Charles & Colvard Reports 52% Increase in Second Quarter Operating Income.Business Editors MORRISVILLE Morrisville, borough (1990 pop. 9,765), Bucks co., SE Pa., on the Delaware River opposite Trenton, N.J.; settled c.1624 by the Dutch West India Company, inc. 1804. Water pumps, clutches, coatings, and concrete and rubber products are among the manufactures. , N.C.--(BUSINESS WIRE)--July 21, 2003 Charles Charles, archduke of Austria Charles, 1771–1847, archduke of Austria; brother of Holy Roman Emperor Francis II. Despite his epilepsy, he was the ablest Austrian commander in the French Revolutionary and Napoleonic wars; however, he was handicapped by & Colvard, Ltd., (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CTHR) the sole source of moissanite - a created jewel available for use in fine jewelry jewelry, personal adornments worn for ornament or utility, to show rank or wealth, or to follow superstitious custom or fashion. The most universal forms of jewelry are the necklace, bracelet, ring, pin, and earring. today reported operating results for the second quarter of 2003. The Company reported second quarter sales of $4.3 million, resulting in income before taxes of $918,000 and net income of $502,000 or $.04 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. This represents a 6% increase over last year's second quarter sales of $4.1 million, a 44% gain over last year's pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. of $638,000, and a 45% improvement over 2002 pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income of $347,000 or $.03 per diluted share. Sales for the six months ended June June: see month. 30, 2003 aggregated $8.7 million on shipments of 48,600 carats. Net income for the first half of 2003 was $1,035,000 or $.08 per diluted share. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. sales are 6% ahead of first half 2002 sales of $8.2 million on shipments of 51,000 carats. Six months '03 net income was 67% ahead of 2002 pro forma net income of $618,000 or $.05 per diluted share. The 21% and 9% declines in net income for the second quarter and first half of 2003, respectively, compared to the same periods last year are primarily due to no Federal taxes being recorded in 2002. During the fourth quarter of 2002, the Company recorded a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. $6.7 million non-operating and non-cash addition to earnings due to the expected realization of deferred tax benefits from tax net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. . Recognition of this deferred tax asset has resulted in the recording of income tax expense in each quarter of 2003. Pro forma amounts are shown so as to compare net income as if the Company had incurred income tax expense during 2002. A full explanation of this tax reconciliation can be found at the end of this release. A comparison of key operating results for the second quarter and first six months are as follows (in thousands, except for per share data):
Second First Six
Quarter Months
--------------- ---------------
2003 2002 2003 2002
------- ------- ------- -------
Net Sales $4,312 $4,076 $8,685 $8,226
Operating Income $ 889 $ 585 $1,807 $1,035
Reported after tax net income $ 502 $ 638 $1,035 $1,138
Reported after tax net income
per diluted share $ 0.04 $ 0.05 $ 0.08 $ 0.08
Net Income (Pro Forma for 2002) $ 502 $ 347 $1,035 $ 618
Net Income per diluted share
(Pro Forma for 2002) $ 0.04 $ 0.03 $ 0.08 $ 0.05
North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. sales, which represents 87% of total sales, were up 9% for the quarter (down 3% in carat CARAT, weights. A carat is a weight equal to three and one-sixth grains, in diamonds, and the like. Jac. L. Dict. See Weight. shipments) primarily due to a 13% increase in the average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. per carat, as customers purchased a higher percentage of larger stones. International sales for the second quarter decreased 10% and thus shipments of 23,500 carats for the current period were 7% below the 25,300 carats in the same period of 2002. Gross margin as a percentage of sales for the second quarter was 67.7%, an increase of 7.8 percentage points when compared to the same quarter in 2002. This increase was primarily caused by a 13% increase in average selling price per carat and improved yields during the specific FIFO (First In First Out) A storage method that retrieves the item stored for the longest time. Contrast with LIFO. See traffic engineering methods. FIFO - first-in first-out period being relieved from inventory. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were up 9% for the quarter when compared to last year amounts due to higher sales and marketing expenditures used to promote customer sales opportunities. As a percentage of sales operating expenses for the quarter were one percent higher than last year. Bob Thomas For the Irish footballer, see . Bob Thomas (born March 1, 1965 in Appalachia, Virginia) is a radio personality, actor, and writer. He was one of the top radio announcers in Knoxville, Tennessee for 25 years. , President and Chief Executive Officer of Charles & Colvard, said, "A 52% increase in operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. versus the second quarter of last year demonstrates our commitment to our shareholders. Although our top line growth did not meet our internal goals, the 9% increase in North American sales volume is, we feel, a major achievement, given the current economic climate." He concluded, "I believe that Charles & Colvard is positioned for continued improvement in sales and operating income. The aggressive work of our existing distributors and addition of significant new manufacturing partners have provided us with promising new business leads and in several cases, allowed for Moissanite jewelry tests in a number of new outlets. Based upon advanced discussions, we look forward to additional tests in important distribution channels to be initiated in the near future. Our aggressive advertising campaign addressed at consumers as well as the jewelry trade is achieving the desired results." CONFERENCE CALL Management will host a conference call tomorrow morning, Tuesday Tuesday: see week. , July July: see month. 22 at 9:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT to discuss these results as well as recent corporate developments. After opening remarks, there will be a question and answer period. Interested parties may participate in the call by dialing 800-863-1575 (973-582-2866 for international callers). Please call in 10 minutes before the conference is scheduled to begin and ask for the Charles & Colvard call. The conference call will also be broadcast live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . To listen to the live call, please go to www.moissanite.com and click on the Investor Relations Investor relations The process by which the corporation communicates with its investors. section where conference calls are posted. Please go to the website 15 minutes early to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 30 days. A recorded telephone replay of the call will also be available for approximately one week following the live call. Listeners may dial 877-519-4471 (973-341-3080 for international callers) and use the code #4049662 for the telephone replay. Charles & Colvard, based in the Research Triangle Park Research Triangle Park, research, business, medical, and educational complex situated in central North Carolina. It has an area of 6,900 acres (2,795 hectares) and is 8 × 2 mi (13 × 3 km) in size. Named for the triangle formed by Duke Univ. area of North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. , is the sole source of moissanite, a created jewel used in fine jewelry. Moissanite is near colorless col·or·less adj. 1. Lacking color. 2. Weak in color; pallid. 3. Lacking animation, variety, or distinction; dull. See Synonyms at dull. , with more fire, brilliance and luster than a fine diamond, but retails for only a fraction of the cost. For more information, please access www.moissanite.com. This press release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Such forward-looking statements are subject to a number of material risks, uncertainties and contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. that could cause actual results to differ materially from those set forth in the forward-looking statements. Those risks and uncertainties include but are not limited to the Company's ability to manage growth effectively, dependence on Cree Inc. for SiC crystals, dependence on a limited number of distributors such as K&G Creations and Stuller Settings, Inc., limited operating history, dependence on continued growth and consumer acceptance of the Company's products, the risks and uncertainties of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. including the substantial management time and attention required and substantial expenses incurred regardless of its outcome, and other risks and uncertainties set forth in the Company's 10-K for the year ended December 31, 2002 and other filings with the Securities and Exchange Commission.
Charles & Colvard, Ltd.
Condensed Consolidated Statements Of Operations
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
(Unaudited) (Unaudited)
2003 2002 2003 2002
--------------------- ---------------------
Net sales $4,311,706 $4,075,602 $8,684,849 $8,225,748
Cost of goods 1,392,576 1,632,901 3,091,017 3,671,855
---------- ---------- ---------- ----------
Gross profit 2,919,130 2,442,701 5,593,832 4,553,893
Operating expenses:
Marketing and sales 1,440,832 1,125,730 2,592,844 2,179,376
General and
administrative 583,844 732,513 1,186,201 1,339,725
Research and
development 5,842 --- 7,592 ---
Other expense
(income) --- (450) --- (450)
---------- ---------- ---------- ----------
Total operating
expenses 2,030,518 1,857,793 3,786,637 3,518,651
---------- ---------- ---------- ----------
Operating income 888,612 584,908 1,807,195 1,035,242
Interest income, net 28,989 52,879 63,909 102,755
---------- ---------- ---------- ----------
Income before taxes 917,601 637,787 1,871,104 1,137,997
Income tax expense 415,370 --- 836,422 ---
---------- ---------- ---------- ----------
Net income $ 502,231 $ 637,787 $1,034,682 $1,137,997
========== ========== ========== ==========
Basic net income
per share $ 0.04 $ 0.05 $ 0.08 $ 0.09
========== ========== =========== ==========
Diluted net income
per share $ 0.04 $ 0.05 $ 0.08 $ 0.08
========== ========== =========== ==========
Weighted-average
common shares:
Basic 13,219,530 13,377,484 13,260,836 13,375,626
========== ========== =========== ==========
Diluted 13,521,463 13,707,458 13,584,854 13,641,479
========== ========== =========== ==========
Charles & Colvard, Ltd.
Condensed Consolidated Balance Sheets
June 30, December 31,
2003 2002
------------------------
Assets (Unaudited)
Current Assets:
Cash and equivalents $12,354,223 $13,282,245
Accounts receivable 2,165,735 2,195,952
Interest receivable 8,170 11,926
Inventory 23,919,123 22,365,325
Prepaid expenses and other assets 337,956 327,179
Deferred Income Taxes 250,601 250,601
----------- -----------
Total Current Assets 39,035,808 38,433,228
Long-Term Assets
Equipment, net 492,928 449,947
Patent and license rights, net 273,501 272,291
Deferred Income Taxes 6,000,874 6,793,296
----------- -----------
Total Long Term Assets 6,767,303 7,515,534
----------- -----------
Total Assets $45,803,111 $45,948,762
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable:
Cree, Inc. $ 836,665 $ 780,029
Other 201,045 122,931
Accrued payroll 179,869 723,467
Accrued expenses 252,621 387,417
Deferred revenue 253,793 183,367
----------- -----------
Total Current Liabilities 1,723,993 2,197,211
Shareholders' Equity:
Common stock 54,258,882 54,972,302
Additional paid-in capital - stock options 2,446,039 2,439,734
Accumulated deficit (12,625,803)(13,660,485)
-----------------------
Total Shareholders' Equity 44,079,118 43,751,551
----------- -----------
Total Liabilities and Shareholders'
Equity $45,803,111 $45,948,762
=========== ===========
Charles & Colvard, Ltd.
Pro Forma Net Income Reconciliation
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------
2003 2002 2003 2002
--------- --------- ----------- -----------
As reported:
Income before income tax
expense $917,601 $637,787 $1,871,104 $1,137,997
Income tax expense $415,370 $ --- $ 836,422 $ ---
--------- --------- ----------- -----------
Net Income $502,231 $637,787 $1,034,682 $1,137,997
========= ========= =========== ===========
Pro Forma:
Income before income tax
expense $917,601 $637,787 $1,871,104 $1,137,997
Income tax expense (38%
of U.S. taxable income) $415,370 $290,941 $ 836,422 $ 520,244
--------- --------- ----------- -----------
Net Income $502,231 $346,846 $1,034,682 $ 617,753
========= ========= =========== ===========
Pro forma net income for 2002 is comprised of the Company's net income for the period after adjustment for estimated income taxes utilizing an effective tax rate of 38% of U.S. taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . During the fourth quarter of 2002, the Company recorded a one-time, non-operating, non-cash addition to earnings of $6.7 million which reflects the expected future tax benefits from net operating loss carryforwards ($16.0 million at December 31, 2002) and other deferred tax assets. Recognition of this deferred tax asset has resulted in the recording of tax expense in each quarter of 2003. Tax expense will be recorded during all profitable future quarters. However, U.S. Federal tax payments will only resume once the tax net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. carryforward carryforward 1. A business operating loss that, for tax purposes, may be claimed a certain number of years in the future, often up to 15 years. has been completely utilized or if alternative minimum taxes are applicable. Management believes that this pro forma information is useful to investors in comparing results of operations on a U.S. tax-equivalent basis in both periods. |
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