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Charles & Colvard Ltd Reports Operating Results (10-Q)

November 12, 2010 | About:
10qk

10qk

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Charles & Colvard Ltd (CTHR) filed Quarterly Report for the period ended 2010-09-30.

Charles & Colvard Ltd has a market cap of $42.8 million; its shares were traded at around $2.22 with a P/E ratio of 44.4 and P/S ratio of 5.1. CTHR is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

As a result of these efforts to date, our total net sales for the nine months ended September 30, 2010 were 54% greater than total net sales during the same period of 2009, with loose jewel sales improving 67% period to period. Jewelry sales were 7% less than the same period of 2009 but are beginning to improve as we establish our moissanite jewelry business and replace the jewelry sales in 2009 that were primarily to a certain retailer for sales at trunk show events, which were discontinued after September 2009.

Net sales were $3.00 million for the three months ended September 30, 2010 compared to $2.15 million for the three months ended September 30, 2009, an increase of 858,000 or 40%. Net sales were $9.18 million for the nine months ended September 30, 2010 compared to $5.95 million for the nine months ended September 30, 2009, an increase of $3.23 million or 54%. In the third quarter of 2010, carat sales of loose moissanite jewels and moissanite jewels mounted in jewelry increased 52% to approximately 20,000 carats from approximately 13,000 carats in the third quarter of 2009. For the nine months ended September 30, 2010, carat sales of loose moissanite jewels and moissanite jewels mounted in jewelry increased 103% to approximately 67,000 carats from approximately 33,000 carats in the same period of 2009. As our management team continues to reposition moissanite in the marketplace and explore new opportunities for our product, including finished jewelry featuring moissanite, we anticipate orders and related sales will continue to improve.

For the three months ended September 30, 2010, jewelry sales were $169,000 compared to $260,000 in the same period of 2009, a decrease of $90,000 or 35%. For the nine months ended September 30, 2010, jewelry sales were $958,000 compared to $1.03 million in the same period of 2009, a decrease of $73,000 or 7%. Sales of jewelry represented 6% and 10% of total net sales in the three and nine months ended September 30, 2010, respectively, compared to 12% and 17% of total net sales in the three and nine months ended September 30, 2009, respectively. We have been pursuing new jewelry opportunities in 2010, and as a result of those efforts, we have begun to replace the jewelry sales for trunk show events discontinued in 2009, which represented the majority of our jewelry sales for the nine months ended September 30, 2009.

U.S. net sales accounted for approximately 63% and 67% of total net sales during the three months ended September 30, 2010 and 2009, respectively, and approximately 59% and 65% of total net sales during the nine months ended September 30, 2010 and 2009, respectively. U.S. net sales and carat shipments, which do not include shipments of consigned inventory, increased by 33% and 46%, respectively, for the three months ended September 30, 2010 as compared to the same period in 2009; and by 40% and 91%, respectively, for the nine months ended September 30, 2010 as compared to the same period in 2009. U.S. sales increased during these periods primarily due to our continuing efforts to revitalize existing customer relationships, the execution of our strategic plan, and the addition of several new customers during the first nine months of 2010.

Our two largest U.S. customers during the three months ended September 30, 2010 accounted for 38% and 11%, respectively, of our total sales compared to 31% and 7%, respectively, during the same period of 2009. No additional U.S. customers accounted for more than 10% of total sales in the third quarter of 2010 or 2009. Our largest U.S. customer during the nine months ended September 30, 2010 accounted for 24% of our total sales compared to 18% during the same period of 2009. A second U.S. customer accounted for 11% of our sales in the same period of 2009 but did not account for a significant percentage of our sales during the nine months ended September 30, 2010. We expect that we will remain dependent on our ability, and that of our largest customers, to maintain and enhance retail programs. A change in or loss of any of these customer or retailer relationships could have a material adverse effect on our results of operations.

International net sales accounted for approximately 37% and 33% of total net sales during the three months ended September 30, 2010 and 2009, respectively, and approximately 41% and 35% of net sales during the nine months ended September 30, 2010 and 2009, respectively. International net sales and carat shipments, which do not include shipments of consigned inventory, increased by 53% and 63%, respectively, for the three months ended September 30, 2010 as compared to the same period in 2009; and by 81% and 118%, respectively, for the nine months ended September 30, 2010 as compared to the same period in 2009. International sales increased during the three months ended September 30, 2010 primarily due to increased sales to an existing customer in India and during the nine months ended September 30, 2010 due to the acquisition of new customers in India and Russia. Our largest international customer during the three months ended September 30, 2010 accounted for 18% of our total sales compared to 4% during the same period of 2009. No additional international customers accounted for more than 10% of our total sales in the three and nine months ended September 30, 2010 and 2009. A portion of our international sales represents jewels sold internationally that will be re-imported to North American retailers. Our top three international distributors by sales volume during the three months ended September 30, 2010 were located in India, Hong Kong, and Italy; and our top three international distributors by sales volume during the nine months ended September 30, 2010 were located in Russia and India.

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