• Operating income increased 2.3% to $13.3 million as compared to $13.1 million in the prior year period. Operating income was 17.1% of sales in Q1 2010 versus 20.5% in Q1 2009. The Consumer Direct segment's operating margin increased by 190 basis points. However, the impact of the U. S. Wholesale sales decrease and other spending to support company-wide growth plans reduced the overall operating margin.
• The effective tax rate for the quarter was 37.2% as compared to 41.7% in the first quarter of 2009.
• Net income increased 10.1% to $8.4 million, or $0.34 per diluted share based on weighted average shares outstanding of 24.9 million, as compared to $7.6 million, or $0.32 per diluted share based on weighted average shares outstanding of 24.0 million in the 2009 first quarter.
Balance Sheet and Liquidity
As of March 31, 2010, the Company had $108.8 million of cash and cash equivalents as compared to $105.5 million as of December 31, 2009. The Company also ended the quarter with no long-term borrowings. As compared to March 31, 2009, inventory increased by $5.6 million to $33.7 million, a 19.9% increase; the additional inventory supports the Company's 27 branded retail stores opened since March 31, 2009. Net cash provided by operating activities during Q1 2010 was $12.5 million compared to $23.0 million in the prior year. In the first quarter of 2010, the Company paid more income tax than the first quarter of 2009, which caused this reduction in operating cash flows.
Store Openings
During the 2010 first quarter, True Religion opened six new stores, bringing its total store count at March 31, 2010, to 76 stores, compared to 70 stores at December 31, 2009. The Company anticipates opening 24 additional new retail stores in 2010, including 21 stores in the U.S. and its first three international full-price stores: Tokyo, London, and Toronto.
True Religion Apparel Inc
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