<PAGE>
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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, 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 September 30, 1996, 6,258,566 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
August 31,
(Unaudited)
------------------------
1996 1995
---- ----
<S> <C> <C>
Net Sales $69,400 $61,697
Cost of Sales 63,868 57,019
------- ------
5,532 4,678
------- ------
Selling, General & Administrative Expenses 2,992 2,776
Interest Expense - net 945 1,016
------- ------
3,937 3,792
------- ------
Income before taxes and minority interest 1,595 886
Income tax provision (Note 2) 93 57
------- ------
Income before minority interest 1,502 829
Minority interest in income/(loss)
of consolidated subsidiary (157) 43
------- ------
Net Income $ 1,659 $ 786
======= =======
Net Income per share
Income per share $ 0.26 $ 0.13
======= =======
Average number of shares outstanding
during the period 6,484,029 6,236,021
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
2
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<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
August 31, 1996 May 31, 1996
(unaudited)
---------------------------------
(in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 827 $ 905
Accounts receivable - net 28,570 25,493
Inventories - rough diamonds 11,287 9,320
- polished diamonds 50,596 46,979
Prepaid expenses and other
current assets 11,157 10,142
-------- --------
TOTAL CURRENT ASSETS 102,437 92,839
PROPERTY, PLANT & EQUIPMENT - net 7,173 7,198
OTHER ASSETS 4,790 5,029
-------- --------
$114,400 $105,066
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable & other
current liabilities $ 17,017 $ 15,770
Notes payable - other 3,000 3,000
Notes payable - banks 6,460 --
-------- --------
TOTAL CURRENT LIABILITIES 26,477 18,770
SENIOR NOTES AND OTHER LONG-TERM DEBT 34,230 34,155
-------- --------
TOTAL LIABILITIES 60,707 52,925
-------- --------
MINORITY INTEREST 7,114 7,271
-------- --------
STOCKHOLDERS' EQUITY
Common stock, par value $1 per share
Authorized 10,000,000 shares;
issued and outstanding, 6,185,531
shares and 6,176,425 shares 6,186 6,176
Additional paid-in capital 26,138 26,098
Retained earnings 14,255 12,596
-------- --------
TOTAL STOCKHOLDERS' EQUITY 46,579 44,870
-------- --------
$114,400 $105,066
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
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<PAGE>
Consolidated Summary of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
August 31,
(unaudited)
----------------------
1996 1995
---- ----
(in thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 1,659 $ 786
Adjustments to reconcile net income
to net cash provided by/(used in)
operating activities:
Depreciation and amortization $ 619 573
Provision for uncollectible accounts 15 15
Minority interest in income/(loss) of
consolidated subsidiary (157) 43
Loss on disposition of fixed assets 22 --
(Increase)/decrease in assets and increase/
(decrease) in liabilities:
Accounts receivable (3,092) (3,969)
Inventories (5,584) (1,293)
Other current assets (1,015) (976)
Non-current assets (42) (15)
Accounts payable and other current
liabilities 1,247 5,271
------- -------
Net cash provided by/(used in)
operating activities (6,328) 435
------- -------
Cash Flows From Investing Activities:
Proceeds from sale of fixed assets 11 --
Capital expenditures (346) (312)
------- -------
Net cash used in investing activities (335) (312)
------- -------
Cash Flows From Financing Activities:
Increase/(decrease) in short-term
borrowings 6,460 (1,625)
Increase in long-term debt 75 --
Proceeds from exercise of stock options 50 --
------- -------
Net Cash provided by/(used in)
financing activities 6,585 (1,625)
------- -------
Net (decrease) in cash (78) (1,502)
Cash at beginning of year 905 2,532
------- -------
Cash at end of period $ 827 $ 1,030
======= =======
</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 three months ended August 31,
1996 and 1995 and the financial position as of August 31, 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 conduct 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 $8,600,000 less a
valuation allowance of approximately $8,600,000 resulting in no net deferred
tax asset.
For the three months ended August 31, 1996, the Company has utilized
approximately $2,100,000 of net operating loss carryforwards to offset Federal,
state and local income taxes.
5
<PAGE>
<PAGE>
Taxes (continued)
At August 31, 1996, the Company has available U.S. net operating losses of $17.4
million which expire as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1998 $ 2,000,000
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
-----------
$17,400,000
============
</TABLE>
6
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in Item 1 - "Description of
Business" and elsewhere in the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1996.
Results of Operations
Net Sales
Net sales during the three month period ended August 31, 1996 of $69.4 million
were $7.7 million or 12% above the $61.7 million in sales during the comparable
period last year.
Revenue from the sale of polished diamonds decreased 9% to $18.2 million from
$20.0 million during the comparable three month period. This decrease is
attributable to lower sales in Japan as the Company continued to examine
opportunities for augmenting its channels of distribution with its existing
distributor and a decrease in sales from its Russian production caused by a
temporary delay in shipments of polished diamonds from Russia. The delayed
shipments have since been exported and received.
Rough sales increased to $51.2 million for the three months ended August 31,
1996 from $41.7 million a year ago. The increase from the prior year is a result
of the Company's continued success in its rough buying operations in Africa.
Gross Profit
During the quarter, gross margin on net polished sales was 18%, almost 3
percentage points higher than the 15% gross margin in the comparable quarter
last year. The increase from last year resulted from sales of larger stones
(which historically have higher margins) and selling price increases to offset
the increased cost of rough diamonds. During the quarter, overall (both polished
and rough diamond) gross margin on net sales was 8.0% compared to 7.6% for the
same period last year.
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 first quarter ended August
31, 1996 were $2,992,000, compared to $2,776,000 for this quarter last year. The
increase was primarily attributable to higher consulting and legal expenses
associated with the development of expansion opportunities.
Interest Expense
Net interest expense for the three month period ended August 31, 1996 was
$945,000 compared to $1,016,000 last year. The decrease was due primarily to the
decrease in the interest rate charged on the Company's Senior Notes in the
current year.
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 dilutive
stock options, during each period.
Liquidity and Capital Resources
The Company's working capital at August 31, 1996 was $76.0 million, which was
$1.9 million greater than its working capital at May 31, 1996. The increase is
due to higher inventories and accounts receivable partially offset by an
increase in short-term borrowings in the current year.
The Company believes that it has the ability to meet its current and anticipated
financing needs for the next twelve months.
Stockholders' equity was $46.5 million at August 31, 1996 as compared to $44.9
million at May 31, 1996. No dividends were paid to stockholders during the
quarter ended August 31, 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
(principal financial officer)
Dated: October 11, 1996
10
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<PAGE>
<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> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> AUG-31-1996
<CASH> 827
<SECURITIES> 0
<RECEIVABLES> 28,866
<ALLOWANCES> 296
<INVENTORY> 61,883
<CURRENT-ASSETS> 102,437
<PP&E> 15,487
<DEPRECIATION> 8,314
<TOTAL-ASSETS> 114,400
<CURRENT-LIABILITIES> 26,477
<BONDS> 34,230
<COMMON> 6,186
0
0
<OTHER-SE> 40,393
<TOTAL-LIABILITY-AND-EQUITY> 114,400
<SALES> 69,400
<TOTAL-REVENUES> 69,400
<CGS> 63,868
<TOTAL-COSTS> 63,868
<OTHER-EXPENSES> 2,992
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 945
<INCOME-PRETAX> 1,595
<INCOME-TAX> 93
<INCOME-CONTINUING> 1,659
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,659
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
