Selling, general and administrative expenses were $12.2 million in the quarter compared with $8.5 million in the same period in 2006, which included charges of $2.0 million related to a litigation settlement.
Excluding this settlement cost from the 2006 results, the company's SG&A expense in the most recent quarter increased by $5.7 million.
This included $1.2 million in charges related to the separation agreements with former executives and the termination of the strategic review with Goldman Sachs.
The company had $4.5 million of additional costs, of which $2.3 million reflected incremental operating costs for the continued growth in the company's consumer direct business; an additional $0.8 million in non-cash restricted stock expense; and, $1.4 million primarily for additional management and occupancy costs to support the company's growth.
Net income for the second quarter of 2007 was $5.1 million, or $0.21 per diluted share. Excluding the above-mentioned $1.2 million in charges that equate to $0.04 per diluted share and were not part of the company's guidance, adjusted net income was $5.8 million, or $0.25 per diluted share, which was in line with the company's plan.
This compares with 2006 second quarter net income of $4.9 million, or $0.21 per diluted share. In 2006, excluding the impact of the litigation settlement that equated to $0.05 per diluted share, adjusted net income in the second quarter was $6.1 million, or $0.26 per diluted share.
Management believes that including non-GAAP net income and net income per diluted share for the second quarter periods provides a useful and relevant measure for comparative year-over-year operating performance.
The company currently is addressing a question about the $1.2 million expense that was recorded in the first quarter of 2007 when it changed its restricted stock compensation accounting method.
It is considering if some, or all, of this expense should have been recorded in 2006 instead of 2007, and if so, should the company revise its prior year financial statements.
True Religion will file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 after it reaches a conclusion on this matter.
At this time, the company expects to request an extension to file the 2007 second quarter 10-Q report after its due date, Thursday, August 9, 2007. The financial information as of June 30, 2007 that is being released is prepared on the same basis as that for March 31, 2007.
True Religion Apparel Inc
marketing@alchempro.com
