(BUSINESS WIRE) Charles & Colvard, Ltd. (NASDAQ: CTHR), the sole manufacturer of moissanite lab-created gemstones, The Most Brilliant Jewel in the World^TM, announced today its financial results for the second quarter ended June 30, 2010.
Net sales for the quarter were $3.33 million, an increase of 152% from $1.32 million in the second quarter of 2009 and an increase of 17% from $2.85 million in the first quarter of 2010. Sales improved as a result of management’s execution of its strategy to revitalize existing customer relationships as well as the addition of several new customers, domestically and internationally, during the quarter.

The Company recorded net income during the second quarter of $336,000, or $0.02 per diluted share, a $1.58 million improvement over net loss “as adjusted” of $1.24 million, or ($0.07) per diluted share, in the second quarter of 2009.

Randy N. McCullough, Chief Executive Officer of Charles & Colvard, commented, “We have been hard at work during the first half of 2010 to increase sales, reduce expenses, and improve profitability. The financial and operational accomplishments during the second quarter are very gratifying to the team at Charles & Colvard, particularly when we can report a 152% increase in net sales over the second quarter of 2009 and our second consecutive profitable quarter.” Mr. McCullough continued, “We added several new customers during the quarter, including one in Russia, which is a new market for our company. We also continue to partner closely with our customers to formulate strategies designed to increase consumer awareness of moissanite. Toward that end, during the quarter Charles & Colvard and its business partners around the globe increased the production of finished jewelry featuring moissanite. We are very excited about the progress we have made to date and look forward to continuing to execute on our strategy.”

Contributing to net income was a reduction in operating expenses during the quarter of $247,000, or 13%, when compared with the same period in 2009, due primarily to ongoing cost control initiatives that commenced in the latter part of 2009.

Prior year results are shown “as adjusted” due to a change in the Company’s method of accounting for inventories from the first-in, first-out (“FIFO”) method to the average cost method that was adopted January 1, 2010. As a result, cost of goods sold increased in the second quarter of 2009 by $48,000 and net income decreased by the same amount. In addition, inventory decreased $2.08 million as of June 30, 2009 due to the cumulative change in accounting principle.

Financial Position

The Company had $8.12 million in cash and liquid long-term investments at the end of the second quarter and generated approximately $141,000 of cash from operations during the quarter. Net income of $336,000, a net decrease in inventory of $348,000, an increase in accounts payable of $156,000, and an increase in accrued cooperative advertising of $173,000 were the primary drivers for positive cash flow in the quarter, which more than offset an increase in trade accounts receivable of $945,000.

Total inventory, including long-term and consignment inventory, was $38.14 million at the end of the quarter, down from $39.13 million at the end of fiscal year 2009 primarily as a result of sales, offset in part by purchases of silicon carbide and jewelry castings, findings, and other jewelry components. Trade accounts receivable were $2.59 million at the end of the quarter, up from $1.04 million at the end of fiscal year 2009 primarily as a result of increased sales during the quarter.

Second Quarter 2010 Financial Results Webcast

Charles & Colvard will host a webcast to present second quarter 2010 results on Wednesday, July 28, 2010 at 4:30 p.m. EDT. The webcast can be accessed live and will be available for replay at www.charlesandcolvard.com.

About Charles & Colvard, Ltd.

Charles & Colvard, Ltd. (NASDAQ: CTHR), based in the Research Triangle Park area of North Carolina, is the global sole source of moissanite, a unique, near-colorless lab-created gemstone that is distinct from other gemstones and jewels based on its exceptional fire, brilliance, luster, durability, and rarity. Charles & Colvard Created Moissanite is currently used in fine jewelry sold primarily through domestic and international retailers. For more information, please access www.moissanite.com or www.charlesandcolvard.com.

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