- Net Sales from Continuing Operations
Increased 14% in 2016 -
- Enhanced Branded Web Presence Features Unique
and Sophisticated Moissanite Jewelry -
- Conference Call to Be Held Today at 4:30 PM
EST -
Charles & Colvard, Ltd. (NASDAQ: CTHR), the original and
leading worldwide source of created moissanite, reports financial
results for the fourth quarter and full year ended December 31,
2016. Continuing operations for the quarter and prior periods do
not include the results of Charles & Colvard Direct, LLC (dba
Lulu Avenue®), which are now being reported as a discontinued
operation following the sale of certain assets on March 4, 2016 to
Yanbal USA, Inc.
Suzanne Miglucci, President and CEO of Charles & Colvard,
said, “We remain focused on our vision to create the world’s most
brilliant gem, leading the way for environmentally and socially
responsible choices in the jewelry industry at a revolutionary
value. We made substantial progress during the year by executing a
corporate re-branding initiative designed to position our brand as
a premier, consumer-facing provider of fine jewelry. We shifted to
an up-market offering led by our innovative and popular Forever
One™ moissanite collection and expanded our jewelry line featuring
a curated bridal collection. We enhanced our omni-channel
distribution network, expanding partnerships with leading online
marketplaces, retailers and a pilot roll out in more than 50 stores
of a well-respected national fine jewelry retailer.”
“2016 was a pivotal year for Charles & Colvard from both a
marketing and financial perspective. We are gradually improving our
financial performance and balance sheet position as our strategic
actions take effect. For the full year of 2016, net sales increased
14%, gross margin percentages expanded by approximately 400 basis
points and net loss declined by 53% compared to the full year of
2015. On a quarterly basis, comparisons were impacted first, by the
transition to the redesigned e-commerce website in the fourth
quarter of 2016 with a strategy that requires attracting a new
customer base, and second, by the reduction of online clearance
sales in fourth quarter 2016 versus 2015 due to the rebranding of
Charles & Colvard on the new website. As we move forward with
our transformation into 2017, we are committed to continuing
product innovation, investing in key retail and wholesale
partnerships and leveraging traditional and non-traditional sales
channels,” Ms. Miglucci concluded.
Recent Corporate Highlights:
- Expanded the Forever One™ moissanite
collection through continuous research and development to include
four sought-after shapes: emerald, hearts and arrows, pear and
radiant;
- Continued product line expansion and
increased customer options with the introduction of Forever One™ in
a second quality grade (G-H-I);
- Extended the robust lifetime guarantee
of Charles & Colvard Created Moissanite® gemstones to include
protection against usage damage;
- Launched an updated brand platform in
the fourth quarter of 2016 through the redesigned Charles &
Colvard website;
- Continued deployment of digital
marketing, social media and public relations campaigns to increase
market awareness of Charles & Colvard brands, products and
marketplaces; and
- Enhanced the management team with the
addition of Jose Ayala, Senior Director of Merchandising, who
brings extensive brand management expertise having worked in
premier organizations including Colombian Emeralds, Tiffany &
Co, Saks Fifth Avenue and HSN/Cornerstone Brands.
Financial Summary for the Fourth Quarter 2016:
- Net sales from continuing operations
were $6.0 million for the quarter, compared with $7.4 million in
the year-ago fourth quarter, a decrease of 18%.
- Loose jewel net sales from continuing
operations were $3.3 million for the quarter, compared with $4.7
million for the year-ago fourth quarter, a decrease of 30%.
- Finished jewelry net sales from
continuing operations were $2.8 million for the quarter, compared
with $2.7 million in the year-ago fourth quarter, a 2%
increase.
- The Company’s wholesale business net
sales decreased 11% to $4.9 million, or 81% of net sales for the
quarter compared with $5.5 million, or 75% of net sales in the
year-ago fourth quarter.
- The Company’s direct-to-consumer
e-commerce business, charlesandcolvard.com (formerly
Moissanite.com), net sales decreased 40% to $1.1 million, or 19% of
net sales for the quarter compared with $1.9 million, or 25% of net
sales in the year-ago fourth quarter.
- Operating expenses from continuing
operations were $3.0 million for the fourth quarter of 2016,
compared with $3.3 million in the year-ago fourth quarter.
- Net loss from continuing operations for
the fourth quarter of 2016 was $1.1 million, or $0.05 per share,
compared with a net loss of $1.0 million, or $0.05 per share, in
the year-ago fourth quarter.
- Net loss for the fourth quarter of 2016
was $1.1 million, or $0.05 per share, compared with a net loss of
$1.9 million, or $0.09 per share, in the year-ago fourth
quarter.
Financial Summary for Full Year 2016:
- Net sales from continuing operations
for the year ended December 31, 2016 were $29.2 million compared
with $25.7 million in the year-ago period, an increase of 14%.
- Loose jewel net sales from continuing
operations were $21.5 million in 2016 compared with $15.1 million
for the year-ago period, an increase of 42%.
- Finished jewelry net sales from
continuing operations were $7.7 million in 2016 compared with $10.6
million in the year-ago period, a 27% decrease.
- The Company’s wholesale business net
sales increased 21% to $24.5 million, or 84% of net sales in 2016,
compared with $20.3 million, or 79% of net sales in the year-ago
period.
- The Company’s direct-to-consumer
e-commerce business, charlesandcolvard.com, net sales decreased by
15% to $4.6 million, or 16% of net sales in 2016, compared with
$5.4 million, or 21% of net sales in the year-ago period.
- Operating expenses from continuing
operations were $12.7 million in 2016, compared with $11.8 million
in the year-ago period.
- Net loss from continuing operations in
2016 was $4.0 million, or $0.19 per share, compared with a net loss
of $5.1 million, or $0.25 per share, in the year-ago period.
- Net loss in 2016 was $4.5 million, or
$0.22 per share, compared with a net loss of $9.6 million, or $0.47
per share, in the year-ago period.
Financial Position
Cash and cash equivalents totaled $7.4 million at December 31,
2016, an increase of approximately $2.2 million from $5.3 million
at December 31, 2015. The Company had no debt outstanding as of
December 31, 2016. Total inventory was $28.1 million at December
31, 2016 compared with $32.3 million at December 31, 2015.
Investor Conference Call
Shareholders and other interested parties may participate in the
upcoming investor conference call by dialing 844-875-6912 (U.S.
toll-free) or 412-317-6708 (international) and asking to be
connected to the “Charles & Colvard, Ltd. Conference Call” a
few minutes before 4:30 p.m. EST on Thursday, March 9, 2017. A
replay of this conference call will be available until March 16,
2017 at 877-344-7529 (U.S. toll-free) or 412-317-0088
(international). The replay conference ID is 10101900. The call
will also be available live and for replay in the Investor
Relations section of the Company’s website at
http://ir.charlesandcolvard.com/events.
About Charles & Colvard, Ltd.
Charles & Colvard, Ltd., based in the Research Triangle Park
area of North Carolina, is the original creator and leading source
of Forever Classic™, Forever Brilliant® and Forever One™ moissanite
gemstones for fine jewelry. Moissanite is unique, available in
three color grades (colorless, near-colorless and faint color) and
produced from silicon carbide (SiC) crystals. Charles & Colvard
Created Moissanite® is sold with a Certificate of Authenticity and
Limited Lifetime Warranty to wholesale distributors, manufacturers,
retailers, TV shopping networks and designers as loose stones or
set in a wide variety of quality metal setting options. Charles
& Colvard, Ltd. also sells direct to consumers through its
wholly owned operating subsidiary, charlesandcolvard.com, LLC, and
through third-party marketplaces. Charles & Colvard, Ltd.’s
common stock is listed on the NASDAQ Global Select Market under the
symbol “CTHR.” For more information, please visit
www.charlesandcolvard.com.
Forward-Looking Statement
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Statements expressing expectations regarding our
future and projections relating to our products, sales, revenues,
and earnings are typical of such statements and are made under the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to,
statements about our plans, objectives, representations, and
contentions and are not historical facts and typically are
identified by use of terms such as “may,” “will,” “should,”
“could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,”
“predict,” “continue,” and similar words, although some
forward-looking statements are expressed differently.
All forward-looking statements are subject to the risks and
uncertainties inherent in predicting the future. You should be
aware that although the forward-looking statements included herein
represent management’s current judgment and expectations, our
actual results may differ materially from those projected, stated,
or implied in these forward-looking statements as a result of many
factors including, but not limited to, our dependence on consumer
awareness, acceptance, and growth of sales of our products
resulting from our strategic initiatives; dependence on a limited
number of customers; the impact of the execution of our business
plans on our liquidity; our ability to fulfill orders on a timely
basis; the financial condition of our major customers and their
willingness and ability to market our products; dependence on our
exclusive supply agreement with Cree, Inc. for the sole supply of
the raw material; intense competition in the worldwide jewelry
industry; our ability to successfully manage the transition of our
Chief Financial Officer and other organizational change; our
ability to maintain compliance with the continued listing
requirements of The Nasdaq Stock Market LLC; our current wholesale
customers’ potential perception of us as a competitor in the
finished jewelry business; quality control challenges from time to
time that can result in lost revenue and harm to our brands and
reputation; general economic and market conditions, including the
current economic environment; risks of conducting business in
foreign countries; the impact of natural disasters on our
operations; the pricing of precious metals, which is beyond our
control; the potential impact of seasonality on our business; our
ability to protect our intellectual property; the risk of a failure
of our information technology infrastructure to protect
confidential information and prevent security breaches; the impact
of significant changes in e-commerce opportunities, technology, or
models; the failure to evaluate and integrate strategic
opportunities; possible adverse effects of governmental regulation
and oversight; and the impact of anti-takeover provisions included
in our charter documents, in addition to the other risks and
uncertainties described in our filings with the Securities and
Exchange Commission, or the SEC, including our Annual Report on
Form 10-K for the fiscal year ended December 31, 2015 and
subsequent reports filed with the SEC. Forward-looking statements
speak only as of the date they are made. We undertake no obligation
to update or revise such statements to reflect new circumstances or
unanticipated events as they occur except as required by the
federal securities laws, and you are urged to review and consider
disclosures that we make in the reports that we file with the SEC
that discuss other factors relevant to our business.
-Financial Tables Follow-
CHARLES & COLVARD, LTD.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2016 2015 2016 2015 Net
sales $ 6,034,880 $ 7,393,819 $ 29,168,128 $
25,693,292 Costs and expenses: Cost of goods sold 4,122,450
5,073,263 20,401,439 18,943,507 Sales and marketing 1,815,520
1,451,808 7,038,277 5,764,389 General and administrative 1,164,234
1,812,572 5,544,452 6,031,829 Research and development - 2,.340
2,848 17,795
Loss on abandonment of property and
equipment
1,909 - 117,930 - Total
costs and expenses 7,104,113 8,339,983
33,104,946 30,757,520 Loss from operations (1,069,233
) (946,164 ) (3,936,818 ) (5,064,228 ) Other income (expense):
Interest income - - - 11 Interest expense (189 ) (9,558 ) (1,737 )
(10,359 ) Gain on sale of long-term assets - -
- 125 Total other expense, net (189 )
(9,558 ) (1,737 ) (10,223 ) Loss
before income taxes from continuing operations (1,069,422 )
(955,722 ) (3,938,555 ) (5,074,451 ) Income tax net expense from
continuing operations (3,412 ) (3,242 )
(13,480 ) (12,821 ) Net loss from continuing
operations (1,072,834 ) (958,964 ) (3,952,035 ) (5,087,272 )
Discontinued operations: Loss from discontinued operations (97 )
(921,027 ) (586,124 ) (4,485,787 ) (Loss) gain on sale of assets
from discontinued operations - - 12,398 -
Net loss from
discontinued operations (97 ) (921,027 )
(573,726 ) (4,485,787 ) Net loss $ (1,072,931
) $ (1,879,991 ) $ (4,525,761 ) $ (9,573,059 )
Net loss per common share: Basic – continuing operations $ (0.05 )
$ (0.05 ) $ (0.19 ) $ (0.25 ) Basic – discontinued operations
(0.00 ) (0.04 ) (0.03 )
(0.22 ) Basic – total $ (0.05 ) $ (0.09 ) $ (0.22 ) $ (0.47 )
Diluted – continuing operations $ (0.05 ) $ (0.05 ) $ (0.19
) $ (0.25 ) Diluted – discontinued operations (0.00 )
(0.04 ) (0.03 ) (0.22 ) Diluted – total
$ (0.05 ) $ (0.09 ) $ (0.22 ) $ (0.47 ) Weighted average
number of shares used in computing net loss per common share: Basic
21,008,429 20,618,225 20,926,120 20,407,764 Diluted 21,008,429
20,618,225 20,926,120 20,407,764
CHARLES & COLVARD, LTD.
CONSOLIDATED BALANCE SHEETS
(unaudited)
December 31,
2016
2015
ASSETS Current assets: Cash and cash
equivalents $ 7,427,273 $ 5,274,305 Accounts receivable, net
2,794,626 3,852,651 Inventory, net 9,770,206 10,739,798 Prepaid
expenses and other assets 682,083 701,105 Assets related to
discontinued operations - 83,000 Total current assets
20,674,188 20,650,859 Long-term assets: Inventory, net 18,360,211
21,588,622 Property and equipment, net 1,391,116 1,615,683
Intangible assets, net 8,808 71,086 Other assets 71,453
214,588 Total long-term assets 19,831,588
23,489,979 TOTAL ASSETS $ 40,505,776 $ 44,140,838
LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities:
Accounts payable $ 3,977,149 $ 3,323,148 Accrued cooperative
advertising 50,000 58,000 Accrued expenses and other liabilities
581,107 891,187 Liabilities related to discontinued operations
- 349,000 Total current liabilities 4,608,256
4,621,335 Long-term liabilities: Accrued expenses and other
liabilities 594,916 710,223 Accrued income taxes 433,983
420,503 Total long-term liabilities 1,028,899
1,130,726 Total liabilities 5,637,155 5,752,061
Commitments and contingencies Shareholders’ equity: Common stock,
no par value; 50,000,000 shares authorized; 21,369,885 and
21,111,585 shares issued and outstanding at December 31, 2016 and
2015, respectively 54,243,816 54,240,247 Additional paid-in capital
14,282,956 13,280,920 Accumulated deficit (33,658,151 )
(29,132,390 ) Total shareholders’ equity 34,868,621
38,388,777 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $
40,505,776 $ 44,140,838
CHARLES & COLVARD, LTD.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited)
Year Ended December 31, 2016
2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $
(4,525,761 ) $ (9,573,059 ) Net loss from discontinued operations
(573,726 ) (4,485,787 ) Net loss from continuing operations $
(3,952,035 ) $ (5,087,272 ) Adjustments to reconcile net loss to
net cash provided by operating activities of continuing operations:
Depreciation and amortization 557,393 758,787 Stock-based
compensation 959,134 1,545,144 Provision for uncollectible accounts
(73,300 ) 89,462 Provision for sales returns (316,000 ) (179,000 )
Provision for inventory reserves 200,000 436,000 Loss on
abandonment of property and equipment 117,930 - Gain on sale of
long-term assets - (125 ) Changes in operating assets and
liabilities: Accounts receivable 1,447,325 1,747,140 Inventory
3,998,003 6,174,209 Prepaid expenses and other assets, net 162,157
(103,012 ) Accounts payable 654,001 251,517 Accrued cooperative
advertising (8,000 ) (162,000 ) Accrued income taxes 13,480 12,821
Accrued expenses and other liabilities (425,387 )
338,702 Net cash provided by operating activities of continuing
operations 3,334,701 5,822,373 Net cash used in
operating activities of discontinued operations (1,125,578 )
(4,254,480 ) Net cash provided by operating activities
2,209,123 1,567,893 CASH FLOWS FROM INVESTING
ACTIVITIES: Purchases of property and equipment (421,761 ) (407,452
) Patent, license rights, and trademark costs (5,615 ) (45,742 )
Proceeds from sale of long-term assets 250 175 Net
cash used in investing activities of continuing operations
(427,126 ) (453,019 ) Net cash provided by (used in)
investing activities of discontinued operations 368,671
(20,676 ) Net cash used in investing activities
(58,455 ) (473,695 ) CASH FLOWS FROM FINANCING
ACTIVITIES: Stock option exercises 2,300 172,766 Net
cash provided by financing activities of continuing operations
2,300 172,766 NET INCREASE IN CASH AND CASH
EQUIVALENTS 2,152,968 1,266,964 CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 5,274,305 4,007,341 CASH AND CASH
EQUIVALENTS, END OF PERIOD $ 7,427,273 $ 5,274,305
Supplemental disclosure of cash flow information: Cash paid during
the period for interest $ 1,737 $ 10,359
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170309006200/en/
Charles & Colvard, Ltd.Clint J. Pete, 919-468-0399Interim
Chief Financial Officercpete@charlesandcolvard.comorInvestor
Relations:Taglich Brothers, Inc.Christopher Schreiber,
212-661-6886
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