After selling its LEM laboratory in Varese, Spy Inc. has decided to shut down its European office in Italy and to move to a distribution model in the region. Combined with layoffs in North America, this will result in the elimination of 20 jobs, resulting in a one-time charge of $1.2 million in the third quarter.

Together with a cut in marketing spending, these measures should deliver annual cost savings of up to $6 million by next year.

Separately, Gregory Hagerman has left his position of executive vice president of sales and operations with the California-based company, effective Aug. 31.

For the second quarter ended June 30, the company reported a net loss of $1.6 million during the quarter, an improvement over the net loss of $3.0 million during the same quarter of 2011. The reduced loss was primarily due to lower general and administrative expenses, offset by increased sales and marketing expenses related to Spy brand products. In addition, 2011 included other operating expenses of $2.0 million substantially related to the decision to terminate the sourcing of licensed products.

The quarterly results also showed a 5 percent increase in total net sales to $9.5 million. Total sales for the six months ended June 30 were up by 13 percent to $17.6 million. Sales of core Spy brand products increased by 13 percent to $9.3 million for the quarter, making it the fifth consecutive quarter of year-over-year growth for the brand. Other sales were $0.2 million, consisting of licensed brand products that are no longer a focus of the company, compared with licensed product sales of $0.8 million during the quarter ended June 30, 2011.

Last month, the company increased its borrowing capacity by raising the maximum principal amount available to it under one of its credit facilities with Costa Brava by $3.0 million to $10.0 million. It also extended the due dates of both of its credit facilities with Costa Brava to April 1, 2014.