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True Religion Apparel Inc. Reports Operating Results (10-Q)

November 05, 2012 | About:
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10qk

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True Religion Apparel Inc. (TRLG) filed Quarterly Report for the period ended 2012-09-30.

True Religion Apparel, Inc. has a market cap of $666.4 million; its shares were traded at around $26.3 with a P/E ratio of 13.5 and P/S ratio of 1.6. The dividend yield of True Religion Apparel, Inc. stocks is 3.1%. True Religion Apparel, Inc. had an annual average earning growth of 26.6% over the past 10 years.

Highlight of Business Operations:

In the ordinary course of business, we make sales to customers affiliated with the noncontrolling interest holder of TRBJ Germany (Related Parties). Net sales to Related Parties, which is included in net sales in the accompanying condensed consolidated statements of income, were $0.6 million and $1.8 million for the three and nine months ended September 30, 2012, respectively, and were $0.5 million and $2.5 million for the three and nine months ended September 30, 2011. As of September 30, 2012 and 2011, our accounts receivable from Related Parties was $4.2 million and $4.1 million, respectively.

The U.S. Consumer Direct SG&A increased $8.9 million, from $63.7 million in the first nine months of 2011 to $72.6 million in the first nine months of 2012. This increase is primarily related to the store expansion over the past year, from 105 stores at the end of September 2011 to 119 stores at the end of September 2012. Also contributing to the increase were the increases in merchandise planning and buying resources to support the growth in this segment. As a percentage of net sales, U.S. Consumer Direct SG&A increased from 36.6% in the first nine months of 2011 to 37.2% in the first nine months of 2012 primarily due to these planned increases in back office support. The four-wall SG&A rate improved 90 basis points from 32.5% to 31.6%, due to the segments same store sales increase, which produced leverage on fixed costs.

U.S. Wholesale SG&A decreased $1.1 million, from $5.8 million in the first nine months of 2011 to $4.7 million in the first nine months of 2012 due to a decrease in bad debt expense. In the second quarter of 2011, we wrote off a $0.7 million receivable from a former customer as a result of its bankruptcy filing. The decrease in SG&A costs combined with the segments increase in net sales contributed to the U.S. Wholesale SG&A rate decreasing from 9.1% in the first nine months of 2011 to 6.4% in the first nine months of 2012.

Core Services SG&A decreased $2.0 million, from $54.6 million in the first nine months of 2011 to $52.6 million in the first nine months of 2012, primarily due to a decrease in litigation settlement expense of $1.5 million and a 2011 separation cost of $1.2 million associated with the resignation of the Companys former president. As a percentage of total net sales, Core Services SG&A decreased from 18.2% in the first nine months of 2011 to 15.9% in the first nine months of 2012 due to the 9.9% increase in total net sales and the decrease in litigation settlement expense and separation costs.

Net income attributable to True Religion Apparel, Inc. was $32.5 million, or $1.29 per diluted share, for the first nine months of 2012 compared to $30.5 million, or $1.22 per diluted share, for the first nine months of 2011. The increase in net income attributable to True Religion Apparel, Inc. resulted primarily from a 9.9% increase in total net sales. Included in the 2011 result was a litigation settlement expense and separation costs, which reduced net income attributable to True Religion Apparel, Inc. by $1.7 million, net of tax. Excluding the litigation settlement and the separation costs of $0.07 per share (after tax), net income attributable to True Religion Apparel, Inc. for the first nine months of 2011 was $1.29 based on weighted average shares outstanding of 25.0 million.

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