- Published: 06 May 2009
- Written by Editor
True Religion Apparel Reports 2009 First Quarter Financial Results
True Religion Apparel, Inc. (Nasdaq: TRLG) today announced financial results for the first quarter ended March 31, 2009.
First Quarter 2009 Financial Results
Total net sales were $63.6 million, an increase of 19.1% from $53.4 million in the first quarter of 2008.
Net sales for the Company’s U.S. wholesale segment decreased 11.0% to $28.9 million from $32.5 million in the prior year period.
Net sales for the Company’s consumer direct segment, which includes the Company’s branded retail stores and e-commerce site, increased 95.8% to $23.1 million from $11.8 million in the prior year period.
The Company operated 49 branded stores as of March 31, 2009, compared to 18 as of March 31, 2008.
- Net sales for the Company’s international segment increased 26.0% to $11.2 million from $8.9 million in the prior year period.
- First quarter 2009 net sales included $0.4 million of licensing revenue.
- Gross profit was $38.7 million, or 60.9% of net sales, compared to $30.5 million, or 57.1% of net sales, in the first quarter of 2008. The overall improvement in gross margin was due to the ongoing segment mix shift toward the Company’s higher-margin consumer direct business.
- Selling, general and administrative (“SG&A”) expense increased 34.1% to $25.7 million from $19.1 million in the prior year period, and as a percentage of sales, increased 450 basis points to 40.3% from 35.8% in the same period a year ago. The year-over-year growth in SG&A expenses was driven by the increased investment in infrastructure to support the Company’s growth plans, including the expansion of its consumer direct and international businesses. The increase in SG&A expenses was partially offset by a decrease in share-based compensation expense.
- Operating income increased 15.0% to $13.1 million, or 20.5% of net sales, from $11.4 million, or 21.2% of net sales, in the 2008 first quarter. The year-over-year reduction in operating margin was primarily driven by the decrease in the Company’s consumer direct operating margin.
- The effective tax rate for the quarter was 41.7%. In the first quarter 2009, the Company revised its state income tax apportionment factors for 2004 through 2008, the cumulative impact of which resulted in approximately $540,000 in incremental taxes that were recorded in the quarter. The Company expects an effective tax rate of 37.7% for the remaining quarters in 2009 with an effective tax rate of 38.5% for the full year of 2009.
- Net income increased 9.8% to $7.6 million, or $0.32 per diluted share based on weighted average shares outstanding of 24.0 million, from $6.9 million, or $0.29 per diluted share based on weighted average shares outstanding of 24.1 million, in the 2008 first quarter.
Management Comments
“We are pleased with our start to 2009, which marks a continuation of the positive brand momentum experienced in 2008,” said Jeffrey Lubell, Chairman, Chief Executive Officer and Chief Merchant of True Religion Apparel, Inc. “Despite the challenging economic environment, we remained committed to our strategy of continually delivering innovative jeans, sportswear and licensed products, reaching more consumers through our branded retail stores and wholesale partners, and building awareness of the True Religion brand world-wide. Our integrated approach to growth enabled us to increase first quarter revenues by 19% and net income by 10% over the prior year period.”
Balance Sheet and Liquidity
As of March 31, 2009, the Company had $76.5 million of cash and cash equivalents and no long-term borrowings. Inventory increased to $28.1 million, or $2.3 million, from the beginning of 2009, to support the expansion of the Company’s branded retail stores. Net cash provided by operating activities during the first quarter of 2009 was $23.0 million compared to $19.4 million in the prior year period.
Store Openings
During the 2009 first quarter, True Religion opened seven new stores, bringing its total store count at March 31, 2009, to 49 stores, compared to 18 stores at March 31, 2008. In April 2009, the Company opened two new stores, bringing the total store count to 51 stores. The Company continues to anticipate opening 16 additional new stores by year-end 2009 for a total of 67 branded retail stores.
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Q1 2009 Segment Results (Dollar amounts in thousands) |
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| Three Months Ended | |||||||||||||
| March 31, | |||||||||||||
| 2009 | 2008 |
% Increase/Decrease |
|||||||||||
| Net Sales | |||||||||||||
| U.S. Wholesale | $ | 28,925 | $ | 32,511 | (11.0 | %) | |||||||
| Consumer Direct | 23,061 | 11,778 | 95.8 | % | |||||||||
| International | 11,219 | 8,903 | 26.0 | % | |||||||||
| Other | 419 | 240 | 74.6 | % | |||||||||
| $ | 63,624 | $ | 53,432 | 19.1 | % | ||||||||
| Gross Margin % | Gross Margin % | ||||||||||||
| Gross Profit | |||||||||||||
| U.S. Wholesale | $ | 15,135 | 52.3 | % | $ | 16,907 | 52.0 | % | |||||
| Consumer Direct | 17,090 | 74.1 | % | 9,193 | 78.1 | % | |||||||
| International | 6,075 | 54.1 | % | 4,145 | 46.6 | % | |||||||
| Other | 419 | 100.0 | % | 240 | 100.0 | % | |||||||
| $ | 38,719 | 60.9 | % | $ | 30,485 | 57.1 | % | ||||||
| Operating Margin % | Operating Margin % | ||||||||||||
| Operating Income | |||||||||||||
| U.S. Wholesale | $ | 6,868 | 23.7 | % | $ | 9,049 | 27.8 | % | |||||
| Consumer Direct | 7,013 | 30.4 | % | 4,737 | 40.2 | % | |||||||
| International | 5,153 | 45.9 | % | 3,982 | 44.7 | % | |||||||
| Other | (5,981 | ) | NM | (6,418 | ) | NM | |||||||
| $ | 13,053 | 20.5 | % | $ | 11,350 | 21.2 | % | ||||||
Guidance
The Company is reiterating its guidance for the fiscal year ended December 31, 2009, as follows:
- Net sales are expected to be in the range of $290 million to $297 million
- EPS is expected to be in the range of $1.73 to $1.81.
The Company's 2009 EPS guidance reflects fully diluted weighted average shares outstanding of approximately 24.6 million and an effective tax rate of 38.5%.
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 and available online at both sites. A telephone replay of the call will be available for approximately one month following the conclusion of the call by dialing (800) 406-7325 (domestic) or (303) 590-3030 (international) and entering passcode: 4054899.
About True Religion Apparel, Inc.
True Religion Apparel, Inc. is a growing, design-based jean and jean-related 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 in denim, sportswear, and licensed products, may be found in contemporary department stores and boutiques in 50 countries around the world, including the United States, Canada, Germany, United Kingdom, Japan, Korea, France, Spain, Sweden, Greece, Italy, Mexico, Australia, South Africa 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. Among these forward looking statements are our 2009 Guidance, Segment Guidance, Store Opening Guidance and the other statements contained in this press release addressing our plans, expectations, future financial condition and results of operations. These forward-looking statements are not historical facts and are inherently uncertain and outside of our control. Any or all of our forward-looking statements in this press release may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Actual future results may vary materially. Factors that may cause our plans, expectations, future financial condition and results to change are described in our Annual Report on Form 10-K, Reports of Form 10-Q and our other filings with the SEC, and include: the current downturn in the United States economy and in particular, the decline in consumer spending generally and in the apparel industry more specifically; the Company’s ability to predict fashion trends; the Company’s ability to continue to maintain its brand image and reputation; competition from companies with significantly greater resources than ours; and the Company’s ability to continue and control its expansion plans.
| TRUE RELIGION APPAREL, INC. AND SUBSIDIARIES | ||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
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(Amounts in thousands, except per share amounts) |
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(unaudited) |
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| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2009 | 2008 | |||||||||
| Net sales | $ | 63,624 | $ | 53,432 | ||||||
| Cost of sales | 24,905 | 22,947 | ||||||||
| Gross profit | 38,719 | 30,485 | ||||||||
| Selling, general, and administrative expenses | 25,666 | 19,135 | ||||||||
| Operating income | 13,053 | 11,350 | ||||||||
| Interest income, net | (18 | ) | (424 | ) | ||||||
| Income before provision for income taxes | 13,071 | 11,774 | ||||||||
| Provision for income taxes | 5,446 | 4,827 | ||||||||
| Net income | $ | 7,625 | $ | 6,947 | ||||||
| Earnings per share: | ||||||||||
| Basic | $ | 0.32 | $ | 0.30 | ||||||
| Diluted | $ | 0.32 | $ | 0.29 | ||||||
| Weighted average shares outstanding: | ||||||||||
| Basic | 23,851 | 23,221 | ||||||||
| Diluted | 23,953 | 24,070 | ||||||||
| TRUE RELIGION APPAREL, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
|
(Amounts in thousands, except per share amounts) |
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|
(unaudited) |
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| March 31, | December 31, | |||||||
| 2009 | 2008 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 76,500 | $ | 57,245 | ||||
| Short-term investments | - | 4,850 | ||||||
| Accounts receivable, net of allowances: | ||||||||
| From factor | 15,110 | 23,060 | ||||||
| From customers | 7,283 | 10,043 | ||||||
| Inventory | 28,104 | 25,828 | ||||||
| Deferred income tax assets | 3,481 | 6,498 | ||||||
| Prepaid expenses and other current assets | 4,651 | 4,148 | ||||||
| Total current assets | 135,129 | 131,672 | ||||||
| Property and equipment, net | 31,126 | 28,006 | ||||||
| Long-term investments | 4,990 | 4,990 | ||||||
| Other assets | 1,795 | 1,784 | ||||||
| TOTAL ASSETS | $ | 173,040 | $ | 166,452 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 11,312 | $ | 10,633 | ||||
| Accrued salaries, wages and benefits | 4,064 | 6,889 | ||||||
| Income taxes payable | 1,011 | 1,042 | ||||||
| Total current liabilities | 16,387 | 18,564 | ||||||
| Long-Term Liabilities: | ||||||||
| Long-term deferred rent | 5,656 | 4,536 | ||||||
| Long-term deferred tax liabilities | 1,541 | 1,102 | ||||||
| Total long-term liabilities | 7,197 | 5,638 | ||||||
| Total liabilities | 23,584 | 24,202 | ||||||
| Stockholders' Equity: | ||||||||
| Preferred stock, $0.0001 par value, 20,000, shares authorized, no shares issued and outstanding | ||||||||
| - | - | |||||||
| Common stock, $0.0001 par value, 80,000 shares authorized, 25,357 and 24,450 issued and outstanding, respectively | ||||||||
| 3 | 2 | |||||||
| Additional paid-in capital | 40,684 | 38,554 | ||||||
| Retained earnings | 108,751 | 103,508 | ||||||
| Accumulated other comprehensive income, net | 18 | 186 | ||||||
| Total stockholders' equity | 149,456 | 142,250 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 173,040 | $ | 166,452 | ||||
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TRUE RELIGION APPAREL, INC. AND SUBSIDIARIES |
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| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (Amounts in thousands) | ||||||||||
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(Unaudited) |
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| Three Months Ended March 31, | ||||||||||
| 2009 | 2008 | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
| Net Income | $ | 7,625 | $ | 6,947 | ||||||
| Adjustments to reconcile net income to net cash provided | ||||||||||
| by operating activities: | ||||||||||
| Depreciation and amortization | 1,267 | 592 | ||||||||
| Provision for bad debts and returns | 758 | 301 | ||||||||
| Stock-based compensation | 2,783 | 3,864 | ||||||||
| Tax benefit from stock-based compensation | (653 | ) | - | |||||||
| Excess tax benefit from stock-based compensation | 653 | (29 | ) | |||||||
| Deferred income tax provision | 3,408 | 1,941 | ||||||||
| Other | 41 | - | ||||||||
| Changes in operating assets and liabilities: | - | |||||||||
| Accounts receivable from customers | 2,421 | 6,327 | ||||||||
| Accounts receivable from factor | 7,423 | (1,844 | ) | |||||||
| Inventory | (2,356 | ) | (3,848 | ) | ||||||
| Prepaid expenses and other current assets | (512 | ) | 122 | |||||||
| Accounts payable and accrued expenses | 1,910 | 3,629 | ||||||||
| Accrued salaries, wages and benefits | (2,825 | ) | (1,514 | ) | ||||||
| Income taxes payable | (31 | ) | 2,702 | |||||||
| Long-term deferred rent | 1,121 | 251 | ||||||||
| Net cash provided by operating activities | 23,033 | 19,441 | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
| Purchases of property and equipment | (5,591 | ) | (3,237 | ) | ||||||
| Expenditures to establish trademarks | (20 | ) | (40 | ) | ||||||
| Sales of marketable securities | 4,850 | 5,203 | ||||||||
| Net cash used in investing activities | (761 | ) | 1,926 | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
| Tax withholding payment for stock-based compensation | (2,381 | ) | (2,254 | ) | ||||||
| Excess tax benefit from stock-based compensation | (653 | ) | 29 | |||||||
| Net cash used in financing activities | (3,034 | ) | (2,225 | ) | ||||||
| Effect of exchange rate changes in cash | 17 | - | ||||||||
| Net increase (decrease) in cash and cash equivalents | 19,255 | 19,142 | ||||||||
| Cash and cash equivalents, beginning of period | 57,245 | 28,686 | ||||||||
| Cash and cash equivalents, end of period | $ | 76,500 | $ | 47,828 | ||||||
True Religion Apparel, Inc.
Pete Collins, Chief Financial Officer
323-266-3072
or
Investor Relations
Laura Foster
ICR, Inc.
310-954-1110