Orange 21 Inc. net sales for the fourth quarter of 2006 increased 28% to $11.4 million compared to $8.9 million in the fourth quarter of 2005. $1.7 million of the sales came from the companys newly acquired manufacturing facility, LEM. Without the acquisition sales would have increased 9%.
Gross profit for the fourth quarter was 17% of net sales, as compared to 41% of net sales for the comparable period last year. The decrease in gross profit and gross profit as a percentage of sales is primarily due to increases in inventory reserves for slow moving and obsolete inventory that is no longer being marketed for resale.
“At the heart of our (explanation) why this all happened is really simply – and I hate to sound offensive – but we just made the wrong product and lots of it,” Mark Simo, Orange 21 co-chairman and CEO said during a conference call with analysts. “We just did not address in the past two years the inflow of inventories that were not selling.”
Total operating expenses for the fourth quarter of 2006 were $7.2 million, or 63% of net sales, as compared to $6.2 million or 70% of net sales, for the comparable period last year. The company reported a net loss for the fourth quarter of 2006 of approximately $4.0 million, or 49 cents per diluted share compared to a net loss of approximately $1.8 million, or 22 cents per diluted share. Due to the current transitional nature of the company, ORNG executives did not provide any financial guidance.
