<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED AUGUST 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ________________ TO _______________
Commission File No. 1-7848
LAZARE KAPLAN INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2728690
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
529 Fifth Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
(212) 972-9700
(Registrant's telephone number, including area code)
___________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------- -------
As of September 30, 1994, 6,131,890 shares of the
registrant's common stock were outstanding.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Operations
(in thousands except share and per share data)
Three Months Ended
August 31,
(Unaudited)
-------------------
1994 1993
---- ----
<S> <C> <C>
Net Sales $38,586 $52,046
Cost of Sales 34,745 48,367
------- -------
3,841 3,679
------- -------
Selling, General & Administrative Expenses 2,298 2,440
Interest Expense - net 963 975
------- -------
3,261 3,415
------- -------
Income before taxes and minority interest 580 264
Income tax provision (Note 2) 105 32
------- -------
Income before minority interest 475 232
Minority interest in loss of
consolidated subsidiary (50) (49)
------- -------
Net Income $ 525 $ 281
======= =======
Net Income per share
Income per share $ 0.08 $ 0.05
======= =======
Average number of shares
outstanding during the period 6,324,185 6,182,710
========= =========
See Notes to Consolidated Financial Statements.
</TABLE>
2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
August 31, 1994 May 31, 1994
(unaudited)
--------------------------------
(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 8,470 $ 914
Notes & accounts receivable - net 28,555 23,200
Inventories - rough diamonds 14,748 14,467
- polished diamonds 42,847 39,019
Other current assets 3,687 3,255
-------- --------
TOTAL CURRENT ASSETS 98,307 80,855
PROPERTY, PLANT & EQUIPMENT - Net 6,271 6,253
NON-CURRENT ASSETS 5,868 6,070
-------- --------
$110,446 $ 93,178
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - banks $ 13,660 $ 9,900
Notes payable - other 3,000 3,000
Current portion of long term debt 4,285 4,285
Accounts payable & other
current liabilities 16,487 11,337
-------- --------
TOTAL CURRENT LIABILITIES 37,432 28,522
SENIOR NOTES 25,715 25,715
-------- --------
TOTAL LIABILITIES 63,147 54,237
-------- --------
MINORITY INTEREST 8,023 190
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $1 per share
Authorized 10,000,000 shares;
issued and outstanding, 6,131,606
shares and 6,131,106 shares,
respectively 6,132 6,131
Additional paid-in capital 25,886 25,884
Retained earnings 7,258 6,736
-------- --------
TOTAL STOCKHOLDERS' EQUITY 39,276 38,751
-------- --------
$110,446 $ 93,178
======== ========
See Notes to Consolidated Financial Statements.
</TABLE>
3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Summary of Cash Flows
Three Months Ended
August 31,
(unaudited)
----------------------
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 525 $ 281
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 450 343
Provision for uncollectible accounts 12 (10)
Minority interest in loss of
consolidated subsidiary (50) (49)
(Increase)/decrease in assets and increase/
(decrease) in liabilities:
Notes and accounts receivable (5,367) (3,178)
Inventories (4,109) (6,322)
Other current assets (432) 428
Non-current assets - (6)
Accounts payable and other current
liabilities 5,150 2,627
------ ------
Net cash used in operating activities (3,821) (5,886)
------ ------
Cash Flows From Investing Activities:
Capital expenditures (269) (185)
------ ------
Net cash used in investing activities (269) (185)
------ ------
Cash Flows From Financing Activities:
Increase in minority interest 7,883 -
Increase in short-term borrowings 3,760 6,850
Proceeds from exercise of stock options 3 -
------ -----
Net cash provided by financing activities 11,646 6,850
------ -----
Net increase (decrease) in cash 7,556 779
Cash at beginning of year 914 553
------ ------
Cash at end of period $8,470 $1,332
====== ======
Supplemental Schedule of Non-Cash
Investing Activities:
Capitalized Lease $ - $ 28
====== ======
See Notes to Consolidated Financial Statement.
</TABLE>
4
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Interim Financial Reporting
This financial information has been prepared in conformity with
the accounting principles and practices reflected in the
financial statements included in the annual report filed with the
Commission for the preceding fiscal year. In the opinion of
management, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to present fairly
Lazare Kaplan International Inc.'s operating results for the
three months ended August 31, 1994 and 1993 and the financial
position as of August 31, 1994.
The operating results for the interim periods presented are not
necessarily indicative of the operating results for a full year.
2. Taxes
The Company's subsidiaries do business in foreign countries. The
subsidiaries are not subject to federal income taxes and their
provisions have been determined based upon the effective tax
rates, if any, in the foreign countries.
Deferred income taxes reflect the net tax effects of (a)
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes, and (b) operating loss carryforwards.
The Company's net deferred tax asset is comprised primarily of
operating loss carryforwards which have a tax effect of
approximately $12,600,000 less a valuation allowance of
approximately $12,600,000 resulting in no net deferred tax asset.
For the three months ended August 31, 1994, the Company has
utilized $600,000 of net operating loss carryforwards to offfset
Federal, state and local income taxes. The provision for income
taxes of $105,000 relates to current foreign tax expense.
5
<PAGE>
<PAGE>
Taxes (continued)
At August 31, 1994, the Company has available U.S. net operating
losses of $25.8 million which expire as follows:
Year Amount
---- ------
1998 $10,800,000
1999 4,200,000
2000 4,300,000
2001 3,500,000
2002 500,000
2007 1,000,000
2008 1,500,000
-----------
$25,800,000
===========
3. Minority Interest
On August 31, 1994, the Company completed its transaction with
the Botswana Development Corporation ("BDC") whereby the BDC
invested approximately $8.0 million for an equity position in
Lazare Kaplan Botswana (Pty.) Ltd. Following this transaction,
the Company owns 60% of Lazare Kaplan Botswana (Pty.) Ltd., the
BDC owns 34.9% and the Government of Botswana owns 5.1%.
6
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- - -----------------------------------------------------------
Results of Operations
Net Sales
Net sales during the three month period ended August 31, 1994 of
$38.6 million were $13.4 million or 26% below the $52.0 million
in sales during the comparable period last year.
Revenue from the sale of polished diamonds increased 67% to $15.9
million from $9.6 million during the comparable three month
period. During the first quarter, the Company experienced
increased polished sales due to an increase in consumer spending
as a result of improved economic conditions in all geographic
regions, including Japan, important to the distribution of Lazare
Diamonds.
Rough sales decreased to $22.6 million for the three months ended
August 31, 1994 from $42.5 million a year ago. This was a result
of industry-wide market conditions and reduced supplies of rough
diamonds from one of the Company's primary suppliers. While the
rough trading operation fell short of initial expectations, the
cutting factories in Puerto Rico and Botswana continued to
operate at their full capacity. The temporary rough shortfall is
not expected to impact the sales of polished diamonds.
Gross Profit
During the quarter, gross margin on net polished sales was 20.1%,
modestly higher than the 18.8% gross margin in the fourth quarter
but lower than the 28.7% during the first quarter last year. The
decrease from last year resulted from lower margined polished
goods sold during the period and continued pressure on margins.
During the quarter, overall (both polished and rough diamond)
gross margin on net sales was 10.0% compared to 7.1% for the same
period last year. The overall gross margin increase was due to a
greater percentage of higher margined polished sales to overall
sales as compared with last year.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the first
quarter ended August 31, 1994 were $2.3 million, 6% less than the
$2.4 million level for this quarter last year.
Interest Expense
Net interest expense for the three month period ended August 31,
1994 was $963,000 compared to $975,000 last year.
7
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
- - -----------------------------------------------------------
Income Per Share
Income per share is computed based on the weighted average number
of shares outstanding including, as appropriate, the assumed
exercise of all outstanding stock options, during each period.
Liquidity and Capital Resources
The Company's working capital at August 31, 1994 was $60.9
million, which was $8.5 million greater than its working capital
at May 31, 1994. The increase was due primarily to the cash
investment made by the Botswana Development Corporation in Lazare
Kaplan Botswana (Pty) Ltd., which occurred on August 31, 1994.
Stockholders' equity was $39.3 million at August 31, 1994 as
compared to $38.8 million at May 31, 1994. No dividends were
paid to stockholders during the quarter ended August 31, 1994.
Other
The Company has received a letter from the Federal Trade
Commission's Bureau of Competition requesting that the Company
voluntarily supply certain documents and information in
connection with a non-public industry-wide investigation which,
according to the letter, the Bureau is conducting to determine
whether diamond suppliers may be engaging in or may have engaged
in unfair methods of competition or unfair acts and practices by
restricting the sale of gemstone quality diamonds in the U.S.
market. The Bureau's letter also states that neither the letter
nor the existence of the investigation should be construed as
indicating that a violation has occurred or is occurring. The
Company is cooperating in this industry-wide investigation and is
in the process of supplying responsive documents and information.
8
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
LAZARE KAPLAN INTERNATIONAL INC.
By (s) Sheldon L. Ginsberg
______________________________
Sheldon L. Ginsberg
Vice President and
Chief Financial Officer
Dated: October 13, 1994
9
