Charles & Colvard, Ltd., the sole source of moissanite, reported third-quarter net sales of $12.1 million, a 7 percent increase compared to $11.3 million in sales for the third quarter of 2005.

Gross profit margins increased to 68.9 percent in the third quarter, ended Sept. 30, up from the 67.5 percent in the comparable quarter of 2005. This was due primarily because of improved production costs offsetting a 4 percent decrease in average selling price per carat due to a slight reduction in the size of the stone sold during the period, the Morrisville, N.C.-based company said in a statement Tuesday.

Operating income for the third quarter rose 12 percent to $3.5 million, up from the $3.1 million for the same period in 2005. Net income for the third quarter 2006 was $2.2 million, the same as the prior year’s period.

“We are pleased to report record results in terms of revenue and operating income,” said Bob Thomas, president and chief executive officer. “Our year-over-year increase in revenues was primarily the result of increased sales to our manufacturing customers in anticipation of the holiday buying season. We continue to work aggressively to add new points of distribution as well as increase our penetration within existing retail customer doors and believe these efforts will result in continued improvement in our overall performance.”

Charles & Colvard’s domestic sales in the third quarter increased 3 percent to $10.8 million.

International sales for the third quarter rose 59 percent to $1.3 million, with strong results from all key geographic regions. Total shipments of 77,300 carats for the quarter were 15 percent more than the 67,200 carats shipped in the same period of 2005. Shipments of carats in the U.S. increased 12 percent while international shipments of carats rose 57 percent.

In the third quarter, the company’s cash position decreased to $14.4 million from $15.6 million at June 30. This $1.2 million decrease was primarily due to a $4 million increase in accounts receivable and the $1.1 million increase in inventory (including consigned inventory) partially offset by the $3.7 million of pre tax income generated, the company said.

Thomas said he believes the company’s marketing efforts over the past year has created awareness of moissanite jewels domestically and abroad, particularly its new venture into some Finlay locations and into other department stores. He expressed confidence of a strong fourth quarter and holiday season.

“We continue to believe that our unique position in the jewelry marketplace as the sole source of moissanite jewels allows us a tremendous opportunity to increase our market position,” Thomas said. “We remain committed to building value for our shareholders and believe our planned initiatives have better positioned our company for future growth.”

JCK