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Charles and Colvard 3Q sales drop 37 percent

November 11, 2008

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Morrisville, N.C.—Net sales for moissanite manufacturer and distributor Charles and Colvard Ltd. dropped 37 percent to $4.2 million for the third quarter ended Sept. 30, compared with $6.6 million for the same period last year, the company announced on Tuesday.

According to the company, the decline in net sales was caused by a "very cautious retail environment" this year, which has contributed to slower sell-through rates and reduced inventory commitments from the major retailers that sell moissanite jewelry.

Domestic sales for the third quarter declined 45 percent to $2.9 million, and international sales for the period increased 1 percent to $1.3 million.

Total shipments of 22,900 carats for the third quarter were 44 percent less than the 40,800 carats shipped for the same period last year.

Shipments of carats in the United States decreased 56 percent to 14,900, or 65 percent of total shipments. International shipments of carats increased 16 percent to 8,000. Some portion of the jewels sold through the company's international sales will be re-imported to North American retailers.

The average selling price per carat increased 5 percent in the third quarter, compared with the third quarter of 2007.

Charles and Colvard President and Chief Executive Officer Dennis M. Reed noted in a media release that the company made significant progress in the third quarter, which included negotiating with its two leading suppliers to defer raw material purchases in the fourth quarter while keeping in place its long-term supply agreements. In turn, the agreements will reduce the company's cash requirements in the fourth quarter and allow it to reduce its inventory.

In addition, the company also completed the closure of its Hong Kong and China operations and transferred the customer relationships to its U.S. operations. Charles and Colvard does not expect a disruption of sales in its Asian markets as a result of this move, the company said.

"We believe the bold, decisive changes we have made, which include a realignment of our management team, has established a sound foundation from which we can redefine our approach to the market and pursue growth in our sales," Reed said in the release.

In August 2008, Charles and Colvard received a letter from the Nasdaq Stock Market Inc. indicating that it did not meet the minimum $1 closing bid price requirement and is subject to potential de-listing. In October 2008, Nasdaq suspended enforcement of the rule requiring a minimum $1 closing bid price. As a result of the suspension, the company now has until May 21, 2009, to regain compliance with the minimum closing bid price requirement.

Based in Research Triangle Park, N.C., Charles and Colvard is the global sole source of lab-created moissanite, a unique near-colorless jewel. Charles and Colvard-created moissanite is currently used in fine jewelry sold primarily through domestic and international retailers.

For more information, visit Moissanite.com or CharlesandColvard.com.
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