2016	51,895
2017	41,293
2018	28,397
Thereafter	31,932
Total	$	291,277

Operating lease rent expense (including some real estate taxes and maintenance costs) and leases on a month to month basis were approximately $79,794, $77,390, and $78,138, for the years ended December 31, 2013, 2012, and 2011, respectively. The Company did not incur any significant contingent rent during the same periods. Rent expense is allocated to cost of sales (for production-related activities) and selling expenses (primarily for retail stores) in the accompanying consolidated statements of operations.

Sales Tax

The Company sells its products through its wholesale business, retail stores and the internet. The Company operates these channels separately and accounts for sales and use tax accordingly. The Company is periodically audited by state taxing authorities and it is possible they may disagree with the Company’s method of assessing and remitting these taxes. The Company believes that it properly assesses and remits all applicable state sales taxes in the applicable jurisdictions and has accrued $0 and $289 as of December 31, 2013 and 2012, respectively, for state sales tax contingencies.

Customs and duties

The Company is being audited by German customs authorities for the years ended December 31, 2009 through December 31, 2011. In connection with the audit, German customs authorities have issued retroactive assessments on the Company's imports totaling $5,003 at the December 31, 2013 exchange rates (assessment was issued in Euros). The size of the retroactive assessments are largely due to member countries of the European Union (“E.U.”) limited right to impose retaliatory duties on certain imports of U.S. origin goods into the E.U., based upon the World Trade Organization's (“WTO”) Dispute Settlement procedures and the related WTO arbitrator rulings brought into place as a result of EU complaint against the U.S. "Continued Dumping and Subsidy Offset Act of 2000" (the "CDSOA") usually referred to as "the Byrd Amendment". Consequently, German customs authorities are attempting to impose a substantially higher tariff rate than the original rate that the Company had paid on the imports, approximately doubling the amount of the tariff that the Company would have to pay.

The Company believes that it has valid arguments to challenge the merit of the German customs assessment and has filed litigation in German courts to contest such assessment. However, as the appeals as to the assessment are not decided, the Company is unable to reasonably estimate the financial outcome of the matter at this time and it cannot predict whether the outcome will be favorable or unfavorable to the Company, or if the Company will be required to advance material amounts during the pendancy of the litigation, and accordingly has not recorded a provision for this matter. No assurance can be made that this matter will not result in a material financial exposure in connection with the audit, which could have a material effect on the Company's financial condition, results of operations or cash flows.

New York Stock Exchange Compliance

The common stock is currently traded on the NYSE MKT. On February 28, 2014, the Company received a letter from NYSE MKT indicating that it was not in compliance with the continued listing standards of NYSE MKT set forth in Section 1003(a)(iv) of the NYSE MKT LLC Company Guide. In order to maintain its listing, the Company has submitted a plan of compliance by addressing how it intends to regain compliance with Section 1003(a)(iv) of the Company Guide by April 15, 2014. If the plan is accepted, the Company may be able to continue its listing but will be subject to periodic review by NYSE MKT. If the plan is not accepted or if the Company does not make progress consistent with the plan by April 15, 2014, NYSE MKT will initiate delisting proceedings as appropriate. No assurance can be given that the Company will regain compliance with those listing requirements or that it will continue to meet the listing requirements of NYSE MKT in the future.

Advertising

At December 31, 2013 the Company had approximately $2,450, in open advertising commitments, which primarily relate to print advertisements in various newspapers, magazines, as well as outdoor advertising and other advertisements. The majority of these commitments are expected to be paid during the remainder of 2014.

XML

Property and Equipment (Summary of Property, Plant and Equipment) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Abstract]
Machinery and equipment	$ 58,069	$ 50,180
Furniture and fixtures	46,749	42,430
Leasehold improvements	95,886	86,623
Buildings	547	587
Construction in progress	1,353	5,293
Property, Plant and Equipment, Gross	249,340	223,836
Computer equipment and software	45,402	37,556
Automobiles and light trucks	1,334	1,167
Less: Accumulated depreciation and amortization	(180,037)	(156,058)
Property, Plant and Equipment, Net	$ 69,303	$ 67,778

XML

Commitments and Contingencies (Tables)

3 Months Ended

Dec. 31, 2012

Operating Leased Assets [Line Items]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Future minimum rental payments (excluding real estate tax and maintenance costs) for retail locations and other leases that have initial or non-cancelable lease terms in excess of one year at December 31, 2013 are as follows:

	Amount
2014	$	74,161
2015	63,599
2016	51,895
2017	41,293
2018	28,397
Thereafter	31,932
Total	$	291,277

XML

Stockholders' Equity (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	0 Months Ended		1 Months Ended	12 Months Ended						3 Months Ended	12 Months Ended					24 Months Ended		12 Months Ended			0 Months Ended	12 Months Ended			12 Months Ended		3 Months Ended	12 Months Ended		12 Months Ended		3 Months Ended			12 Months Ended
	Mar. 31, 2014	Mar. 26, 2014	Apr. 30, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jun. 30, 2011	Mar. 31, 2011	Mar. 24, 2011	Dec. 31, 2012 CEO AntiDilution Rights [Member] Rate	Apr. 15, 2016 CEO AntiDilution Rights [Member]	Apr. 15, 2015 CEO AntiDilution Rights [Member]	Dec. 31, 2013 CEO AntiDilution Rights [Member]	Dec. 31, 2012 CEO AntiDilution Rights [Member]	Dec. 31, 2011 CEO AntiDilution Rights [Member]	Apr. 15, 2014 CEO AntiDilution Rights [Member]	Oct. 16, 2012 CEO AntiDilution Rights [Member]	Dec. 31, 2013 Stock Compensation Plan [Member]	Dec. 31, 2012 Stock Compensation Plan [Member]	Dec. 31, 2011 Stock Compensation Plan [Member]	Mar. 31, 2014 Lion Warrants [Member]	Dec. 31, 2013 Lion Warrants [Member] Rate	Dec. 31, 2012 Lion Warrants [Member]	Mar. 31, 2012 Lion Warrants [Member]	Dec. 31, 2013 SOF Warrants [Member]	Dec. 31, 2012 SOF Warrants [Member] Rate	Jun. 30, 2011 Rights [Member] Rate	Dec. 31, 2011 Rights [Member]	Dec. 31, 2010 Rights [Member]	Dec. 31, 2011 Investor [Member]	Dec. 31, 2011 Charney Rights [Member]	Jun. 30, 2011 April 26, 2011 transaction [Member]	Sep. 30, 2011 Chief Executive Officer [Member]	Jun. 30, 2011 Chief Executive Officer [Member]	Dec. 31, 2013 Employment Agreement 2012 [Member]
Class of Warrant or Right [Line Items]
Sale of Stock, Number of Shares Issued in Transaction																																15,777		778
Common Stock, Shares Authorized				230,000	230,000		120,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount				46,684	53,478	49,270							20,416	20,416	20,416			2,550	3,344	4,136		21,606			1,000
CEO Anti-Dilution Rights, Fair Value																	$ 13,192
Exercise Price, Adjustment																								$ 0.25
Class of warrant or right, exercise price of warrant or right																					$ 0.66			$ 0.75				$ 0	$ 0
Sale of common stock, net of fees	61,645		8,500																		2,900
Fair Value Assumptions, Expected Term										3 years 6 months												8 years 3 months				1 year	0 years 6 months
Share Price						$ 1.11		$ 3.50	$ 1.11								$ 1.3					$ 1.23				$ 1.01	$ 1.58
Vested, in shares																																			2,500
Fair Value Assumptions, Risk Free Interest Rate										0.45%												2.70%				0.16%	0.11%
Fair Value Assumptions, Expected Volatility Rate										90.00%
Fair Value Assumptions, Weighted Average Volatility Rate																						70.84%				50.82%	99.08%
Fair Value Assumptions, Expected Dividend Rate																						0.00%				0.00%
Class of Warrant or Right, Outstanding																						20,954	17,222					0	0
Fair Value Assumptions, Exercise Price																	$ 0									$ 2.148	$ 0.90
Warrants and Rights Outstanding				20,954	17,241																					19
Sale of Stock, Price Per Share																																$ 0.90		$ 0.90
Proceeds from Issuance or Sale of Equity		25,000																														12,417		700
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																																27,443		1,556
Fair value of purchase rights issued																																15,605
Fair Value, Liabilities Measured on Recurring Basis, Change in Unrealized Gain (Loss) Included in Other Income				(3,713)	(4,126)	23,467																					3,188
Exercised																												(8,407)
Class of Warrant or Right, Weighted Average Exercise Price, Issued				$ 0.00	$ 0.90	$ 1.14																						$ 0.90
Net proceeds from purchase rights exercised																												6,593
fair value of purchase rights exercised																												2,857
Class of Warrant or Right, Expired																												(20,592)		(19,036)	(1,556)
VWAP, average volume weighted closing price per share, first installment (4/16/12-4/15/14)																$ 3.25
VWAP, average volume weighted closing price per share, second installment (4/15/14-4/15/15)												$ 4.25
VWAP, average volume weighted closing price per share, third installment (4/16/15-4/15/16)											$ 5.25
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period											2 years 8 months 12 days	1 year 9 months 18 days				0 years 10 months 24 days
Treasury Stock, Shares				304	304
Net proceeds from issuance of common stock and purchase rights				0	0	21,710																											700
Common stock purchased by CEO								1,802
cash for shares purchased by CEO						2,000
Subordinated Debt								$ 4,688
Common stock issued to CEO, cancellation of subordinated debt								4,223

XML

Condensed Consolidating Financial Information Condensed Cash Flow Statement (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Parent Company [Member]	Dec. 31, 2012 Parent Company [Member]	Dec. 31, 2011 Parent Company [Member]	Dec. 31, 2013 Guarantor Subsidiaries [Member]	Dec. 31, 2012 Guarantor Subsidiaries [Member]	Dec. 31, 2011 Guarantor Subsidiaries [Member]	Dec. 31, 2013 Non-Guarantor Subsidiaries [Member]	Dec. 31, 2012 Non-Guarantor Subsidiaries [Member]	Dec. 31, 2011 Non-Guarantor Subsidiaries [Member]	Dec. 31, 2013 Consolidation, Eliminations [Member]	Dec. 31, 2012 Consolidation, Eliminations [Member]	Dec. 31, 2011 Consolidation, Eliminations [Member]	Dec. 31, 2013 Consolidated Entities [Member]	Dec. 31, 2012 Consolidated Entities [Member]	Dec. 31, 2011 Consolidated Entities [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net Cash Provided by (Used in) Operating Activities	$ (12,723)	$ 23,589	$ 2,305	$ (13,825)	$ (584)	$ (3,949)	$ (16,811)	$ 15,181	$ (7,139)	$ 17,913	$ 8,992	$ 13,393	$ 0	$ 0	$ 0	$ (12,723)	$ 23,589	$ 2,305
Capital expenditures	(27,054)	(21,607)	(11,070)	0	0	0	(21,319)	(16,418)	(8,527)	(5,735)	(5,189)	(2,543)	0	0	0	(27,054)	(21,607)	(11,070)
Proceeds from Sale of Property, Plant, and Equipment				0	0	0	109	414	249	64	60	62	0	0	0	173	474	311
Restricted cash	1,734	(3,720)	0	0	0	0	3,265	(3,265)	0	(1,531)	(455)	0	0	0	0	1,734	(3,720)	0
Net Cash Provided by (Used in) Investing Activities	(25,147)	(24,853)	(10,759)	0	0	0	(17,945)	(19,269)	(8,278)	(7,202)	(5,584)	(2,481)	0	0	0	(25,147)	(24,853)	(10,759)
Cash overdraft	3,993	(1,921)	(1,407)	0	0	0	3,993	(1,921)	(1,407)	0	0	0	0	0	0	3,993	(1,921)	(1,407)
Repayments of Lines of Credit				0	0	0	(28,513)	(48,324)	(5,089)	0	0	(1,785)	0	0	0	(28,513)	(48,324)	(6,874)
Borrowings under current revolving credit facilities, net	39,794	28,451	0	0	0	0	43,579	26,113	0	(3,785)	2,338	(13)	0	0	0	39,794	28,451	(13)
Proceeds from (Repayments of) Short-term Debt				9,500	0		(29,953)	30,000		(13)	(13)		0	0		(20,466)	29,987
Payment of debt issuance costs	(11,909)	(5,226)	(1,881)	(10,540)	(231)	903	(1,369)	(4,995)	978	0	0	0	0	0	0	(11,909)	(5,226)	1,881
Net proceeds from issuance of common stock and purchase rights	0	0	21,710			(21,710)			0			0			0			(21,710)
Payment of payroll statutory tax withholding on share-based compensation associated with issuance of common stock	(2,623)	(393)	(759)	(2,623)	393	759	0	0	0	0	0	0	0	0	0	(2,623)	393	759
Proceeds from equipment lease financing	0	4,533	3,100		0	0		(4,533)	(3,100)		0	0		0	0		(4,533)	(3,100)
Repayments of Long-term Capital Lease Obligations	1,719	2,893	1,294	0	0	0	(1,662)	2,979	1,314	(57)	(86)	(20)	0	0	0	(1,719)	2,893	1,294
Increase (Decrease) in Due to Affiliates				(38,183)	1,208	(16,099)	45,397	5,167	20,777	(7,214)	(6,375)	(4,678)	0	0	0	0	0	0
Net Cash Provided by (Used in) Financing Activities	34,228	4,214	12,582	13,825	584	3,949	31,472	7,594	15,089	(11,069)	(3,964)	(6,456)	0	0	0	34,228	4,214	12,582
Effect of Exchange Rate on Cash and Cash Equivalents				0	0	0	0	0	0	(535)	(390)	(1,491)	0	0	0	(535)	(390)	(1,491)
Cash and Cash Equivalents, Period Increase (Decrease)	(4,177)	2,560	2,637	0	0	0	(3,284)	3,506	(328)	(893)	(946)	2,965	0	0	0	(4,177)	2,560	2,637
Cash	8,676	12,853		0	0	0	512	3,796	290	8,164	9,057	10,003	0	0	0	8,676	12,853	10,293
Capital Expenditures Incurred but Not yet Paid	(1,576)	(3,778)	(1,323)	0	0	0	(818)	3,160	(1,255)	(758)	618	(68)	0	0	0	(1,576)	3,778	(1,323)
Capital Lease Obligations Incurred	4,213	0	0	0			4,213			0			0			4,213
Reclassification of Lion Warrant from equity to debt	0	0	11,339			11,339			0			0			0			11,339
Conversion of debt to equity	0	0	4,688			4,688			0			0			0			4,688
Issuance of warrants and purchase rights at fair value	0	0	6,387			6,387			0			0			0			6,387
Exercise of purchase rights	0	0	2,857			2,857			0			0			0			2,857
Repayments of Long-term Debt	144,149	0	0	144,149			0			0			0			144,149
Issuance of Senior Secured Notes	$ 199,820	$ 0	$ 0	$ 199,820			$ 0			$ 0			$ 0			$ 199,820

XML

Capital Lease Obligations (Tables)

12 Months Ended

Dec. 31, 2013

Capital Lease Obligations [Abstract]

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

Minimum future payments under these capital leases at December 31, 2013 are:

Year Ending December 31,
2014	$	2,616
2015	3,097
2016	3,024
2017	18
2018 and thereafter	—
Total future minimum lease payments	8,755
Less: Amount representing interest	(1,593		)
Net minimum lease payments	7,162
Current portion	1,709
Long-term portion	$	5,453

XML

Goodwill, Intangible Assets and Other Assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Goodwill and Intangible Assets and Other Assets [Abstract]
Goodwill	$ 1,906	$ 1,906
Goodwill, Impairment Loss	$ 0

XML

Income Taxes (Deferred Tax Assets and Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure [Abstract]
Allowance for doubtful accounts	$ 831	$ 778
Deferred rent	7,295	7,773
Accrued liabilities and workers’ compensation	16,134	12,409
Inventories	6,877	6,731
Federal and California tax credits	12,067	12,067
Net operating loss carryforward	62,052	36,111
Deferred gift card income	2,379	1,866
Fixed assets	5,723	870
Foreign tax credits	9,296	8,335
Other comprehensive income	0	29
Other	1,833	848
Total gross deferred tax assets	124,487	87,817
Less valuation allowance	(120,694)	(77,578)	(73,773)
Net deferred tax assets	3,793	10,239
Prepaid expenses	(1,432)	(1,004)
Unrealized (gain) loss on warrants and purchase rights	0	(8,003)
Other	(1,113)	(35)
Total gross deferred tax liabilities	(2,545)	(9,042)
Net deferred tax assets and liabilities	$ 1,248	$ 1,197

XML

Capital Lease Obligations (Details)	Dec. 31, 2013 Rate
Capital leases [Abstract]
Interest rate, minimum range, capital lease	0.00%
Interest rate, maximum range, capital lease	24.00%
Average interest rate, capital leases	0.00%

XML

Summary of Significant Accounting Policies (Non-printing) (Details) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Preferred stock - Non Print [Abstract]
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0

XML

Organization and Business

12 Months Ended

Dec. 31, 2013

Organization and Business [Abstract]

Nature of Operations [Text Block]

Organization and Business

American Apparel, Inc. and its subsidiaries (collectively “the Company”) is a vertically-integrated manufacturer, distributor, and retailer of branded fashion basic apparel products and designs, manufactures and sells clothing and accessories for women, men, children and babies. The Company sells its products through the wholesale distribution channel supplying t-shirts and other casual wear to distributors and screen printers, as well as direct to customers through its retail stores located in the United States, and internationally. In addition, the Company operates an online retail e-commerce website. At December 31, 2013, the Company operated a total of 248 retail stores in 20 countries: the United States, Canada and 18 other countries.

Liquidity and Management's Plan

As of December 31, 2013, the Company had approximately $8,676 in cash and $6,268 of availability for additional borrowings under the credit facility with Capital One Business Credit Corp. ("Capital One" and such facility the "Capital One Credit Facility") and the Company's credit agreement with Bank of Montreal ("the Bank of Montreal Credit Agreement") (as defined in Note 7). Additionally, the Company had $43,526 outstanding on a $50,000 asset-backed revolving credit facility (increased from $35,000 to $50,000 on July 5, 2013) under the Capital One Credit Facility and $443 outstanding on the C$5,000 (Canadian dollars) revolving credit facility under the Bank of Montreal Credit Agreement. On February 28, 2014 the Bank of Montreal Credit Agreement was reduced to C$2,000. Amounts outstanding were repaid, and the agreement expired by its own terms on March 31, 2014.

On February 28, 2014, the Company had approximately $4,878 in cash and $3,299 of availability for additional borrowings under the Capital One Credit Facility and Bank of Montreal Credit Agreement.

On April 4, 2013, the Company closed a private offering of $206,000 aggregate principal amount of its Senior Secured Notes due April 15, 2020 (the "Notes") at 97% of par and also entered into a new $35,000 asset-backed revolving credit facility with Capital One maturing on April 4, 2018, subject to a January 15, 2018 maturity under certain circumstances. Subsequently, on July 5, 2013, the Company entered into an amendment to the Capital One Credit Facility, pursuant to which the total commitment under the credit facility was raised to $50,000. Interest on the Notes approximating $13,500 per payment period (in 2014), is payable semi-annually, in arrears, on April 15 and October 15 of each year, beginning on October 15, 2013. The Company used the net proceeds from the offering of the Notes, together with borrowings under the new credit facility, to repay and terminate its credit agreement with Crystal Financial LLC ("Crystal") and its loan agreement with Lion Capital LLP ("Lion"). The notes and the new credit facility are the Company's senior secured obligations and are guaranteed, on a senior secured basis, by the Company's domestic restricted subsidiaries, subject to some exceptions.

During the third quarter of 2013, the Company determined it was probable that a special interest trigger event under the indenture governing the Notes would occur as of December 31, 2013 and accrued interest on the Notes at 15% retroactive to April 4, 2013 representing an additional 2% interest, which additional interest is payable in-kind until April 15, 2018 and in cash on subsequent interest dates. The Company recorded $3,044 in additional interest expense for the special interest trigger event for the year ended December 31, 2013. The company will pay in-kind the additional 2% interest retroactive to the issue date of the Notes on the next interest payment date, April 15, 2014.

Under the Capital One Credit Facility, the Company was in violation of certain covenants for the twelve consecutive fiscal months ended September 30, 2013 and December 31, 2013, and anticipated a violation for the twelve months ended March 31, 2014.

On November 14, 2013, the Company entered into a third amendment to the Capital One Credit Facility, which among other things, waived the obligation to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio for the twelve consecutive fiscal month period ending September 30, 2013. As a condition to the waiver, the Company agreed to a one percentage point increase in the interest rate to either LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at the Company's option) and limitations on amounts available to be borrowed, consisting of the imposition of a reserve against the line that gradually reduced the total borrowing capacity to $47,500 and certain amendments to the borrowing base calculation.  In addition, the Company paid a waiver fee of $75.

On March 25, 2014, the Company entered into a fifth amendment to the Capital One Credit Facility which, effective upon its receipt of at least $25,000 of net proceeds from a financing prior to April 15, 2014, among other things: waives the obligation to maintain the minimum fixed charge coverage and maximum leverage ratios for the three month periods ended December 31, 2013 and March 31, 2014; resets for future periods the fixed charge coverage ratio, the maximum leverage ratio and the maximum capital expenditures allowed; adds a minimum EBITDA covenant; increases the interest rate payable under the credit agreement by 0.5% per annum to either LIBOR plus 5.0% or the bank's prime rate plus 4.0% (at the Company's option); and increases the fees payable upon early termination.

On May 22, 2013 the Company entered into a loan agreement with Lion (the “Lion Loan Agreement”) in a principal amount of $4,500. On November 29, 2013, the Lion Loan Agreement was amended to increase the amount we borrowed by $5,000 and to make certain other technical amendments. The term loans under the Lion Loan Agreement mature on October 4, 2018 and bear interest at an initial interest rate of 18% per annum, which interest rate increased to 20% per annum due to the occurrence of a special interest trigger event under the Notes. Interest under the loan agreement is payable in cash or, to the extent permitted by the Company’s other debt agreements, in-kind.

On March 31, 2014, the Company completed a public offering of approximately 61,645 shares of its common stock at $0.50 per share for net proceeds of approximately $28,500. As a result of this offering, common stock issued and outstanding were 175,109 and 173,377 shares, respectively. Additionally, the underwriters have a 30 day option to acquire up to an additional 8,500 shares of the Company's common stock at $0.50 per share.

The Company believes that it has sufficient financing commitments to meet funding requirements for the next twelve months.

The Company's transition to its new distribution center in La Mirada, California has had a significant negative impact on the Company's earnings and cash flow in 2013. For the yearended December 31, 2013, the Company incurred incremental distribution costs associated with these transition activities of approximately $14,874. All such costs have been charged to cost of sales and operating expense in the accompanying statements of operations. The issues surrounding the transition primarily relate to improper system design and integration and inadequate training and staffing. These issues caused processing inefficiencies that required the Company to employ additional staffing, among other things, in order to meet customer demand. The transition was successfully completed during the fourth quarter of 2013. The center is now fully operational and labor costs have been reduced.

The Company continues to develop other initiatives intended to either increase sales, reduce costs or improve liquidity. In the fourth quarter of 2013 and continuing into January of 2014, significant reductions were made in payroll and related costs associated with manufacturing and administrative overheads. The Company also instituted a program in the first quarter of 2014 to limit capital expenditures. Additionally, the Company intends to continue to drive productivity improvements from its new distribution center, reduce inventories, reduce store labor costs, and evaluate further consolidation of administrative and manufacturing functions. Efforts to identify additional ways to reduce costs and improve productivity are ongoing.

Although the Company has made significant improvements under this plan, the Company's cash flows are dependent upon meeting future sales growth projections and reducing certain expenses. There can be no assurance that planned improvements will be successful.

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Capital Lease Obligations (Minimum future payments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Capital leases [Abstract]
Future Minimum Payments Due, 2013	$ 2,616
Future Minimum Payments Due, 2014	3,097
Future Minimum Payments Due, 2015	3,024
Future Minimum Payments Due, 2016	18
Future Minimum Payments Due, 2017 and thereafter	0
Total future minimum lease payments	8,755
Current portion	1,709	1,703
Long-term portion	5,453	2,844
Capital Leases, Future Minimum Payments, Interest Included in Payments	(1,593)
Capital Lease Obligations	$ 7,162

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Quarterly Financial Information Quarterly Financial Information (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information [Text Block]

Supplementary Financial Information

The following quarterly data are derived from the Company’s consolidated statements of operations.

QUARTERLY INFORMATION (unaudited)

(Amounts in thousands except per share amounts)

	Quarter Ended December 31,  2013			Quarter Ended September 30,  2013			Quarter Ended June 30, 2013			Quarter Ended March 31,  2013			Year Ended December 31,  2013
Fiscal 2013
Net sales	$	169,102		$	164,543		$	162,236		$	138,060		$	633,941
Gross profit	$	79,507		$	84,640		$	83,870		$	72,868		$	320,885
Net loss	$	(20,770	)	$	(1,513	)	$	(37,504	)	$	(46,511	)	$	(106,298	)
Loss per share-basic and diluted	$	(0.19	)	$	(0.01	)	$	(0.34	)	$	(0.42	)	$	(0.96	)
	Quarter Ended December 31,  2012			Quarter Ended September 30,  2012			Quarter Ended June 30, 2012			Quarter Ended March 31,  2012			Year Ended December 31,  2012
Fiscal 2012
Net sales	$	173,028		$	162,160		$	149,462		$	132,660		$	617,310
Gross profit	$	93,091		$	85,200		$	79,036		$	70,056		$	327,383
Net loss	$	4,903		$	(19,012	)	$	(15,272	)	$	(7,891	)	$	(37,272	)
Loss per share-basic and diluted	$	0.05		$	(0.18	)	$	(0.14	)	$	(0.07	)	$	(0.35	)

Seasonality

The Company experiences seasonality in its operations. Historically, sales during the third and fourth fiscal quarters have generally been the highest, with sales during the first fiscal quarter the lowest. This reflects the combined impact of the seasonality of the wholesale and retail segments. Generally, the Company’s retail segment has not experienced the same pronounced sales seasonality as other retailers.

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Summary of Significant Accounting Policies [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

CEO Anti-Dilution Rights - On October 16, 2012, the Company and Mr. Charney entered into an amendment to Mr. Charney's anti-dilution rights (see Note 13). As the amendment lengthened the requisite service period, the Company will recognize the unrecorded compensation cost from the original award of $2,738 over its remaining service period and recognize the incremental compensation cost as a result of the modification of $6,854 over the requisite service period of the modified award.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most complex and subjective estimates include: inventory valuation and obsolescence; valuation and recoverability of long-lived assets, including the values assigned to goodwill and property and equipment; fair value calculations, including derivative liabilities such as warrants; contingencies, including accruals for the outcome of current litigation and assessments and self-insurance; income taxes, including uncertain tax positions and recoverability of deferred income taxes; and cash flow projections in assessing future performance related to financial standards requiring a prospective analysis in valuing and classifying assets and liabilities.

On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted. Actual results could differ from the estimates.

Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restricted Cash

Restricted cash primarily represented cash collateral on standby letters of credit. The standby letters of credit are predominantly used as collateral for the Company's workers' compensation program. See Note 16.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

Financial instruments which potentially subject the Company to credit risk consist primarily of cash (the amounts of which may, at times, exceed Federal Deposit Insurance Corporation limits on insurable amounts) and trade accounts receivable, relating substantially to the Company’s U.S. Wholesale segment. The Company mitigates its cash risk by investing through major financial institutions. The Company had approximately $7,374 and $8,265 held in foreign banks at December 31, 2013, and 2012, respectively.

The Company mitigates its risks related to trade receivables by performing on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information. The Company also maintains an insurance policy for certain customers based on a customer’s credit rating and established limits. Collections and payments from customers are continuously monitored. One customer, in the U.S. Wholesale segment, accounted for 14.2% and 15.1% of the Company’s total accounts receivables as of December 31, 2013 and 2012, respectively. The Company maintains an allowance for doubtful accounts, which is based upon historical experience and specific customer collection issues that have been identified. While bad debt expenses have historically been within expectations and allowances established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

The Company’s financial instruments are primarily composed of cash, restricted cash, accounts receivable (including credit card receivables), accounts payable, revolving credit borrowings, its senior secured notes, term loans and warrants. The fair value of cash, restricted cash, accounts receivable and accounts payable closely approximates their carrying value due to their short maturities and variable rates. The fair value of fixed-rate borrowings not based on quoted prices is estimated using a discounted cash flow analysis.

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related asset or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities.

Wherever possible, the Company utilizes observable market inputs (quoted market prices) when measuring fair value.

For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company's accounting and finance department determine valuation policies and procedures. Their determinations are approved by the Chief Financial Officer.

As of December 31, 2013, there were no transfers in or out of Level 2 and Level 3 from other levels.

The fair value of fixed rate borrowings not based on quoted prices are estimated using a projected discounted cash flow analysis based on unobservable inputs including interest payments, principal payments and discount rate, and is classified within Level 3 of the valuation hierarchy. An increase or decrease in the stock price and the discount rate assumption can significantly decrease or increase the fair value of the fixed rate borrowings. See Note 9.

The fair value of each warrant was estimated using the Binomial Lattice option valuation model. Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and were classified within Level 3 of the valuation hierarchy. An increase or decrease in these inputs could significantly increase or decrease the fair value of the warrant. See Notes 9 and 13.

The fair value of indefinite-lived assets, which consists exclusively of goodwill, is measured in connection with the Company’s annual goodwill impairment test.  The fair value of the reporting unit to which goodwill has been assigned, is determined using a projected discounted cash flow analysis based on unobservable inputs including gross profit, discount rate, working capital requirements, capital expenditures, depreciation and terminal value assumptions, and are classified within Level 3 of the valuation hierarchy. An increase or decrease in the discount rate assumption and/or the terminal value assumption, in isolation, can have a significant effect on the fair value of the reporting unit. See Goodwill and Other Intangible Assets below.

Retail stores that have indicators of impairment and whose carrying value of assets are greater than their related projected undiscounted future cash flows, are measured for impairment by comparing the fair value of the assets against their carrying value. Fair value of the assets is estimated using a projected discounted cash flow analysis based on unobservable inputs including gross profit and discount rate, and is classified within Level 3 of the valuation hierarchy.  The key assumptions used in the estimates of projected cash flows were sales, gross margin and payroll costs. These forecasts are based on historical trends and take into account recent developments, as well as the Company's plans and intentions. An increase or decrease in the discount rate assumption and/or projected cash flows, in isolation, can significantly decrease or increase the fair value of the assets, which would have an effect on the impairment recorded. See Impairment of Long-Lived Assets below.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of companies acquired. Goodwill and other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but are instead tested for impairment at least annually. The Company’s annual impairment test date is December 31.

Based on the qualitative assessment provisions of ASC 350 "Intangibles-Goodwill and Other", the Company determined that based on an analysis of qualitative factors, the fair value of the reporting unit was more likely than not greater than its carrying amount, and therefore, a quantitative calculation of the reporting unit's fair value was not be needed. The Company has not historically had any goodwill impairment.

Other intangible assets consist of deferred financing costs (amortized over the term of the applicable debt facility) and key money, broker and finder fees and lease rights (amortized over the life of the respective lease).

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if a write down to a new depreciable basis is required. If required, an impairment charge is measured by the difference between the carrying value and the estimated fair value of the assets, with such estimated fair values generally determined using the discounted future cash flows of the assets using a rate that approximates the Company’s weighted average cost of capital. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of retail stores relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of the assets or in the Company's overall strategy with respect to the manner or use of the acquired assets or changes in the Company's overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company's stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets and its retail stores for potential impairment indicators at least annually and more frequently upon the occurrence of events that could impact prior conclusions.

The key assumptions used in management's estimates of projected cash flow at its retail stores deal largely with forecasts of sales levels, gross margins, and payroll costs. These forecasts are typically based on historical trends and take into account recent developments as well as management's plans and intentions. Any material change in manufacturing costs or a raw material costs could significantly impact projected future cash flows of retail stores and these factors are considered in evaluating impairment. Other factors, such as increased competition or a decrease in the desirability of the Company's products, could lead to lower projected sales levels, which would adversely impact cash flows. A significant change in cash flows in the future could result in an impairment of long lived assets.

Website Development, Policy [Policy Text Block]

Web Site Development

The Company capitalizes applicable costs incurred during the application and infrastructure website development stage and expenses costs incurred during the planning and operating stage. As of December 31, 2013 and 2012, the carrying value of the Company's capitalized website development costs were $2,805 and $2,242, respectively, and were included in property and equipment in the accompanying consolidated balance sheets.

Self-Insurance Accruals [Policy Text Block]

Self-Insurance Liabilities

The Company self-insures a significant portion of expected losses under workers’ compensation and healthcare benefits programs. Estimated costs under the workers’ compensation program, including incurred but not reported claims, are recorded as expense based upon historical experience, trends of paid and incurred claims, and other actuarial assumptions. If actual claim trends under these programs, including the severity or frequency of claims, differ from the Company's estimates, its financial results may be significantly impacted. The Company's estimated self-insurance liabilities are classified in its balance sheets as accrued expenses or other long-term liabilities based upon whether they are expected to be paid during or beyond the Company's normal operating cycle of 12 months from the date of its consolidated financial statements. Estimated costs under the Company's healthcare program are based on estimated losses for claims incurred, but not paid at the end of the period. Funding is made directly to the providers and/or claimants by the insurance company.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. For the years ended December 31, 2013, 2012 and 2011, the Company recorded a valuation allowance against deferred tax assets of $120,694, $77,578 and $73,773. For all years presented, the Company recorded a valuation allowance against substantially all deferred tax assets. In the event the Company determines that it will be able to realize deferred income tax assets in the future, it will make an adjustment to the valuation allowance.

The Company records net deferred tax assets to the extent it believes these assets will be realized using a more likely than not standard. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.

Management makes judgments as to the interpretation of tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management's opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

The Company accounts for uncertain tax positions in accordance with ASC 740-“Income Taxes”. Gross unrecognized tax benefits are included in other long-term liabilities in the accompanying consolidated balance sheets. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying consolidated statements of operations.

Contingencies, Policy [Policy Text Block]

Contingencies

Certain conditions may exist at the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings or governmental assessments that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of these matters as well as the merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company's consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, is disclosed. Associated legal fees are expensed as incurred.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

In making these determinations, the Company assesses the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. Management determines the amount of reserves needed, if any, for each individual issue based on its knowledge and experience and discussions with legal counsel. The required reserves may change in the future due to new developments in each matter, the ultimate resolution of each matter, or changes in approach, such as a change in settlement strategy. The Company currently does not believe, based upon information available, that these matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows. There can be no assurance that such matters will not materially and adversely affect the Company's business, financial position, and results of operations or cash flows. See Notes 15 and 18, Commitments and Contingencies and Litigation.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes product sales when title and risk of loss have transferred to the customer, there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collectability is reasonably assured. Wholesale product sales are recorded at the time the product is either picked up by or shipped to the customer. Online product sales are recorded at the time the product is received by the customer. Retail store sales are recorded as revenue upon the sale of product to retail customers. The Company’s net sales represent gross sales invoiced to customers, less certain related charges for discounts, returns, and other promotional allowances, and are recorded net of sales or value added tax. Allowances provided for these items are presented in the consolidated financial statements primarily as reductions to sales and cost of sales (see Sales Returns and Allowances below for further information).

The Company recognizes revenue from gift cards, gift certificates and store credits as they are redeemed for product or when it is determined that some portion of gift cards will not be redeemed. See Gift Cards below.

Sales Returns and Allowances, Policy [Policy Text Block]

Sales Returns and Allowances

The Company analyzes sales returns in order to make reasonable estimates of product returns for its wholesale, online and retail store sales based upon historical experience. Estimates for sales returns are based on a variety of factors including actual returns based on expected return data communicated to the Company by its customers. Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns. The Company regularly reviews the factors that influence its estimates and, if necessary, makes adjustments when it believes that actual product returns and credits may differ from established reserves. If actual or expected future returns and claims are significantly greater or lower than the allowance for sales returns established, the Company would record a reduction or increase to net revenues in the period in which it made such determination.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and Handling Costs

Shipping and handling costs consist primarily of freight expenses incurred to transport products to the Company's retail stores and distribution center, and to its wholesale and online retail customers. These costs are included in cost of sales. Amounts billed to customers for shipping are included in net sales.

Gift Cards [Policy Text Block]

Gift Cards

Upon issuance of a gift card a liability is established for the cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Over time, some portion of gift cards is not redeemed ("breakage"). The Company determines breakage income for gift cards based on historical redemption patterns. Breakage income is recorded as a credit to selling expenses, which is a component of operating expenses in the consolidated statements of operations. Currently, the Company records breakage when gift cards remain unredeemed after two-years. The Company's gift cards, gift certificates and store credits do not have expiration dates. See Note 6.

The Company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate breakage.

Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block]

Trade Receivables and Allowance for Doubtful Accounts

Accounts receivable primarily consists of trade receivables, including amounts due from credit card companies, net of allowances. On a periodic basis, the Company evaluates its trade receivables and establishes an allowance for doubtful accounts.

The Company performs on-going credit evaluations of its customers and adjust credit limits based upon payment history and the customer’s current credit worthiness, as determined by its review of current credit information. Payments from customers are continuously monitored. The Company maintains an allowance for doubtful accounts, which is based upon historical experience as well as specific customer collection issues that have been identified. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Deferred Rent, Rent Expense and Tenant Allowances [Policy Text Block]

Deferred Rent, Rent Expense and Tenant Allowances

The Company occupies its retail stores, corporate office, manufacturing, and distribution center under operating leases generally with terms of one to ten years. Some leases contain renewal options for periods ranging from five to fifteen years under substantially the same terms and conditions as the original leases but with rent adjustments based on various factors specific to each agreement. Many of the store leases require payment of a specified minimum rent, a contingent rent based on a percentage of the store’s net sales in excess of a specified threshold, plus defined escalating rent provisions. The Company recognizes its minimum rent expense on a straight-line basis over the term of the lease (including probable lease renewals), plus the construction period prior to occupancy of the retail location, using a mid-month convention. Also included in rent expense are payments of real estate taxes, insurance and certain common area and maintenance costs in addition to the future minimum operating lease payments. Certain lease agreements provide for the Company to receive lease inducements or tenant allowances from landlords to assist in the financing of certain property. These inducements are recorded as a component of deferred rent and amortized as a reduction of rent expense over the term of the related lease.

Advertising Costs, Policy [Policy Text Block]

Advertising, Promotion and Catalog

The Company expenses the production costs of advertising the first time the advertising takes place. Advertising, promotion and catalog expenses for the years ended December 31, 2013, 2012 and 2011 amounted to $19,814, $22,114, and $15,194 respectively, and are included in selling expenses in the accompanying consolidated statements of operations. The Company has cooperative advertising arrangements with certain vendors in its U.S. wholesale segment. For the years ended December 31, 2013, 2012 and 2011, cooperative advertising expenses were not significant.

Share-based Compensation, Policy [Policy Text Block]

Share-Based Compensation

The Company recognizes compensation expense on a straight-line basis net of forfeitures over the vesting period for all share-based awards granted. The Company determines the fair value of restricted stock awards based on the market value at the grant date. The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards at the grant date. The Company calculates the expected volatility using the historical volatility over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. Due to the lack of historical information, the Company determines the expected term of its stock option awards by using the simplified method, which assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires. Estimated forfeitures are zero, as to date, actual forfeitures have been insignificant. The expected dividend yield is zero as the Company has not paid or declared any cash dividends on its Common Stock. Based on these valuations, the Company recognized share-based compensation expense of $8,451, $10,580, and $6,814 for the years ended December 31, 2013, 2012 and 2011, respectively.

Preferred stock [Policy Text Block]

Preferred Stock

At December 31, 2013 and 2012, the Company was authorized to issue 1,000 shares of preferred stock with a par value of $0.0001 with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. There were no shares issued or outstanding at December 31, 2013 and 2012. Shares may be issued in one or more series.

Earnings Per Share, Policy [Policy Text Block]

Earnings per Share

The Company presents earnings per share (“EPS”) utilizing a dual presentation of basic and diluted EPS. Basic EPS includes no dilution and is computed by dividing net (loss) income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The Company had common stock under various options, warrants and other agreements at December 31, 2013, 2012 and 2011. The weighted average effects of 46,684, 53,478 and 49,270 shares at December 31, 2013, 2012 and 2011, respectively, were excluded from the calculations of net loss per share for the years ended December 31, 2013, 2012 and 2011, because their impact would have been anti-dilutive. See Note 13.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive Loss

Comprehensive loss represents the change in stockholders’ equity resulting from transactions other than stockholder investments and distributions. Accumulated other comprehensive loss includes changes in equity that are excluded from the Company’s net loss, specifically, unrealized gains and losses on foreign currency translation adjustments and is presented in the consolidated statements of stockholders' equity.

New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Standards Updates

Accounting standards updates effective after December 31, 2013, are not expected to have a material effect on the Company's consolidated financial statements.

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

The Company has evaluated events that occurred subsequent to December 31, 2013 and through the date the financial statements were issued.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

The fair value of the Company's financial instruments are measured on a recurring basis. The carrying amount reported in the accompanying consolidated balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximates fair value because of the short-term maturity of those instruments. The carrying amount for borrowings from Capital One and Bank of Montreal approximates fair value because of the variable market interest rate charged to the Company for these borrowings. The fair value of the Notes was calculated based on the quoted market price of the Notes. The fair value of the Lion Loan Agreement was estimated using a discounted cash flow analysis and a yield rate that was estimated using yield rates for publicly traded debt instruments of comparable companies with similar features. The fair value of each warrant was estimated using the Binomial Lattice option valuation model.

Segment Reporting, Policy [Policy Text Block]

The Company reports the following four operating segments: U.S. Wholesale, U.S. Retail, Canada, and International. The Company believes this method of segment reporting reflects both the way its business segments are managed and the way the performance of each segment is evaluated. U.S. Wholesale segment consists of the Company's wholesale operations of sales of undecorated apparel products to distributors and third party screen printers in the United States, as well as the Company's online consumer sales to U.S. customers. U.S. Retail segment consists of the Company's retail operations in the United States, which comprised 139 retail stores operating in the United States as of December 31, 2013. Canada segment includes retail, wholesale and online consumer operations in Canada. As of December 31, 2013, the retail operations in the Canada segment comprised 32 retail stores. The International segment includes retail, wholesale and online consumer operations outside of the United States and Canada. As of December 31, 2013, the retail operations in the International segment comprised 77 retail stores operating in 18 countries outside of the United States and Canada. All of the Company's retail stores sell the Company's apparel products directly to consumers.

The Company's management evaluates performance based on a number of factors; however, the primary measures of performance are net sales and income or loss from operations of each business segment, as these are the key performance indicators reviewed by management. Operating income or loss for each segment does not include unallocated corporate general and administrative expenses, interest expense and other miscellaneous income/expense items. Corporate general and administrative expenses include, but are not limited to: human resources, legal, finance, information technology, accounting, executive compensation and various other corporate level expenses.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Deferred financing costs represent costs incurred in connection with the issuance of certain indebtedness and were capitalized as deferred costs and are being amortized over the term of the related indebtedness. The Company incurred related amortization expense of $1,895, $2,287, and $1,634, for the years ended December 31, 2013, 2012 and 2011, respectively, which is recorded to interest expense.

Lease rights are costs incurred to acquire the right to lease a specific property. A majority of the Company's lease rights are related to premiums paid to landlords. Lease rights are recorded at cost and are amortized over the term of the respective leases.

Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease for a certain property. Key money represents the “right to lease” with an automatic right of renewal. This right can be subsequently sold by the Company or can be recovered should the landlord refuse to allow the automatic right of renewal to be exercised. Key money is amortized over the respective lease terms.

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Condensed Consolidating Financial Information (Notes)

12 Months Ended

Dec. 31, 2013

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

Condensed Consolidating Financial Information

On April 4, 2013, American Apparel Inc. ("Parent") issued $206,000 aggregate principal amount of its 13% Senior Secured Notes due 2020 (the "Notes") with a maturity date of April 15, 2020. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the Company's existing and future owned direct and indirect domestic subsidiaries, subject to certain customary automatic release provisions, including release of the subsidiary guarantor's guarantee upon the sale of all of such guarantor's equity interest or all or substantially all of its assets, designation of such guarantor as an unrestricted or immaterial subsidiary for purposes of the indenture and satisfaction of the defeasance or discharge provisions of the indenture. The following presents the condensed consolidating balance sheets as of December 31, 2013 and 2012, the condensed consolidating statements of operations for the years ended December 31, 2013, 2012 and 2011 and the condensed consolidating statements of cash flows for the years ended December 31, 2013, 2012 and 2011 of the Parent, the Company's material guarantor subsidiaries and the non-guarantor subsidiaries, and the elimination entries necessary to present the Company's financial statements on a consolidated basis. This condensed consolidating financial information should be read in conjunction with the accompanying consolidated financial statements of the Company.

Condensed Consolidating Balance Sheets

December 31, 2013

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
ASSETS
CURRENT ASSETS
Cash	$	—		$	512		$	8,164		$	—		$	8,676
Trade accounts receivable, net	—			15,109			5,592			—			20,701
Intercompany accounts receivable, net	247,414			(224,181		)	(23,233		)	—			—
Inventories, net	—			129,716			39,736			(74		)	169,378
Other current assets	97			10,442			6,002			—			16,541
Total current assets	247,511			(68,402		)	36,261			(74		)	215,296
PROPERTY AND EQUIPMENT, net	—			53,424			15,879			—			69,303
INVESTMENTS IN SUBSIDIARIES	(94,161		)	18,158			—			76,003			—
OTHER ASSETS, net	9,282			27,934			11,937			—			49,153
TOTAL ASSETS	$	162,632		$	31,114		$	64,077		$	75,929		$	333,752
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Revolving credit facilities and current portion of long-term debt	$	—		$	43,586		$	456		$	—		$	44,042
Accounts payable	—			34,738			3,552			—			38,290
Accrued expenses and other current liabilities	5,952			28,344			15,722			—			50,018
Fair value of warrant liability	20,954			—			—			—			20,954
Other current liabilities	—			6,830			1,855			—			8,685
Total current liabilities	26,906			113,498			21,585			—			161,989
LONG-TERM DEBT, net	213,130			47			291			—			213,468
OTHER LONG-TERM LIABILITIES	—			29,711			5,988			—			35,699
TOTAL LIABILITIES	240,036			143,256			27,864			—			411,156
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock	11			100			492			(592		)	11
Additional paid-in capital	185,472			6,726			7,685			(14,411		)	185,472
Accumulated other comprehensive (loss) income	(4,306		)	(543		)	(671		)	1,214			(4,306		)
(Accumulated deficit) retained earnings	(256,424		)	(118,425		)	28,707			89,718			(256,424		)
Less: Treasury stock	(2,157		)	—			—			—			(2,157		)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY	(77,404		)	(112,142		)	36,213			75,929			(77,404		)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	162,632		$	31,114		$	64,077		$	75,929		$	333,752

Condensed Consolidating Balance Sheets

December 31, 2012

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
ASSETS
CURRENT ASSETS
Cash	$	—		$	3,796		$	9,057		$	—		$	12,853
Trade accounts receivable, net	—			15,697			7,265			—			22,962
Intercompany accounts receivable, net	200,529			(169,818		)	(30,711		)	—			—
Inventories, net	—			125,988			49,493			(1,252		)	174,229
Other current assets	438			8,200			5,708			—			14,346
Total current assets	200,967			(16,137		)	40,812			(1,252		)	224,390
PROPERTY AND EQUIPMENT, net	—			50,551			17,227			—			67,778
INVESTMENTS IN SUBSIDIARIES	(50,773		)	17,766			—			33,007			—
OTHER ASSETS, net	204			25,607			10,233			—			36,044
TOTAL ASSETS	$	150,398		$	77,787		$	68,272		$	31,755		$	328,212
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Revolving credit facilities and current portion of long-term debt	$	—		$	56,156		$	4,400		$	—		$	60,556
Accounts payable	—			34,120			4,040			—			38,160
Accrued expenses and other current liabilities	1,679			24,137			15,700			—			41,516
Fair value of warrant liability	17,241			—			—			—			17,241
Other current liabilities	(286		)	1,778			2,644			—			4,136
Total current liabilities	18,634			116,191			26,784			—			161,609
LONG-TERM DEBT, net	109,680			6			326			—			110,012
OTHER LONG-TERM LIABILITIES	—			28,230			6,277			—			34,507
TOTAL LIABILITIES	128,314			144,427			33,387			—			306,128
STOCKHOLDERS' EQUITY (EQUITY)
Common stock	11			100			492			(592		)	11
Additional paid-in capital	177,081			6,726			7,223			(13,949		)	177,081
Accumulated other comprehensive (loss) income	(2,725		)	(381		)	736			(355		)	(2,725		)
(Accumulated deficit) retained earnings	(150,126		)	(73,085		)	26,434			46,651			(150,126		)
Less: Treasury stock	(2,157		)	—			—			—			(2,157		)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY	22,084			(66,640		)	34,885			31,755			22,084
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	150,398		$	77,787		$	68,272		$	31,755		$	328,212

Condensed Consolidating Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2013

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
Net sales	$	—		$	462,732		$	227,680		$	(56,471	)	$	633,941
Cost of sales	—			285,947			84,938			(57,829		)	313,056
Gross profit	—			176,785			142,742			1,358			320,885
Selling expenses	—			143,379			98,304			—			241,683
General and administrative expenses	502			67,779			38,676			—			106,957
Retail store impairment	—			642			898			—			1,540
(Loss) income from operations	(502		)	(35,015		)	4,864			1,358			(29,295		)
Interest expense and other expense	63,992			10,622			618			—			75,232
Equity in loss (earnings) of subsidiaries	41,804			(95		)	—			(41,709		)	—
(Loss) income before income taxes	(106,298		)	(45,542		)	4,246			43,067			(104,527		)
Income tax provision	—			(202		)	1,973			—			1,771
Net (loss) income	$	(106,298	)	$	(45,340	)	$	2,273		$	43,067		$	(106,298	)
Other comprehensive (loss) income, net of tax	(1,581		)	(162		)	(1,407		)	1,569			(1,581		)
Comprehensive (loss) income	$	(107,879	)	$	(45,502	)	$	866		$	44,636		$	(107,879	)

Condensed Consolidating Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2012

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		Elimination Entries			Consolidated
Net sales	$	—		$	452,234		$	233,069	$	(67,993	)	$	617,310
Cost of sales	—			271,809			85,958		(67,840		)	289,927
Gross profit	—			180,425			147,111		(153		)	327,383
Selling expenses	—			126,492			100,955		—			227,447
General and administrative expenses	1,276			59,420			36,518		113			97,327
Retail store impairment	—			243			1,404		—			1,647
(Loss) income from operations	(1,276		)	(5,730		)	8,234		(266		)	962
Interest expense and other expense	23,975			9,629			817		—			34,421
Equity in loss (earnings) of subsidiaries	12,021			(1,057		)	—		(10,964		)	—
(Loss) income before income taxes	(37,272		)	(14,302		)	7,417		10,698			(33,459		)
Income tax provisions	—			133			3,680		—			3,813
Net (loss) income	$	(37,272	)	$	(14,435	)	$	3,737	$	10,698		$	(37,272	)
Other comprehensive income, net of tax	631			164			498		(662		)	631
Comprehensive (loss) income	$	(36,641	)	$	(14,271	)	$	4,235	$	10,036		$	(36,641	)

Condensed Consolidating Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2011

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
Net sales	$	—		$	396,303		$	213,872		$	(62,839	)	$	547,336
Cost of sales	—			234,755			82,445			(64,764		)	252,436
Gross profit	—			161,548			131,427			1,925			294,900
Selling expenses	—			115,319			94,522			—			209,841
General and administrative expenses	2,668			69,624			31,793			—			104,085
Retail store impairment	—			558			3,709			—			4,267
(Loss) income from operations	(2,668		)	(23,953		)	1,403			1,925			(23,293		)
Interest and other expense	7,202			4,896			2,214			(12		)	14,300
Equity in loss (earnings) of subsidiaries	29,444			1,543			—			(30,987		)	—
(Loss) income before income taxes	(39,314		)	(30,392		)	(811		)	32,924			(37,593		)
Income tax provision	—			228			1,493			—			1,721
Net loss	$	(39,314	)	$	(30,620	)	$	(2,304	)	$	32,924		$	(39,314	)
Other comprehensive (loss) income, net of tax	(188		)	214			(53		)	(161		)	(188		)
Comprehensive loss	$	(39,502	)	$	(30,406	)	$	(2,357	)	$	32,763		$	(39,502	)

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2013

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(13,825	)	$	(16,811	)	$	17,913		$	—	$	(12,723	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			(21,319		)	(5,735		)	—		(27,054		)
Proceeds from sale of fixed assets	—			109			64			—		173
Restricted cash	—			3,265			(1,531		)	—		1,734
Net cash used in investing activities	—			(17,945		)	(7,202		)	—		(25,147		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	—			3,993			—			—		3,993
Repayments of expired revolving credit facilities, net	—			(28,513		)	—			—		(28,513		)
Borrowings (repayments) under current revolving credit facilities, net	—			43,579			(3,785		)	—		39,794
Repayments of term loans and notes payable	9,500			(29,953		)	(13		)	—		(20,466		)
Repayment of Lion term loan	(144,149		)	—			—			—		(144,149		)
Issuance of Senior Secured Notes	199,820			—			—			—		199,820
Payments of debt issuance costs	(10,540		)	(1,369		)	—			—		(11,909		)
Payment of statutory payroll tax withholding on stock-based compensation associated with issuance of common stock	(2,623		)	—			—			—		(2,623		)
Repayments of capital lease obligations	—			(1,662		)	(57		)	—		(1,719		)
Advances to/from affiliates	(38,183		)	45,397			(7,214		)	—		—
Net cash provided by (used in) financing activities	13,825			31,472			(11,069		)	—		34,228
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	—			—			(535		)	—		(535		)
NET DECREASE IN CASH	—			(3,284		)	(893		)	—		(4,177		)
CASH, beginning of period	—			3,796			9,057			—		12,853
CASH, end of period	$	—		$	512		$	8,164		$	—	$	8,676
NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired, and included in accounts payable	$	—		$	818		$	758		$	—	$	1,576
Property and equipment acquired under capital lease	—			4,213			—			—		4,213

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2012

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(584	)	$	15,181		$	8,992		$	—	$	23,589
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			(16,418		)	(5,189		)	—		(21,607		)
Proceeds from sale of fixed assets	—			414			60			—		474
Restricted cash	—			(3,265		)	(455		)	—		(3,720		)
Net cash used in investing activities	—			(19,269		)	(5,584		)	—		(24,853		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	—			(1,921		)	—			—		(1,921		)
Repayments of expired revolving credit facilities, net	—			(48,324		)	—			—		(48,324		)
Borrowings under current revolving credit facilities, net	—			26,113			2,338			—		28,451
Borrowings (repayments) of term loans and notes payable, net	—			30,000			(13		)	—		29,987
Payments of debt issuance costs	(231		)	(4,995		)	—			—		(5,226		)
Payment of statutory payroll tax withholding on stock-based compensation associated with issuance of common stock	(393		)	—			—			—		(393		)
Proceeds from equipment lease financing	—			4,533			—			—		4,533
(Repayments) proceeds of capital lease obligations	—			(2,979		)	86			—		(2,893		)
Advances to/from affiliates	1,208			5,167			(6,375		)	—		—
Net cash provided by (used in) financing activities	584			7,594			(3,964		)	—		4,214
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	—			—			(390		)	—		(390		)
NET INCREASE (DECREASE) IN CASH	—			3,506			(946		)	—		2,560
CASH, beginning of period	—			290			10,003			—		10,293
CASH, end of period	$	—		$	3,796		$	9,057		$	—	$	12,853
NON-CASH INVESTING ACTIVITIES
Property and equipment acquired, and included in accounts payable	$	—		$	3,160		$	618		$	—	$	3,778

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2011

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities	$	(3,949	)	$	(7,139	)	$	13,393		$	—	$	2,305
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			(8,527		)	(2,543		)	—		(11,070		)
Proceeds from sale of fixed assets	—			249			62			—		311
Restricted cash	—			—			—			—		—
Net cash used in investing activities	—			(8,278		)	(2,481		)	—		(10,759		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	—			(1,407		)	—			—		(1,407		)
Repayments of expired revolving credit facilities, net	—			(5,089		)	(1,785		)	—		(6,874		)
Borrowings (repayments) of term loans and notes payable	—			—			(13		)	—		(13		)
Payments of debt issuance costs	(903		)	(978		)	—			—		(1,881		)
Net proceeds from issuance of common stock and purchase rights	21,710			—			—			—		21,710
Payment of statutory payroll tax withholding on stock-based compensation associated with issuance of common stock	(759		)	—			—			—		(759		)
Proceeds from equipment lease financing	—			3,100			—			—		3,100
(Repayments) proceeds of capital lease obligations	—			(1,314		)	20			—		(1,294		)
Advances to/from affiliates	(16,099		)	20,777			(4,678		)	—		—
Net cash provided by (used in) financing activities	3,949			15,089			(6,456		)	—		12,582
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	—			—			(1,491		)	—		(1,491		)
NET INCREASE (DECREASE) IN CASH	—			(328		)	2,965			—		2,637
CASH, beginning of period	—			618			7,038			—		7,656
CASH, end of period	$	—		$	290		$	10,003		$	—	$	10,293
NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired, and included in accounts payable	$	—		$	1,255		$	68		$	—	$	1,323
Reclassification of Lion Warrant from equity to debt	11,339			—			—			—		11,339
Conversion of debt to equity	4,688			—			—			—		4,688
Issuance of warrants and purchase rights at fair value	6,387			—			—			—		6,387
Exercise of purchase rights	2,857			—			—			—		2,857

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Revolving Credit Facilities and Current Portion of Long-Term Debt (Details) In Thousands, unless otherwise specified	0 Months Ended	12 Months Ended				0 Months Ended	12 Months Ended							12 Months Ended			12 Months Ended					0 Months Ended	12 Months Ended	0 Months Ended	12 Months Ended
	Mar. 26, 2014 USD ($)	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Feb. 28, 2014 USD ($)	Mar. 26, 2014 Capital One Credit Agreement [Member] Rate	Dec. 31, 2013 Capital One Credit Agreement [Member] USD ($) Rate	Apr. 04, 2013 Capital One Credit Agreement [Member] USD ($)	Dec. 31, 2012 Capital One Credit Agreement [Member] USD ($)	Dec. 31, 2013 Revolving Credit Facility [Member] USD ($)	Dec. 31, 2013 Crystal Credit Agreement [Member] USD ($)	Dec. 31, 2012 Crystal Credit Agreement [Member] USD ($)	Dec. 31, 2013 Bank of America [Member] USD ($)	Dec. 31, 2013 Bank of Montreal Credit Agreement [Member] USD ($) Rate	Dec. 31, 2013 Bank of Montreal Credit Agreement [Member] CAD	Dec. 31, 2012 Bank of Montreal Credit Agreement [Member] USD ($)	Dec. 31, 2013 Interest Expense [Member] USD ($)	Dec. 31, 2012 Interest Expense [Member] USD ($)	Dec. 31, 2011 Interest Expense [Member] USD ($)	Dec. 31, 2013 term loan [Member] Crystal Credit Agreement [Member] USD ($)	Dec. 31, 2013 Senior Notes [Member] USD ($) Rate	Mar. 26, 2014 London Interbank Offered Rate (LIBOR) [Member] Capital One Credit Agreement [Member] Rate	Dec. 31, 2013 London Interbank Offered Rate (LIBOR) [Member] Capital One Credit Agreement [Member] Rate	Mar. 26, 2014 Prime Rate [Member] Capital One Credit Agreement [Member] Rate	Dec. 31, 2013 Prime Rate [Member] Capital One Credit Agreement [Member] Rate	Dec. 31, 2013 Prime Rate [Member] Bank of Montreal Credit Agreement [Member] Rate
Line of Credit Facility [Line Items]
Interest expense - additional for long-term debt																					$ 3,044
Interest Expense, Debt		39,286	41,559	33,167													39,286	41,559	33,167
Interest Costs Capitalized																	0	0	0
Line of Credit Facility, Maximum Borrowing Capacity							50,000			50,000	80,000		75,000		5,000
Long-term Line of Credit								35,000
Line of credit facility, minimum excess availability threshold covenant							15,000
Debt Instrument, Basis Spread on Variable Rate																						0.00%	0.00%	4.00%	3.50%	3.00%
Line of Credit Facility, Maximum Borrowing Capacity as of 09-30-2013							47,500
Line of credit facility, Fixed interest rate, Percent														4.00%
Payments for Fees							75							10
Proceeds from Issuance or Sale of Equity	25,000
Change in Interest Rate						0.50%	1.00%
Gains (Losses) on Extinguishment of Debt		(32,101)	11,588	(3,114)																5,878
Line of Credit Facility, Amount Outstanding							43,526		0	43,526	30,000			443		4,387
Letters of Credit Outstanding, Amount							1,230				0	26,113
Line of Credit Facility, Remaining Borrowing Capacity		6,268			3,299		4,179							2,089
Debt Instrument, Interest Rate, Stated Percentage																					13.00%
line of credit facility, covenant, minimum excess availability														5.00%
Liabilities Subject to Compromise, Early Contract Termination Fees																				2,400
Current debt, net carrying amount																				60,533
Early Repayment of Senior Debt																				66,411
Line of credit facility, covenants, fixed charge coverage ratio, Minimum							1.00
Line of Credit Facility, Current Borrowing Capacity															2,000
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Maximum														7.00%
Current portion of long-term debt (Note 8)		73	56
Total revolving credit facilities and current portion of long-term debt		$ 44,042	$ 60,556								$ 0	$ 30,000
Long-term Debt, Percentage Bearing Variable Interest, Percentage Rate																					15.00%
Debt Instrument, Interest Rate, Increase (Decrease)							1.00%														0.00%

XML

Condensed Consolidating Financial Information Tables (Tables)

12 Months Ended

Dec. 31, 2013

Dec. 31, 2012

Dec. 31, 2011

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Balance Sheet [Table Text Block]

Condensed Consolidating Balance Sheets

December 31, 2013

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
ASSETS
CURRENT ASSETS
Cash	$	—		$	512		$	8,164		$	—		$	8,676
Trade accounts receivable, net	—			15,109			5,592			—			20,701
Intercompany accounts receivable, net	247,414			(224,181		)	(23,233		)	—			—
Inventories, net	—			129,716			39,736			(74		)	169,378
Other current assets	97			10,442			6,002			—			16,541
Total current assets	247,511			(68,402		)	36,261			(74		)	215,296
PROPERTY AND EQUIPMENT, net	—			53,424			15,879			—			69,303
INVESTMENTS IN SUBSIDIARIES	(94,161		)	18,158			—			76,003			—
OTHER ASSETS, net	9,282			27,934			11,937			—			49,153
TOTAL ASSETS	$	162,632		$	31,114		$	64,077		$	75,929		$	333,752
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Revolving credit facilities and current portion of long-term debt	$	—		$	43,586		$	456		$	—		$	44,042
Accounts payable	—			34,738			3,552			—			38,290
Accrued expenses and other current liabilities	5,952			28,344			15,722			—			50,018
Fair value of warrant liability	20,954			—			—			—			20,954
Other current liabilities	—			6,830			1,855			—			8,685
Total current liabilities	26,906			113,498			21,585			—			161,989
LONG-TERM DEBT, net	213,130			47			291			—			213,468
OTHER LONG-TERM LIABILITIES	—			29,711			5,988			—			35,699
TOTAL LIABILITIES	240,036			143,256			27,864			—			411,156
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock	11			100			492			(592		)	11
Additional paid-in capital	185,472			6,726			7,685			(14,411		)	185,472
Accumulated other comprehensive (loss) income	(4,306		)	(543		)	(671		)	1,214			(4,306		)
(Accumulated deficit) retained earnings	(256,424		)	(118,425		)	28,707			89,718			(256,424		)
Less: Treasury stock	(2,157		)	—			—			—			(2,157		)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY	(77,404		)	(112,142		)	36,213			75,929			(77,404		)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	162,632		$	31,114		$	64,077		$	75,929		$	333,752

Condensed Consolidating Balance Sheets

December 31, 2012

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
ASSETS
CURRENT ASSETS
Cash	$	—		$	3,796		$	9,057		$	—		$	12,853
Trade accounts receivable, net	—			15,697			7,265			—			22,962
Intercompany accounts receivable, net	200,529			(169,818		)	(30,711		)	—			—
Inventories, net	—			125,988			49,493			(1,252		)	174,229
Other current assets	438			8,200			5,708			—			14,346
Total current assets	200,967			(16,137		)	40,812			(1,252		)	224,390
PROPERTY AND EQUIPMENT, net	—			50,551			17,227			—			67,778
INVESTMENTS IN SUBSIDIARIES	(50,773		)	17,766			—			33,007			—
OTHER ASSETS, net	204			25,607			10,233			—			36,044
TOTAL ASSETS	$	150,398		$	77,787		$	68,272		$	31,755		$	328,212
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Revolving credit facilities and current portion of long-term debt	$	—		$	56,156		$	4,400		$	—		$	60,556
Accounts payable	—			34,120			4,040			—			38,160
Accrued expenses and other current liabilities	1,679			24,137			15,700			—			41,516
Fair value of warrant liability	17,241			—			—			—			17,241
Other current liabilities	(286		)	1,778			2,644			—			4,136
Total current liabilities	18,634			116,191			26,784			—			161,609
LONG-TERM DEBT, net	109,680			6			326			—			110,012
OTHER LONG-TERM LIABILITIES	—			28,230			6,277			—			34,507
TOTAL LIABILITIES	128,314			144,427			33,387			—			306,128
STOCKHOLDERS' EQUITY (EQUITY)
Common stock	11			100			492			(592		)	11
Additional paid-in capital	177,081			6,726			7,223			(13,949		)	177,081
Accumulated other comprehensive (loss) income	(2,725		)	(381		)	736			(355		)	(2,725		)
(Accumulated deficit) retained earnings	(150,126		)	(73,085		)	26,434			46,651			(150,126		)
Less: Treasury stock	(2,157		)	—			—			—			(2,157		)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY	22,084			(66,640		)	34,885			31,755			22,084
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	150,398		$	77,787		$	68,272		$	31,755		$	328,212

Condensed Income Statement [Table Text Block]

Condensed Consolidating Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2013

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
Net sales	$	—		$	462,732		$	227,680		$	(56,471	)	$	633,941
Cost of sales	—			285,947			84,938			(57,829		)	313,056
Gross profit	—			176,785			142,742			1,358			320,885
Selling expenses	—			143,379			98,304			—			241,683
General and administrative expenses	502			67,779			38,676			—			106,957
Retail store impairment	—			642			898			—			1,540
(Loss) income from operations	(502		)	(35,015		)	4,864			1,358			(29,295		)
Interest expense and other expense	63,992			10,622			618			—			75,232
Equity in loss (earnings) of subsidiaries	41,804			(95		)	—			(41,709		)	—
(Loss) income before income taxes	(106,298		)	(45,542		)	4,246			43,067			(104,527		)
Income tax provision	—			(202		)	1,973			—			1,771
Net (loss) income	$	(106,298	)	$	(45,340	)	$	2,273		$	43,067		$	(106,298	)
Other comprehensive (loss) income, net of tax	(1,581		)	(162		)	(1,407		)	1,569			(1,581		)
Comprehensive (loss) income	$	(107,879	)	$	(45,502	)	$	866		$	44,636		$	(107,879	)

Condensed Consolidating Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2012

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		Elimination Entries			Consolidated
Net sales	$	—		$	452,234		$	233,069	$	(67,993	)	$	617,310
Cost of sales	—			271,809			85,958		(67,840		)	289,927
Gross profit	—			180,425			147,111		(153		)	327,383
Selling expenses	—			126,492			100,955		—			227,447
General and administrative expenses	1,276			59,420			36,518		113			97,327
Retail store impairment	—			243			1,404		—			1,647
(Loss) income from operations	(1,276		)	(5,730		)	8,234		(266		)	962
Interest expense and other expense	23,975			9,629			817		—			34,421
Equity in loss (earnings) of subsidiaries	12,021			(1,057		)	—		(10,964		)	—
(Loss) income before income taxes	(37,272		)	(14,302		)	7,417		10,698			(33,459		)
Income tax provisions	—			133			3,680		—			3,813
Net (loss) income	$	(37,272	)	$	(14,435	)	$	3,737	$	10,698		$	(37,272	)
Other comprehensive income, net of tax	631			164			498		(662		)	631
Comprehensive (loss) income	$	(36,641	)	$	(14,271	)	$	4,235	$	10,036		$	(36,641	)

Condensed Consolidating Statement of Operations and Comprehensive Loss

For the Year Ended December 31, 2011

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated
Net sales	$	—		$	396,303		$	213,872		$	(62,839	)	$	547,336
Cost of sales	—			234,755			82,445			(64,764		)	252,436
Gross profit	—			161,548			131,427			1,925			294,900
Selling expenses	—			115,319			94,522			—			209,841
General and administrative expenses	2,668			69,624			31,793			—			104,085
Retail store impairment	—			558			3,709			—			4,267
(Loss) income from operations	(2,668		)	(23,953		)	1,403			1,925			(23,293		)
Interest and other expense	7,202			4,896			2,214			(12		)	14,300
Equity in loss (earnings) of subsidiaries	29,444			1,543			—			(30,987		)	—
(Loss) income before income taxes	(39,314		)	(30,392		)	(811		)	32,924			(37,593		)
Income tax provision	—			228			1,493			—			1,721
Net loss	$	(39,314	)	$	(30,620	)	$	(2,304	)	$	32,924		$	(39,314	)
Other comprehensive (loss) income, net of tax	(188		)	214			(53		)	(161		)	(188		)
Comprehensive loss	$	(39,502	)	$	(30,406	)	$	(2,357	)	$	32,763		$	(39,502	)

Condensed Cash Flow Statement [Table Text Block]

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2013

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(13,825	)	$	(16,811	)	$	17,913		$	—	$	(12,723	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			(21,319		)	(5,735		)	—		(27,054		)
Proceeds from sale of fixed assets	—			109			64			—		173
Restricted cash	—			3,265			(1,531		)	—		1,734
Net cash used in investing activities	—			(17,945		)	(7,202		)	—		(25,147		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	—			3,993			—			—		3,993
Repayments of expired revolving credit facilities, net	—			(28,513		)	—			—		(28,513		)
Borrowings (repayments) under current revolving credit facilities, net	—			43,579			(3,785		)	—		39,794
Repayments of term loans and notes payable	9,500			(29,953		)	(13		)	—		(20,466		)
Repayment of Lion term loan	(144,149		)	—			—			—		(144,149		)
Issuance of Senior Secured Notes	199,820			—			—			—		199,820
Payments of debt issuance costs	(10,540		)	(1,369		)	—			—		(11,909		)
Payment of statutory payroll tax withholding on stock-based compensation associated with issuance of common stock	(2,623		)	—			—			—		(2,623		)
Repayments of capital lease obligations	—			(1,662		)	(57		)	—		(1,719		)
Advances to/from affiliates	(38,183		)	45,397			(7,214		)	—		—
Net cash provided by (used in) financing activities	13,825			31,472			(11,069		)	—		34,228
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	—			—			(535		)	—		(535		)
NET DECREASE IN CASH	—			(3,284		)	(893		)	—		(4,177		)
CASH, beginning of period	—			3,796			9,057			—		12,853
CASH, end of period	$	—		$	512		$	8,164		$	—	$	8,676
NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired, and included in accounts payable	$	—		$	818		$	758		$	—	$	1,576
Property and equipment acquired under capital lease	—			4,213			—			—		4,213

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2012

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash (used in) provided by operating activities	$	(584	)	$	15,181		$	8,992		$	—	$	23,589
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			(16,418		)	(5,189		)	—		(21,607		)
Proceeds from sale of fixed assets	—			414			60			—		474
Restricted cash	—			(3,265		)	(455		)	—		(3,720		)
Net cash used in investing activities	—			(19,269		)	(5,584		)	—		(24,853		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	—			(1,921		)	—			—		(1,921		)
Repayments of expired revolving credit facilities, net	—			(48,324		)	—			—		(48,324		)
Borrowings under current revolving credit facilities, net	—			26,113			2,338			—		28,451
Borrowings (repayments) of term loans and notes payable, net	—			30,000			(13		)	—		29,987
Payments of debt issuance costs	(231		)	(4,995		)	—			—		(5,226		)
Payment of statutory payroll tax withholding on stock-based compensation associated with issuance of common stock	(393		)	—			—			—		(393		)
Proceeds from equipment lease financing	—			4,533			—			—		4,533
(Repayments) proceeds of capital lease obligations	—			(2,979		)	86			—		(2,893		)
Advances to/from affiliates	1,208			5,167			(6,375		)	—		—
Net cash provided by (used in) financing activities	584			7,594			(3,964		)	—		4,214
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	—			—			(390		)	—		(390		)
NET INCREASE (DECREASE) IN CASH	—			3,506			(946		)	—		2,560
CASH, beginning of period	—			290			10,003			—		10,293
CASH, end of period	$	—		$	3,796		$	9,057		$	—	$	12,853
NON-CASH INVESTING ACTIVITIES
Property and equipment acquired, and included in accounts payable	$	—		$	3,160		$	618		$	—	$	3,778

Condensed Consolidating Statement of Cash Flows

For the Year Ended December 31, 2011

(Amounts in thousands)

	Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities	$	(3,949	)	$	(7,139	)	$	13,393		$	—	$	2,305
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	—			(8,527		)	(2,543		)	—		(11,070		)
Proceeds from sale of fixed assets	—			249			62			—		311
Restricted cash	—			—			—			—		—
Net cash used in investing activities	—			(8,278		)	(2,481		)	—		(10,759		)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash overdraft	—			(1,407		)	—			—		(1,407		)
Repayments of expired revolving credit facilities, net	—			(5,089		)	(1,785		)	—		(6,874		)
Borrowings (repayments) of term loans and notes payable	—			—			(13		)	—		(13		)
Payments of debt issuance costs	(903		)	(978		)	—			—		(1,881		)
Net proceeds from issuance of common stock and purchase rights	21,710			—			—			—		21,710
Payment of statutory payroll tax withholding on stock-based compensation associated with issuance of common stock	(759		)	—			—			—		(759		)
Proceeds from equipment lease financing	—			3,100			—			—		3,100
(Repayments) proceeds of capital lease obligations	—			(1,314		)	20			—		(1,294		)
Advances to/from affiliates	(16,099		)	20,777			(4,678		)	—		—
Net cash provided by (used in) financing activities	3,949			15,089			(6,456		)	—		12,582
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	—			—			(1,491		)	—		(1,491		)
NET INCREASE (DECREASE) IN CASH	—			(328		)	2,965			—		2,637
CASH, beginning of period	—			618			7,038			—		7,656
CASH, end of period	$	—		$	290		$	10,003		$	—	$	10,293
NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired, and included in accounts payable	$	—		$	1,255		$	68		$	—	$	1,323
Reclassification of Lion Warrant from equity to debt	11,339			—			—			—		11,339
Conversion of debt to equity	4,688			—			—			—		4,688
Issuance of warrants and purchase rights at fair value	6,387			—			—			—		6,387
Exercise of purchase rights	2,857			—			—			—		2,857

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Inventories (Tables)

12 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

The following table presents the components of inventories at December 31, 2013 and 2012:

	2013			2012
Raw materials	$	23,199		$	22,301
Work in process	2,596			2,197
Finished goods	146,361			152,384
	172,156			176,882
Less: Reserve for inventory shrinkage and obsolescence	(2,778		)	(2,653		)
	$	169,378		$	174,229

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Components [Table Text Block]

The following table presents the components of property and equipment at December 31, 2013 and 2012:

	2013			2012
Machinery and equipment	$	58,069		$	50,180
Furniture and fixtures	46,749			42,430
Computers and software	45,402			37,556
Automobiles and light trucks	1,334			1,167
Leasehold improvements	95,886			86,623
Buildings	547			587
Construction in progress	1,353			5,293
	249,340			223,836
Less: Accumulated depreciation and amortization	(180,037		)	(156,058		)
Total	$	69,303		$	67,778

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Consolidated Statements of Cash Flows Reconciliation of Net Loss to Net Cash (Used In) Provided by Operating Activities (audited) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net loss	$ (106,298)	$ (37,272)	$ (39,314)
Depreciation and amortization of property and equipment, and other assets	26,076	22,989	24,980
Retail store impairment	1,540	1,647	4,267
Loss on disposal of property and equipment	241	102	80
Share-based compensation expense	8,451	10,580	6,814
Unrealized loss (gain) on change in fair value of warrants and purchase rights	3,713	4,126	(23,467)
Amortization of debt discount and deferred financing costs	4,325	10,261	9,024
Loss (gain) on extinguishment of debt	32,101	(11,588)	3,114
Accrued interest paid-in-kind	9,949	20,344	18,711
Foreign currency transaction loss	1	120	1,679
Allowance for inventory shrinkage and obsolescence	116	(1,331)	(1,652)
Bad debt expense	1,512	99	996
Deferred income taxes	(168)	154	701
Deferred rent	(2,093)	(895)	(1,969)
Changes in cash due to changes in operating assets and liabilities:
Trade accounts receivables	596	(2,067)	(5,402)
Inventories	3,715	13,949	(6,771)
Prepaid expenses and other current assets	(6,063)	(1,829)	1,770
Other assets	(4,393)	(8,455)	(5,075)
Accounts payable	2,287	1,779	3,944
Accrued expenses and other liabilities	11,764	(4,223)	9,701
Income taxes receivable / payable	(95)	5,099	174
Net cash (used in) provided by operating activities	(12,723)	23,589	2,305
NON-CASH INVESTING AND FINANCING ACTIVITIES
Property and equipment acquired, and included in accounts payable	1,576	3,778	1,323
Property and equipment acquired under capital lease	4,213	0	0
Reclassification of Lion Warrant from equity to debt	0	0	11,339
Conversion of debt to equity	0	0	4,688
Issuance of warrants and purchase rights at fair value	0	0	6,387
Exercise of purchase rights	$ 0	$ 0	$ 2,857

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Goodwill, Intangible Assets and Other Assets (Tables)

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill [Table Text Block]

The following table presents the net carrying amounts of definite and indefinite lived intangible assets and other assets at December 31, 2013 and 2012:

	2013			2012
Deferred financing costs	$	10,275		$	4,101
Broker and finder fees	1,779			1,486
Lease rights	187			213
Key money on store leases	1,652			2,244
Gross amortizable intangible assets	13,893			8,044
Accumulated amortization	(2,361		)	(2,048		)
Total net amortizable intangible assets	11,532			5,996
Goodwill	1,906			1,906
Workers compensation deposit	16,124			14,624
Lease security deposits	9,013			8,117
Restricted cash	2,078			—
Other	6,074			4,140
Total	$	46,727		$	34,783

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

The following table presents the estimated amortization expense of deferred financing costs, broker and finder fees, lease rights and key money for each of the five succeeding years as of December 31, 2013:

	Amount
2014	$	2,119
2015	2,013
2016	1,901
2017	1,877
2018 and thereafter	3,622

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Business Segment and Geographic Area Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013 countries stores	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013 number_of_operating_segments countries stores	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Net sales	$ 169,102	$ 164,543	$ 162,236	$ 138,060	$ 173,028	$ 162,160	$ 149,462	$ 132,660	$ 633,941	$ 617,310	$ 547,336
Number of Operating Segments									4
Number of Stores	248								248
Number of Countries in which Entity Operates	20								20
Other Foreign Countries [Member]
Segment Reporting Information [Line Items]
Net sales									7,434	7,002	6,673
Number of Countries in which Entity Operates	18								18
U.S. Wholesale [Member]
Segment Reporting Information [Line Items]
Net sales									201,251	185,355	158,628
U.S Retail [Member]
Segment Reporting Information [Line Items]
Net sales									205,011	198,886	174,837
Number of Stores	139								139
Canada [Member]
Segment Reporting Information [Line Items]
Net sales									60,134	63,669	61,865
Number of Stores	32								32
International [Member]
Segment Reporting Information [Line Items]
Net sales									167,545	169,400	152,006
Number of Stores	77								77
Consolidated Entities [Member]
Segment Reporting Information [Line Items]
Net sales									633,941	617,310	547,336
Wholesale Sales Channel [Member] | U.S. Wholesale [Member]
Segment Reporting Information [Line Items]
Net sales									159,682	149,611	132,135
Wholesale Sales Channel [Member] | U.S Retail [Member]
Segment Reporting Information [Line Items]
Net sales									0	0	0
Wholesale Sales Channel [Member] | Canada [Member]
Segment Reporting Information [Line Items]
Net sales									12,092	13,006	11,492
Wholesale Sales Channel [Member] | International [Member]
Segment Reporting Information [Line Items]
Net sales									8,893	10,278	10,406
Wholesale Sales Channel [Member] | Consolidated Entities [Member]
Segment Reporting Information [Line Items]
Net sales									$ 180,667	$ 172,895	$ 154,033

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Shared-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2013

Share-based Compensation [Abstract]

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

Restricted Share Awards - The following table summarizes shares of restricted stock that were granted, vested, forfeited and outstanding (shares in thousands):

	Number of Restricted Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Vesting Period (in years)
Non-vested - January 1, 2011	5,050		$	1.53	3.9
Granted	1,006		0.88
Vested	(2,668	)	1.38
Forfeited	(202	)	1.53
Non-vested - December 31, 2011	3,186		$	1.45	2.7
Granted	1,418		0.93
Vested	(1,783	)	1.23
Forfeited	(177	)	1.13
Non-vested - December 31, 2012	2,644		$	1.33	1.3
Granted	963		1.75
Vested	(1,650	)	1.42
Forfeited	(107	)	1.60
Non-vested - December 31, 2013	1,850		$	1.46	0.9

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

Stock Option Awards - The following table summarizes stock options granted, forfeited, expired and outstanding (shares in thousands):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Remaining Life (Years)	Aggregate Intrinsic Value
Outstanding - January 1, 2011	1,000		$	1.75	9.8
Granted	700		0.82
Forfeited	(750	)	1.75
Expired	—		—
Outstanding - December 31, 2011	950		$	1.06	9.5
Granted	—		—
Forfeited	—		—
Expired	(250	)	1.75
Outstanding - December 31, 2012	700		$	0.82	8.8
Granted	—		—
Forfeited	—		—
Expired	—		—
Outstanding - December 31, 2013	700		$	0.82	7.8
Vested (exercisable) - December 31, 2013	525		$	0.82	7.8	$	—
Non-vested - December 31, 2013	175		$	0.82	7.8	$	—

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Goodwill, Intangible Assets and Other Assets (Definite and indefinite intangible assets) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Goodwill, Intangible Assets and Other Assets [Abstract]
Deferred financing costs	$ 10,275	$ 4,101
Broker and finder fees	1,779	1,486
Lease rights	187	213
Key money on store leases	1,652	2,244
Gross amortizable intangible assets	13,893	8,044
Accumulated amortization	(2,361)	(2,048)
Total net amortizable intangible assets	11,532	5,996
Goodwill	1,906	1,906
Workers compensation deposit	16,124	14,624
Lease security deposits	9,013	8,117
Restricted Cash and Cash Equivalents, Noncurrent	2,078	0
Other	6,074	4,140
Intangible Assets, Net (Including Goodwill)	46,727	34,783
Amortization of Intangible Assets	$ 456	$ 472	$ 752

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Related Party Transaction (Lease Agreements) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended			12 Months Ended
	Mar. 31, 2012 Chief Executive Officer [Member] Y	Dec. 31, 2013 Chief Executive Officer [Member] Rate	Dec. 31, 2013 Chief Operating Officer [Member] Rate	Dec. 31, 2013 Lease Agreements [Member]	Dec. 31, 2012 Lease Agreements [Member]	Dec. 31, 2011 Lease Agreements [Member]
Related Party Transaction [Line Items]
Investment Owned, Percent of Net Assets		18.75%	6.25%
Related Party Transaction, years to expiration	3
Related Party Transaction, Expenses from Transactions with Related Party				$ 778	$ 830	$ 622

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
CURRENT ASSETS
Cash	$ 8,676	$ 12,853
Trade accounts receivable, net of allowances of $2,229 and $2,085 at December 31, 2013 and 2012, respectively	20,701	22,962
Restricted cash	0	3,733
Prepaid expenses and other current assets	15,636	9,589
Inventories, net	169,378	174,229
Income taxes receivable and prepaid income taxes	306	530
Deferred income taxes, net of valuation allowance	599	494
Total current assets	215,296	224,390
PROPERTY AND EQUIPMENT, net	69,303	67,778
DEFERRED INCOME TAXES, net of valuation allowance	2,426	1,261
OTHER ASSETS, net	46,727	34,783
ASSETS	333,752	328,212
CURRENT LIABILITIES
Cash overdraft	3,993	0
Revolving credit facilities and current portion of long-term debt	44,042	60,556
Accounts payable	38,290	38,160
Accrued expenses and other current liabilities	50,018	41,516
Fair value of warrant liability	20,954	17,241
Income taxes payable	1,742	2,137
Deferred income tax liability, current	1,241	296
Current portion of capital lease obligations	1,709	1,703
Total current liabilities	161,989	161,609
LONG-TERM DEBT, net of unamortized discount of $5,779 and $27,929 at December 31, 2013 and 2012, respectively	213,468	110,012
CAPITAL LEASE OBLIGATIONS, net of current portion	5,453	2,844
DEFERRED TAX LIABILITY	536	262
DEFERRED RENT, net of current portion	18,225	20,706
OTHER LONG-TERM LIABILITIES	11,485	10,695
TOTAL LIABILITIES	411,156	306,128
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIT) EQUITY
Preferred stock, $0.0001 par value per share, authorized 1,000 shares; none issued	0	0
Common stock, $0.0001 par value per share, authorized 230,000 shares; 113,469 shares issued and 111,330 shares outstanding at December 31, 2013 and 110,111 shares issued and 107,181 shares outstanding at December 31, 2012	11	11
Additional paid-in capital	185,472	177,081
Accumulated other comprehensive loss	(4,306)	(2,725)
Accumulated deficit	(256,424)	(150,126)
Less: Treasury stock, 304 shares at cost	(2,157)	(2,157)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY	(77,404)	22,084
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$ 333,752	$ 328,212

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Organization and Business (Details) (Details) In Thousands, except Per Share data, unless otherwise specified	0 Months Ended	1 Months Ended	12 Months Ended						0 Months Ended	12 Months Ended			12 Months Ended			12 Months Ended		0 Months Ended	12 Months Ended	0 Months Ended	12 Months Ended
	Mar. 31, 2014 USD ($)	Apr. 30, 2014	Dec. 31, 2013 USD ($) stores countries	Dec. 31, 2011 USD ($)	Feb. 28, 2014 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2013 Other Foreign Countries [Member] countries	Dec. 31, 2013 Revolving Credit Facility [Member] USD ($)	Mar. 26, 2014 Capital One Credit Agreement [Member] Rate	Dec. 31, 2013 Capital One Credit Agreement [Member] USD ($) Rate	Apr. 04, 2013 Capital One Credit Agreement [Member] USD ($)	Dec. 31, 2012 Capital One Credit Agreement [Member] USD ($)	Dec. 31, 2013 Bank of Montreal Credit Agreement [Member] USD ($)	Dec. 31, 2013 Bank of Montreal Credit Agreement [Member] CAD	Dec. 31, 2012 Bank of Montreal Credit Agreement [Member] USD ($)	Dec. 31, 2013 Senior Notes [Member] USD ($) Rate	Dec. 31, 2012 Lion Credit Agreement [Member] USD ($)	Mar. 26, 2014 London Interbank Offered Rate (LIBOR) [Member] Capital One Credit Agreement [Member] Rate	Dec. 31, 2013 London Interbank Offered Rate (LIBOR) [Member] Capital One Credit Agreement [Member] Rate	Mar. 26, 2014 Prime Rate [Member] Capital One Credit Agreement [Member] Rate	Dec. 31, 2013 Prime Rate [Member] Capital One Credit Agreement [Member] Rate	Dec. 31, 2013 Prime Rate [Member] Bank of Montreal Credit Agreement [Member] Rate
Number of Stores			248
Number of Countries in which Entity Operates			20				18
Cash			$ 8,676		$ 4,878	$ 12,853
Line of Credit Facility, Remaining Borrowing Capacity			6,268		3,299					4,179			2,089
Debt Instrument, Face Amount																206,000
coupon, rate																97.00%
Line of Credit Facility, Amount Outstanding								43,526		43,526		0	443		4,387
Line of Credit Facility, Maximum Borrowing Capacity								50,000		50,000				5,000
Long-term Line of Credit											35,000
Line of Credit Facility, Current Borrowing Capacity														2,000
Accrued Interest Paid In Kind																3,044	16,469
Debt Instrument, Unamortized Discount			5,779			27,929										5,779	27,929
Long-term Debt, Percentage Bearing Variable Interest, Percentage Rate																15.00%
Debt Instrument, Interest Rate, Increase (Decrease)										1.00%						0.00%
Interest expense - additional for long-term debt																3,044
Change in Interest Rate									0.50%	1.00%
Sale of common stock, net of fees	61,645	8,500
Shares Issued, Price Per Share	$ 0.50
Sale of common stock, net of fees	28,500			9,295
Common Stock, Shares, Issued	175,109		113,469			110,111
Common Stock, Shares, Outstanding	173,377		111,330			107,181
Debt Instrument, Basis Spread on Variable Rate																		0.00%	0.00%	4.00%	3.50%	3.00%
Line of Credit Facility, Maximum Borrowing Capacity as of 09-30-2013										47,500
Payments for Fees										75			10
Distribution costs, labor			$ 14,874

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Condensed Consolidating Financial Information Condensed Income Statement (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Condensed Income Statements, Captions [Line Items]
Net sales	$ 169,102	$ 164,543	$ 162,236	$ 138,060	$ 173,028	$ 162,160	$ 149,462	$ 132,660	$ 633,941	$ 617,310	$ 547,336
Cost of sales									313,056	289,927	252,436
Gross Profit	79,507	84,640	83,870	72,868	93,091	85,200	79,036	70,056	320,885	327,383	294,900
Selling expenses									241,683	227,447	209,841
General and Administrative Expense									106,957	97,327	104,085
Retail store impairment									1,540	1,647	4,267
Operating Income (Loss)									(29,295)	962	(23,293)
Income tax provision									1,771	3,813	1,721
Net loss									(106,298)	(37,272)	(39,314)
Other comprehensive (loss) income item:									(1,581)	631	(188)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent									(107,879)	(36,641)	(39,502)
Parent Company [Member]
Condensed Income Statements, Captions [Line Items]
Net sales									0	0	0
Cost of sales									0	0	0
Gross Profit									0	0	0
Selling expenses									0	0	0
General and Administrative Expense									502	1,276	2,668
Retail store impairment									0	0	0
Operating Income (Loss)									(502)	(1,276)	(2,668)
Interest expense and other expenses									63,992	23,975	7,202
Income (Loss) from Equity Method Investments									41,804	12,021	29,444
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest									(106,298)	(37,272)	(39,314)
Income tax provision									0	0	0
Net loss									(106,298)	(37,272)	(39,314)
Other comprehensive (loss) income item:									(1,581)	631	(188)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent									(107,879)	(36,641)	(39,502)
Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Net sales									462,732	452,234	396,303
Cost of sales									285,947	271,809	234,755
Gross Profit									176,785	180,425	161,548
Selling expenses									143,379	126,492	115,319
General and Administrative Expense									67,779	59,420	69,624
Retail store impairment									642	243	558
Operating Income (Loss)									(35,015)	(5,730)	(23,953)
Interest expense and other expenses									10,622	9,629	4,896
Income (Loss) from Equity Method Investments									(95)	(1,057)	1,543
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest									(45,542)	(14,302)	(30,392)
Income tax provision									(202)	133	228
Net loss									(45,340)	(14,435)	(30,620)
Other comprehensive (loss) income item:									(162)	164	214
Comprehensive Income (Loss), Net of Tax, Attributable to Parent									(45,502)	(14,271)	(30,406)
Non-Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Net sales									227,680	233,069	213,872
Cost of sales									84,938	85,958	82,445
Gross Profit									142,742	147,111	131,427
Selling expenses									98,304	100,955	94,522
General and Administrative Expense									38,676	36,518	31,793
Retail store impairment									898	1,404	3,709
Operating Income (Loss)									4,864	8,234	1,403
Interest expense and other expenses									618	817	2,214
Income (Loss) from Equity Method Investments									0	0	0
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest									4,246	7,417	(811)
Income tax provision									1,973	3,680	1,493
Net loss									2,273	3,737	(2,304)
Other comprehensive (loss) income item:									(1,407)	498	(53)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent									866	4,235	(2,357)
Consolidation, Eliminations [Member]
Condensed Income Statements, Captions [Line Items]
Net sales									(56,471)	(67,993)	(62,839)
Cost of sales									(57,829)	(67,840)	(64,764)
Gross Profit									1,358	(153)	1,925
Selling expenses									0	0	0
General and Administrative Expense									0	113	0
Retail store impairment									0	0	0
Operating Income (Loss)									1,358	(266)	1,925
Interest expense and other expenses									0	0	(12)
Income (Loss) from Equity Method Investments									(41,709)	(10,964)	(30,987)
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest									43,067	10,698	32,924
Income tax provision									0	0	0
Net loss									43,067	10,698	32,924
Other comprehensive (loss) income item:									1,569	(662)	(161)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent									44,636	10,036	32,763
Consolidated Entities [Member]
Condensed Income Statements, Captions [Line Items]
Net sales									633,941	617,310	547,336
Cost of sales									313,056	289,927	252,436
Gross Profit									320,885	327,383	294,900
Selling expenses									241,683	227,447	209,841
General and Administrative Expense									106,957	97,327	104,085
Retail store impairment									1,540	1,647	4,267
Operating Income (Loss)									(29,295)	962	(23,293)
Interest expense and other expenses									75,232	34,421	14,300
Income (Loss) from Equity Method Investments									0	0	0
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest									(104,527)	(33,459)	(37,593)
Income tax provision									1,771	3,813	1,721
Net loss									(106,298)	(37,272)	(39,314)
Other comprehensive (loss) income item:									(1,581)	631	(188)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent									$ (107,879)	$ (36,641)	$ (39,502)

XML

Consolidated Statement of Operations (Parentheticals) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Related Party Costs	$ 1,016	$ 1,090	$ 919

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Quarterly Financial Information (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Quarterly Financial Information Disclosure [Abstract]
Net sales	$ 169,102	$ 164,543	$ 162,236	$ 138,060	$ 173,028	$ 162,160	$ 149,462	$ 132,660	$ 633,941	$ 617,310	$ 547,336
Gross Profit	79,507	84,640	83,870	72,868	93,091	85,200	79,036	70,056	320,885	327,383	294,900
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ (20,770)	$ (1,513)	$ (37,504)	$ (46,511)	$ 4,903	$ (19,012)	$ (15,272)	$ (7,891)	$ (106,298)	$ (37,272)	$ (39,314)
Basic and diluted loss per share	$ (0.19)	$ (0.01)	$ (0.34)	$ (0.42)	$ 0.05	$ (0.18)	$ (0.14)	$ (0.07)	$ (0.96)	$ (0.35)	$ (0.42)

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Fair Value of Financial Instruments (Summary of Present Carrying Amounts and Fair Vallue - Level 3) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net	$ 0
Warrants and Rights Outstanding	20,954	17,241
Debt Instrument, Unamortized Discount	5,779	27,929
Lion Credit Agreement 2013 [Member] [Domain]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value	365	16,469
Long-Term Debt including current maturities, accrued interest paid-in-kind, net of unamortized discount 2013	9,865	0
Lion Credit Agreement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Fair Value		16,469
Debt Instrument, Unamortized Discount		27,929
Long-Term Debt including current maturities, accrued interest paid-in-kind, net of unamortized discount	0	109,680
Senior Notes [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes	203,265	0
Long-term Debt, Fair Value	3,044
Debt Instrument, Unamortized Discount	5,779
Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Liability (levels 2 & 3), carrying amount	213,130
Liability (level 3), carrying amount		109,680
Financial Liabilities Fair Value Disclosure	221,792	123,033
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Senior Notes [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes	191,065
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Lion Credit Agreement 2013 [Member] [Domain]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-Term Debt including current maturities, accrued interest paid-in-kind, net of unamortized discount 2013	9,773
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Lion Credit Agreement [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-Term Debt including current maturities, accrued interest paid-in-kind, net of unamortized discount		105,792
SOF Warrants [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Warrants and Rights Outstanding		19
SOF Warrants [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Warrants and Rights Outstanding		19
Lion Warrants [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Warrants and Rights Outstanding	$ 20,954	$ 17,222

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Long-Term Debt (Tables)

12 Months Ended

Dec. 31, 2013

Long-term Debt, Unclassified [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

The following table presents the components of long-term debt as of December 31, 2013 and 2012:

	2013				2012
Senior secured notes due 2020	$	203,265		(a)	$	—
Long-term debt with Lion, replaced in April 2013	—				109,680			(b)
Long-term debt with Lion, maturing October 2018	9,865			(c)	—
Other	411				388
Total long-term debt	213,541				110,068
Current portion of debt	(73		)		(56		)
Long-term debt, net of current portion	$	213,468			$	110,012

(a)Includes accrued interest paid-in-kind of $3,044 of and net of unamortized discount of $5,779 at December 31, 2013.

(b)Includes accrued interest paid-in-kind of $16,469 and net of unamortized discount of $27,929 at December 31, 2012.

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Income Taxes (Provision (benefit) for income taxes) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure [Abstract]
Current Federal Tax Expense (Benefit)	$ 0	$ 0	$ 0
Current State and Local Tax Expense (Benefit)	200	134	228
Current Foreign Tax Expense (Benefit)	2,024	3,446	879
Current Income Tax Expense (Benefit)	2,224	3,580	1,107
Deferred Federal Income Tax Expense (Benefit)	(402)	0	0
Deferred State and Local Income Tax Expense (Benefit)	0	0	0
Deferred Foreign Income Tax Expense (Benefit)	(51)	233	614
Deferred Income Tax Expense (Benefit)	(453)	233	614
Total income tax provision	$ 1,771	$ 3,813	$ 1,721

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Shared-Based Compensation

12 Months Ended

Dec. 31, 2013

Share-based Compensation [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Share-Based Compensation

Plan Description - On June 21, 2011 the Company's Board of Directors and stockholders approved the American Apparel, Inc. 2011 Omnibus Stock Incentive Plan (the “2011 Plan”). The 2011 Plan authorizes the granting of a variety of incentive awards, the exercise or vesting of which would allow up to an aggregate of 10,000 shares of the Company's common stock to be acquired by the holders of such awards. The Board amended the 2007 Performance Equity Plan ("2007 Plan") to provide that as of the July 11, 2011 effective date of registration of the 2011 Plan shares, no new awards shall be made under the 2007 Plan, and any and all shares that would otherwise become available for issuance under the terms of the 2007 Plan by reason of the expiration, cancellation, forfeiture or termination of an outstanding award under such plan shall again be available for grant under the 2011 Plan as of the date of such expiration, cancellation, forfeiture or termination.

On June 25, 2013, the Company's Board of Directors and stockholders approved amendments to the 2011 Plan to increase the maximum number of shares reserved under the 2011 Plan to 17,500 shares and increase the number of shares that may be awarded to any one participant during any calendar year to 3,000 shares. The purpose of the 2011 Plan is to provide an incentive to selected employees, directors, independent contractors, and consultants of the Company or its affiliates, and provides that the Company may grant options, stock appreciation rights, restricted stock, and other stock-based and cash-based awards. As of December 31, 2013, there were approximately 13,416 shares available for future grants under the 2011 Plan.

Restricted Share Awards - The following table summarizes shares of restricted stock that were granted, vested, forfeited and outstanding (shares in thousands):

	Number of Restricted Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Vesting Period (in years)
Non-vested - January 1, 2011	5,050		$	1.53	3.9
Granted	1,006		0.88
Vested	(2,668	)	1.38
Forfeited	(202	)	1.53
Non-vested - December 31, 2011	3,186		$	1.45	2.7
Granted	1,418		0.93
Vested	(1,783	)	1.23
Forfeited	(177	)	1.13
Non-vested - December 31, 2012	2,644		$	1.33	1.3
Granted	963		1.75
Vested	(1,650	)	1.42
Forfeited	(107	)	1.60
Non-vested - December 31, 2013	1,850		$	1.46	0.9

Vesting of the restricted share awards to employees may be either immediately upon grant or over a period of three to five years of continued service by the employee in equal annual installments. Vesting is immediate in the case of members of the Board of Directors. Share-based compensation is recognized over the vesting period based on the grant-date fair value. As of December 31, 2013, the weighted average remaining amortization period was 0.9 years.

Stock Option Awards - The following table summarizes stock options granted, forfeited, expired and outstanding (shares in thousands):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Remaining Life (Years)	Aggregate Intrinsic Value
Outstanding - January 1, 2011	1,000		$	1.75	9.8
Granted	700		0.82
Forfeited	(750	)	1.75
Expired	—		—
Outstanding - December 31, 2011	950		$	1.06	9.5
Granted	—		—
Forfeited	—		—
Expired	(250	)	1.75
Outstanding - December 31, 2012	700		$	0.82	8.8
Granted	—		—
Forfeited	—		—
Expired	—		—
Outstanding - December 31, 2013	700		$	0.82	7.8
Vested (exercisable) - December 31, 2013	525		$	0.82	7.8	$	—
Non-vested - December 31, 2013	175		$	0.82	7.8	$	—

Share-Based Compensation Expense - During the years ended December 31, 2013, 2012 and 2011, the Company recorded share-based compensation expense of $8,451, $10,580 and $6,814, respectively, related to its share-based compensation awards that are expected to vest. No amounts have been capitalized. As of December 31, 2013, unrecorded compensation cost related to non-vested awards was $5,062, which is expected to be recognized through 2016.

CEO Anti-Dilution Rights - On October 16, 2012, the Company and Mr. Charney entered into an amendment to Mr. Charney's anti-dilution rights (see Note 13). As the amendment lengthened the requisite service period, the Company will recognize the unrecorded compensation cost from the original award of $2,738 over its remaining service period and recognize the incremental compensation cost as a result of the modification of $6,854 over the requisite service period of the modified award. During the year ended December 31, 2013, 2012 and 2011, the Company recorded share-based compensation expense (included in the above) associated with Mr. Charney's certain anti-dilution rights of $6,459, $5,440 and $3,055, respectively. As of December 31, 2013, unrecorded compensation cost was $1,984, which is expected to be recognized through 2015.

CEO Performance-Based Award - Pursuant to an employment agreement with Mr. Charney commencing on April 1, 2012, the Company provided to the CEO rights to 7,500 shares of the Company's stock (see Note 12). The shares vest in three equal installments, one per each measurement period, only upon the achievement of certain EBITDA targets for each of fiscal 2012, 2013 and 2014. For the fiscal 2012 measurement period, the Company achieved the target EBITDA and Mr. Charney received 2,500 shares on June 25, 2013. For the fiscal 2013 measurement period, the Company did not achieve the target EBITDA and as a result, the Company recorded an adjustment of $703 to reverse previously recorded share-based compensation related to unvested shares. For the fiscal 2014 measurement period, based on currently available information, the Company does not believe that the target EBITDA will be achieved and as a result, the Company recorded an adjustment of $469 to reverse previously recorded share-based compensation related to unvested shares. As of December 31, 2013, there was no unrecorded compensation cost related to this grant.

The grant date fair value of the award was based on the share price of $0.75. During the year ended December 31, 2013 and 2012, the Company recorded share-based compensation expense of $(703) and $2,578, respectively.

Non-Employee Directors

On January 2, 2014, October 1, 2013, July 1, 2013 and April 1, 2013, the Company issued a quarterly stock grant to each non-employee director for services performed of approximately 8, 8, 5 and 5 shares of common stock, based on grant date fair values of $1.21, $1.28, $1.88 and $2.10 per share, respectively. Additionally, Messrs. Danzinger and Igelman each received an additional 23 shares for services performed during the second half of 2011. For the yearended December 31, 2011, a $75 cash award was paid to five non-employee directors in lieu of the annual stock grant. The share-based compensation is reflected in operating expenses in the accompanying consolidated statements of operations.

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Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value of Financial Instruments [Abstract]

Fair Value, Liabilities Measured on Recurring Basis [Table Text Block]

The following table presents carrying amounts and fair values of the Company's financial instruments as of December 31, 2013 and 2012:

		December 31, 2013
		Carrying Amount			Fair Value
Senior Secured Notes due 2020, net of discount of $5,779 and including interest paid-in-kind of $3,044	Level 2 Liability	$	203,265		$	191,065
Lion Loan due 2018 including interest paid-in-kind of $365	Level 3 Liability	9,865			9,773
Lion Warrant	Level 3 Liability	—		(a)	20,954
		$	213,130		$	221,792
		December 31, 2012
		Carrying Amount			Fair Value
Long-term debt with Lion, net of discount of $27,929 and including interest paid-in-kind of $16,469	Level 3 Liability	$	109,680		$	105,792
Lion Warrant	Level 3 Liability	—		(a)	17,222
SOF Warrant	Level 3 Liability	—		(a)	19
		$	109,680		$	123,033

(a) No cost is associated with these liabilities (see Note 13).

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following summarizes the activity of Level 3 inputs measured on a recurring basis for the years ended December 31, 2013, 2012 and 2011:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Warrants			Purchase Rights			Total
Balance at January 1, 2011	$	993		$	—		$	993
Additions (see Note 13)	22,547			15,605			38,152
Exercises	—			(2,857		)	(2,857		)
Realized loss	—			(3,188		)	(3,188		)
Adjustment resulting from change in fair value recognized in earnings	(13,907		)	(9,560		)	(23,467		)
Balance at January 1, 2012	9,633			—			9,633
Adjustment resulting from change in fair value recognized in earnings	4,126			—			4,126
Gain on extinguishment of debt (see Note 8)	3,482			—			3,482
Balance at January 1, 2013	17,241			—			17,241
Adjustment resulting from change in fair value recognized in earnings	3,713			—			3,713
Balance at December 31, 2013	$	20,954		$	—		$	20,954

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Business Segment and Geographic Area Information

12 Months Ended

Dec. 31, 2013

Business Segment and Geographic Area Information [Abstract]

Segment Reporting Disclosure [Text Block]

Business Segment and Geographic Area Information

The Company reports the following four operating segments: U.S. Wholesale, U.S. Retail, Canada, and International. The Company believes this method of segment reporting reflects both the way its business segments are managed and the way the performance of each segment is evaluated. U.S. Wholesale segment consists of the Company's wholesale operations of sales of undecorated apparel products to distributors and third party screen printers in the United States, as well as the Company's online consumer sales to U.S. customers. U.S. Retail segment consists of the Company's retail operations in the United States, which comprised 139 retail stores operating in the United States as of December 31, 2013. Canada segment includes retail, wholesale and online consumer operations in Canada. As of December 31, 2013, the retail operations in the Canada segment comprised 32 retail stores. The International segment includes retail, wholesale and online consumer operations outside of the United States and Canada. As of December 31, 2013, the retail operations in the International segment comprised 77 retail stores operating in 18 countries outside of the United States and Canada. All of the Company's retail stores sell the Company's apparel products directly to consumers.

The Company's management evaluates performance based on a number of factors; however, the primary measures of performance are net sales and income or loss from operations of each business segment, as these are the key performance indicators reviewed by management. Operating income or loss for each segment does not include unallocated corporate general and administrative expenses, interest expense and other miscellaneous income/expense items. Corporate general and administrative expenses include, but are not limited to: human resources, legal, finance, information technology, accounting, executive compensation and various other corporate level expenses.

The following table represents key financial information of the Company’s reportable segments before unallocated corporate expenses:

	For the Year Ended December 31, 2013
	U.S. Wholesale		U.S. Retail			Canada			International			Consolidated
Wholesale net sales	159,682		—			12,092			8,893			180,667
Retail net sales	—		205,011			45,163			141,517			391,691
Online consumer net sales	41,569		—			2,879			17,135			61,583
Total net sales to external customers	201,251		205,011			60,134			167,545			633,941
Gross profit	49,877		131,912			34,720			104,376			320,885
Income (loss) from segment operations	11,981		(2,731		)	3,684			3,916			16,850
Depreciation and amortization	7,418		12,420			1,853			4,385			26,076
Capital expenditures	10,115		11,204			1,167			4,568			27,054
Retail store impairment	—		642			144			754			1,540
Deferred rent expense (benefit)	81		(1,678		)	(375		)	(121		)	(2,093		)
	For the Year Ended December 31, 2012
	U.S. Wholesale		U.S. Retail			Canada			International			Consolidated
Wholesale net sales	$	149,611	$	—		$	13,006		$	10,278		$	172,895
Retail net sales	—		198,886			48,499			141,738			389,123
Online consumer net sales	35,744		—			2,164			17,384			55,292
Total net sales to external customers	185,355		198,886			63,669			169,400			617,310
Gross profit	53,195		130,498			37,500			106,190			327,383
Income (loss) from segment operations	27,893		4,197			(57		)	10,670			42,703
Depreciation and amortization	6,322		10,909			1,543			4,215			22,989
Capital expenditures	9,791		6,626			1,607			3,583			21,607
Retail store impairment	—		243			130			1,274			1,647
Deferred rent expense (benefit)	523		(706		)	(197		)	(515		)	(895		)
	For the Year Ended December 31, 2011
	U.S. Wholesale		U.S. Retail			Canada			International			Consolidated
Wholesale net sales	$	132,135	$	—		$	11,492		$	10,406		$	154,033
Retail net sales	—		174,837			48,527			126,868			350,232
Online consumer net sales	26,493		—			1,846			14,732			43,071
Total net sales to external customers	158,628		174,837			61,865			152,006			547,336
Gross profit	44,000		117,228			35,799			97,873			294,900
Income (loss) from segment operations	23,500		(4,659		)	(3,695		)	7,340			22,486
Depreciation and amortization	7,757		10,492			1,567			5,164			24,980
Capital expenditures	3,638		4,889			407			2,136			11,070
Retail store impairment	—		558			808			2,901			4,267
Deferred rent expense (benefit)	257		(1,662		)	(121		)	(443		)	(1,969		)

Reconciliation of reportable segments consolidated income (loss) from operations for the years ended December 31, 2013, 2012 and 2011 to the consolidated loss before income taxes is as follows:

	2013			2012			2011
Income from operations of reportable segments	$	16,850		$	42,703		$	22,486
Unallocated corporate expenses	(46,145		)	(41,741		)	(45,779		)
Interest expense	39,286			41,559			33,167
Foreign currency transaction loss	1			120			1,679
Unrealized loss (gain) on change in fair value of warrant and purchase rights	3,713			4,126			(23,467		)
Loss (gain) on extinguishment of debt	32,101			(11,588		)	3,114
Other expense (income)	131			204			(193		)
Consolidated loss before income taxes	$	(104,527	)	$	(33,459	)	$	(37,593	)

Net sales by each reportable segment’s class of customer and geographic location of customer for the years ended December 31, 2013, 2012, and 2011 consist of the following:

	Years Ended December 31,
	2013		2012		2011
Net sales by geographic location of customer:
United States	$	406,262	$	384,241	$	333,464
Canada	60,134		63,669		61,865
Europe (excluding United Kingdom)	70,347		66,861		68,130
United Kingdom	44,153		47,694		40,039
South Korea	10,380		10,732		9,749
China	6,894		5,317		3,857
Japan	18,119		20,336		14,176
Australia	10,218		11,458		9,383
Other foreign countries	7,434		7,002		6,673
Total consolidated net sales	$	633,941	$	617,310	$	547,336

Long-lived assets—property and equipment, net by geographic location, is summarized as follows as of December 31,:

	2013		2012
United States	$	53,424	$	50,551
Canada	3,913		5,079
Europe (excluding the United Kingdom)	4,741		3,987
United Kingdom	4,434		4,500
South Korea	344		433
China	291		358
Japan	750		1,097
Australia	846		1,057
Other foreign countries	560		716
Total consolidated long-lived assets	$	69,303	$	67,778
Identifiable assets by reportable segment:
U.S. Wholesale	$	169,474	$	153,856
U.S. Retail	77,150		76,709
Canada	17,761		28,586
International	69,367		69,061
Total	$	333,752	$	328,212

Foreign subsidiaries accounted for the following percentages of total assets and total liabilities as of December 31,:

	2013		2012
Total assets	26.1	%	29.8	%
Total liabilities	6.8	%	10.9	%

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Income Taxes (Parentheticals) (Details)	12 Months Ended
	Dec. 31, 2013 Rate
Income Tax Disclosure [Abstract]
Statutory federal tax rate	35.00%

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS USED IN OPERATING ACTIVITIES
Cash received from customers	$ 636,049	$ 615,342	$ 542,930
Cash paid to suppliers, employees and others	(627,910)	(580,685)	(534,497)
Income taxes paid	(2,033)	(10)	(866)
Interest paid	(18,948)	(10,954)	(5,535)
Other	119	(104)	273
Net cash (used in) provided by operating activities	(12,723)	23,589	2,305
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital expenditures	(27,054)	(21,607)	(11,070)
Proceeds from sale of fixed assets	173	474	311
Restricted cash	1,734	(3,720)	0
Net cash used in investing activities	(25,147)	(24,853)	(10,759)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
Cash overdraft	3,993	(1,921)	(1,407)
Repayments of expired revolving credit facilities, net	(28,513)	(48,324)	(6,874)
Borrowings under current revolving credit facilities, net	39,794	28,451	0
(Repayments) borrowings of term loans and notes payable	(20,466)	29,987	(13)
Repayments of Lion term loan	(144,149)	0	0
Issuance of Senior Secured Notes	199,820	0	0
Payment of debt issuance costs	(11,909)	(5,226)	(1,881)
Net proceeds from issuance of common stock and purchase rights	0	0	21,710
Payment of payroll statutory tax withholding on share-based compensation associated with issuance of common stock	(2,623)	(393)	(759)
Proceeds from equipment lease financing	0	4,533	3,100
Repayment of capital lease obligations	(1,719)	(2,893)	(1,294)
Net cash provided by financing activities	34,228	4,214	12,582
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH	(535)	(390)	(1,491)
NET (DECREASE) INCREASE IN CASH	(4,177)	2,560	2,637
CASH, beginning of period	12,853	10,293	7,656
CASH, end of period	$ 8,676	$ 12,853	$ 10,293

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Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Consolidated Balance Sheet - Non Print [Abstract]
Allowance for Doubtful Accounts Receivable, Current	$ 2,229	$ 2,085
Debt Instrument, Unamortized Discount	$ 5,779	$ 27,929
Preferred Stock, Par or Stated Value Per Share	$ 0.0001	$ 0.0001
Preferred Stock, Shares Authorized	1,000	1,000
Preferred Stock, Shares Issued	0	0
Common Stock, Par or Stated Value Per Share	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized	230,000	230,000
Common Stock, Shares, Issued	113,469	110,111
Common Stock, Shares, Outstanding	111,330	107,181
Treasury Stock, Shares	304	304

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2013

Fair Value of Financial Instruments [Abstract]

Fair Value Disclosures [Text Block]

Fair Value of Financial Instruments

The fair value of the Company's financial instruments are measured on a recurring basis. The carrying amount reported in the accompanying consolidated balance sheets for cash, accounts receivable, accounts payable and accrued expenses approximates fair value because of the short-term maturity of those instruments. The carrying amount for borrowings from Capital One and Bank of Montreal approximates fair value because of the variable market interest rate charged to the Company for these borrowings. The fair value of the Notes was calculated based on the quoted market price of the Notes. The fair value of the Lion Loan Agreement was estimated using a discounted cash flow analysis and a yield rate that was estimated using yield rates for publicly traded debt instruments of comparable companies with similar features. The fair value of each warrant was estimated using the Binomial Lattice option valuation model.  

The Company did not have any assets or liabilities categorized as Level 1 as of December 31, 2013.

The following table presents carrying amounts and fair values of the Company's financial instruments as of December 31, 2013 and 2012:

		December 31, 2013
		Carrying Amount			Fair Value
Senior Secured Notes due 2020, net of discount of $5,779 and including interest paid-in-kind of $3,044	Level 2 Liability	$	203,265		$	191,065
Lion Loan due 2018 including interest paid-in-kind of $365	Level 3 Liability	9,865			9,773
Lion Warrant	Level 3 Liability	—		(a)	20,954
		$	213,130		$	221,792
		December 31, 2012
		Carrying Amount			Fair Value
Long-term debt with Lion, net of discount of $27,929 and including interest paid-in-kind of $16,469	Level 3 Liability	$	109,680		$	105,792
Lion Warrant	Level 3 Liability	—		(a)	17,222
SOF Warrant	Level 3 Liability	—		(a)	19
		$	109,680		$	123,033

(a) No cost is associated with these liabilities (see Note 13).

The following summarizes the activity of Level 3 inputs measured on a recurring basis for the years ended December 31, 2013, 2012 and 2011:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Warrants			Purchase Rights			Total
Balance at January 1, 2011	$	993		$	—		$	993
Additions (see Note 13)	22,547			15,605			38,152
Exercises	—			(2,857		)	(2,857		)
Realized loss	—			(3,188		)	(3,188		)
Adjustment resulting from change in fair value recognized in earnings	(13,907		)	(9,560		)	(23,467		)
Balance at January 1, 2012	9,633			—			9,633
Adjustment resulting from change in fair value recognized in earnings	4,126			—			4,126
Gain on extinguishment of debt (see Note 8)	3,482			—			3,482
Balance at January 1, 2013	17,241			—			17,241
Adjustment resulting from change in fair value recognized in earnings	3,713			—			3,713
Balance at December 31, 2013	$	20,954		$	—		$	20,954

Realized loss is the difference between the net proceeds received and the fair value of the purchase rights acquired related to the April 26, 2011 Investor Purchase Agreement (see Note 13). The realized loss is recorded in unrealized (gain) loss on change in fair value of warrants and purchase rights in the accompanying consolidated statements of operations.

Adjustment resulting from change in fair value is the amount of total gains or losses for the period attributable to the change in unrealized gains or losses relating to liabilities held at the reporting date. The unrealized gain or loss is recorded in unrealized (gain) loss on change in fair value of warrants and purchase rights in the accompanying consolidated statements of operations.

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Schedule II (Valuation allowance of deferred tax assets) (Details) (Valuation Allowance of Deferred Tax Assets [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Valuation Allowance of Deferred Tax Assets [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Valuation Allowances and Reserves, Balance	$ 120,694	$ 77,578	$ 73,773	$ 51,979
Valuation Allowances and Reserves, Adjustments	43,116	4,720	21,794
Valuation Allowances and Reserves, Deductions	0	(915)	0
Deferred Tax Assets, Valuation Allowance	$ 0	$ 0	$ 0

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Schedule II (Allowance for trade accounts receivable) (Details) (Allowance for Trade Receivables [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Allowance for Trade Receivables [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Valuation Allowances and Reserves, Balance	$ 2,229	$ 2,085	$ 2,195	$ 2,630
Valuation Allowances and Reserves, Charged to Cost and Expense	1,512	99	996
Valuation Allowances and Reserves, Deductions	0	0	0
Valuation Allowances and Reserves, Charged to Other Accounts	$ (1,368)	$ (209)	$ (1,431)

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DEI Document Document (USD $)	12 Months Ended
	Dec. 31, 2013	Mar. 31, 2014	Jun. 30, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	AMERICAN APPAREL, INC
Entity Central Index Key	0001336545
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		175,108,823
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 115,070,051

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Capital Lease Obligations

12 Months Ended

Dec. 31, 2013

Capital Lease Obligations [Abstract]

Capital Leases in Financial Statements of Lessee Disclosure [Text Block]

Capital Lease Obligations

The Company leases certain equipment under capital lease arrangements expiring at various times through 2017. The assets and liabilities under capital leases are recorded at the lower of the present values of the minimum lease payments or the fair values of the assets. The interest rates pertaining to these capital leases range from 0.4% to 23.5% (average interest rate is 14.1%).

Minimum future payments under these capital leases at December 31, 2013 are:

Year Ending December 31,
2014	$	2,616
2015	3,097
2016	3,024
2017	18
2018 and thereafter	—
Total future minimum lease payments	8,755
Less: Amount representing interest	(1,593		)
Net minimum lease payments	7,162
Current portion	1,709
Long-term portion	$	5,453

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Shared-Based Compensation (Resticted Shares) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Restricted Stock [Member]
Non-vested - January 1		2,644	3,186	5,050
Granted, in shares		963	1,418	1,006
Vested, in shares		(1,650)	(1,783)	(2,668)
Forfeited, in shares		(107)	(177)	(202)
Non-vested - December 31	5,050	1,850	2,644	3,186
Weighted Average Grant Date Fair Value, Non-vested - January 1		$ 1.33	$ 1.45	$ 1.53
Weighted Average Grant Date Fair Value, Granted		$ 1.75	$ 0.93	$ 0.88
Weighted Average Grant Date Fair Value, Vested		$ 1.42	$ 1.23	$ 1.38
Weighted Average Grant Date Fair Value, Forfeited		$ 1.60	$ 1.13	$ 1.53
Weighted Average Grant Date Fair Value, Non-vested - December 31	$ 1.53	$ 1.46	$ 1.33	$ 1.45
Weighted Average Remaining Contractual Terms, in years	3 years 10 months 25 days	0 years 10 months 31 days	1 year 3 months 3 days	2 years 8 months 15 days
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		5 years

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Litigation Litigation (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013
Individual Actions - Heupel Case [Domain]
Loss Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss	$ 3,600
Individual Actions - Aggregate [Domain]
Loss Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss	875
Other Proceedings [Domain]
Loss Contingencies [Line Items]
Loss Contingency, Estimate of Possible Loss	$ 4,800

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Consolidated Statement of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Statement [Abstract]
Net sales	$ 633,941	$ 617,310	$ 547,336
Cost of sales	313,056	289,927	252,436
Gross profit	320,885	327,383	294,900
Selling expenses	241,683	227,447	209,841
General and administrative expenses (including related party charges of $1,016, $1,090 and $919 for the years ended December 31, 2013, 2012 and 2011, respectively)	106,957	97,327	104,085
Retail store impairment	1,540	1,647	4,267
(Loss) gain from operations	(29,295)	962	(23,293)
Interest expense	39,286	41,559	33,167
Foreign currency transaction loss	1	120	1,679
Unrealized loss (gain) on change in fair value of warrants and purchase rights	3,713	4,126	(23,467)
Loss (gain) on extinguishment of debt	32,101	(11,588)	3,114
Other expense (income)	131	204	(193)
Loss before income taxes	(104,527)	(33,459)	(37,593)
Income tax provision	1,771	3,813	1,721
Net loss	(106,298)	(37,272)	(39,314)
Basic and diluted loss per share	$ (0.96)	$ (0.35)	$ (0.42)
Weighted average basic and diluted shares outstanding	110,326	105,980	92,599
Net loss (from above)	(106,298)	(37,272)	(39,314)
Other comprehensive (loss) income item:
Foreign currency translation, net of tax	(1,581)	631	(188)
Other comprehensive (loss) income item:	(1,581)	631	(188)
Comprehensive loss	$ (107,879)	$ (36,641)	$ (39,502)

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Property and Equipment

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Property and Equipment

The following table presents the components of property and equipment at December 31, 2013 and 2012:

	2013			2012
Machinery and equipment	$	58,069		$	50,180
Furniture and fixtures	46,749			42,430
Computers and software	45,402			37,556
Automobiles and light trucks	1,334			1,167
Leasehold improvements	95,886			86,623
Buildings	547			587
Construction in progress	1,353			5,293
	249,340			223,836
Less: Accumulated depreciation and amortization	(180,037		)	(156,058		)
Total	$	69,303		$	67,778

Property and equipment is recorded on the basis of cost and is depreciated over the estimated used useful lives of fixed assets. The useful lives of the Company's major classes of assets are as follows:

Machinery and equipment	5 to 7 years
Furniture and fixtures	3 to 5 years
Computers and software	3 to 5 years
Automobiles and light trucks	3 to 5 years
Leasehold improvements	Shorter of lease term or useful life
Buildings	25 years

Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets. The costs of normal maintenance and repairs are charged to expense in the year incurred. Expenditures which significantly improve or extend the life of an asset are capitalized and depreciated over the asset’s remaining useful life. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the estimated useful lives of the related assets or the lease term. Upon sale or disposition, the related cost and accumulated depreciation are removed from the Company’s financial statements and the resulting gain or loss, if any, is reflected in income from operations. Property plant and equipment acquired are recorded as construction in progress until placed in-service, at which time the asset is reclassified to the appropriate asset category and depreciation commences. For the years ended December 31, 2013, 2012, and 2011, depreciation and amortization expense relating to property and equipment was $26,076, $22,989 and $24,980, respectively. At December 31, 2013 and 2012, property and equipment includes $15,115 and $16,415, for machinery and equipment held under capital leases, respectively. Accumulated amortization for these capital leases at December 31, 2013 and 2012 was $12,252 and $12,093.

The Company identified indicators of impairment present at certain retail stores within its U.S. Retail, Canadian and International segments, specifically related to under-performance or operating losses relative to expected historical or projected future operating results. The Company performed a recoverability test on these stores, and for the stores which failed the test, measured and recorded an impairment charge as applicable. The key assumptions used in the estimates of projected cash flows utilized in both the test and measurement steps of the impairment analysis were sales, gross margins, and payroll costs. These forecasts were based on historical trends and take into account recent developments as well as the Company's plans and intentions. Based upon the results of the discounted cash flow analysis, the Company recorded an impairment charge, primarily on certain retail store leasehold improvements, of $1,540, $1,647 and $4,267 for the years ended December 31, 2013, 2012, and 2011, respectively.

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Inventories

12 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Inventories

The following table presents the components of inventories at December 31, 2013 and 2012:

	2013			2012
Raw materials	$	23,199		$	22,301
Work in process	2,596			2,197
Finished goods	146,361			152,384
	172,156			176,882
Less: Reserve for inventory shrinkage and obsolescence	(2,778		)	(2,653		)
	$	169,378		$	174,229

Inventories are stated at the lower of cost or market. Cost is primarily determined on the first-in, first-out (FIFO) method. The cost elements of inventories include materials, labor and overhead. For the years ended December 31, 2013, 2012 and 2011, no one supplier provided more than 10% of the Company’s raw material purchases.

The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors and provides reserves for lower of cost or market reserves for such identified excess and slow-moving inventories. At December 31, 2013 and 2012, the Company had a lower of cost or market reserve for excess and slow-moving inventories of $1,951 and $2,140, respectively.

The Company establishes a reserve for inventory shrinkage for each of its retail locations and its warehouse. The reserve is based on the historical results of physical inventory cycle counts. The Company has a reserve for inventory shrinkage in the amount of $827 and $513 at December 31, 2013 and 2012, respectively.

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Workers' Compensation and Other Self-Insurance Reserve

12 Months Ended

Dec. 31, 2013

Workers' Compensation and Other Self-Insurance Reserves [Abstract]

Insurance Disclosure [Text Block]

Workers’ Compensation and Other Self-Insurance Reserves

The Company uses a combination of third-party insurance and/or self-insurance for a number of risks including workers’ compensation, medical benefits provided to employees, and general liability claims. General liability costs relate primarily to litigation that arises from store operations. Self-insurance reserves include estimates of both filed claims carried at their expected ultimate settlement value and claims incurred but not yet reported. The Company’s estimated claim amounts are discounted using a rate of 1.03% with a duration that approximates the duration of the Company’s self-insurance reserve portfolio. As of December 31, 2013 the undiscounted liability amount was $15,809. The Company’s liability reflected on the accompanying consolidated balance sheets represents an estimate of the ultimate cost of claims incurred as of the balance sheet dates. In estimating this liability, the Company utilizes loss development factors based on Company-specific data to project the future development of incurred losses. Loss estimates are adjusted based upon actual claim settlements and reported claims. These projections are subject to a high degree of variability based upon future inflation rates, litigation trends, legal interpretations, benefit level changes and claim settlement patterns. Although the Company does not expect the amounts ultimately paid to differ significantly from its estimates, self-insurance reserves could be affected if future claim experience differs significantly from the historical trends and the assumptions applied.

The workers’ compensation liability is based on estimate of losses for claims incurred, but not paid at the end of the period. Funding is made directly to the providers and/or claimants by the insurance company. To guarantee performance under the workers' compensation program, as of the both December 31, 2013 and 2012, the Company had issued standby letters of credit in the amounts of $450 with insurance companies being the beneficiaries, through a bank, and cash deposits of $16,124 and $14,624, respectively, in favor of insurance company beneficiaries. At December 31, 2013, the Company recorded a total reserve of $15,356, of which $3,871 is included in accrued expenses and $11,485 is included in other long-term liabilities on the accompanying consolidated balance sheets. At December 31, 2012, the Company recorded a total reserve of $14,472, of which, $3,778 is included in accrued expenses and $10,694 is included in other long-term liabilities on the accompanying consolidated balance sheets. These reserves for potential losses on existing claims are believed to be for potential losses which are probable and reasonably estimable.

The Company self-insures its health insurance benefit obligations while the claims are administered through a third party administrator. The medical benefit liability is based on estimated losses for claims incurred, but not paid at the end of the period. Funding is made directly to the providers and/or claimants by the insurance company. At December 31, 2013 and 2012, the Company’s total reserve of $2,512 and $1,510 was included in accrued expenses in the accompanying consolidated balance sheets.

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

ncome Taxes

The Company's net loss before income taxes includes the following components for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
United States	$	(107,637	)	$	(38,365	)	$	(37,876	)
Foreign	3,110			4,906			283
	$	(104,527	)	$	(33,459	)	$	(37,593	)

The following table presents the federal and state income tax provision (benefit) for the years ended December 31, 2013, 2012 and 2011:

	2013			2012		2011
Current:
Federal	$	—		$	—	$	—
State	200			134		228
Foreign	2,024			3,446		879
	2,224			3,580		1,107
Deferred:
Federal	(402		)	—		—
State	—			—		—
Foreign	(51		)	233		614
	(453		)	233		614
Income tax provision	$	1,771		$	3,813	$	1,721

The following table presents a reconciliation of taxes at the U.S. federal statutory rate and the effective tax rate for the years ended December 31:

	2013		2012		2011
Taxes at the statutory federal tax rate of 35%	(36,585	)	(11,711	)	(13,158	)
State tax, net of federal benefit	(4,059	)	4,913		(18	)
Change in valuation allowance	42,771		5,123		21,794
Foreign taxes	10		(618	)	533
Unrealized loss (gain) on warrants and purchase rights	1,299		4,809		(8,213	)
Other	(1,665	)	1,297		783
Total income tax provision	1,771		3,813		1,721

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and b) operating losses and tax credit carryforwards.

The following table presents the tax effects of significant items comprising the Company's deferred taxes as of December 31:

	2013			2012
Deferred tax assets:
Allowance for doubtful accounts	$	831		$	778
Deferred rent	7,295			7,773
Accrued liabilities and workers’ compensation	16,134			12,409
Inventories	6,877			6,731
Federal and California tax credits	12,067			12,067
Net operating loss carryforward	62,052			36,111
Deferred gift card income	2,379			1,866
Fixed assets	5,723			870
Foreign tax credits	9,296			8,335
Other comprehensive income	—			29
Other	1,833			848
Total gross deferred tax assets	124,487			87,817
Less valuation allowance	(120,694		)	(77,578		)
Net deferred tax assets	3,793			10,239
Deferred tax liabilities:
Prepaid expenses	(1,432		)	(1,004		)
Unrealized (gain) loss on warrants and purchase rights	—			(8,003		)
Other	(1,113		)	(35		)
Total gross deferred tax liabilities	(2,545		)	(9,042		)
Net deferred tax assets and liabilities	$	1,248		$	1,197

At December 31, 2013, the Company had net operating loss carryforwards of approximately $163,455 expiring beginning in 2030, state net operating loss carryforwards of approximately $113,747, expiring beginning in 2020 and foreign net operating loss carryforwards of $8,000 with expiration dates starting in 2014 (certain foreign loss carryforwards do not expire). The Company performed an analysis and determined it is more likely than not that an ownership change has not occurred through December 31, 2013 pursuant to §382 of the I.R.C. and, accordingly, the federal net operating loss carryfowards through such date are not subject to an annual Section 382 limitation. As a result of the March 31, 2014 public offering of the Company's common shares, there may have been an ownership change pursuant to §382 of the I.R.C.; however, an analysis has not yet been completed. See Note 13.

The California state tax credits of $11,800 carryover for ten years. Management determined that it is more likely than not that the state tax credits are not realizable due to the Company’s inability to generate future tax liabilities and accordingly has provided a full valuation allowance against the unused California credit carryforwards.

The Company accounts for its uncertain tax positions in accordance with ASC 740-10.

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits:

	2013		2012			2011
Gross unrecognized tax benefits at January 1	$	—	$	2,163		$	1,311
Increases for tax positions in prior periods	—		—			852
Decreases for tax positions in prior period	—		(2,163		)	—
Gross unrecognized tax benefits at December 31	$	—	$	—		$	2,163

Included in the balance of unrecognized tax benefits at December 31, 2013, 2012 and 2011 are $0, $0, and $1,329, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service ("IRS") for the calendar years ended December 31, 2010 through December 31, 2013. The IRS is currently auditing the Company's tax return for the year ended December 31, 2011. The Company completed an audit with the IRS through December 31, 2010. The Company's state and foreign tax returns are open to audit under similar statute of limitations for the calendar years ended December 31, 2008 through 2013.

The Company agreed to a settlement with the Canadian Revenue Agency (“CRA”) for audit of the years ended December 31, 2005 through December 31, 2007 representing $830 in additional tax interest and penalty. As a result, the Company's unrecognized tax benefits were decreased by $552 for the year ended December 31, 2012.

The Company does not provide for U.S. Federal income taxes on the undistributed earnings ($34,075 at December 31, 2013) of its controlled foreign corporations which are considered permanently invested outside of the United States. Undistributed cash at controlled foreign corporations, which remains permanently reinvested at December 31, 2013 was $3,109. Determination of the amount of U.S. income tax liability that would be incurred is not practicable because of the complexities associated with its hypothetical calculation, but would be substantially eliminated as the Company has U.S. net operating losses of approximately $163,455 at December 31, 2013 and U.S. tax credits of approximately $9,296 available to utilize to offset the tax effect of repatriation.

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2009
Commitments and contingencies [Line Items]
Future Minimum Payments Due, 2013	$ 74,161
Operating Leases, Future Minimum Payments, Due in Two Years	63,599
Operating Leases, Future Minimum Payments, Due in Three Years	51,895
Operating Leases, Future Minimum Payments, Due in Four Years	41,293
Operating Leases, Future Minimum Payments, Due in Five Years	28,397
Capital Leases, Future Minimum Payments Due Thereafter	31,932
Operating Leases, Rent Expense, Net	79,794	77,390	78,138
State sales tax contingencies	0	289
Advertising commitments	2,450
Imports, amount, Germany				5,003
Operating Leases, Rent Expense, Minimum Rentals	$ 291,277

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Revolving Credit Facilities and Current Portion of Long-Term Debt

12 Months Ended

Dec. 31, 2013

Revolving Credit Facilities and Current Portion of Long-Term Debt [Abstract]

Short-term Debt [Text Block]

Revolving Credit Facilities and Current Portion of Long-Term Debt

The following table presents revolving credit facilities and current portion of long-term debt as of December 31, 2013 and 2012:

	2013		2012
Revolving credit facility (Capital One), maturing April 2018	$	43,526	$	—
Revolving credit facility (Crystal), replaced in April 2013	—		26,113
Term loan (Crystal), replaced in April 2013	—		30,000
Revolving credit facility (Bank of Montreal), maturing March 2014	443		4,387
Current portion of long-term debt (Note 8)	73		56
Total revolving credit facilities and current portion of long-term debt	$	44,042	$	60,556

The Company incurred interest charges of $39,286, $41,559 and $33,167 for the years ended December 31, 2013, 2012 and 2011, respectively, for all outstanding borrowings. The interest charges subject to capitalization for the years ended December 31, 2013, 2012 and 2011 were not significant.

Revolving Credit Facility - Capital One

On April 4, 2013, the Company and its domestic subsidiaries replaced the credit facility with Crystal with a new $35,000 asset-based revolving facility with Capital One. On July 5, 2013, the Company entered into an amendment to the credit agreement with Capital One, pursuant to which the total commitment under the credit facility was raised to $50,000. The additional commitment was made under substantially the same terms as the existing facility.

The Capital One Credit Facility matures on April 4, 2018, subject to a January 15, 2018 maturity if excess availability is less than $15,000 at the time of notice to Capital One of a determination by the Company that an Applicable High Yield Discount Obligation ("AHYDO") redemption will be required pursuant to Section 3.01(e) of the indenture governing the Notes. See Note 8, Long-Term Debt. Borrowings under the Capital One Credit Facility bear interest equal to LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at the Company's option) and are subject to maintenance of specified borrowing base requirements and covenants. The Capital One Credit Facility is secured by a lien on substantially all of the assets of the Company's domestic subsidiaries and equity interests in certain of the Company's foreign subsidiaries, subject to some exceptions. As of December 31, 2013, the Company had $1,230 of outstanding letters of credit secured against the Capital One Credit Facility. The amount available for additional borrowings on December 31, 2013 was $4,179.

Among other provisions, the Capital One Credit Facility requires that the Company maintain a lockbox arrangement and contains certain subjective acceleration clauses. In addition, Capital One may at its discretion, adjust the advance restriction and criteria for eligible inventory and accounts receivable. The Capital One Credit Facility contains cross-default provisions whereby an event of default under the Bank of Montreal Credit Agreement, under the indenture governing the Notes or other indebtedness, in each case of an amount greater than a specified threshold, would cause an event of default under the Capital One Credit Facility.

The Company is required to maintain a minimum fixed charge coverage ratio of not less than 1.00 to 1.00 and is also required to not exceed certain maximum leverage ratio thresholds, both determined as at the end of each fiscal quarter. Additionally, the Company's domestic subsidiaries are subject to an annual limitation of certain specified capital expenditure amounts as determined at the end of each fiscal year.

Under the Capital One Credit Facility, the Company was in violation of certain covenants for the twelve consecutive fiscal months ended September 30, 2013 and December 31, 2013, and anticipated a violation for the twelve months ended March 31, 2014.

On November 14, 2013, the Company entered into a third amendment to the Capital One Credit Facility, which among other things, waived the obligation to maintain a minimum fixed charge coverage ratio and a maximum leverage ratio for the twelve consecutive fiscal month period ending September 30, 2013. As a condition to the waiver, the Company agreed to a one percentage point increase in the interest rate to either LIBOR plus 4.5% or the bank's prime rate plus 3.5% (at the Company's option) and limitations on amounts available to be borrowed, consisting of the imposition of a reserve against the line that gradually reduced the total borrowing capacity to $47,500 and certain amendments to the borrowing base calculation.  In addition, the Company paid a waiver fee of $75 .

On March 25, 2014, the Company entered into a fifth amendment to the Capital One Credit Facility which, effective upon its receipt of at least $25,000 of net proceeds from a financing prior to April 15, 2014, among other things: waives the obligation to maintain the minimum fixed charge coverage and maximum leverage ratios for the three month periods ended December 31, 2013 and March 31, 2014; resets for future periods the fixed charge coverage ratio, the maximum leverage ratio and the maximum capital expenditures allowed; adds a minimum EBITDA covenant; increases the interest rate payable under the credit agreement by 0.5% per annum to either LIBOR plus 5.0% or the bank's prime rate plus 4.0% (at the Company's option); and increases the fees payable upon early termination.

Revolving Credit Facility - Bank of Montreal

On December 31, 2013, the Company's wholly-owned Canadian subsidiaries, entered into a fourth amendment to the Bank of Montreal Credit Agreement that reduced the existing revolving credit facility amount from C$11,000 (Canadian dollars) to C$5,000 (Canadian dollars) and extended the maturity date to February 28, 2014. On February 28, 2014, the revolving credit facility commitment was further reduced to C$2,000 (Canadian dollars) and the maturity set to March 31, 2014. Additionally, the Company paid an extension fee of $10 plus certain legal fees. Outstanding amounts under the Bank of Montreal Credit Agreement was repaid, and on March 31, 2014 expired by its terms.

The Bank of Montreal Credit Agreement bore interest at 7.0% (the bank's prime rate at 3.0% as of December 31, 2013 plus 4.0% per annum) payable monthly. This line of credit was secured by a lien on the Canadian subsidiaries' accounts receivable, inventory and certain other tangible assets. Available borrowing capacity at December 31, 2013 was $2,089.

The Bank of Montreal Credit Agreement contained a fixed charge coverage ratio and restricts the Company's Canadian subsidiaries from entering into operating leases above a specified threshold. Additionally, the Bank of Montreal Credit Agreement imposed a minimum excess availability covenant, which required the Company's Canadian subsidiaries to maintain at all times minimum excess availability of 5.0% of the revolving credit commitment under the facility.

The Bank of Montreal Credit Agreement contained cross-default provisions with the Capital One Credit Facility and the Notes, whereby an event of default occurring thereunder would cause an event of default under the Bank of Montreal Credit Agreement.

As of December 31, 2013, the Company was in compliance with all required financial covenants of the Bank of Montreal Credit Agreement.

Revolving Credit Facility and Term Loan - Crystal

On April 4, 2013, the Company replaced its existing revolving credit facility and term loan with Crystal (the "Crystal Credit Agreement"), with a new asset-based revolving credit agreement with Capital One.

In connection with the termination of the Crystal Credit Agreement, the Company paid an early termination fee of $2,400 . The difference between the net carrying amount of the Crystal loans of $60,533 (which includes the outstanding balance, accrued but unpaid interest, and unamortized financing cost immediately prior to the date of the extinguishment) and the cash paid to Crystal of $66,411 , which includes the early termination fee, was recorded as a $5,878 loss on early extinguishment of debt in the statement of operations for the year ended December 31, 2013.

On March 13, 2012, the Company replaced its revolving credit facility of $75,000 with Bank of America with an $80,000 senior credit facility with Crystal and other lenders. The Crystal Credit Agreement called for the $80,000 to be allocated between an asset based revolving credit facility of $50,000 and term loan of $30,000. In connection with the financing from Crystal, the Company entered into an amendment to the Lion Credit Agreement. See Notes 8 and 13.

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Fair Value of Financial Instruments (Activity of Level 3 Inputs) (Details) (Fair Value, Measurements, Recurring [Member], Fair Value, Inputs, Level 3 [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	$ 17,241	$ 9,633	$ 993
Adjustment resulting from change in fair value recognized in earnings			38,152
Gain on extinguishment of debt (see Note 8)			(2,857)
Realized loss			(3,188)
Adjustment resulting from change in fair value recognized in earnings	3,713	4,126	(23,467)
Gain on extinguishment of debt (see Note 8)	3,482
Ending Balance	20,954	17,241	9,633
Rights [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	0	0	0
Adjustment resulting from change in fair value recognized in earnings			15,605
Gain on extinguishment of debt (see Note 8)			(2,857)
Realized loss			(3,188)
Adjustment resulting from change in fair value recognized in earnings	0	0	(9,560)
Gain on extinguishment of debt (see Note 8)		0
Ending Balance	0	0	0
Warrant [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	17,241	9,633	993
Adjustment resulting from change in fair value recognized in earnings			22,547
Gain on extinguishment of debt (see Note 8)			0
Realized loss			0
Adjustment resulting from change in fair value recognized in earnings	3,713	4,126	(13,907)
Gain on extinguishment of debt (see Note 8)		3,482
Ending Balance	$ 20,954	$ 17,241	$ 9,633

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Goodwill, Intangible Assets and Other Assets

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Goodwill, Intangible Assets and Other Assets

Goodwill of $1,906 is assigned to the U.S. Wholesale segment and is related to the acquisition of American Apparel Dyeing & Finishing, Inc. on June 2, 2005 and American Apparel Garment and Dyeing, Inc. on May 9, 2008.

Based on the quantitative assessment provisions of ASC 350 "Intangibles-Goodwill and Other", the Company determined that the fair value of the reporting unit was more likely than not greater than its carrying amount. For the years ended December 31, 2013, 2012 and 2011, the Company had no goodwill impairment.

The following table presents the net carrying amounts of definite and indefinite lived intangible assets and other assets at December 31, 2013 and 2012:

	2013			2012
Deferred financing costs	$	10,275		$	4,101
Broker and finder fees	1,779			1,486
Lease rights	187			213
Key money on store leases	1,652			2,244
Gross amortizable intangible assets	13,893			8,044
Accumulated amortization	(2,361		)	(2,048		)
Total net amortizable intangible assets	11,532			5,996
Goodwill	1,906			1,906
Workers compensation deposit	16,124			14,624
Lease security deposits	9,013			8,117
Restricted cash	2,078			—
Other	6,074			4,140
Total	$	46,727		$	34,783

Deferred financing costs represent costs incurred in connection with the issuance of certain indebtedness and were capitalized as deferred costs and are being amortized over the term of the related indebtedness. The Company incurred related amortization expense of $1,895, $2,287, and $1,634, for the years ended December 31, 2013, 2012 and 2011, respectively, which is recorded to interest expense.

Lease rights are costs incurred to acquire the right to lease a specific property. A majority of the Company's lease rights are related to premiums paid to landlords. Lease rights are recorded at cost and are amortized over the term of the respective leases.

Key money is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease for a certain property. Key money represents the “right to lease” with an automatic right of renewal. This right can be subsequently sold by the Company or can be recovered should the landlord refuse to allow the automatic right of renewal to be exercised. Key money is amortized over the respective lease terms.

Aggregate amortization expense of intangible assets and other assets (excluding deferred financing costs) is included in operating expenses in the consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011 and was approximately $456, $472, and $752, respectively.

The following table presents the estimated amortization expense of deferred financing costs, broker and finder fees, lease rights and key money for each of the five succeeding years as of December 31, 2013:

	Amount
2014	$	2,119
2015	2,013
2016	1,901
2017	1,877
2018 and thereafter	3,622

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Accrued Expenses and Other Current Liabilities

12 Months Ended

Dec. 31, 2013

Accrued Expenses and Other Current Liabilities [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

Accrued Expenses and Other Current Liabilities

The following table presents the components of accrued expenses and other current liabilities as of December 31, 2013 and 2012:

	2013		2012
Compensation, bonuses and related taxes	$	10,170	$	11,524
Accrued interest	6,064		520
Workers’ compensation and other self-insurance reserves (Note 16)	6,383		5,288
Sales, value and property taxes	3,868		4,751
Gift cards and store credits	7,391		5,964
Loss contingencies	1,177		752
Accrued vacation	1,603		1,055
Deferred revenue	1,258		590
Deferred rent	3,363		2,997
Other	8,741		8,075
Total accrued expenses	$	50,018	$	41,516

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Long-Term Debt

12 Months Ended

Dec. 31, 2013

Long-term Debt, Unclassified [Abstract]

Long-term Debt [Text Block]

Long-Term Debt

The following table presents the components of long-term debt as of December 31, 2013 and 2012:

	2013				2012
Senior secured notes due 2020	$	203,265		(a)	$	—
Long-term debt with Lion, replaced in April 2013	—				109,680			(b)
Long-term debt with Lion, maturing October 2018	9,865			(c)	—
Other	411				388
Total long-term debt	213,541				110,068
Current portion of debt	(73		)		(56		)
Long-term debt, net of current portion	$	213,468			$	110,012

(a)Includes accrued interest paid-in-kind of $3,044 of and net of unamortized discount of $5,779 at December 31, 2013.

(b)Includes accrued interest paid-in-kind of $16,469 and net of unamortized discount of $27,929 at December 31, 2012.

(c)Includes accrued interest paid-in-kind of $365 at December 31, 2013.

Senior Secured Notes due 2020

On April 4, 2013, the Company issued the Notes in an aggregate principal amount of $206,000. The Notes mature on April 15, 2020. The Notes were issued at 97% of par value with an interest rate at issuance of 13% per annum, subject to adjustment. Interest on the Notes approximating $13,500 per payment period (in 2014), is payable semi-annually, in arrears, on April 15 and October 15 of each year, beginning on October 15, 2013.

A "special interest trigger event" is deemed to have occurred under the indenture governing the Notes if the Company's net leverage ratio for the year ended December 31, 2013 is greater than 4.50 to 1.00. Upon the occurrence of a special interest trigger event, interest on the Notes accrues at the rate of 15% per annum, retroactive to April 4, 2013, with the interest in excess of 13% per annum payable (i) in the case of any interest payment date prior to April 15, 2018, by adding such excess interest to the principal amount of the Notes on the interest payment date, and (ii) for any interest payment date on or after April 15, 2018, in cash.

During the third quarter of 2013, the Company determined it was probable that a special interest trigger event under the indenture governing the Notes would occur as of December 31, 2013 and accrued interest on the Notes at 15% retroactive to April 4, 2013 representing an additional 2% interest, which additional interest is payable in kind until April 15, 2018 and in cash on subsequent interest dates. The Company recorded $3,044 in additional interest expense for the special interest trigger event for the year ended December 31, 2013. The company will pay in-kind the additional 2% interest retroactive to the issue date of the notes on the next interest payment date, April 15, 2014.

On or after April 15, 2017, the Company may, at its option, redeem some or all of the Notes at a premium decreasing ratably to zero as specified in the indenture, plus accrued and unpaid interest to, but not including, the redemption date. Prior to April 15, 2017, the Company may, at its option, redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds of certain equity offerings at a redemption price of 113% of the aggregate principal amount of the redeemed notes plus accrued and unpaid interest to, but not including, the redemption date. In addition, at any time prior to April 15, 2017 the Company may, at its option, redeem some or all of the Notes by paying a "make whole" premium, plus accrued and unpaid interest to, but not including, the redemption date. If the Company experiences certain change of control events, the holders of the Notes will have the right to require the Company to purchase all or a portion of the Notes at a price in cash equal to 101% of the principal amount of such Notes, plus accrued and unpaid interest to, but not including, the date of purchase. In addition, the Company is required to use the net proceeds of certain asset sales, if not used for specified purposes, to purchase some of the Notes at 100% of the principal amount, plus accrued and unpaid interest to, but not including, the date of purchase. On each interest payment date after April 4, 2018, the Company will be required to redeem, for cash, a portion of each Note then outstanding equal to the amount necessary to prevent such Note from being treated as an “applicable high yield discount obligation” within the meaning of the Internal Revenue Code. The redemption price will be 100% of the principal amount plus accrued and unpaid interest thereon on the date of redemption.

The Notes are guaranteed, jointly and severally, on a senior secured basis by the Company's existing and future domestic subsidiaries. The Notes and the related guarantees are secured by a first-priority lien on the Company's and its domestic subsidiaries' assets (other than the Credit Facility Priority Collateral, as defined below, subject to some exceptions and permitted liens). The Notes and the related guarantees also are secured by a second-priority lien on all of Company's and its domestic subsidiaries' accounts receivable, inventory, cash, and certain other assets (collectively, the "Credit Facility Priority Collateral"), subject to certain exceptions and permitted liens. The Notes and the guarantees, respectively, rank equal in right of payment with the Company's and its domestic subsidiaries' senior indebtedness, including indebtedness under the Capital One Credit Facility, before giving effect to collateral arrangements.

The Notes impose certain limitations on the ability of the Company and its domestic subsidiaries to, among other things, and subject to a number of important qualifications and exceptions, incur additional indebtedness or issue disqualified capital stock or preferred stock (with respect to restricted subsidiaries), grant liens, make payments in respect of their capital stock or certain indebtedness, enter into transactions with affiliates, create dividend or other payment restrictions affecting subsidiaries, merge or consolidate with any other person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. The Company must annually report to the trustee on compliance with such limitations. The Notes also contain cross-default provisions whereby a payment default or acceleration of any indebtedness in an aggregate amount greater than a specified threshold would cause an event of default with respect to the Notes. As of December 31, 2013, the Company was in compliance with the required covenants of the Notes.

Lion Loan Agreement

On May 22, 2013 the Company entered into a loan agreement with Lion (the “Lion Loan Agreement”) in a principal amount of $4,500. On November 29, 2013, the Lion Loan Agreement was amended to increase the amount we borrowed by $5,000 and to make certain other technical amendments. The term loans under the Lion Loan Agreement mature on October 4, 2018 and bear interest at an initial interest rate of 18% per annum, which interest rate increased to 20% per annum due to the occurrence of a special interest trigger event under the Notes. Interest under the loan agreement is payable in cash or, to the extent permitted by the Company’s other debt agreements, in-kind.

Lion Credit Agreement

On April 4, 2013, the Company repaid and terminated its previous outstanding obligations with Lion Capital LLP with a portion of the proceeds of the financing transactions. The difference between the net carrying amount of the Lion debt of $117,926 (which includes the principal, accrued but unpaid interest, unamortized discount and unamortized financing cost immediately prior to the date of extinguishment) and the cash paid to Lion of $144,149 was recorded in the statement of operations for the year ended December 31, 2013 as a $26,223 loss on the early extinguishment of debt.

Schedule of Long-term Debt Instruments [Table Text Block]

The following table presents the components of long-term debt as of December 31, 2013 and 2012:

	2013				2012
Senior secured notes due 2020	$	203,265		(a)	$	—
Long-term debt with Lion, replaced in April 2013	—				109,680			(b)
Long-term debt with Lion, maturing October 2018	9,865			(c)	—
Other	411				388
Total long-term debt	213,541				110,068
Current portion of debt	(73		)		(56		)
Long-term debt, net of current portion	$	213,468			$	110,012

(a)Includes accrued interest paid-in-kind of $3,044 of and net of unamortized discount of $5,779 at December 31, 2013.

(b)Includes accrued interest paid-in-kind of $16,469 and net of unamortized discount of $27,929 at December 31, 2012.

XML

Income Taxes (Net loss before income taxes) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure [Abstract]
United States	$ (107,637)	$ (38,365)	$ (37,876)
Foreign	3,110	4,906	283
Consolidated income (loss) before income taxes	$ (104,527)	$ (33,459)	$ (37,593)

XML

Business Segment and Geographic Area Information (Key financial information of the Companys reportable segments) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Net sales	$ 169,102	$ 164,543	$ 162,236	$ 138,060	$ 173,028	$ 162,160	$ 149,462	$ 132,660	$ 633,941	$ 617,310	$ 547,336
Gross Profit	79,507	84,640	83,870	72,868	93,091	85,200	79,036	70,056	320,885	327,383	294,900
Income (loss) from segment operations									(29,295)	962	(23,293)
Depreciation and amortization									26,076	22,989	24,980
Capital expenditures									27,054	21,607	11,070
Retail store impairment									1,540	1,647	4,267
Deferred rent expense (benefit)									(2,093)	(895)	(1,969)
U.S. Wholesale [Member]
Segment Reporting Information [Line Items]
Net sales									201,251	185,355	158,628
Gross Profit									49,877	53,195	44,000
Income (loss) from segment operations									11,981	27,893	23,500
Depreciation and amortization									7,418	6,322	7,757
Capital expenditures									10,115	9,791	3,638
Retail store impairment									0	0	0
Deferred rent expense (benefit)									81	523	257
U.S Retail [Member]
Segment Reporting Information [Line Items]
Net sales									205,011	198,886	174,837
Gross Profit									131,912	130,498	117,228
Income (loss) from segment operations									(2,731)	4,197	(4,659)
Depreciation and amortization									12,420	10,909	10,492
Capital expenditures									11,204	6,626	4,889
Retail store impairment									642	243	558
Deferred rent expense (benefit)									(1,678)	(706)	(1,662)
Canada [Member]
Segment Reporting Information [Line Items]
Net sales									60,134	63,669	61,865
Gross Profit									34,720	37,500	35,799
Income (loss) from segment operations									3,684	(57)	(3,695)
Depreciation and amortization									1,853	1,543	1,567
Capital expenditures									1,167	1,607	407
Retail store impairment									144	130	808
Deferred rent expense (benefit)									(375)	(197)	(121)
International [Member]
Segment Reporting Information [Line Items]
Net sales									167,545	169,400	152,006
Gross Profit									104,376	106,190	97,873
Income (loss) from segment operations									3,916	10,670	7,340
Depreciation and amortization									4,385	4,215	5,164
Capital expenditures									4,568	3,583	2,136
Retail store impairment									754	1,274	2,901
Deferred rent expense (benefit)									(121)	(515)	(443)
Consolidated Entities [Member]
Segment Reporting Information [Line Items]
Net sales									633,941	617,310	547,336
Gross Profit									320,885	327,383	294,900
Income (loss) from segment operations									16,850	42,703	22,486
Depreciation and amortization									26,076	22,989	24,980
Capital expenditures									27,054	21,607	11,070
Retail store impairment									1,540	1,647	4,267
Deferred rent expense (benefit)									(2,093)	(895)	(1,969)
Wholesale Sales Channel [Member] | U.S. Wholesale [Member]
Segment Reporting Information [Line Items]
Net sales									159,682	149,611	132,135
Wholesale Sales Channel [Member] | U.S Retail [Member]
Segment Reporting Information [Line Items]
Net sales									0	0	0
Wholesale Sales Channel [Member] | Canada [Member]
Segment Reporting Information [Line Items]
Net sales									12,092	13,006	11,492
Wholesale Sales Channel [Member] | International [Member]
Segment Reporting Information [Line Items]
Net sales									8,893	10,278	10,406
Wholesale Sales Channel [Member] | Consolidated Entities [Member]
Segment Reporting Information [Line Items]
Net sales									180,667	172,895	154,033
Retail Sales Channel [Member] | U.S. Wholesale [Member]
Segment Reporting Information [Line Items]
Net sales									0	0	0
Retail Sales Channel [Member] | U.S Retail [Member]
Segment Reporting Information [Line Items]
Net sales									205,011	198,886	174,837
Retail Sales Channel [Member] | Canada [Member]
Segment Reporting Information [Line Items]
Net sales									45,163	48,499	48,527
Retail Sales Channel [Member] | International [Member]
Segment Reporting Information [Line Items]
Net sales									141,517	141,738	126,868
Retail Sales Channel [Member] | Consolidated Entities [Member]
Segment Reporting Information [Line Items]
Net sales									391,691	389,123	350,232
Online Sales Channel [Member] | U.S. Wholesale [Member]
Segment Reporting Information [Line Items]
Net sales									41,569	35,744	26,493
Online Sales Channel [Member] | U.S Retail [Member]
Segment Reporting Information [Line Items]
Net sales									0	0	0
Online Sales Channel [Member] | Canada [Member]
Segment Reporting Information [Line Items]
Net sales									2,879	2,164	1,846
Online Sales Channel [Member] | International [Member]
Segment Reporting Information [Line Items]
Net sales									17,135	17,384	14,732
Online Sales Channel [Member] | Consolidated Entities [Member]
Segment Reporting Information [Line Items]
Net sales									$ 61,583	$ 55,292	$ 43,071

XML

Income Taxes (Reconciliation of statutory federal tax rate) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure [Abstract]
Taxes at the statutory federal tax rate of 35%	$ (36,585)	$ (11,711)	$ (13,158)
State tax, net of federal benefit	(4,059)	4,913	(18)
Change in valuation allowance	42,771	5,123	21,794
Foreign taxes	10	(618)	533
Unrealized loss (gain) on warrants and purchase rights	1,299	4,809	(8,213)
Other	(1,665)	1,297	783
Total income tax provision	$ 1,771	$ 3,813	$ 1,721

XML

Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Contingency [Line Items]
Unrecognized Tax Benefits, Decreases Resulting from Prior Period Tax Positions	$ 0	$ (2,163)	$ 0
Undistributed Earnings of Foreign Subsidiaries	34,075
Undistributed cash from foreign subsidiaries	3,109
Tax Credit Carryforward, Amount	9,296
Tax Credit Carryforward, Description	10
Domestic Tax Authority [Member]
Income Tax Contingency [Line Items]
Operating Loss Carryforwards	163,455
State and Local Jurisdiction [Member]
Income Tax Contingency [Line Items]
Operating Loss Carryforwards	113,747
Foreign Tax Authority [Member]
Income Tax Contingency [Line Items]
Operating Loss Carryforwards	8,000
Income Tax Examination, Penalties and Interest Expense	830
Unrecognized Tax Benefits, Decreases Resulting from Settlements with Taxing Authorities	552
CALIFORNIA
Income Tax Contingency [Line Items]
Tax Credit Carryforward, Amount	$ 11,800

XML

Schedule II (Reserve for inventory) (Details) (Inventory Valuation Reserve [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Inventory Valuation Reserve [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Valuation Allowances and Reserves, Balance	$ 2,778	$ 2,653	$ 3,932	$ 5,853
Valuation Allowances and Reserves, Charged to Cost and Expense	912	690	(1,652)
Valuation Allowances and Reserves, Deductions	0	0	0
Valuation Allowances and Reserves, Charged to Other Accounts	$ (787)	$ (1,969)	$ (269)

XML

Revolving Credit Facilities and Current Portion of Long-Term Debt (Tables)

12 Months Ended

Dec. 31, 2013

Revolving Credit Facilities and Current Portion of Long-Term Debt [Abstract]

Schedule of Line of Credit Facilities [Table Text Block]

The following table presents revolving credit facilities and current portion of long-term debt as of December 31, 2013 and 2012:

	2013		2012
Revolving credit facility (Capital One), maturing April 2018	$	43,526	$	—
Revolving credit facility (Crystal), replaced in April 2013	—		26,113
Term loan (Crystal), replaced in April 2013	—		30,000
Revolving credit facility (Bank of Montreal), maturing March 2014	443		4,387
Current portion of long-term debt (Note 8)	73		56
Total revolving credit facilities and current portion of long-term debt	$	44,042	$	60,556

XML

Property and Equipment Parenthetical (Details)	12 Months Ended
	Dec. 31, 2013
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	7 years
Furniture and Fixtures [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Furniture and Fixtures [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Computer Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Computer Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Automobiles [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Automobiles [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Land, Buildings and Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	25 years

XML

Stockholders' Equity (Notes)

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Attributable to Parent [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Stockholders' (Deficit) Equity

Authorization of Common Stock

On June 21, 2011 the Company's stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Common Stock from 120,000 to 230,000.

On March 31, 2014, the Company completed a public offering of approximately 61,645 shares of its common stock at $0.50 per share for net proceeds of approximately $28,500. As a result of this offering, common stock issued and outstanding were 175,109 and 173,377 shares. Additionally, the underwriters have a 30 day option to acquire up to an additional 8,500 shares of the Company's common stock at $0.50 per share.

Common Stock Warrants

Lion Warrants

As of December 31, 2013, Lion held warrants (the "Lion Warrants") to purchase 21,606 shares of the Company's common stock, with an exercise price of $0.75 per share. These warrants expire on February 18, 2022.

The Lion Warrants, as amended, contain certain anti-dilution protections in favor of Lion providing for proportional adjustment of the warrant price and, under certain circumstances, the number of shares of the Company's common stock issuable upon exercise of the Lion Warrant, in connection with, among other things, stock dividends, subdivisions and combinations and the issuance of additional equity securities at less than fair market value, as well as providing for the issuance of additional warrants to Lion in the event of certain equity sales or debt for equity exchanges.

The fair value for the warrants at December 31, 2013 and 2012 were estimated using the Binomial Lattice option valuation model. The fair value of the warrants at December 31, 2011 was estimated using the Monte Carlo simulation valuation model. The calculations as of December 31, 2013 assumed a contractual remaining term of 8.25 years, exercise price of $0.75, stock price of $1.23, interest rate of 2.7%, volatility of 70.84% and no dividends. As of December 31, 2013 and 2012, the fair value of the Lion Warrants were estimated to be $20,954 and $17,222, respectively, and in accordance with ASC 815-40 "Derivatives and Hedging - Contracts in Entity's Own Equity", was recorded as a liability in the accompanying consolidated balance sheets.

On March 13, 2012, in connection with the new credit agreement with Crystal Financial, LLC, the Company entered into an amendment to the Lion Credit Agreement (see Note 8), which required that the warrants issued to Lion be amended to, among other things, extend the term of the warrants to February 18, 2022 and add a provision pursuant to which, if American Apparel did not meet a certain quarterly EBITDA amount, the exercise price of the warrants would be reduced by $0.25 (a one-time adjustment for the first violation of such covenant; subsequent violations would not result in further adjustment). As of March 31, 2012, the Company did not meet the EBITDA requirement, and, as a result, the exercise price of the existing Lion warrants was reduced by $0.25 to $0.75 per share.

On March 31, 2014, as a result of the public offering of the Company's common shares as discussed above, the Company estimated that Lion received the right to purchase approximately 2,900 shares of the Company's common stock under their existing warrants and the exercise price of all of Lion's warrants will be adjusted to approximately $0.66 per share. Such adjustments were required by the terms of the existing Lion warrants.

SOF Warrants

On December 19, 2013, warrants held by SOF Investments, L.P. ("SOF") to purchase 1,000 of the Company's shares with the exercise price of $2.148 per share expired.

The fair value for the warrants at December 31, 2012 was estimated using the Binomial Lattice option valuation model. The calculations as of December 31, 2012 assumed a contractual remaining term of 1.0 year, exercise price of $2.148, stock price of $1.01, interest rate of 0.16%, volatility of 50.82% and no dividends. As of December 31, 2012, the fair value of the warrants were estimated to be $19, respectively, and in accordance with ASC 815-40, was recorded as a liability in the accompanying consolidated balance sheets.

The following table summarizes common stock warrants issued, forfeited, expired and outstanding (shares in thousands):

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Life (Years)
Outstanding - January 1, 2011	17,000			$	2.05	5.1
Issued (1)	41,366			1.14		—
Forfeited (2)	(35,760		)	1.63		—
Expired	—			—		—
Outstanding - December 31, 2011	22,606			1.05		6.0
Issued (1)	44,212			0.90		—
Forfeited (2)	(44,212		)	1.03		—
Expired	—			—		—
Outstanding - December 31, 2012	22,606			0.81		8.8
Issued (1)	—			—		—
Forfeited (2)	—			—		—
Expired	(1,000		)	2.15		—
Outstanding - December 31, 2013	21,606			$	0.75	8.2
Fair value - December 31, 2013	$	20,954

(1) Issued shares at December 31, 2011 include issuances and repriced shares.

(2) Represents repriced shares.

Common Stock and Purchase Rights

On April 26, 2011 and in connection with the February 18, 2011 amendment to the Lion Credit Agreement, the Company entered into a purchase and investment agreement with a group of investors ("Investors") and sold approximately 15,777 shares of common stock at a price of $0.90 per share and purchase rights to acquire additional shares of common stock for the aggregate net cash purchase price of approximately $12,417. The purchase rights gave the Investors the right to purchase up to approximately 27,443 additional shares of common stock at a price of $0.90 per share.

In connection with the purchase agreement with the Investors, the Company entered into a purchase agreement with Mr. Charney that, among other things, allowed Mr. Charney to purchase from the Company 778 shares of common stock at $0.90 per share, generating net proceeds of $700, and granted to Mr. Charney a right to purchase up to 1,556 additional shares of common stock on substantially the same terms as the purchase agreement with the Investors (the "Charney Purchase Rights").

The Investor Purchase Rights and Charney Purchase Rights (collectively, the "Purchase Rights") had a fair value of $15,605 at the date of the agreement. The Company recorded the Purchase Rights as a liability since they met the classification requirements for liability accounting in accordance with the ASC 815-40. The fair value was calculated using the Monte Carlo simulation pricing model, and assumed a stock price of $1.58, exercise price of $0.90, volatility of 99.08%, annual risk free rate of 0.11% and a term of 0.5 years. Net proceeds of $12,417 were allocated entirely to the Purchase Rights. The difference between the net proceeds received and the fair value of the purchase rights aggregating $3,188 were recorded in unrealized (gain) loss on change in fair value of warrants and purchase rights in the consolidated statements of operations.

In July 2011, the Investors exercised their purchase rights and acquired 8,407 shares of the Company's common stock for $0.90 per share, generating net proceeds of $6,593. The fair value of these exercised rights aggregated $2,857, which was reclassified in accordance with ASC 815-40 from a liability to stockholders' equity. As a result of the exercise of their purchase rights, the Investors have one remaining demand registration right with respect to their shares, subject to the terms and conditions of the relevant purchase agreement.

In October 2011, the remaining 19,036 Investor Purchase Rights and the 1,556 Charney Purchase Rights expired without being exercised.

The following table summarizes Purchase Rights issued, forfeited and expired (shares in thousands):

	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Life (Years)
Outstanding - January 1, 2011	—		$	—	—
Issued	28,999		0.90		0.5
Forfeited	—		—		—
Exercised	(8,407	)	0.90		—
Expired	(20,592	)	0.90		—
Outstanding - December 31, 2011	—		$	—	—

The Company's CEO Anti-Dilution Rights

As a condition to the Investors purchasing the shares and as a result of the July 2011 exercises of the Investor Purchase Rights, the Company provided Mr. Charney with certain anti-dilution rights (the ''Charney Anti-Dilution Rights"). The Charney Anti-Dilution Rights provided that Mr. Charney has a right to receive from the Company, subject to the satisfaction of certain average volume weighted closing price targets, and other terms and conditions set forth in the agreement, up to approximately 20,416 shares of the Company's common stock as anti-dilution protection.

On October 16, 2012, the Company and Mr. Charney entered into an amendment to the anti-dilution provisions contained in the Purchase Agreement with Mr. Charney dated as of April 27, 2011. The amendment extended by one year the measurement periods for Mr. Charney’s anti-dilution protection provisions and reduced the length of the corresponding stock price target periods from 60 days to 30 days. The fair value of these awards of $13,192 was determined under the Monte Carlo simulation pricing model. The calculation was based on the exercise price of $0, the stock price of $1.3, annual risk free rate of 0.45%, volatility of 90.46% and a term of 3.5 years.

As amended, each of the shares associated with the anti-dilution provision is issuable in three equal installments, one per each measurement period set forth below, subject to meeting the applicable average volume weighted closing price (“VWAP ”) for 30 consecutive trading days, calculated as set forth in the purchase agreement with Mr. Charney as follows: (i) for the measurement period from April 16, 2012 to and including April 15, 2014, if the VWAP of the common stock during a period of 30 consecutive trading days exceeds $3.25 per share; (ii) for the measurement period from but not including April 16, 2014 to and including April 15, 2015, if the VWAP of the common stock during a period of 30 consecutive trading days exceeds $4.25 per share; and (iii) for the measurement period from but not including April 16, 2015 to and including April 15, 2016, the VWAP of the common stock during a period of 30 consecutive trading days exceeds $5.25 per share.

The Company considered the shares to be awards with market conditions under ASC 718 "Stock Based Compensation," (“ASC 718”). The related service and amortization period for the shares occurs in three probability-weighted terms of 0.9, 1.8 and 2.7 years corresponding to the three measurement periods above. These awards expire after completion of each respective measurement period. See Note 14.

Sale of Common Stock to the Company's CEO

On July 7, 2011, the Company sold 778 shares of the Company's common stock to Mr. Charney at $0.90 per share for total proceeds of $700.

On March 24, 2011, the Company sold to Mr. Charney 1,802 shares of common stock at a price of $1.11 per share in cash, for approximately $2,000.

Also on March 24, 2011, the three promissory notes issued by two subsidiaries of the Company to Mr. Charney, which as of March 24, 2011 had an aggregate outstanding balance of $4,688, including principal and accrued and unpaid interest (to but not including March 24, 2011), were canceled in exchange for an issuance by the Company to Mr. Charney of an aggregate of 4,223 shares of common stock at a price of $1.11 per share, with 50% of such shares being issued on March 24, 2011 and the remaining shares issuable to Mr. Charney only if prior to March 24, 2014, (1) the closing sale price of common stock exceeds $3.50 for 30 consecutive trading days or (2) there is a change of control of the Company. On March 24, 2014, the Company determined that it did not meet the closing share price target and the remaining shares expired unissued.

Earnings Per Share

The Company presents earnings per share (“EPS”) utilizing a dual presentation of basic and diluted EPS. Basic EPS includes no dilution and is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The Company had common stock under various options, warrants and other agreements at December 31, 2013, 2012 and 2011. The weighted average effects of 46,684, 53,478 and 49,270 shares at December 31, 2013, 2012 and 2011, respectively, were excluded from the calculations of net loss per share for the years ended December 31, 2013 and 2012, because their impact would have been anti-dilutive.

A summary of the potential stock issuances under various options, warrants and other agreements that could have a dilutive effect on the shares outstanding as of December 31, 2013 and 2012 are as follows:

	2013	2012	2011
SOF Warrants	—	1,000	1,000
Lion Warrants	21,606	21,606	21,606
Shares issuable to Mr. Charney based on market conditions (1)	20,416	20,416	20,416
Contingent shares issuable to Mr. Charney based on market conditions (2)	2,112	2,112	2,112
Contingent shares issuable to Mr. Charney based on performance factors (3)	—	5,000	—
Employee options & restricted shares	2,550	3,344	4,136
	46,684	53,478	49,270

(1) Included Charney Anti-Dilution Rights pursuant to the April 26, 2011 Investor Purchase Agreement

(2) Pursuant to the March 24, 2011 conversion of debt to equity

(3) Pursuant to Mr. Charney's employment agreement commencing April 1, 2012

The table above does not include additional warrants that may be issuable to Lion pursuant to the anti-dilution provisions under the Lion Credit Agreement such as in the event anti-dilutive shares are issued to Mr. Charney pursuant to the Charney Anti-Dilution Rights.

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Litigation

12 Months Ended

Dec. 31, 2013

Litigation [Abstract]

Legal Matters and Contingencies [Text Block]

Litigation

The Company is subject to various claims and contingencies in the ordinary course of business, including those related to litigation, business transactions, employee-related matters and taxes, and others. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. There is no assurance that such matters will not materially and adversely affect the Company's business, financial position, and results of operations or cash flows.

Individual Actions

On February 7, 2006, Sylvia Hsu, a former employee of American Apparel, filed a Charge of Discrimination with the Los Angeles District Office of the Equal Employment Opportunity Commission (“EEOC”) (Hsu v. American Apparel: Charge No. 480- 2006-00418), alleging that she was subjected to sexual harassment by a co-worker and constructively discharged as a result of the sexual harassment and a hostile working environment. On March 9, 2007, the EEOC expanded the scope of its investigation to other employees of American Apparel who may have been sexually harassed. On August 9, 2010, the EEOC issued a written determination finding that reasonable cause exists to believe the Company discriminated against Ms. Hsu and women, as a class, on the basis of their female gender, by subjecting them to sexual harassment. No finding was made on the issue of Ms. Hsu's alleged constructive discharge. In August 2013 the parties entered into a Conciliation Agreement providing for an immaterial compensatory payment to Ms. Hsu and the Company's agreement to comply with the Company's Policy on Sexual Harassment and Sexual Discrimination, which Policy was reviewed by the EEOC, and take certain administrative measures relating thereto. The Conciliation Agreement remains in effect for three years.

On November 5, 2009, Guillermo Ruiz, a former employee of American Apparel, filed suit against the Company on behalf of putative classes of all current and former non-exempt California employees (Guillermo Ruiz, on behalf of himself and all others similarly situated v. American Apparel, Inc., Case Number BC425487) in the Superior Court of the State of California for the County of Los Angeles, alleging the Company failed to pay certain wages due for hours worked, to provide meal and rest periods or compensation in lieu thereof and to pay wages due upon termination to certain of the Company's employees. The complaint further alleges that the Company failed to comply with certain itemized employee wage statement provisions and violations of unfair competition law.  The plaintiff is seeking compensatory damages and economic and/or special damages in an unspecified amount, premium pay, wages and penalties, injunctive relief and restitution, and reimbursement for attorneys' fees, interest and the costs of the suit.

On June 21, 2010, Antonio Partida, a former employee of American Apparel, filed suit against the Company on behalf of putative classes of current and former non-exempt California employees (Antonio Partida, on behalf of himself and all others similarly situated v. American Apparel (USA), LLC, Case No. 30-2010-00382719-CU-OE-CXC) in the Superior Court of the State of California for the County of Orange, alleging the Company failed to pay certain wages for hours worked, to provide meal and rest periods or compensation in lieu thereof, and to pay wages due upon separation. The complaint further alleges that the Company failed to timely pay wages, unlawfully deducted wages and failed to comply with certain itemized employee wage statement provisions and violations of unfair competition law. The plaintiff is seeking compensatory damages and economic and/or special damages in an unspecified amount, premium pay, wages and penalties, injunctive relief and restitution, and reimbursement of attorneys' fees, interest and the costs of the suit.

On or about December 2, 2010, Emilie Truong, a former employee of American Apparel, filed suit against the Company on behalf of putative classes of current and former non-exempt California employees (Emilie Truong, individually and on behalf of all others similarly situated v. American Apparel, Inc. and American Apparel LLC, Case No. BC450505) in the Superior Court of the State of California for the County of Los Angeles, alleging the Company failed to timely provide final paychecks upon separation.  Plaintiff is seeking unspecified premium wages, attorneys' fees and costs, disgorgement of profits, and an injunction against the alleged unlawful practices.

On or about February 9, 2011, Jessica Heupel, a former retail employee filed suit on behalf of putative classes of current and former non-exempt California employees (Jessica Heupel, individually and on behalf of all others similarly situated v. American Apparel Retail, Inc., Case No. 37-2011-00085578-CU-OE-CTL) in the Superior Court of the State of California for the County of San Diego, alleging the Company failed to pay certain wages for hours worked, to provide meal and rest periods or compensation in lieu thereof, and to pay wages due upon separation.  The plaintiff is seeking monetary damages as follows: (1) for alleged meal and rest period violations; (2) for alleged failure to timely pay final wages, as well as for punitive damages for the same; and (3) unspecified damages for unpaid minimum wage and overtime.  In addition, Plaintiff seeks premium pay, wages and penalties, injunctive relief and restitution, and reimbursement of attorneys' fees, interest and the costs of the suit. This matter is now proceeding in arbitration. On or about September 9, 2011, Anthony Heupel, a former retail employee initiated arbitration proceedings on behalf of putative classes of current and former non-exempt California employees, alleging the Company failed to pay certain wages for hours worked, to provide meal and rest periods or compensation in lieu thereof, and to pay wages due upon separation.  The plaintiff is seeking monetary damages in an amount in excess of $3,600, as follows: (1) for alleged meal and rest period violations; (2) for alleged failure to timely pay final wages, as well as for punitive damages for the same; and (3) unspecified damages for unpaid minimum wage and overtime.  In addition, Plaintiff seeks premium pay, wages and penalties, injunctive relief and restitution, and reimbursement of attorneys' fees, interest and the costs of the suit.

The Company does not have insurance coverage for the above matters. Each of the aforementioned wage and hour cases have been proceeding in arbitration. All of these cases have been settled on an aggregate and class-wide basis for a payment by the Company in the total amount of $875, most of which will be paid to class members and to their attorneys. Certain class members have opted out of the settlement and so may proceed with individual claims. Also, the settlement is subject to and conditional upon approval of the arbitrator, and if the arbitrator approves, one or more of the California Superior Courts. There is no guarantee that such approvals will be obtained.

Additionally, the Company is currently engaged in other employment-related claims and other matters incidental to the Company's business.  The Company believes that all such claims against the Company are without merit or not material, and the Company intends to vigorously dispute the validity of the plaintiffs' claims. While the ultimate resolution of such claims cannot be determined, based on information at this time, the Company believes, but the Company cannot provide assurance that, the amount, and ultimate liability, if any, with respect to these actions will not materially affect the Company's business, financial position, results of operations, or cash flows. Should any of these matters be decided against the Company, the Company could not only incur liability but also experience an increase in similar suits and suffer reputational harm.

Derivative Matters

Two shareholder derivative lawsuits (Case No. CV106576 GAF (JCx) and Case No. CV107518 RSWL (FFMx)) were filed in the United States District Court for the Central District of California which were subsequently consolidated for all purposes into a case entitled In re American Apparel, Inc. Shareholder Derivative Litigation, Lead Case No. CV106576 (the “Federal Derivative Action”).  Plaintiffs in the Federal Derivative Action allege a cause of action for breach of fiduciary duty arising out of (i) the Company's alleged failure to maintain adequate accounting and internal control policies and procedures; (ii) the Company's alleged violation of state and federal immigration laws in connection with the previously disclosed termination of over 1,500 employees following an Immigration and Customs Enforcement inspection; and (iii) the Company's alleged failure to implement controls sufficient to prevent a sexually hostile and discriminatory work environment.  The Company does not maintain any direct exposure to loss in connection with these shareholder derivative lawsuits. The Company's status as a “Nominal Defendant” in the actions reflects the fact that the lawsuits are maintained by the named plaintiffs on behalf of American Apparel and that plaintiffs seek damages on the Company's behalf. The Company filed a motion to dismiss the Federal Derivative Action which was granted with leave to amend on July 31, 2012. Plaintiffs did not amend the complaint and subsequently filed a motion to dismiss each of their claims, with prejudice, for the stated purpose of taking an immediate appeal of the Court's July 31, 2012 order. On October 16, 2012, the Court granted the Plaintiffs' motion to dismiss and entered judgment accordingly. On November 12, 2012, Plaintiffs filed a Notice of Appeal to the Ninth Circuit Court of Appeals where the case is currently pending.

Four shareholder derivative lawsuits (Case No. BC 443763, Case No. BC 443902, Case No. BC 445094, and Case No. BC 447890) were filed in fall of 2010 in the Superior Court of the State of California for the County of Los Angeles which were subsequently consolidated for all purposes into a case entitled In re American Apparel, Inc. Shareholder Derivative Litigation, Lead Case No. BC 443763 (the "State Derivative Action"). 

Three of the matters comprising the State Derivative Action allege causes of action for breach of fiduciary duty arising out of (i) the Company's alleged failure to maintain adequate accounting and internal control policies and procedures; and (ii) the Company's alleged violation of state and federal immigration laws in connection with the previously disclosed termination of over 1,500 employees following an Immigration and Customs Enforcement inspection.  The fourth matter alleges seven causes of action for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets also arising out of the same allegations.  On April 12, 2011, the Court issued an order granting a stay (which currently remains in place) of the State Derivative Action on the grounds that the case is duplicative of the Federal Derivative Action, as well as the Federal Securities Action currently pending in the United States District Court for the Central District of California (see below).

Both the Federal Derivative Action and State Derivative Actions are covered under the Company's Directors and Officers Liability insurance policy, subject to a deductible and a reservation of rights.

Other Proceedings

Four putative class action lawsuits, (Case No. CV106352 MMM (RCx), Case No. CV106513 MMM (RCx), Case No. CV106516 MMM (RCx), and Case No. CV106680 GW (JCGx)) were filed in the United States District Court for the Central District of California in the Fall of 2010 against American Apparel and certain of the Company's officers and executives on behalf of American Apparel shareholders. On December 3, 2010, the four lawsuits were consolidated for all purposes into a case entitled In re American Apparel, Inc. Shareholder Litigation, Lead Case No. CV106352 MMM (JCGx) (the “Federal Securities Action”). The lead plaintiff filed a consolidated class action complaint on April 29, 2011 on behalf of shareholders who purchased the Company's common stock between November 28, 2007 and August 17, 2010. The lead plaintiff alleges two causes of action for violations of Section 10(b) and 20(a) of the 1934 Act, and Rule 10b-5 promulgated under Section 10(b), arising out of alleged misrepresentations contained in the Company's press releases, public filings with the SEC, and other public statements relating to (i) the adequacy of the Company's internal and financial control policies and procedures; (ii) the Company's employment practices; and (iii) the effect that the dismissal of over 1,500 employees following an Immigration and Customs Enforcement inspection would have on the Company. Plaintiff seeks damages in an unspecified amount, reasonable attorneys' fees and costs, and equitable relief as the Court may deem proper.  The Company filed two motions to dismiss the Federal Securities Action which the court granted with leave to amend. Plaintiffs filed a Second Amended Complaint on February 15, 2013. The Company filed a motion to dismiss the complaint on March 15, 2013. The hearing on the motion was held on June 3, 2013, at which time, the Court took the matter under submission. On August 8, 2013, the court issued its final order granting the motion to dismiss in regards to certain claims. Defendants answered the complaint's remaining claims on September 27, 2013. On November 6, 2013, the Court issued an order staying the case pending ongoing settlement discussions between the parties. Plaintiff filed an unopposed Motion for Preliminary Approval of the settlement on December 16, 2013. The settlement, if approved, would result in a payment by the Company's insurance carrier of $4,800. The Federal Securities Action is covered under the Company's Directors and Officers Liability insurance policy, subject to a deductible and a reservation of rights.

Should any of the above matters (i.e., the Federal Derivative Action, the State Derivative Action, or the Federal Securities Action) be decided against the Company in an amount that exceeds the Company's insurance coverage, or if liability is imposed on grounds which fall outside the scope of the Company's insurance coverage, the Company could not only incur a substantial liability, but also experience an increase in similar suits and suffer reputational harm.  The Company is unable to predict the financial outcome of these matters at this time, and any views formed as to the viability of these claims or the financial exposure which could result may change from time to time as the matters proceed through their course. However, no assurance can be made that these matters, either individually or together with the potential for similar suits and reputational harm, will not result in a material financial exposure, which could have a material adverse effect upon the Company's financial condition, results of operations, or cash flows.

The Company has previously disclosed an arbitration filed by the Company on February 17, 2011, related to cases filed in the Supreme Court of New York, County of Kings (Case No. 5018-1) and Superior Court of the State of California for the County of Los Angeles (Case Nos. BC457920 and BC460331) against American Apparel, Dov Charney and certain members of the Board of Directors asserting claims of sexual harassment, assault and battery, impersonation through the internet, defamation and other related claims.  The Company settled one of these cases with no monetary liability to the Company.  In another case, the arbitrator ruled that both American Apparel and the plaintiff had established certain claims and damages against one another resulting in a net inconsequential amount awarded to the plaintiff. The Company is awaiting the arbitrator’s ruling on the outstanding attorney’s fees issue in this case.  The Company cannot provide assurances that, the amount and ultimate liability, if any, with respect to the remaining actions will not materially affect the Company's business, financial position, results of operations, or cash flows.

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Condensed Consolidating Financial Information Condensed Balance Sheet (Details) (USD $) In Thousands, unless otherwise specified	Feb. 28, 2014	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Condensed Balance Sheet Statements, Captions [Line Items]
Cash	$ 4,878	$ 8,676	$ 12,853
Accounts Receivable, Net, Current		20,701	22,962
Inventories, net		169,378	174,229
Assets, Current		215,296	224,390
Property, Plant and Equipment, Net		69,303	67,778
OTHER ASSETS, net		46,727	34,783
Assets		333,752	328,212
Revolving credit facilities and current portion of long-term debt		44,042	60,556
Accounts payable		38,290	38,160
Accrued expenses and other current liabilities		50,018	41,516
Fair value of warrant liability		20,954	17,241
Liabilities, Current		161,989	161,609
Long-term debt, net of current portion		213,468	110,012
OTHER LONG-TERM LIABILITIES		11,485	10,695
Liabilities		411,156	306,128
Common Stock, Value, Outstanding		11	11
Additional paid-in capital		185,472	177,081
Accumulated deficit		(256,424)	(150,126)
Treasury Stock, Value		2,157	2,157
Stockholders' Equity Attributable to Parent		(77,404)	22,084	48,130	75,024
Liabilities and Equity		333,752	328,212
Parent Company [Member]
Condensed Balance Sheet Statements, Captions [Line Items]
Cash		0	0	0	0
Accounts Receivable, Net, Current		0	0
Due from Affiliate, Current		247,414	200,529
Inventories, net		0	0
Other Assets, Current		97	438
Assets, Current		247,511	200,967
Property, Plant and Equipment, Net		0	0
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures		(94,161)	(50,773)
OTHER ASSETS, net		9,282	204
Assets		162,632	150,398
Revolving credit facilities and current portion of long-term debt		0	0
Accounts payable		0	0
Accrued expenses and other current liabilities		5,952	1,679
Fair value of warrant liability		20,954	17,241
Other Liabilities, Current		0	(286)
Liabilities, Current		26,906	18,634
Long-term debt, net of current portion		213,130	109,680
OTHER LONG-TERM LIABILITIES		0	0
Liabilities		240,036	128,314
Common Stock, Value, Outstanding		11	11
Additional paid-in capital		185,472	177,081
Accumulated Other Comprehensive Income (Loss), Net of Tax		(4,306)	(2,725)
Accumulated deficit		(256,424)	(150,126)
Treasury Stock, Value		(2,157)	(2,157)
Stockholders' Equity Attributable to Parent		(77,404)	22,084
Liabilities and Equity		162,632	150,398
Guarantor Subsidiaries [Member]
Condensed Balance Sheet Statements, Captions [Line Items]
Cash		512	3,796	290	618
Accounts Receivable, Net, Current		15,109	15,697
Due from Affiliate, Current		(224,181)	(169,818)
Inventories, net		129,716	125,988
Other Assets, Current		10,442	8,200
Assets, Current		(68,402)	(16,137)
Property, Plant and Equipment, Net		53,424	50,551
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures		18,158	17,766
OTHER ASSETS, net		27,934	25,607
Assets		31,114	77,787
Revolving credit facilities and current portion of long-term debt		43,586	56,156
Accounts payable		34,738	34,120
Accrued expenses and other current liabilities		28,344	24,137
Fair value of warrant liability		0	0
Other Liabilities, Current		6,830	1,778
Liabilities, Current		113,498	116,191
Long-term debt, net of current portion		47	6
OTHER LONG-TERM LIABILITIES		29,711	28,230
Liabilities		143,256	144,427
Common Stock, Value, Outstanding		100	100
Additional paid-in capital		6,726	6,726
Accumulated Other Comprehensive Income (Loss), Net of Tax		(543)	(381)
Accumulated deficit		(118,425)	(73,085)
Treasury Stock, Value		0	0
Stockholders' Equity Attributable to Parent		(112,142)	(66,640)
Liabilities and Equity		31,114	77,787
Non-Guarantor Subsidiaries [Member]
Condensed Balance Sheet Statements, Captions [Line Items]
Cash		8,164	9,057	10,003	7,038
Accounts Receivable, Net, Current		5,592	7,265
Due from Affiliate, Current		(23,233)	(30,711)
Inventories, net		39,736	49,493
Other Assets, Current		6,002	5,708
Assets, Current		36,261	40,812
Property, Plant and Equipment, Net		15,879	17,227
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures		0	0
OTHER ASSETS, net		11,937	10,233
Assets		64,077	68,272
Revolving credit facilities and current portion of long-term debt		456	4,400
Accounts payable		3,552	4,040
Accrued expenses and other current liabilities		15,722	15,700
Fair value of warrant liability		0	0
Other Liabilities, Current		1,855	2,644
Liabilities, Current		21,585	26,784
Long-term debt, net of current portion		291	326
OTHER LONG-TERM LIABILITIES		5,988	6,277
Liabilities		27,864	33,387
Common Stock, Value, Outstanding		492	492
Additional paid-in capital		7,685	7,223
Accumulated Other Comprehensive Income (Loss), Net of Tax		(671)	736
Accumulated deficit		28,707	26,434
Treasury Stock, Value		0	0
Stockholders' Equity Attributable to Parent		36,213	34,885
Liabilities and Equity		64,077	68,272
Consolidation, Eliminations [Member]
Condensed Balance Sheet Statements, Captions [Line Items]
Cash		0	0	0	0
Accounts Receivable, Net, Current		0	0
Due from Affiliate, Current		0	0
Inventories, net		(74)	(1,252)
Other Assets, Current		0	0
Assets, Current		(74)	(1,252)
Property, Plant and Equipment, Net		0	0
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures		76,003	33,007
OTHER ASSETS, net		0	0
Assets		75,929	31,755
Revolving credit facilities and current portion of long-term debt		0	0
Accounts payable		0	0
Accrued expenses and other current liabilities		0	0
Fair value of warrant liability		0	0
Other Liabilities, Current		0	0
Liabilities, Current		0	0
Long-term debt, net of current portion		0	0
OTHER LONG-TERM LIABILITIES		0	0
Liabilities		0	0
Common Stock, Value, Outstanding		(592)	(592)
Additional paid-in capital		(14,411)	(13,949)
Accumulated Other Comprehensive Income (Loss), Net of Tax		1,214	(355)
Accumulated deficit		89,718	46,651
Treasury Stock, Value		0	0
Stockholders' Equity Attributable to Parent		75,929	31,755
Liabilities and Equity		75,929	31,755
Consolidated Entities [Member]
Condensed Balance Sheet Statements, Captions [Line Items]
Cash		8,676	12,853	10,293	7,656
Accounts Receivable, Net, Current		20,701	22,962
Due from Affiliate, Current		0	0
Inventories, net		169,378	174,229
Other Assets, Current		16,541	14,346
Assets, Current		215,296	224,390
Property, Plant and Equipment, Net		69,303	67,778
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures		0	0
OTHER ASSETS, net		49,153	36,044
Assets		333,752	328,212
Revolving credit facilities and current portion of long-term debt		44,042	60,556
Accounts payable		38,290	38,160
Accrued expenses and other current liabilities		50,018	41,516
Fair value of warrant liability		20,954	17,241
Other Liabilities, Current		8,685	4,136
Liabilities, Current		161,989	161,609
Long-term debt, net of current portion		213,468	110,012
OTHER LONG-TERM LIABILITIES		35,699	34,507
Liabilities		411,156	306,128
Common Stock, Value, Outstanding		11	11
Additional paid-in capital		185,472	177,081
Accumulated Other Comprehensive Income (Loss), Net of Tax		(4,306)	(2,725)
Accumulated deficit		(256,424)	(150,126)
Treasury Stock, Value		(2,157)	(2,157)
Stockholders' Equity Attributable to Parent		(77,404)	22,084
Liabilities and Equity		$ 333,752	$ 328,212

XML

Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, Plant and Equipment [Abstract]
Depreciation and amortization	$ 26,076	$ 22,989	$ 24,980
Capital leased assets, gross	15,115	16,415
Capital leases, accumulated depreciation	12,252	12,093
Asset Impairment Charges	$ 1,540	$ 1,647	$ 4,267

XML

Business Segment and Geographic Area Information (Tables)

12 Months Ended

Dec. 31, 2013

Business Segment and Geographic Area Information [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

The following table represents key financial information of the Company’s reportable segments before unallocated corporate expenses:

	For the Year Ended December 31, 2013
	U.S. Wholesale		U.S. Retail			Canada			International			Consolidated
Wholesale net sales	159,682		—			12,092			8,893			180,667
Retail net sales	—		205,011			45,163			141,517			391,691
Online consumer net sales	41,569		—			2,879			17,135			61,583
Total net sales to external customers	201,251		205,011			60,134			167,545			633,941
Gross profit	49,877		131,912			34,720			104,376			320,885
Income (loss) from segment operations	11,981		(2,731		)	3,684			3,916			16,850
Depreciation and amortization	7,418		12,420			1,853			4,385			26,076
Capital expenditures	10,115		11,204			1,167			4,568			27,054
Retail store impairment	—		642			144			754			1,540
Deferred rent expense (benefit)	81		(1,678		)	(375		)	(121		)	(2,093		)
	For the Year Ended December 31, 2012
	U.S. Wholesale		U.S. Retail			Canada			International			Consolidated
Wholesale net sales	$	149,611	$	—		$	13,006		$	10,278		$	172,895
Retail net sales	—		198,886			48,499			141,738			389,123
Online consumer net sales	35,744		—			2,164			17,384			55,292
Total net sales to external customers	185,355		198,886			63,669			169,400			617,310
Gross profit	53,195		130,498			37,500			106,190			327,383
Income (loss) from segment operations	27,893		4,197			(57		)	10,670			42,703
Depreciation and amortization	6,322		10,909			1,543			4,215			22,989
Capital expenditures	9,791		6,626			1,607			3,583			21,607
Retail store impairment	—		243			130			1,274			1,647
Deferred rent expense (benefit)	523		(706		)	(197		)	(515		)	(895		)
	For the Year Ended December 31, 2011
	U.S. Wholesale		U.S. Retail			Canada			International			Consolidated
Wholesale net sales	$	132,135	$	—		$	11,492		$	10,406		$	154,033
Retail net sales	—		174,837			48,527			126,868			350,232
Online consumer net sales	26,493		—			1,846			14,732			43,071
Total net sales to external customers	158,628		174,837			61,865			152,006			547,336
Gross profit	44,000		117,228			35,799			97,873			294,900
Income (loss) from segment operations	23,500		(4,659		)	(3,695		)	7,340			22,486
Depreciation and amortization	7,757		10,492			1,567			5,164			24,980
Capital expenditures	3,638		4,889			407			2,136			11,070
Retail store impairment	—		558			808			2,901			4,267
Deferred rent expense (benefit)	257		(1,662		)	(121		)	(443		)	(1,969		)

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

Reconciliation of reportable segments consolidated income (loss) from operations for the years ended December 31, 2013, 2012 and 2011 to the consolidated loss before income taxes is as follows:

	2013			2012			2011
Income from operations of reportable segments	$	16,850		$	42,703		$	22,486
Unallocated corporate expenses	(46,145		)	(41,741		)	(45,779		)
Interest expense	39,286			41,559			33,167
Foreign currency transaction loss	1			120			1,679
Unrealized loss (gain) on change in fair value of warrant and purchase rights	3,713			4,126			(23,467		)
Loss (gain) on extinguishment of debt	32,101			(11,588		)	3,114
Other expense (income)	131			204			(193		)
Consolidated loss before income taxes	$	(104,527	)	$	(33,459	)	$	(37,593	)

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

Net sales by each reportable segment’s class of customer and geographic location of customer for the years ended December 31, 2013, 2012, and 2011 consist of the following:

	Years Ended December 31,
	2013		2012		2011
Net sales by geographic location of customer:
United States	$	406,262	$	384,241	$	333,464
Canada	60,134		63,669		61,865
Europe (excluding United Kingdom)	70,347		66,861		68,130
United Kingdom	44,153		47,694		40,039
South Korea	10,380		10,732		9,749
China	6,894		5,317		3,857
Japan	18,119		20,336		14,176
Australia	10,218		11,458		9,383
Other foreign countries	7,434		7,002		6,673
Total consolidated net sales	$	633,941	$	617,310	$	547,336

Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country [Table Text Block]

Long-lived assets—property and equipment, net by geographic location, is summarized as follows as of December 31,:

	2013		2012
United States	$	53,424	$	50,551
Canada	3,913		5,079
Europe (excluding the United Kingdom)	4,741		3,987
United Kingdom	4,434		4,500
South Korea	344		433
China	291		358
Japan	750		1,097
Australia	846		1,057
Other foreign countries	560		716
Total consolidated long-lived assets	$	69,303	$	67,778
Identifiable assets by reportable segment:
U.S. Wholesale	$	169,474	$	153,856
U.S. Retail	77,150		76,709
Canada	17,761		28,586
International	69,367		69,061
Total	$	333,752	$	328,212

Percentages of Total Assets and Total Liabilities in Foreign Subsidiaries [Table Text Block]

Foreign subsidiaries accounted for the following percentages of total assets and total liabilities as of December 31,:

	2013		2012
Total assets	26.1	%	29.8	%
Total liabilities	6.8	%	10.9	%

XML

Consolidated Statements of Stockholders’ (Deficit) Equity (USD $) In Thousands, unless otherwise specified	Total	Common Stock	Treasury Stock	Additional Paid-in Capital	Accumulated Other Comprehensive (Loss) Income	Accumulated Deficit
Balance at Dec. 31, 2010	$ 75,024	$ 8	$ (2,157)	$ 153,881	$ (3,168)	$ (73,540)
Number of Common Shares Issued		108,870
Share-based compensation, net		801
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation, net	7,107			7,107
Reclassification of warrants from equity to debt	(11,339)			(11,339)
Conversion of debt to equity, shares		2,113
Conversion of debt to equity	4,688			4,688
Sale of common stock, net of fees, shares		26,764
Sale of common stock, net of fees	9,295	3		9,292
Reclassification of purchase rights upon exercise				2,857
Reclassification of purchase rights upon exercise	2,857
Net loss	(39,314)					(39,314)
Foreign currency translation, net of tax	(188)				(188)
Balance at Dec. 31, 2011	48,130	11	(2,157)	166,486	(3,356)	(112,854)
Number of Common Shares Issued		110,111
Share-based compensation, net		1,241
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation, net	10,595			10,595
Conversion of debt to equity	0
Net loss	(37,272)					(37,272)
Foreign currency translation, net of tax	631				631
Balance at Dec. 31, 2012	22,084	11	(2,157)	177,081	(2,725)	(150,126)
Number of common shares issued at Dec. 31, 2012	110,111
Number of Common Shares Issued		113,469
Share-based compensation, net		3,358
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation, net	8,391			8,391
Conversion of debt to equity	0
Net loss	(106,298)					(106,298)
Foreign currency translation, net of tax	(1,581)				(1,581)
Balance at Dec. 31, 2013	$ (77,404)	$ 11	$ (2,157)	$ 185,472	$ (4,306)	$ (256,424)
Number of common shares issued at Dec. 31, 2013	113,469

XML

Business Segment and Geographic Area Information (Long-lived assets-property and equipment, net) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	$ 69,303	$ 67,778
U.S. Wholesale [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	169,474	153,856
U.S Retail [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	77,150	76,709
Canada [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	17,761	28,586
International [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	69,367	69,061
Consolidated Entities [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	333,752	328,212
United States [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	53,424	50,551
Canada [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	3,913	5,079
Europe [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	4,741	3,987
United Kingdom [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	4,434	4,500
South Korea [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	344	433
China [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	291	358
Japan [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	750	1,097
Australia [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	846	1,057
Other Foreign Countries [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	560	716
Consolidated Entities [Member]
Segment Reporting Information [Line Items]
Property, Plant and Equipment, Net	$ 69,303	$ 67,778

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Summary of Significant Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of American Apparel, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. Certain reclassifications have been made to the prior year consolidated financial statements and related footnotes to conform them to the 2013 presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The most complex and subjective estimates include: inventory valuation and obsolescence; valuation and recoverability of long-lived assets, including the values assigned to goodwill and property and equipment; fair value calculations, including derivative liabilities such as warrants; contingencies, including accruals for the outcome of current litigation and assessments and self-insurance; income taxes, including uncertain tax positions and recoverability of deferred income taxes; and cash flow projections in assessing future performance related to financial standards requiring a prospective analysis in valuing and classifying assets and liabilities.

On a regular basis, management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted. Actual results could differ from the estimates.

Restricted Cash

Restricted cash primarily represented cash collateral on standby letters of credit. The standby letters of credit are predominantly used as collateral for the Company's workers' compensation program. See Note 16.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to credit risk consist primarily of cash (the amounts of which may, at times, exceed Federal Deposit Insurance Corporation limits on insurable amounts) and trade accounts receivable, relating substantially to the Company’s U.S. Wholesale segment. The Company mitigates its cash risk by investing through major financial institutions. The Company had approximately $7,374 and $8,265 held in foreign banks at December 31, 2013, and 2012, respectively.

The Company mitigates its risks related to trade receivables by performing on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information. The Company also maintains an insurance policy for certain customers based on a customer’s credit rating and established limits. Collections and payments from customers are continuously monitored. One customer, in the U.S. Wholesale segment, accounted for 14.2% and 15.1% of the Company’s total accounts receivables as of December 31, 2013 and 2012, respectively. The Company maintains an allowance for doubtful accounts, which is based upon historical experience and specific customer collection issues that have been identified. While bad debt expenses have historically been within expectations and allowances established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past.

Fair Value Measurements

The Company’s financial instruments are primarily composed of cash, restricted cash, accounts receivable (including credit card receivables), accounts payable, revolving credit borrowings, its senior secured notes, term loans and warrants. The fair value of cash, restricted cash, accounts receivable and accounts payable closely approximates their carrying value due to their short maturities and variable rates. The fair value of fixed-rate borrowings not based on quoted prices is estimated using a discounted cash flow analysis.

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related asset or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of assets or liabilities.

Wherever possible, the Company utilizes observable market inputs (quoted market prices) when measuring fair value.

For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company's accounting and finance department determine valuation policies and procedures. Their determinations are approved by the Chief Financial Officer.

As of December 31, 2013, there were no transfers in or out of Level 2 and Level 3 from other levels.

The fair value of fixed rate borrowings not based on quoted prices are estimated using a projected discounted cash flow analysis based on unobservable inputs including interest payments, principal payments and discount rate, and is classified within Level 3 of the valuation hierarchy. An increase or decrease in the stock price and the discount rate assumption can significantly decrease or increase the fair value of the fixed rate borrowings. See Note 9.

The fair value of each warrant was estimated using the Binomial Lattice option valuation model. Significant observable and unobservable inputs include stock price, exercise price, annual risk free rate, term, and expected volatility, and were classified within Level 3 of the valuation hierarchy. An increase or decrease in these inputs could significantly increase or decrease the fair value of the warrant. See Notes 9 and 13.

The fair value of indefinite-lived assets, which consists exclusively of goodwill, is measured in connection with the Company’s annual goodwill impairment test.  The fair value of the reporting unit to which goodwill has been assigned, is determined using a projected discounted cash flow analysis based on unobservable inputs including gross profit, discount rate, working capital requirements, capital expenditures, depreciation and terminal value assumptions, and are classified within Level 3 of the valuation hierarchy. An increase or decrease in the discount rate assumption and/or the terminal value assumption, in isolation, can have a significant effect on the fair value of the reporting unit. See Goodwill and Other Intangible Assets below.

Retail stores that have indicators of impairment and whose carrying value of assets are greater than their related projected undiscounted future cash flows, are measured for impairment by comparing the fair value of the assets against their carrying value. Fair value of the assets is estimated using a projected discounted cash flow analysis based on unobservable inputs including gross profit and discount rate, and is classified within Level 3 of the valuation hierarchy.  The key assumptions used in the estimates of projected cash flows were sales, gross margin and payroll costs. These forecasts are based on historical trends and take into account recent developments, as well as the Company's plans and intentions. An increase or decrease in the discount rate assumption and/or projected cash flows, in isolation, can significantly decrease or increase the fair value of the assets, which would have an effect on the impairment recorded. See Impairment of Long-Lived Assets below.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets of companies acquired. Goodwill and other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but are instead tested for impairment at least annually. The Company’s annual impairment test date is December 31.

Based on the qualitative assessment provisions of ASC 350 "Intangibles-Goodwill and Other", the Company determined that based on an analysis of qualitative factors, the fair value of the reporting unit was more likely than not greater than its carrying amount, and therefore, a quantitative calculation of the reporting unit's fair value was not be needed. The Company has not historically had any goodwill impairment.

Other intangible assets consist of deferred financing costs (amortized over the term of the applicable debt facility) and key money, broker and finder fees and lease rights (amortized over the life of the respective lease).

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying amount to determine if a write down to a new depreciable basis is required. If required, an impairment charge is measured by the difference between the carrying value and the estimated fair value of the assets, with such estimated fair values generally determined using the discounted future cash flows of the assets using a rate that approximates the Company’s weighted average cost of capital. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of retail stores relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of the assets or in the Company's overall strategy with respect to the manner or use of the acquired assets or changes in the Company's overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company's stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets and its retail stores for potential impairment indicators at least annually and more frequently upon the occurrence of events that could impact prior conclusions.

The key assumptions used in management's estimates of projected cash flow at its retail stores deal largely with forecasts of sales levels, gross margins, and payroll costs. These forecasts are typically based on historical trends and take into account recent developments as well as management's plans and intentions. Any material change in manufacturing costs or a raw material costs could significantly impact projected future cash flows of retail stores and these factors are considered in evaluating impairment. Other factors, such as increased competition or a decrease in the desirability of the Company's products, could lead to lower projected sales levels, which would adversely impact cash flows. A significant change in cash flows in the future could result in an impairment of long lived assets.

Web Site Development

The Company capitalizes applicable costs incurred during the application and infrastructure website development stage and expenses costs incurred during the planning and operating stage. As of December 31, 2013 and 2012, the carrying value of the Company's capitalized website development costs were $2,805 and $2,242, respectively, and were included in property and equipment in the accompanying consolidated balance sheets.

Self-Insurance Liabilities

The Company self-insures a significant portion of expected losses under workers’ compensation and healthcare benefits programs. Estimated costs under the workers’ compensation program, including incurred but not reported claims, are recorded as expense based upon historical experience, trends of paid and incurred claims, and other actuarial assumptions. If actual claim trends under these programs, including the severity or frequency of claims, differ from the Company's estimates, its financial results may be significantly impacted. The Company's estimated self-insurance liabilities are classified in its balance sheets as accrued expenses or other long-term liabilities based upon whether they are expected to be paid during or beyond the Company's normal operating cycle of 12 months from the date of its consolidated financial statements. Estimated costs under the Company's healthcare program are based on estimated losses for claims incurred, but not paid at the end of the period. Funding is made directly to the providers and/or claimants by the insurance company.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using the enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. For the years ended December 31, 2013, 2012 and 2011, the Company recorded a valuation allowance against deferred tax assets of $120,694, $77,578 and $73,773. For all years presented, the Company recorded a valuation allowance against substantially all deferred tax assets. In the event the Company determines that it will be able to realize deferred income tax assets in the future, it will make an adjustment to the valuation allowance.

The Company records net deferred tax assets to the extent it believes these assets will be realized using a more likely than not standard. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.

Management makes judgments as to the interpretation of tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liabilities. In management's opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

The Company accounts for uncertain tax positions in accordance with ASC 740-“Income Taxes”. Gross unrecognized tax benefits are included in other long-term liabilities in the accompanying consolidated balance sheets. The Company accrues interest and penalties, if incurred, on unrecognized tax benefits as components of the income tax provision in the accompanying consolidated statements of operations.

Contingencies

Certain conditions may exist at the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings or governmental assessments that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of these matters as well as the merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company's consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, is disclosed. Associated legal fees are expensed as incurred.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

In making these determinations, the Company assesses the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. Management determines the amount of reserves needed, if any, for each individual issue based on its knowledge and experience and discussions with legal counsel. The required reserves may change in the future due to new developments in each matter, the ultimate resolution of each matter, or changes in approach, such as a change in settlement strategy. The Company currently does not believe, based upon information available, that these matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows. There can be no assurance that such matters will not materially and adversely affect the Company's business, financial position, and results of operations or cash flows. See Notes 15 and 18, Commitments and Contingencies and Litigation.

Revenue Recognition

The Company recognizes product sales when title and risk of loss have transferred to the customer, there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collectability is reasonably assured. Wholesale product sales are recorded at the time the product is either picked up by or shipped to the customer. Online product sales are recorded at the time the product is received by the customer. Retail store sales are recorded as revenue upon the sale of product to retail customers. The Company’s net sales represent gross sales invoiced to customers, less certain related charges for discounts, returns, and other promotional allowances, and are recorded net of sales or value added tax. Allowances provided for these items are presented in the consolidated financial statements primarily as reductions to sales and cost of sales (see Sales Returns and Allowances below for further information).

The Company recognizes revenue from gift cards, gift certificates and store credits as they are redeemed for product or when it is determined that some portion of gift cards will not be redeemed. See Gift Cards below.

Sales Returns and Allowances

The Company analyzes sales returns in order to make reasonable estimates of product returns for its wholesale, online and retail store sales based upon historical experience. Estimates for sales returns are based on a variety of factors including actual returns based on expected return data communicated to the Company by its customers. Accordingly, the Company believes that its historical returns analysis is an accurate basis for its allowance for sales returns. The Company regularly reviews the factors that influence its estimates and, if necessary, makes adjustments when it believes that actual product returns and credits may differ from established reserves. If actual or expected future returns and claims are significantly greater or lower than the allowance for sales returns established, the Company would record a reduction or increase to net revenues in the period in which it made such determination.

Shipping and Handling Costs

Shipping and handling costs consist primarily of freight expenses incurred to transport products to the Company's retail stores and distribution center, and to its wholesale and online retail customers. These costs are included in cost of sales. Amounts billed to customers for shipping are included in net sales.

Gift Cards

Upon issuance of a gift card a liability is established for the cash value. The liability is relieved and net sales are recorded upon redemption by the customer. Over time, some portion of gift cards is not redeemed ("breakage"). The Company determines breakage income for gift cards based on historical redemption patterns. Breakage income is recorded as a credit to selling expenses, which is a component of operating expenses in the consolidated statements of operations. Currently, the Company records breakage when gift cards remain unredeemed after two-years. The Company's gift cards, gift certificates and store credits do not have expiration dates. See Note 6.

The Company does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate breakage.

Trade Receivables and Allowance for Doubtful Accounts

Accounts receivable primarily consists of trade receivables, including amounts due from credit card companies, net of allowances. On a periodic basis, the Company evaluates its trade receivables and establishes an allowance for doubtful accounts.

The Company performs on-going credit evaluations of its customers and adjust credit limits based upon payment history and the customer’s current credit worthiness, as determined by its review of current credit information. Payments from customers are continuously monitored. The Company maintains an allowance for doubtful accounts, which is based upon historical experience as well as specific customer collection issues that have been identified. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Deferred Rent, Rent Expense and Tenant Allowances

The Company occupies its retail stores, corporate office, manufacturing, and distribution center under operating leases generally with terms of one to ten years. Some leases contain renewal options for periods ranging from five to fifteen years under substantially the same terms and conditions as the original leases but with rent adjustments based on various factors specific to each agreement. Many of the store leases require payment of a specified minimum rent, a contingent rent based on a percentage of the store’s net sales in excess of a specified threshold, plus defined escalating rent provisions. The Company recognizes its minimum rent expense on a straight-line basis over the term of the lease (including probable lease renewals), plus the construction period prior to occupancy of the retail location, using a mid-month convention. Also included in rent expense are payments of real estate taxes, insurance and certain common area and maintenance costs in addition to the future minimum operating lease payments. Certain lease agreements provide for the Company to receive lease inducements or tenant allowances from landlords to assist in the financing of certain property. These inducements are recorded as a component of deferred rent and amortized as a reduction of rent expense over the term of the related lease.

Advertising, Promotion and Catalog

The Company expenses the production costs of advertising the first time the advertising takes place. Advertising, promotion and catalog expenses for the years ended December 31, 2013, 2012 and 2011 amounted to $19,814, $22,114, and $15,194 respectively, and are included in selling expenses in the accompanying consolidated statements of operations. The Company has cooperative advertising arrangements with certain vendors in its U.S. wholesale segment. For the years ended December 31, 2013, 2012 and 2011, cooperative advertising expenses were not significant.

Share-Based Compensation

The Company recognizes compensation expense on a straight-line basis net of forfeitures over the vesting period for all share-based awards granted. The Company determines the fair value of restricted stock awards based on the market value at the grant date. The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards at the grant date. The Company calculates the expected volatility using the historical volatility over the most recent period equal to the expected term and evaluates the extent to which available information indicate that future volatility may differ from historical volatility. The risk-free rates for the expected terms of the stock options are based on the U.S. Treasury yield curve in effect at the time of the grant. Due to the lack of historical information, the Company determines the expected term of its stock option awards by using the simplified method, which assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires. Estimated forfeitures are zero, as to date, actual forfeitures have been insignificant. The expected dividend yield is zero as the Company has not paid or declared any cash dividends on its Common Stock. Based on these valuations, the Company recognized share-based compensation expense of $8,451, $10,580, and $6,814 for the years ended December 31, 2013, 2012 and 2011, respectively.

Preferred Stock

At December 31, 2013 and 2012, the Company was authorized to issue 1,000 shares of preferred stock with a par value of $0.0001 with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. There were no shares issued or outstanding at December 31, 2013 and 2012. Shares may be issued in one or more series.

Earnings per Share

The Company presents earnings per share (“EPS”) utilizing a dual presentation of basic and diluted EPS. Basic EPS includes no dilution and is computed by dividing net (loss) income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The Company had common stock under various options, warrants and other agreements at December 31, 2013, 2012 and 2011. The weighted average effects of 46,684, 53,478 and 49,270 shares at December 31, 2013, 2012 and 2011, respectively, were excluded from the calculations of net loss per share for the years ended December 31, 2013, 2012 and 2011, because their impact would have been anti-dilutive. See Note 13.

Comprehensive Loss

Comprehensive loss represents the change in stockholders’ equity resulting from transactions other than stockholder investments and distributions. Accumulated other comprehensive loss includes changes in equity that are excluded from the Company’s net loss, specifically, unrealized gains and losses on foreign currency translation adjustments and is presented in the consolidated statements of stockholders' equity. The Company presents the components of comprehensive loss within the consolidated statements of operations and comprehensive loss.

Accounting Standards Updates

Accounting standards updates effective after December 31, 2013, are not expected to have a material effect on the Company's consolidated financial statements.

Subsequent Events

The Company has evaluated events that occurred subsequent to December 31, 2013 and through the date the financial statements were issued.

XML

Long-Term Debt (Components of Long-Term Debt) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended					12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 Senior Notes [Member] Rate	Dec. 31, 2012 Senior Notes [Member]	Dec. 31, 2013 Lion Credit Agreement [Member]	Dec. 31, 2012 Lion Credit Agreement [Member]	Dec. 31, 2013 Lion Credit Agreement 2013 [Member] [Domain] Rate	May 22, 2013 Lion Credit Agreement 2013 [Member] [Domain] Rate	Dec. 31, 2012 Lion Credit Agreement 2013 [Member] [Domain]	Dec. 31, 2013 Other Debt Obligations [Member]	Dec. 31, 2012 Other Debt Obligations [Member]	Dec. 31, 2013 Long-term Debt [Member]	Dec. 31, 2012 Long-term Debt [Member]
Debt Instrument [Line Items]
Senior Notes				$ 203,265	$ 0
Long-Term Debt including current maturities, accrued interest paid-in-kind, net of unamortized discount						0	109,680
Long-Term Debt including current maturities, accrued interest paid-in-kind, net of unamortized discount 2013								9,865		0
Other Long-term Debt											411	388
Current portion of long-term debt	(73)	(56)
Long-term Debt													213,541	110,068
Accrued Interest Paid In Kind				3,044			16,469	365		16,469
Debt Instrument, Face Amount				206,000					4,500
coupon, rate				97.00%
Debt Instrument, Unamortized Discount	5,779	27,929		5,779			27,929
Debt Instrument, Interest Rate, Stated Percentage				13.00%				0.00%	0.00%
Long-term Debt, Percentage Bearing Variable Interest, Percentage Rate				15.00%
Redemption Premium				0
Principal amount subject to redemption, percent				35.00%
Redemption price1, percent				113.00%
Redemption price2, percent				101.00%
Principal amount subject to redemption1, percent				100.00%
Redemption price, percent				100.00%
Gains (Losses) on Extinguishment of Debt	(32,101)	11,588	(3,114)			(32,101)
Long-term debt, net of current portion	$ 213,468	$ 110,012											$ 213,468	$ 110,012

XML

Workers' Compensation and Other Self-Insurance Reserve (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013 Rate	Dec. 31, 2012
Loss Contingencies [Line Items]
Workers compensation deposit	$ 16,124	$ 14,624
Workers' Compensation [Member]
Loss Contingencies [Line Items]
Loss Contingency Accrual, Insurance-related Assessment, Discount Rate	1.03%
Loss Contingency, Undiscounted Amount of Insurance-related Assessment Liability	15,809
Letters of Credit Outstanding, Amount	450
Customer Advances and Deposits	16,124	14,624
Accrued Liabilities	3,871	3,778
Other Accrued Liabilities, Noncurrent	11,485	10,694
Workers compensation deposit	15,356	14,472
self insurance reserves [Member]
Loss Contingencies [Line Items]
Self Insurance Reserve	$ 2,512	$ 1,510

XML

Income Taxes (Unrecognized tax benefit) (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2009
Income Tax Disclosure [Abstract]
Gross unrecognized tax benefits at January 1	$ 0	$ 2,163,000		$ 1,311,000
Increases for tax positions in prior periods	0	0	852,000
Decreases for tax positions in prior period	0	(2,163,000)	0
Gross unrecognized tax benefits at December 31	0	0	2,163,000	1,311,000
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	$ 0	$ 0	$ 1,329,000

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Schedule II

12 Months Ended

Dec. 31, 2013

Valuation and Qualifying Accounts [Abstract]

Schedule II

Schedule II

American Apparel, Inc. and Subsidiaries

Valuation and Qualifying Accounts

(Amounts in thousands)

Description	Balance at Beginning of Year		Charged to Costs and Expenses		Deductions (Recoveries)		Other			Balance at End of Year
Allowance for trade accounts receivable:
For the year ended December 31, 2013	$	2,085	$	1,512	$	—	$	(1,368	)	$	2,229
For the year ended December 31, 2012	$	2,195	$	99	$	—	$	(209	)	$	2,085
For the year ended December 31, 2011	$	2,630	$	996	$	—	$	(1,431	)	$	2,195

Description	Balance at Beginning of Year		Charged to Costs and Expenses			Deductions (Recoveries)		Other			Balance at End of Year
Reserve for inventory shrinkage and obsolescence:
For the year ended December 31, 2013	$	2,653	$	912		$	—	$	(787	)	$	2,778
For the year ended December 31, 2012	$	3,932	$	690		$	—	$	(1,969	)	$	2,653
For the year ended December 31, 2011	$	5,853	$	(1,652	)	$	—	$	(269	)	$	3,932

Description	Balance at Beginning of Year		Increase in Allowance		Deductions to Allowance			Other		Balance at End of Year
Valuation allowance of deferred tax assets:
For the year ended December 31, 2013	$	77,578	$	43,116	$	—		$	—	$	120,694
For the year ended December 31, 2012	$	73,773	$	4,720	$	(915	)	$	—	$	77,578
For the year ended December 31, 2011	$	51,979	$	21,794	$	—		$	—	$	73,773

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Related Party Transaction (Company CEO) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Jun. 30, 2012	Mar. 31, 2012 Y	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Related Party Transaction, years to expiration		3
Officers' Compensation	$ 800		$ 406	$ 1,003	$ 754
Employment Agreement 2012 [Member]
Related Party Transaction [Line Items]
Granted, in shares	7,500

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

The Company's net loss before income taxes includes the following components for the years ended December 31, 2013, 2012 and 2011:

	2013			2012			2011
United States	$	(107,637	)	$	(38,365	)	$	(37,876	)
Foreign	3,110			4,906			283
	$	(104,527	)	$	(33,459	)	$	(37,593	)

Income tax provision [Table Text Block]

The following table presents the federal and state income tax provision (benefit) for the years ended December 31, 2013, 2012 and 2011:

	2013			2012		2011
Current:
Federal	$	—		$	—	$	—
State	200			134		228
Foreign	2,024			3,446		879
	2,224			3,580		1,107
Deferred:
Federal	(402		)	—		—
State	—			—		—
Foreign	(51		)	233		614
	(453		)	233		614
Income tax provision	$	1,771		$	3,813	$	1,721

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

The following table presents a reconciliation of taxes at the U.S. federal statutory rate and the effective tax rate for the years ended December 31:

	2013		2012		2011
Taxes at the statutory federal tax rate of 35%	(36,585	)	(11,711	)	(13,158	)
State tax, net of federal benefit	(4,059	)	4,913		(18	)
Change in valuation allowance	42,771		5,123		21,794
Foreign taxes	10		(618	)	533
Unrealized loss (gain) on warrants and purchase rights	1,299		4,809		(8,213	)
Other	(1,665	)	1,297		783
Total income tax provision	1,771		3,813		1,721

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

The following table presents the tax effects of significant items comprising the Company's deferred taxes as of December 31:

	2013			2012
Deferred tax assets:
Allowance for doubtful accounts	$	831		$	778
Deferred rent	7,295			7,773
Accrued liabilities and workers’ compensation	16,134			12,409
Inventories	6,877			6,731
Federal and California tax credits	12,067			12,067
Net operating loss carryforward	62,052			36,111
Deferred gift card income	2,379			1,866
Fixed assets	5,723			870
Foreign tax credits	9,296			8,335
Other comprehensive income	—			29
Other	1,833			848
Total gross deferred tax assets	124,487			87,817
Less valuation allowance	(120,694		)	(77,578		)
Net deferred tax assets	3,793			10,239
Deferred tax liabilities:
Prepaid expenses	(1,432		)	(1,004		)
Unrealized (gain) loss on warrants and purchase rights	—			(8,003		)
Other	(1,113		)	(35		)
Total gross deferred tax liabilities	(2,545		)	(9,042		)
Net deferred tax assets and liabilities	$	1,248		$	1,197

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

The following table presents a reconciliation of the beginning and ending amount of unrecognized tax benefits:

	2013		2012			2011
Gross unrecognized tax benefits at January 1	$	—	$	2,163		$	1,311
Increases for tax positions in prior periods	—		—			852
Decreases for tax positions in prior period	—		(2,163		)	—
Gross unrecognized tax benefits at December 31	$	—	$	—		$	2,163

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Related Party Transaction

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Related Party Transactions

See Note 8, Long-Term Debt for a description of loans made by Lion to the Company and Note 13, Stockholders' Equity for a description of the warrants issued by the Company to Lion and a purchase agreement, dated April 27, 2011, between Mr. Charney and the Company.

Personal Guarantees by the Company’s CEO

As of December 31, 2013, the CEO of the Company has personally guaranteed the obligations of American Apparel under seven property leases aggregating $17,465 in obligations. Additionally, the CEO of the Company has personally guaranteed the obligations of the Company with two vendor aggregating $1,000.

Lease Agreement Between the Company and Related Parties

The Company is party to an operating lease, expiring in November 2016 for its knitting facility with a related company (“American Central Plaza, LLC”), which is partially owned by the CEO and the Chief Manufacturing Officer (“CMO”) of the Company. The Company’s CEO holds an 18.75% ownership interest in American Central Plaza, LLC, while the CMO holds a 6.25% interest. The remaining members of American Central Plaza, LLC are not affiliated with the Company. Rent expense (including property taxes and insurance payments) related to this lease was $778, $830 and $622 for the years ended December 31, 2013, 2012 and 2011, respectively.

Payments to Morris Charney

Morris Charney, (“Mr. M. Charney”), is the father of the Company's CEO and serves as a director of American Apparel Canada Wholesale Inc. and a director of American Apparel Canada Retail Inc. Day to day operations of these two Canadian subsidiaries are handled by management and other employees of these subsidiaries, none of whom performs any policy making functions for the Company. Management of American Apparel sets the policies for American Apparel and its subsidiaries as a whole. Mr. M. Charney does not perform any policy making functions for the Company or any of its subsidiaries. Instead, Mr. M. Charney only provides architectural consulting services primarily for stores located in Canada and, in limited cases, in the U.S. Mr. M. Charney was paid architectural consulting and director fees amounting to $238, $260 and $297 for the years ended December 31, 2013, 2012 and 2011, respectively.

Registration Rights

Pursuant to a registration rights agreement between the Company and Dov Charney, entered into in connection with the 2006 reverse merger between American Apparel, Inc. and Endeavor Acquisition Corp, Mr. Charney has both demand and piggyback registration rights relating to the shares of the Company's common stock that he received from that transaction.

Employment Agreement with the Company's CEO

In March 2012 the Company's Board of Directors approved a three-year employment agreement with Mr. Charney commencing on April 1, 2012 that will automatically extend for successive one-year periods unless earlier terminated by the Company. The agreement provides for, among other things, a minimum annual base compensation of $800 plus performance bonuses and the right to receive 7,500 shares of the Company's common stock, subject to performance hurdles and other terms, and conditions as described in the agreement. See Note 13.

Bonus to the Company's CEO

For the years ended December 31, 2013, 2012 and 2011, the Company recorded $406, $1,003 and $754, respectively, in CEO bonus in operating expenses in the consolidated statements of operations.