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House of Taylor Jewelry Q2 sales nearly double for 2007

14
Aug '07

House of Taylor Jewelry Inc reported that net sales for its second quarter ended June 30, 2007 nearly doubled to $4.8 million from $2.5 million in the prior-year period, reflecting increased sales of the company's Elizabeth and Kathy Ireland Jewelry branded products and loose diamonds sales of $3.5 million.

Gross profit as a percentage of net sales more than doubled to 15.9% from 7.0% a year earlier, as gross profit increased to $764,000 in the current quarter from $174,000 in the 2006 second quarter.

The company said gross profit gains reflected increased penetration of its higher-margin Elizabeth and Kathy Ireland branded jewelry products. Gross profit margin for the comparable period in 2006 was impacted by sales of closeout merchandise and the introduction of branded products at lower margins.

Even with sales nearly doubling, selling, shipping and general and administrative (SG&A) expenses in the 2007 second quarter were slightly lower at $2.2 million, compared with $2.3 million in the corresponding period a year ago.

The increased sales, higher gross profit margin and lower SG&A expenses resulted in reducing the company's operating loss to $1.5 million for the 2007 second quarter from $2.1 million in the prior-year period.

The company incurred interest expense for the 2007 second quarter of $1.2 million, which included $898,000 of non-cash expense related to the amortization of costs associated with convertible notes.

This compares with $782,000 of interest expense last year, which included $573,000 of non-cash expense related to the amortization of costs associated with convertible
notes.

For the 2007 second quarter, House of Taylor Jewelry posted net income of $25,000, equal to $0.00 per diluted share, which included a non-cash gain of $2.6 million due to the change in the fair value of the company's warrant liability.

In the year-ago period, the company incurred a net loss of $290,000, equal to a loss of $0.01 per share, which included a non-cash gain of $2.6 million due to the change in the fair value of the warrant liability.

"The favorable results reflect the company's improved operating performance, as well as continued execution of our business strategies," said Jack Abramov, president and chief executive officer.

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