True Religion Apparel Reports 2009 Third Quarter Financial Results

http://www.businesswire.com/news/home/20091103006657/en

-- Net Sales Increased 3.8% to $82.4 Million Led by Consumer Direct and
International Sales Gains --

-- Gross Profit Increased 15.0% to $53.3 Million --

-- Operating Income Increased 1.9% to $22.7 Million --

--Net Income of $14.1 Million, or $0.58 Per Diluted Share, Compared to $15.4
Million, or $0.64 Per Diluted Share, Which Included a Cumulative Tax Benefit of
$0.09 in Q3 08 --

--2009 EPS Guidance Increased to $1.82 - $1.86 From $1.76 to $1.84 --
VERNON, Calif.--(Business Wire)--
True Religion Apparel, Inc. (Nasdaq: TRLG) today announced financial results for
the three and nine months ended September 30, 2009.

Third Quarter 2009 Financial Results

* Total net sales were $82.4 million, an increase of 3.8% from $79.4 million in
the third quarter of 2008.

* Net sales for the Company`s U.S. wholesale segment decreased 31.1% to $31.9
million from $46.3 million in the prior year period, due to the planned
reduction in sales to off-price retailers and a decline in sales to boutiques
and Majors.
* Net sales for the Company`s consumer direct segment, which includes the
Company`s branded retail stores and e-commerce site, increased 51.9% to $32.6
million from $21.5 million in the prior year period. The Company operated 66
branded stores as of September 30, 2009, compared to 36 as of September 30,
2008.
* Net sales for the Company`s international segment increased 47.6% to $16.6
million from $11.2 million in the prior year period.
* Net sales included $1.3 million of licensing revenue.

* Gross profit was $53.3 million, or 64.7% of net sales, compared to $46.4
million, or 58.4% of net sales, in the third quarter of 2008. The overall
improvement in gross margin was primarily due to the ongoing sales mix shift
toward the Company`s higher-margin consumer direct segment.
* Selling, general and administrative ("SG&A") expense increased 27.2% to $30.6
million from $24.1 million in the prior year period, and as a percentage of
sales, increased 680 basis points to 37.1% from 30.3% in the same period a year
ago. The year-over-year growth in SG&A expenses was driven by the costs
associated with opening and operating 30 new stores since September 2008.
* Operating income increased 1.9% to $22.7 million, or 27.6% of net sales, from
$22.3 million, or 28.1% of net sales, in the 2008 third quarter.
* The effective tax rate for the quarter was 38.2% compared to 31.1% in the
third quarter of 2008.
* Net income decreased 8.8% to $14.1 million, or $0.58 per diluted share based
on weighted average shares outstanding of 24.2 million, from $15.4 million, or
$0.64 per diluted share based on weighted average shares outstanding of 24.2
million, in the 2008 third quarter. In the third quarter of 2008, the Company
implemented a tax planning strategy that reduced its tax provision in the
quarter and increased its earnings per share by $0.06. The Company also
finalized its 2007 tax returns, which reduced its income tax provision in the
third quarter of 2008 and increased its EPS by $0.03. The cumulative impact of
these changes resulted in a benefit to the Company`s 2008 third quarter earnings
per share of $0.09.

Management Comments

"We are pleased that our positive brand momentum continued into the second half
of 2009, with our Consumer Direct and International segments delivering strong
year-over-year sales gains in the third quarter of 2009," said Jeffrey Lubell,
Chairman, Chief Executive Officer and Chief Merchant of True Religion Apparel,
Inc. "Our performance highlights the ongoing preference for our brand, which we
attribute to our unwavering commitment to deliver quality and innovation in our
core jeanswear and jeans-related sportswear merchandise. Based on our
year-to-date performance, we are able to increase our earnings guidance for the
year."

Mr. Lubell continued, "While we are pleased with our ability to move our
business forward despite the challenging retail environment, we are more focused
on the many opportunities that are being created in today`s marketplace to
further extend our brand leadership. We intend to capitalize on these
opportunities by continuing to develop innovative merchandise, diversify our
distribution, execute alongside our retail partners, and grow our global
presence."

Year-to-date 2009 Financial Results

* Total net sales were $218.2 million, an increase of 10.7% from $197.0 million
in the nine months ended September 30, 2008.

* Net sales for the Company`s U.S. wholesale segment decreased 21.8% to $91.6
million from $117.2 million in the prior year period.
* Net sales for the Company`s consumer direct segment increased 64.8% to $83.9
million from $50.9 million in the prior year period.
* Net sales for the Company`s international segment increased 42.6% to $39.9
million from $28.0 million in the prior year period.
* Net sales included $2.8 million of licensing revenue.

* Gross profit was $136.9 million, or 62.7% of net sales, compared to $113.7
million, or 57.7% of net sales, in the first nine months of 2008. The overall
improvement in gross margin was primarily due to the ongoing sales mix shift
toward the Company`s higher-margin consumer direct segment.
* Selling, general and administrative ("SG&A") expense increased 28.5% to $83.1
million from $64.7 million in the prior year period, and as a percentage of
sales, increased 530 basis points to 38.1% from 32.8% in the same period a year
ago. The year-over-year growth in SG&A expenses was driven by the costs
associated with the significant expansion of the Company`s consumer direct
segment.
* Operating income increased 9.5% to $53.7 million, or 24.6% of net sales, from
$49.0 million, or 24.9% of net sales, in the prior year period.
* The effective tax rate for the nine months ended September 30, 2009 was 39.2%
compared to 36.6% in the nine months ended September 30, 2008.
* Net income increased 3.3% to $32.7 million, or $1.35 per diluted share based
on weighted average shares outstanding of 24.1 million, from $31.7 million, or
$1.31 per diluted share based on weighted average shares outstanding of 24.2
million, in the prior year period. In the third quarter of 2008, the Company
implemented a tax planning strategy that reduced its tax provision in the
quarter and increased its earnings per share by $0.06. The Company also
finalized its 2007 tax returns, which reduced its income tax provision in the
third quarter of 2008 and increased its EPS by $0.03. The cumulative impact of
these changes resulted in a benefit to the Company`s 2008 third quarter EPS of
$0.09.

Balance Sheet and Liquidity

As of September 30, 2009, the Company had $88.7 million of cash and cash
equivalents and no long-term borrowings. Inventory increased to $37.8 million,
or $12.0 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 nine months of 2009 was $45.0 million compared to $42.2 million
in the prior year period.

Store Openings

During the 2009 third quarter, True Religion opened seven new stores, bringing
its total store count at September 30, 2009, to 66 stores, compared to 36 stores
at September 30, 2008. In October 2009, the Company opened one new store,
bringing the total store count to 67 stores. The Company anticipates opening
three additional new stores by year-end 2009 for a total of 70 branded retail
stores.

Q3 2009 Segment Results

(Dollar amounts in thousands)

Three Months Ended September 30, Nine Months Ended September 30,
% Increase/ % Increase/
Net sales: 2009 2008 Decrease 2009 2008 Decrease
U.S. Wholesale $ 31,911 $ 46,292 (31.1 )% $ 91,621 $ 117,215 (21.8 )%
Consumer Direct 32,605 21,458 51.9 % 83,885 50,890 64.8 %
International 16,575 11,226 47.6 % 39,862 27,951 42.6 %
Other 1,332 444 200.1 % 2,795 954 193.0 %
Total net sales $ 82,423 $ 79,420 3.8 % $ 218,163 $ 197,010 10.7 %

Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Gross Gross Gross Gross
Margin Margin Margin Margin
Gross Profit: Amount % Amount % Amount % Amount %
U.S. Wholesale $ 18,399 57.7 % $ 23,614 51.0 % $ 49,862 54.4 % $ 60,078 51.3 %
Consumer Direct 24,329 74.6 % 16,723 77.9 % 62,129 74.1 % 39,396 77.4 %
International 9,274 56.0 % 5,583 49.7 % 22,067 55.4 % 13,319 47.7 %
Other 1,332 100.0 % 444 100.0 % 2,795 100.0 % 954 100.0 %
Total gross profit $ 53,334 64.7 % $ 46,364 58.4 % $ 136,853 62.7 % $ 113,747 57.7 %

Three Months Ended September 30, Nine Months Ended September 30,
2009 2008 2009 2008
Operating Operating Operating Operating
Margin Margin Margin Margin
Operating Income: Amount % Amount % Amount % Amount %
U.S. Wholesale $ 9,267 29.0 % $ 15,440 33.4 % $ 24,511 26.8 % $ 36,329 31.0 %
Consumer Direct 11,253 34.5 % 8,285 38.6 % 27,354 32.6 % 19,270 37.9 %
International 7,810 47.1 % 4,781 42.6 % 18,792 47.1 % 11,962 42.8 %
Other (5,602 ) NM (6,205 ) NM (16,943 ) NM (18,520 ) NM
Total operating Income $ 22,728 27.6 % $ 22,301 28.1 % $ 53,714 24.6 % $ 49,041 24.9 %

Guidance

The Company is updating its guidance for the fiscal year ended December 31,
2009, as follows:

* Net sales are expected to be in the range of $295 million to $300 million.
* EPS is expected to be in the range of $1.82 to $1.86 as compared to its
previously issued guidance of $1.76 to $1.84.

The Company`s net sales guidance by segment remains unchanged from its
previously issued guidance:

* Net sales growth within the Company`s consumer direct segment is forecasted to
be 60% to 65% in the full year 2009 as compared to the full year 2008.
* Net sales in the Company`s U.S. wholesale segment are expected to decline by
18% to 20% in the full year 2009 as compared to the full year 2008.
* The Company`s International segment is forecasted to increase its net sales by
more than 20% in 2009 as compared to 2008.
* The Company`s 2009 net sales guidance includes $4.0 million in licensing
revenues.

The Company`s upwardly revised 2009 EPS guidance reflects stronger than expected
gross margin improvement, particularly within the Company`s U.S. Wholesale and
International segments. The Company's 2009 EPS guidance reflects fully diluted
weighted average shares outstanding of approximately 24.6 million and an
effective tax rate in the range of 38.8% to 39.3%.

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: 4172560.

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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, expect per share data)
(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Net sales $ 82,423 $ 79,420 $ 218,163 $ 197,010
Cost of sales 29,089 33,056 81,310 83,263
Gross profit 53,334 46,364 136,853 113,747

Selling, general and administrative expenses 30,606 24,063 83,139 64,706

Operating income 22,728 22,301 53,714 49,041

Interest income, net (55 ) (100 ) (94 ) (888 )

Income before provision for income taxes 22,783 22,401 53,808 49,929
Provision for income taxes 8,698 6,964 21,111 18,265
Net income $ 14,085 $ 15,437 $ 32,697 $ 31,664

Earnings per share:
Basic $ 0.59 $ 0.65 $ 1.36 $ 1.35
Diluted $ 0.58 $ 0.64 $ 1.35 $ 1.31

Weighted average shares outstanding:
Basic 24,044 23,616 23,973 23,453
Diluted 24,216 24,155 24,146 24,219

TRUE RELIGION APPAREL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
(Unaudited)

September 30, December 31,
2009 2008
ASSETS
Current Assets:
Cash and cash equivalents $ 88,716 $ 57,245
Short-term investments 4,965 4,850
Accounts receivable, net of allowances:
From factor 188 23,060
From customers 28,358 10,043
Inventory 37,835 25,828
Deferred income tax assets 6,792 6,498
Prepaid expenses and other current assets 5,594 4,148
Total current assets 172,448 131,672
Property and equipment, net 38,284 28,006
Long-term investments - 4,990
Other assets 2,013 1,784

TOTAL ASSETS $ 212,745 $ 166,452

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 15,310 $ 10,633
Accrued salaries, wages and benefits 7,037 6,889
Income taxes payable 685 1,042
Total current liabilities 23,032 18,564
Long-Term Liabilities:
Long-term deferred rent 7,198 4,536
Long-term deferred income tax liabilities 2,414 1,102
Total long-term liabilities 9,612 5,638
Total liabilities 32,644 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, 25,351 and 24,450 issued and outstanding, respectively 3 2
Additional paid-in capital 46,474 38,554
Retained earnings 133,240 103,508
Accumulated other comprehensive income, net 384 186
Total stockholders' equity 180,101 142,250

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 212,745 $ 166,452

TRUE RELIGION APPAREL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

Nine Months Ended
September 30,
2009 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 32,697 $ 31,664
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense 4,449 2,265
Provision for bad debts and returns 987 723
Stock-based compensation 8,544 8,248
Tax benefit from stock-based compensation 96 182
Excess tax benefit from stock-based compensation (96 ) (182 )
Deferred income tax provision (benefit) 1,019 (277 )
Other 159 (229 )
Changes in operating assets and liabilities:
Accounts receivable from factor 22,345 (13,093 )
Accounts receivable from customers (18,882 ) 5,978
Inventory (12,001 ) (6,218 )
Prepaid expenses and other current assets (1,586 ) (2,348 )
Accounts payable and accrued expenses 5,555 (10 )
Accrued salaries, wages and benefits 149 2,197
Income taxes payable (1,077 ) 10,495
Long-term deferred rent 2,662 2,762
Net cash provided by operating activities 45,020 42,157

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (15,636 ) (13,664 )
Sales of investments 4,875 5,550
Expenditures to establish trademarks (107 ) (57 )
Net cash used in investing activities (10,868 ) (8,171 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options - 26
Statutory tax withholding payment for stock-based compensation (2,966 ) (7,014 )
Excess tax benefit from stock-based compensation 96 182
Net cash used in financing activities (2,870 ) (6,806 )

Effect of exchange rate changes in cash 189 (17 )

Net increase in cash and cash equivalents 31,471 27,163
Cash and cash equivalents, beginning of period 57,245 28,686
Cash and cash equivalents, end of period $ 88,716 $ 55,849

True Religion Apparel, Inc.
Pete Collins, Chief Financial Officer
323-266-3072
or
Investor Relations
ICR, Inc.
Laura Foster, 310-954-1110

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