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Write-off Sinks Fila

MILAN — Fila managed to narrow its second-quarter operating loss by cutting costs, but the bottom line still sank deeper into the red because of a write-off on its struggling British unit.<br><br>Concurrently, Fila asked shareholders to approve...

MILAN — Fila managed to narrow its second-quarter operating loss by cutting costs, but the bottom line still sank deeper into the red because of a write-off on its struggling British unit.

Concurrently, Fila asked shareholders to approve special measures designed to recapitalize the company, which has endured losses in the last four years. Among these moves, contingent upon shareholder approval, would be dipping into company reserves, executing a capital increase and enacting a 1-for-2 reverse stock split. A special meeting to vote on these proposals will be held Sept. 23.

The net loss for the quarter ended June 30 widened to $34.9 million from $30.7 million in the prior-year quarter. However, because the company issued new shares last year, the loss per share contracted to 57 cents per share from $1.10 the year before. Dollar figures have been converted from the euro at current exchange rates.

Despite sponsoring athletes like tennis star Jennifer Capriati, Ferrari driver Michael Schumacher and skier Alberto Tomba, Fila hasn’t managed to capitalize on its high-profile brand and pull itself into the black.

Sales fell 1 percent to $202.7 million, although Fila said they would have risen by 2 percent on a constant currency basis.

Cost-cutting narrowed the operating loss to $4.5 million from $15.1 million the year earlier. However, Fila’s bottom line suffered the greatest damage from a $14.5 million write-off on goodwill in Fila U.K.

“The write-off was required to recognize adverse changes in the business climate since Fila acquired Fila U.K., because, despite the expected operating improvement of the subsidiary, an immediate return to past conditions is not foreseen,” the company said in a statement.

Losses on foreign exchange came to $1.7 million against a gain of $348,000 the year before. The U.S. dollar depreciated by 5 percent against the euro on a quarterly average basis, Fila said.

Holding di Partecipazioni Industriali, which owns 71.8 percent of Fila, has been trying to sell the embattled sports brand since June of last year. In December, HdP said it was in exclusive talks with U.S. fund Continental Partners. But that situation has changed. HdP is now talking to more than one prospective buyer, a company spokeswoman said.

Apparel sales rose 9 percent to $108.7 million, while footwear sales dropped by 12 percent to $84.6 million.

Citing a 33 percent jump in sales at its Enyce brand, Fila said U.S. revenues advanced by 16 percent to $63.2 million. Lower sales in France and the U.K. pushed down European sales by 14 percent to $53.4 million. Sales in the rest of the world fell by 3 percent to $76.8 million as strong sales in Korea offset a drop in sales in Argentina and Mexico.