Charles & Colvard Reports Fourth Quarter and 2005 Operating Results; Record Sales.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. -- 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 fourth quarter and year ended December December: see month. 31, 2005. Business Expansion Update 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 stated, "We are pleased to announce that moissanite jewelry will be in 90 Helzberg Diamonds Helzberg Diamonds is a diamond retail company founded by Morris Helzberg in 1915 in Kansas City, Missouri. It was quickly taken over, when he became ill, by his son Barnett Helzberg, Sr. at the age of 16. In 1963, Barnett Sr. stores by the end of the first quarter, an increase of 50 stores over the previous announcement. In addition Zales Corporation has expanded its testing of our jewel to include 20 stores within their 105 store Zales Outlet chain and will begin testing during the second quarter in Zales-Canada, People's Division, a 160 store chain." Fourth Quarter & Year End Results Mr. Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs said, "Revenue in the fourth quarter and full year of 2005 were at record levels. We are delighted with the success of the sale of moissanite jewelry during the recent Holiday season". The Company reported fourth quarter sales of $11.7 million resulting 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. of $1,393,000 and net income of $884,000 or $.05 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 34% increase over last year's fourth quarter sales of $8.7 million, a 139% increase versus last year's fourth quarter operating income of $584,000, and a 90% increase versus last year's fourth quarter net income of $465,000. The $809,000 increase in operating income in the fourth quarter was primarily the result of the increase in gross profit resulting from increased sales and a 11.1 percentage point increase in gross profit percentage partially offset by a $2,093,000 increase in marketing and sales expense and a $156,000 increase in general and administrative expense. Sales for the year ended December 31, 2005 aggregated $43.5 million on shipments of 255,000 carats. Net income for 2005 was $5,875,000 or $.31 per diluted share. Sales for 2005 were 82% ahead of 2004 sales of $23.9 million on shipments of 136,000 carats. The 2005 net income was 264% above 2004 net income of $1,612,000 or $.09 per diluted share. A comparison of key operating results for the fourth quarter and year ended December 31, 2005 are as follows (in thousands, except for per share data):
Fourth Quarter Year
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Net Sales $11,672 $8,718 $43,544 $23,917
Operating Income $1,393 $584 $9,130 $3,038
Net Income $884 $465 $5,875 $1,612
Net Income per diluted share $0.05 $0.03 $0.31 $0.09
Share and per share data for all periods presented have been adjusted to reflect the effect of the 5% stock dividend distributed on July July: see month. 15, 2005 and the one share for every four shares owned stock split, effected in the form of a 25% stock dividend, distributed on January 30, 2006. U.S. sales, which represent 93% of total sales, were up 39% for the quarter (46% in carats), primarily attributable to sales to our largest distributor to the independent jeweler and to a lesser extent the rollout to jewelry departments leased to Finlay Enterprises You can improve this article by adding links to related material, within the existing text. After links have been created, remove this message. For more information, see the . Gross profit as a percentage of sales was 66.8% for 2005 and 71.9% for the fourth quarter, an increase of 2.6 and 11.1 percentage points when compared to the same periods in 2004. These increases were primarily caused by lower production costs in the 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 that the relieved inventory was produced partially offset by slight decreases in average selling price The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. per 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. , due to a decrease in the size of the average stone sold. 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 48% for the quarter and 62% for the year when compared to 2004 amounts. As a percentage of sales, operating expenses for the quarter and year were 60% and 46% respectively, an increase of 6 percentage points when compared to the same quarter last year and a decrease of 5 percentage points compared to 2004. Marketing and Sales expense for the quarter was up $2,093,000 primarily due to $1,782,000 of increased print advertising, a $420,000 increase in co-op advertising expense and $370,000 of increased direct mail expense partially offset by a $319,000 decrease in billboard advertising and a $120,000 decrease in expenses of the Hong Kong office. General and administrative expenses increased $156,000 primarily due to $117,000 of professional fees relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc compliance with section 404 of the Sarbanes-Oxley Act See SOX. . Our effective income tax rate for the year ended December 31, 2005 is lower than in the previous year primarily due to non-U.S. operating losses 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. representing a smaller percentage of income before taxes and a reduction in state income tax expense caused by the allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of 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. out of taxable state jurisdictions. Accounts Receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying decreased from $12.8 million at September 30, 2005 to $11.2 million at December 31, 2005 primarily due to increased cash collections. Mr. Thomas noted, "2005 was an extremely successful year for Charles & Colvard. Revenue and earnings growth were fueled by our efforts to expand distribution and supported by an effective marketing campaign. Our fundamental strategy has not changed; we intend to grow revenue while remaining profitable by increasing awareness and demand for our brilliant jewel, moissanite." CONFERENCE CALL Management will host a conference call on Wednesday February 15, 2006 at 9:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy to discuss these results as well as other corporate developments. After opening remarks, there will be a question and answer period. Interested parties may participate in the call by dialing 888-896-0863 (973-339-3086 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 online and can be accessed for approximately 90 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 #7000057 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, 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. as the current supplier of the substantial majority of the raw material and risks inherent in developing a material second source of supply through Norstel AB; dependence on a limited number of distributors such as K&G Creations, Reeves Park and Stuller Settings, Inc.,our early stage of development, dependence on continued growth and consumer acceptance of the Company's products, and other risks and uncertainties set forth in the Company's 10-K for the year ended December 31, 2004 and other filings with the Securities and Exchange Commission.
Charles & Colvard, Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------------- -------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales $11,672,485 $8,718,046 $43,544,090 $23,917,045
Cost of goods 3,281,511 3,420,225 14,463,410 8,570,448
------------ ------------ ------------ ------------
Gross profit 8,390,974 5,297,821 29,080,680 15,346,597
Operating
expenses:
Marketing and
sales 5,970,660 3,877,522 15,566,179 9,287,549
General and
administrative 987,519 831,857 4,168,902 3,006,647
Research and
development 39,492 4,760 215,778 14,076
------------ ------------ ------------ ------------
Total operating
expenses 6,997,671 4,714,139 19,950,859 12,308,272
------------ ------------ ------------ ------------
Operating income 1,393,303 583,682 9,129,821 3,038,325
Interest income 182,042 52,551 503,761 138,223
------------ ------------ ------------ ------------
Income before taxes 1,575,345 636,233 9,633,582 3,176,548
Income tax expense 691,087 170,864 3,758,915 1,564,256
------------ ------------ ------------ ------------
Net income $884,258 $465,369 $5,874,667 $1,612,292
============ ============ ============ ============
Basic net income
per share $0.05 $0.03 $0.33 $0.09
============ ============ ============ ============
Diluted net income
per share $0.05 $0.03 $0.31 $0.09
============ ============ ============ ============
Weighted-average
common shares:
Basic 18,227,725 17,681,457 18,008,855 17,467,173
============ ============ ============ ============
Diluted 19,138,820 18,367,338 18,963,111 18,007,726
============ ============ ============ ============
Share and per share data for all periods presented have been adjusted
to reflect the effect of the 5% stock dividend distributed on July 15,
2005 and the one share for every four shares owned stock split,
effected in the form of a 25% stock dividend, distributed on January
30, 2006.
Charles & Colvard, Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, December 31,
2005 2004
------------- -------------
Assets
Current Assets:
Cash and equivalents $21,003,551 $12,873,847
Accounts receivable 11,236,486 7,007,054
Interest receivable 46,417 14,798
Notes receivable 250,272 ---
Inventory 23,168,028 21,458,879
Inventory on consignment 2,446,722 3,243,797
Prepaid expenses and other
assets 571,277 439,371
Deferred income taxes 600,665 455,766
------------- -------------
Total Current Assets 59,323,418 45,493,512
Long-Term Assets
Notes receivable 263,710 ---
Furniture and equipment, net 496,336 524,645
Patent and license rights, net 298,524 348,435
Deferred income taxes 3,156,238 4,269,033
------------- -------------
Total Long Term Assets 4,214,808 5,142,113
------------- -------------
Total Assets $63,538,226 $50,635,625
============= =============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable:
Cree, Inc. $1,341,187 $663,630
Other 1,591,600 1,565,163
Accrued payroll 1,050,013 557,801
Accrued co-op advertising 1,364,007 208,000
Accrued expenses and other
liabilities 225,801 382,634
------------- -------------
Total Current Liabilities 5,572,608 3,377,228
Shareholders' Equity 57,965,618 47,258,397
------------- -------------
Total Liabilities and
Shareholders' Equity $63,538,226 $50,635,625
============= =============
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