<PAGE>
<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 FEBRUARY 29, 1996
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 March 31, 1996, 6,155,496 shares of the registrant's common stock were
outstanding.
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PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Operations
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
(unaudited) (unaudited)
----------- -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $68,072 $49,449 $202,063 $137,981
Cost of Sales 61,340 47,915 184,897 128,671
------- ------- -------- --------
6,732 1,534 17,166 9,310
------- ------- -------- --------
Selling, General &
Administrative 2,914 2,627 8,700 7,299
Interest Expense - net 967 795 3,016 2,598
------- ------- -------- --------
3,881 3,422 11,716 9,897
------- ------- -------- --------
Income (loss) before taxes,
and minority interest 2,851 (1,888) 5,450 (587)
Income tax provision
(Note 2) 152 70 424 207
------- ------- -------- --------
Income (loss) before
minority interest 2,699 (1,958) 5,026 (794)
Minority interest in
loss of consolidated
subsidiary (228) (280) (215) (400)
------- ------- -------- --------
Net Income (Loss) $ 2,927 $(1,678) $ 5,241 $ (394)
======= ======= ======== ========
Net Income (Loss) per share:
Income (loss) per share $ 0.47 $ (0.27) $ 0.84 $ (0.06)
======= ======= ======== ========
Average number of shares
outstanding during the
period 6,270,656 6,326,909 6,242,512 6,322,789
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
2
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<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
February 29, 1996 May 31, 1995
(Unaudited)
----------------------------------
(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 607 $ 2,532
Notes & accounts receivable - net 26,344 22,302
Inventories - rough diamonds 12,772 11,928
- polished diamonds 45,810 43,806
Other current assets 9,360 6,166
-------- --------
TOTAL CURRENT ASSETS 94,893 86,734
PROPERTY, PLANT & EQUIPMENT - Net 6,818 6,704
NON-CURRENT ASSETS 5,247 5,725
-------- --------
$106,958 $99,163
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - banks $ 7,325 $ 4,125
Notes payable - other 3,000 3,000
Current portion of long term debt 4,285 4,285
Accounts payable & other
current liabilities 15,598 16,034
-------- --------
TOTAL CURRENT LIABILITIES 30,208 27,444
SENIOR NOTES AND OTHER LONG
TERM DEBT 26,430 26,430
-------- --------
TOTAL LIABILITIES 56,638 53,874
-------- --------
MINORITY INTEREST 7,380 7,594
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $1 per share,
Authorized 10,000,000 shares;
issued and outstanding, 6,148,496
and 6,147,808 shares, respectively 6,148 6,148
Additional paid-in capital 25,968 25,964
Retained earnings 10,824 5,583
-------- --------
TOTAL STOCKHOLDERS' EQUITY 42,940 37,695
$106,958 $99,163
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
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<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
Feb. 29, Feb. 28,
(unaudited)
--------------------
1996 1995
(in thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 5,241 $ (394)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,721 1,166
Provision for uncollectible accounts 55 16
Minority interest in loss of
consolidated subsidiary (214) (400)
Gain on sale of assets (45) --
(Increase)/decrease in assets and increase/
(decrease) in liabilities:
Notes and accounts receivable (4,097) (2,545)
Inventories (2,848) (1,846)
Other current assets (3,194) (1,879)
Non-current assets (418) --
Accounts payable and other current
liabilities (436) 6,571
------- -------
Net cash provided by (used in)
operating activities (4,235) 689
------- -------
Cash Flows From Investing Activities:
Proceeds from sale of assets 180 --
Capital expenditures (1,074) (1,454)
------- -------
Net cash used in investing activities (894) (1,454)
------- -------
Cash Flows From Financing Activities:
Increase in minority interest -- 7,883
Increase (decrease) in short-term
borrowings 3,200 (7,490)
Proceeds from exercise of stock options 4 97
------- -------
Net cash provided by financing activities 3,204 490
------- -------
Net decrease in cash (1,925) (275)
Cash at beginning of year 2,532 914
------- -------
Cash at end of period $ 607 $ 639
======= ========
</TABLE>
See Notes to Consolidated Financial Statements
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 nine months ended February 29,
1996 and February 28, 1995 and the financial position as of February 29, 1996.
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, which is comprised
primarily of operating loss carryforwards, is approximately $10,000,000 less a
valuation allowance of approximately $10,000,000 resulting in no net deferred
tax asset.
For the nine months ended February 29, 1996, the Company has utilized $6,500,000
of net operating loss carryforwards to offset Federal, state and local income
taxes.
5
<PAGE>
<PAGE>
Taxes (continued)
At February 29, 1996 the Company has available U.S. net operating losses of
$21.1 million which expire as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $5,700,000
1999 4,200,000
2000 4,300,000
2001 3,500,000
2002 500,000
2007 1,000,000
2008 1,500,000
2010 400,000
-----------
$21,100,000
===========
</TABLE>
6
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net Sales
Net sales during the nine months ended February 29, 1996 of $202.1 million were
$64.1 million, or 46%, above the $138.0 million in sales during the comparable
period last year.
Revenue from the sale of polished diamonds increased 22% to $65.8 million from
$54.1 million during the comparable nine month period. For the three month
period ended February 29, polished diamond sales increased 15% from $17.3
million to $19.9 million. These increases were attributable to higher sales in
the U.S. domestic market, Europe and Japan, including sales of large polished
stones from the Company's Russian production.
Rough sales increased to $136.3 million for the nine months ended February 29,
1996 from $83.9 million a year ago. Rough sales increased 50% to $48.2 million
for the three months ended February 29. The continued growth in this area is a
result of expansion of the Company's rough buying operations in Africa as well
as increases in the supply of rough diamonds from the Company's major supplier
in the current year.
Gross Profit
Gross margin on net polished sales for the nine months and three months ended
February 29, 1996 was 15.9% and 20.0%, respectively. During the same periods
last year, gross margin on net polished sales was 16.3% and 15.3%, respectively,
excluding the effects of a non-recurring charge of approximately $1.8 million
recorded during the third quarter last year. The increase for the three month
period is a result of an improvement in the quality of stones sold as well as an
increase in sales of larger stones as compared to the same period last year. The
overall (both polished and rough diamond) gross margin on net sales for the nine
month and three month periods ended February 29, 1996 was 8.5% and 9.9%,
respectively. This compares to 8.1% and 6.7%, respectively, for the same periods
last year, excluding the effect of the non-recurring charge discussed above.
7
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months ended February
29, 1996 were $8.7 million, compared to $7.3 million for this period last year.
During the three months ended February 29, expenses were $2.9 million as
compared to $2.6 million in the prior year. The increases were primarily
attributable to higher advertising and marketing costs, higher compensation and
benefits and additional rent and office expenses in connection with the opening
of a new sales office in Hong Kong.
Interest expense
Interest expense for the nine month period ended February 29, 1996 was
$3,016,000 compared to $2,598,000 last year and $967,000 in the three months
ended February 29, 1996 compared to $795,000 the prior year. The increases were
primarily a result of the higher interest rate on the Company's Senior Notes in
the current year.
Net Income Per Share
Income per share is computed based on the weighted average number of shares
outstanding, including the assumed exercise of all dilutive stock options,
during each period.
Liquidity and Capital Resources
The Company's working capital at February 29, 1996 was $64.7 million, which was
$5.4 million greater than its working capital at May 31, 1995. The increase was
a result of the net income earned during the period.
Stockholders' equity was $42.9 million at February 29, 1996 as compared to $37.7
million at May 31, 1995. No dividends were paid to stockholders during the nine
months ended February 29, 1996.
8
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
(27) Financial Data Schedule
(B) Reports on Form 8-K
None
9
<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
Executive Vice President and
Chief Financial Officer
Dated: April 10, 1996
10
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the
balance sheet and income statement and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> FEB-29-1996
<CASH> 607
<SECURITIES> 0
<RECEIVABLES> 26,610
<ALLOWANCES> 266
<INVENTORY> 58,582
<CURRENT-ASSETS> 94,893
<PP&E> 15,098
<DEPRECIATION> 8,280
<TOTAL-ASSETS> 106,958
<CURRENT-LIABILITIES> 30,208
<BONDS> 26,430
<COMMON> 6,148
0
0
<OTHER-SE> 36,792
<TOTAL-LIABILITY-AND-EQUITY> 106,958
<SALES> 202,063
<TOTAL-REVENUES> 202,063
<CGS> 184,897
<TOTAL-COSTS> 184,897
<OTHER-EXPENSES> 8,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,016
<INCOME-PRETAX> 5,450
<INCOME-TAX> 424
<INCOME-CONTINUING> 5,241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,241
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
</TABLE>
