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A quick follow-up to my earlier post on True Religion Apparel (Nasdaq: TRLG), since they just put out their 10-Q for the much talked about quarter. Two areas were particularly interesting to me:

The company has a factoring agreement with Merchant Factors Corp., a provider of factoring agreements and asset based lending. In case you're not familiar with a factoring agreement, it's basically a way for a company with business-to-business sales to get access to cash without setting up a line of credit or taking a loan. In a factoring agreement, the company's invoices are directed to the factor provider and the factor allows the company to take advances on these invoices (in this case up to 85%) for a cost much lower than debt.

For a growing company like True Religion, especially as they expand into retail, cash management and availability of cash to finance expansion is crucial - a factoring agreement is a good way for them to get access to cash when needed.

That said, I noticed in their full balance sheet that though their accounts receivable are down versus December '05, their receivables from the factor jumped 2.5 times versus December. So I would think that the right way to look at receivables is to combine the accounts receivable with the factor receivables - a number that is up 60% over December.

I did note that receivables jumped the same way last Q3, but sales were also still growing at a much faster rate then. From a cash management standpoint, it's good that the company has the cash available from the factor, but I also want to make sure that they're on top of collecting from their customers.

Risky marriage?
I typically don't spend too much time looking at risk factors because many of them tend to be either self-evident or ludicrous. However, running past the risk factors in True Religion's 10-Q, the risk that "The loss of our Chief Executive Officer or other key management would have an adverse impact on our future development and could impair our ability to succeed" (a pretty typical risk factor) made me think. Given that Kim Lubell is eligable for a nearly $500k bonus this year, I would have to imagine that she falls in this "key management" group. Thus, just to beat this dead horse a little further, any marital strife and potential departure of Kim from True Religion is very much a business matter.

I'd rather not have to worry about the Lubell's marriage, but I guess that's life. What say ye Jeff?

Disclosure: I (still) own True Religion shares.

Source: True Religion Apparel: Two Concerns From the 10-Q