CARLSBAD, Calif.--(BUSINESS WIRE)--Feb. 21, 2006--Orange 21 Inc.
- Preliminary 2006 outlook provided
- Acquisition of LEM completed
- 4Q 2005 earnings release and investor call planned for late
- CEO Barry Buchholtz to present today at 1 p.m. PT at the
- Updated presentation available on the Company's website at
Orange 21 Inc. (NASDAQ:ORNG), a leading developer of premium
eyewear products for the action sport and youth lifestyle markets,
today pre-announced un-audited summary financial information for the
year ended December 31, 2005, and gave a preliminary outlook for 2006.
Orange 21 anticipates un-audited revenues for 2005 of
approximately $39 million, an increase of approximately 16% from 2004,
and expects to report a net loss of approximately $1.2-$1.7 million or
($0.15)-($0.21) per fully diluted share.
The shortfall in revenues from previous guidance is due to several
factors, including late product shipments in the fourth quarter, the
transition of its distribution arrangements in Australia, late
deployment of point-of-purchase displays and lower than expected sales
in the E Eyewear product line, as well as slightly lower than expected
demand in certain products.
Gross margins continue to be adversely impacted, primarily by the
Euro. Results were additionally impacted by a higher than expected
loss internationally, primarily due to lower than expected sales in
the Asian markets and the transition in the Australian market for
which the Company will receive no income tax benefit.
Un-audited operating results were also adversely impacted by costs
associated with the ongoing class action and IP litigation and
additional inventory reserves, as well as an increase in the returns
reserve primarily due to the transition in Australia. The Company will
discuss its operating results in its fourth quarter earnings release
and conference call in late March. In addition, more specific details
in regard to the 2005 results and the 2006 forecast are available in a
presentation on the Orange 21 website at www.orangetwentyone.com. A
form 8-K containing this press release and the investor presentation
is also available on the U.S. Securities and Exchange Commission's
website, located at www.sec.gov.
For 2006, Orange 21 expects modest revenue growth and an
improvement in operating results. For the first quarter of 2006,
Orange 21 expects revenue and operating results to be down compared to
the first quarter of 2005 due, in part, to the consolidation of LEM
and the seasonality of LEM's business. Historically, approximately 60%
of Orange 21's revenues are recognized in the second half of the year
and the first quarter has been the Company's lowest revenue quarter
and generally results in a loss as a result of substantial sales and
marketing expenses, including tradeshows and other front-end loaded
expenses. Also, 2006 will be impacted by stock option charges as a
result of the Company's adoption of Statement of Financial Accounting
Standards No. 123R.
In 2006, the Company is implementing several new initiatives to
streamline its operations to return to profitability. Jerry
Kohlscheen, who, as previously announced, will join the Company as
Chief Operating Officer on March 1, 2006, will be closely involved in
these initiatives and the execution of the strategic plan. The new
initiatives include consolidating warehouse facilities, strengthening
IT infrastructure, reducing SKU count and reorganizing the Company's
international distribution strategy in Asia and Australia.
Orange 21 recently completed the acquisition of its Italian
manufacturer, LEM S.r.l., which is now a wholly owned subsidiary of
the Company. As previously announced, Orange 21 paid EUR 3.3 million
in cash and has a two-year earn-out commitment for the acquisition of
LEM, which is based on sales of product by LEM during that period of
time. The Company is studying methods of improving the operating
efficiencies of LEM through continued investment and streamlining of
its operations. As previously stated, the acquisition of LEM will be
dilutive in 2006. Barry Buchholtz, Chief Executive Officer of Orange
21, noted, "The acquisition of LEM brings the majority of our sunglass
and goggle manufacturing in-house and will help us to shorten
manufacturing lead times, accelerate our product to market process and
improve product gross margins."
Mr. Buchholtz continued, "The 2005 year was transitional for us,
and while we are very disappointed to report that our financial
results did not meet expectations, we are pleased with the progress we
have made from a brand and product development perspective. We are
committed to revitalizing our operating model and returning to
profitable growth. We have exceptional products and a strong brand
which we believe are the foundation to our long-term success. We will
continue to invest in our brands and are determined to resolve our
challenges so Orange 21 can successfully execute its strategic plan."
Mr. Buchholtz concluded, "While our short-term results will continue
to be affected by the challenges we have outlined, our long-term
outlook remains very positive. We believe we are taking the right
steps for the long term and we expect to benefit from these
initiatives in 2007 and beyond."
About Orange 21 Inc.
Orange 21 is a leading developer of premium eyewear products for
the action sport and youth lifestyle markets. Orange 21's primary
brand, Spy Optic(TM), manufactures sunglasses and goggles targeted
towards the action sports and youth lifestyle markets.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: This press release contains forward-looking
statements and forecasts about Orange 21 and its business, such as
management's estimates of net sales and profitability for 2005 and
2006. Because forecasts are inherently estimates that cannot be made
with precision, the Company's performance may at times differ from its
estimates and targets.
Statements in this press release regarding financial guidance,
management's expectations regarding the impact of operational
initiatives on profitability and efficiency, and statements that refer
to Orange 21's estimated and anticipated future results are
forward-looking statements. All forward-looking statements in this
press release reflect Orange 21's current analysis of existing trends
and information and represent Orange 21's judgment only as of the date
of this press release. Actual results may differ from current
expectations based on a number of factors affecting Orange 21's
business, including, but not limited to, adjustments which may be
necessary upon completion of the final audit by its outside auditors;
uncertainties associated with Orange 21's ability to maintain a
sufficient supply of products and to successfully manufacture its
products; integration of the LEM acquisition; the performance of new
products and continued acceptance of current products; the execution
of strategic initiatives and alliances; the impact of ongoing
litigation; uncertainties associated with intellectual property
protection for its products; matters generally affecting the domestic
and global economy, such as changes in interest and currency exchange
rates; and other factors described in the Company's filings with the
Securities and Exchange Commission, including its most recent
quarterly report on Form 10-Q. Therefore, the reader is cautioned not
to rely on these forward-looking statements. Orange 21 disclaims any
intent or obligation to update these forward-looking statements.
CONTACT: Orange 21 Inc.
Michael Brower, 760-804-8420
Integrated Corporate Relations
Andrew Greenebaum/Allyson Pooley, 310-395-2215
SOURCE: Orange 21 Inc.