November 07, 2006 at 16:05 PM EST
True Religion Apparel Reports Continued Revenue, Income Growth for 2006 Third Quarter

True Religion Apparel, Inc. (Nasdaq:TRLG) today announced financial results for the third quarter ended September 30, 2006.

Net sales for the 2006 third quarter increased 22.6% to $42.9 million from $35.0 million in the 2005 third quarter, although were below the companys internal projections. During the quarter, the companys product mix at retail outside the U.S., which was heavily denim-based, negatively impacted sales due to exceptionally warm weather and, as much as the recovery has been solid, sales in Japan did not perform up to the companys original forecast.

Excluding unusual expenses in the quarter related to the balance of the Indigo Group arbitration settlement and legal and professional fees related to the companys ongoing engagement of Goldman Sachs, which together amounted to approximately $799,000 before income taxes, or $0.02 per diluted share, adjusted net income grew 13% to $8.7 million, or $0.37 per diluted share. This compares with net income of $7.7 million, or $0.33 per diluted share for the third quarter of 2005. Giving effect to these expenses, reported net income for the 2006 third quarter grew 6% to $8.2 million, or $0.35 per diluted share. Management believes that including non-GAAP net income per diluted share for the current period provides a useful and relevant measure for comparative year-over-year operating performance. Refer to the attached table for details regarding the basis for the adjusted net income per diluted share calculation.

On both financial and operating metrics, this was a great quarter with progress on many fronts that supported our goal of becoming a global lifestyle brand with a strong denim foundation, said Jeff Lubell, Chief Executive Officer of True Religion Apparel, Inc. We advanced initiatives that will enhance our ability to develop a richer product offering and broaden distribution channels. Subsequent to the end of the third quarter, we signed our first licensing agreements for footwear, headwear, scarves and gloves; added key new members to our design and marketing teams; signed leases for new stores in Los Angeles, New York and New Jersey, and opened our first outlet store in Desert Hills, CA. As the holiday season approaches, we are hard at work to offer an increasingly diverse product mix to our growing customer base, drawing on our hallmarks of fit, style and high attention to detail.

Gross profit in the third quarter increased to $22.4 million from $18.4 million in the third quarter of 2005. Third quarter 2006 gross margins stood steady at 52.2% compared with 52.7%, in the same period last year.

Selling, general and administrative expenses in the quarter increased to $8.8 million from $5.8 million in the 2005 third quarter, primarily reflecting ongoing infrastructure enhancements including personnel, facilities, warehousing, replenishment systems, marketing initiatives and retail build-out.

Net income from operations was $13.6 million, or 31.6% of sales, in the 2006 third quarter, versus $12.7 million, or 36.2% of sales, in the same period in 2005.

For the nine-month period ended September 30, 2006, net sales increased 41.8% to $109.3 million from $77.1 million in the same period last year. Net income, excluding a one-time arbitration settlement of $2.1 million primarily recorded in the second quarter and unusual banking expenses previously discussed for the most recent quarter, increased 41% to $21.3 million, or $0.91 per diluted share. On a reported basis, net income rose 24.0% to $19.6 million, or $0.83 per diluted share, versus $15.8 million, or $0.68 per diluted share in the first nine months of 2005.

Gross profit in the 2006 nine-month period was $57.5 million, compared with $39.6 million last year. Gross margins for the nine month period increased to 52.6% from 51.3% in 2005.

Selling, general and administrative expenses for the first nine months of the year were $23.6 million, compared with $13.8 million in the first nine months of 2005. Included in the increase for 2006 is $2.5 million non-cash compensation and SFAS 123R compensation expense.

Net income from operations for the first nine months of 2006 was $33.9 million, equal to 31.1% of sales, versus $25.8 million, or 33.5% of sales, in the same period last year.

2006 Financial Guidance

Reflecting current visibility for the remainder of 2006, the company adjusted its expectation of total sales for the full year to $138 million to $140 million, representing a growth rate of 35% to 36% over last year. Earnings per diluted share, before giving effect to the one-time expenses related to the arbitration settlement and unusual banking expenses, equal to $0.08, is expected to be in the range of $1.11 to $1.12 for 2006.

Investor Conference Call

True Religion management will host a conference call to discuss the financial results and answer questions today at 4:30 p.m. ET. The conference call will be available to all interested parties through a live webcast at www.truereligionbrandjeans.com and www.earnings.com. Please visit the Web site at least 15 minutes prior to the start of the call to register and download any necessary software. For those unable to listen to the live broadcast, the call will be archived for a year at both sites. A telephone replay will be available for approximately one week following the conclusion of todays call by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international) and entering passcode: 6804146.

About True Religion Apparel, Inc.

True Religion Apparel, Inc. is a growing, design-based premium global lifestyle brand. The company designs, manufactures and markets True Religion Apparel products, including its premium True Religion Brand Jeans. Its expanding product line, which includes high quality distinctive styling and fit, may be found in premier department stores and boutiques in 50 countries including the United States, Canada, Germany, United Kingdom, France, Spain, Scandinavia, Greece, Italy, Mexico, South America, Australia, South Africa, the Middle East, Korea, Japan, and China. For more information, please visit www.truereligionbrandjeans.com.

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon our current expectations and speak only as of the date hereof. Our actual results may differ materially and adversely from those expressed in any forward-looking statements as a result of various factors and uncertainties, including uncertainties as to the nature of the apparel industry, including changing customer demand and tastes, seasonality, customer acceptance of new products, the impact of competitive products and pricing, dependence on existing management and general economic conditions. Our Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings discuss some of the important risk factors that may affect our business, results of operations and financial condition. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

True Religion Apparel, Inc.

Consolidated Condensed Statements of Operations and Balance Sheets

QUARTER ENDED

 NINE MONTHS ENDED

9/30/069/30/059/30/069/30/05
Net Sales $42,908,956  $34,989,991  $109,252,236  $77,101,311 
Gross Profit 22,383,458  18,431,850  57,511,806  39,587,897 
Selling, G&A 8,824,227  5,765,566  23,564,592  13,757,480 
Operating Income 13,559,231  12,666,284  33,947,214  25,830,417 
Income before Tax 12,986,168  12,685,276  31,622,551  25,849,409 
Income tax expense 4,789,000  4,959,591  12,080,000  10,028,756 
Gain on Securities 19,143  76,872 
Comprehensive Income 8,216,168  7,725,685  19,619,423  15,820,653 
Net Income per share: diluted $0.35  $0.33  $0.83  $0.68 
Average shares outstanding 23,613,000  22,238,000  23,538,000  23,121,000 
9/30/0612/31/05
Balance sheet
Cash and Marketable Securities $34,377,039  $ 15,407,118 
Inventory 9,406,747  10,052,748 
Total Assets 72,182,540  43,991,691 
Total Shareholders Equity $61,239,821  $35,293,006 

True Religion Apparel, Inc.

Reconciliation of GAAP Net Income to Adjusted Net Income (1)

 QUARTER ENDED

 NINE MONTHS ENDED

9/30/069/30/059/30/069/30/05
Reported

Comprehensive

Income

8,216,311  7,725,685  19,619,423  15,820,653 
Add: Settlement

Expense

156,475  2,106,475 
Add: Banking

Expense

642,282  642,282 
Income tax effect

of Settlement

and Banking

Expense

(305,000) (1,044,000)
Adjusted Net

Income

8,710,068  7,725,685  21,324,180  15,820,653 
Adjusted Net

Income per

diluted share

$0.37  $0.33  $0.91  $0.68 
Average shares

outstanding

23,613,000  22,238,000  23,538,000  23,121,000 
(1) Effect of an adjustment for non-recurring legal settlement expense
    and for legal and investment banking expenses associated with a
    review of strategic alternatives.
Related Stocks:
Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here