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True Religion Apparel Announces Third Quarter 2012 Financial Results

Investor Conference Call

True Religion Apparel management will host a conference call to discuss the financial results and answer questions today at 11:00 a.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 one of these Web sites 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 (877) 870-5176 (domestic) or (858) 384-5517 (international) and entering conference identification: 401323. Please note participants must enter the conference identification number in order to access the replay.

Management Commentary

A detailed financial commentary from the Company’s management will be posted on the Company's website, www.truereligionbrandjeans.com, in the Investor Relations section.

About True Religion Apparel, Inc.

True Religion Apparel, Inc. is a growing, design-based jeans and jeans-related sportswear 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 the Company’s branded retail and outlet stores as well as contemporary department stores and boutiques in 50 countries on six continents. As of September 30, 2012, the Company owned and operated 119 retail stores in the United States and 28 international stores. For more information, please visit www.truereligionbrandjeans.com.

 
Q3 2012 Segment Results
(Dollar amounts in thousands)
(unaudited)
     
Three Months Ended September 30, Nine Months Ended September 30,
    % Increase/       % Increase/
Net sales: 2012 2011 (Decrease) 2012 2011 (Decrease)
U.S. Consumer Direct $ 65,325 $ 61,817 5.7% $ 195,144 $ 174,025 12.1%
U.S. Wholesale 29,809 22,020 35.4% 73,670 63,888 15.3%
International 22,748 23,461 (3.0)% 59,604 60,021 (0.7)%
Core Services   667   1,066 (37.4)%   1,825   2,455 (25.7)%
Total net sales $ 118,549 $ 108,364 9.4% $ 330,243 $ 300,389 9.9%
 
  Three Months Ended September 30,   Nine Months Ended September 30,
2012   2011 2012   2011
Gross   Gross Gross   Gross
Gross Profit: Amount Margin   Amount Margin Amount Margin   Amount Margin
U.S. Consumer Direct $ 46,313 70.9% $ 43,490 70.4% $ 137,268 70.3% $ 124,929 71.8%
U.S. Wholesale 14,962 50.2% 11,388 51.7% 37,598 51.0% 33,510 52.5%
International 13,081 57.5% 14,246 60.7% 34,714 58.2% 34,409 57.3%
Core Services   667 100.0%   1,066 100.0%   1,825 100.0%   2,455 100.0%
Total gross profit $ 75,023 63.3% $ 70,190 64.8% $ 211,405 64.0% $ 195,303 65.0%
 
 
Three Months Ended September 30, Nine Months Ended September 30,
2012   2011 2012   2011
Operating Operating Operating Operating
Operating Income: Amount Margin   Amount Margin Amount Margin   Amount Margin
U.S. Consumer Direct $ 21,230 32.5% $ 20,898 34.0% $ 64,630 33.1% $ 61,189 35.2%
U.S. Wholesale 13,251 44.5% 9,752 44.3% 32,903 44.7% 27,700 43.4%
International 1,744 7.7% 6,801 29.0% 5,961 10.0% 13,165 21.9%
Core Services   (17,363) NM   (17,616) NM   (50,768) NM   (52,102) NM
Total operating income $ 18,862 15.9% $ 19,926 18.4% $ 52,726 16.0% $ 49,952 16.6%
 

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 2012 Guidance, expected operating and financial performance 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 on Form 10-Q and our other filings with the SEC, and include: the impact of general economic conditions and the current economic uncertainty in global markets; 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; increases in the price of materials or their reduced availability; and the Company’s ability to continue and manage 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,
2012   2011 2012   2011
Net sales $ 118,549   $ 108,364 $ 330,243   $ 300,389
Cost of sales   43,526     38,174   118,838     105,086
Gross profit 75,023 70,190 211,405 195,303
Selling, general and administrative expenses   56,161     50,264   158,679     145,351
Operating income 18,862 19,926 52,726 49,952
Other (income) expense, net   (415)     250   (78)     (231)
Income before provision for income taxes 19,277 19,676 52,804 50,183
Provision for income taxes   6,928     7,374   19,904     19,070
Net income 12,349 12,302 32,900 31,113
Less: Net income attributable to redeemable noncontrolling interest   5     217   366     612
Net income attributable to True Religion Apparel, Inc. $ 12,344   $ 12,085 $ 32,534   $ 30,501
 
Earnings per share attributable to True Religion Apparel, Inc.:
Basic $ 0.49   $ 0.48 $ 1.30   $ 1.23
Diluted $ 0.49   $ 0.48 $ 1.29   $ 1.22
 
Weighted average shares outstanding:
Basic   25,176     24,927   25,103     24,831
Diluted   25,311     24,999   25,304     25,002
 
Dividends per common share $ 0.20   $ - $ 0.40   $ -
 
 
TRUE RELIGION APPAREL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value amounts)
(Unaudited)
   
September 30, December 31,
2012 2011
ASSETS
Current Assets:
Cash and cash equivalents $ 51,395 $ 200,366
Short-term investments 117,308 -
Accounts receivable, net of allowances 36,156 23,959
Inventories 64,076 53,320
Deferred income tax assets 6,066 7,027
Prepaid income taxes 6,901 3,879
Prepaid expenses and other current assets 11,944 12,137
       
Total current assets   293,846   300,688
Property and equipment, net 62,579 53,698
Long-term investments 31,721 -
Deferred income tax assets 866 1,271
Other assets 5,263 4,496
       
TOTAL ASSETS $ 394,275 $ 360,153
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 30,936 $ 22,872
Accrued salaries, wages and benefits 11,130 11,506
Income taxes payable 262 6,538
       
Total current liabilities   42,328   40,916
Long-Term Liabilities:
Long-term deferred rent 17,125 13,986
Long-term deferred income tax liabilities 3,698 2,224
Long-term income taxes payable 898 604
       
Total long-term liabilities   21,721   16,814
Total liabilities   64,049   57,730
Redeemable noncontrolling interest   2,972   2,635
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, 25,780 and 25,492 issued and outstanding, respectively

3 3
Additional paid-in capital 86,960 77,950
Retained earnings 238,775 221,122
Accumulated other comprehensive income, net 1,516 713
       
Total stockholders' equity   327,254   299,788
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 394,275 $ 360,153
 
 
TRUE RELIGION APPAREL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
Nine Months Ended
September 30,
2012   2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 32,900 $ 31,113

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 9,873 9,351
Provision for bad debts 714 857
Stock-based compensation 8,604 8,516
Tax benefit from stock-based compensation 405 761
Excess tax benefit from stock-based compensation (511) (1,219)
Deferred income taxes 2,836 2,177
Other, net 301 75
Changes in operating assets and liabilities:
Accounts receivable (12,966) 204
Inventories (10,706) (12,255)
Prepaid expenses and other current assets 742 (674)
Other assets (791) (442)
Accounts payable and accrued expenses 6,664 8,745
Accrued salaries, wages and benefits (389) (218)
Prepaid income taxes and income taxes payable (9,002) (747)
Long-term deferred rent   3,069   2,420
Net cash provided by operating activities   31,743   48,664
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (167,282) -
Proceeds from maturities and sales of investments 18,028 -
Purchases of property and equipment (17,389) (15,622)
Expenditures to establish trademarks (7) (30)
Other assets   (242)   -
Net cash used in investing activities   (166,892)   (15,652)
 
CASH FLOWS FROM FINANCING ACTIVITIES:

Statutory tax withholding payment for stock-based compensation

(4,558) (5,450)
Cash dividends paid (10,076) -
Excess tax benefit from stock-based compensation   511   1,219
Net cash used in financing activities   (14,123)   (4,231)
 
Effect of exchange rate changes on cash   301   (415)
 
Net (decrease) increase in cash and cash equivalents (148,971) 28,366
Cash and cash equivalents, beginning of period   200,366   153,792
 
Cash and cash equivalents, end of period $ 51,395 $ 182,158
 
 
TRUE RELIGION APPAREL, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP TO ADJUSTED RESULTS
(Amounts in thousands, except earnings per share data)
(Unaudited)
       
Quarter Ended September 30, 2011
Net income
Selling, general attributable to
& administrative

  Operating  

True Religion Diluted earnings
expenses income Apparel, Inc. per share
As reported (GAAP) $ 50,264 $ 19,926 $ 12,085 $ 0.48
Separation costs (a)   (1,237)   1,237   773   0.03
As adjusted (b) $ 49,027 $ 21,163 $ 12,858 $ 0.51
 
Nine Months Ended September 30, 2011
Net income
Selling, general attributable to
& administrative Operating True Religion Diluted earnings
expenses income Apparel, Inc. per share
As reported (GAAP) $ 145,351 $ 49,952 $ 30,501 $ 1.22
Litigation settlement expense (1,500) 1,500 930 0.04
Separation costs (a)   (1,237)   1,237   767   0.03
As adjusted (b) $ 142,614 $ 52,689 $ 32,198 $ 1.29

 

(a)

 

Separation costs associated with the resignation of a former executive in the third quarter of 2011.

(b)

Management uses adjusted net income, and its components among other factors, to measure the performance of the overall Company. Further, we believe that investors' understanding of our performance is enhanced by disclosing these measures. Adjusted net income and its components and adjusted diluted EPS measures are not, and should not be viewed as substitutes for, U.S. generally accepted accounting principles (GAAP) net income and its components and diluted EPS.





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