After pre-releasing their fourth quarter and 2005 financials in February (see BOSS_0609), Orange 21 delayed filing its quarterly results with the Securities and Exchange Commission until recently. The company reiterated the sales and earnings declines reported earlier, and provided more details on the key factors that influenced the shortfall.

The primary impact on Orange 21’s top-line was due to a shift in its international distribution structure, mainly in Asia and Australia. The company just inked a new distribution agreement with the Marmalade Group PTY LTD in Australia and is working on new arrangements in Japan. Because of the restructuring, Orange 21 sales in Australia were down by 25%, while they were down “considerably” in Asia.

The company’s U.S. business remains strong, with California driving sales as the primary region. Orange 21’s efforts to drive sales outside of California are paying off, with 70% of its new accounts originating from outside of the state.

However, one of the key initiatives to expand the company’s presence on a nationwide scale has not been successful. E-Eyewear was a brand created in conjunction with NASCAR driver Dale Earnhardt. Orange 21 has decided to discontinue the brand as a result of a patent infringement lawsuit filed by Oakley earlier this year. During a conference call with analysts and the media, Orange 21’s management said that they will continue their relationship with Earnhardt, presumably under the SPY Optics brand.

Orange 21’s European expansion is progressing on schedule, with several new accounts and a smooth transition to a third-party distribution service. Sales in Italy and France increased 37% due to this dealer direct transition and the company expects continued growth in these markets. Eventually Orange 21 expects this region to account for the majority of their international sales.

In 2006, the company expects to grow door count by 4-6% with sales inching up to $46 million to $48 million. The company is predicting a net loss of 15 cents to 20 cents per share due to operating losses at their newly acquired manufacturing facility and European subsidiary.