True Religion gross margin expands to 57.2% from 54.6%

True Religion Apparel Inc announced financial results for the fourth quarter and year ended December 31, 2007.

Fourth Quarter Financial Results:
• Net sales were $52.7 million, an increase of 73.5% from $30.4 million in the 2006 fourth quarter. Net sales in the Company's U.S. wholesale segment increased 62.4% to $31.8 million from $19.6 million in the prior year. The Company's international wholesale business increased 21.3% to $9.2 million from $7.6 million in the 2006 fourth quarter.

• Net sales for the consumer direct segment, which includes the Company's branded retail stores and e-commerce site, increased 265.8% to $11.5 million from $3.1 million in the prior year. Fourth quarter net sales included $0.2 million of licensing revenue.

• Gross profit in the 2007 fourth quarter was $30.1 million, or 57.2% of net sales, compared to $16.6 million, or 54.6% of net sales, in the fourth quarter of 2006. The improvement in gross margin is primarily the result of the Company's higher margin consumer direct business generating a larger share of total net sales.

• Selling, general and administrative expenses for the 2007 fourth quarter increased 42.1% to $15.4 million from $10.8 million in the 2006 fourth quarter. Selling, general and administrative expenses for the fourth quarter of 2007 included $2.4 million of incremental operating costs for the expansion of the company's consumer direct business.

• Operating income for the 2007 fourth quarter increased 156.8% to $14.7 million, or 27.9% of net sales, compared to $5.7 million, or 18.9% of net sales, in the 2006 fourth quarter. The increase in operating margin is primarily due to higher sales and stronger margins generated in the Company's consumer direct business.

• True Religion's effective tax rate for the fourth quarter of 2007 was 41.0%.

• Net income for the 2007 fourth quarter was $8.9 million, or $0.37 per diluted share based on weighted average shares outstanding of 24.0 million, compared to $4.1 million, or $0.18 per diluted share based on weighted average shares outstanding of 23.6 million in the 2006 fourth quarter.

• On a Non-GAAP basis, adjusted net income for the fourth quarter of 2007 was $9.4 million, or $0.40 per diluted share based on 23.6 million weighted average shares outstanding. The Company's Non-GAAP adjusted EPS excludes approximately $395,000 of additional income taxes resulting from compensation recorded in the fourth quarter of 2007 that was not deductible and reflects a reduced weighted average share count by approximately 300,000 shares.

• The Company's weighted average share count for the fourth quarter and full year 2007 exceeded the share count used when the Company reiterated its full year 2007 guidance in September of 2007 by approximately 300,000 shares. This is due to a change in the anticipated future tax treatment of vested stock options. The change was identified in the review of the Company's accounting for stock options during the restatement process.