-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Xv+8CQmyjkmQj8CCC240KihMZsjxbmTLLZ71w4l4TD8+06U+9/R/E9405Dgl0YNJ x+WpTiaf30cuSPdwXVob8w== 0000950146-94-000185.txt : 19941020 0000950146-94-000185.hdr.sgml : 19941020 ACCESSION NUMBER: 0000950146-94-000185 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941013 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAZARE KAPLAN INTERNATIONAL INC CENTRAL INDEX KEY: 0000202375 STANDARD INDUSTRIAL CLASSIFICATION: 3910 IRS NUMBER: 132728690 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07848 FILM NUMBER: 94552559 BUSINESS ADDRESS: STREET 1: 529 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129729700 MAIL ADDRESS: STREET 2: 529 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 LAZARE KAPLAN FORM 10-Q 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.
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 ---- ---- 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.
2
Consolidated Balance Sheets August 31, 1994 May 31, 1994 (unaudited) -------------------------------- (in thousands) 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.
3
Consolidated Summary of Cash Flows Three Months Ended August 31, (unaudited) ---------------------- 1994 1993 ---- ---- (in thousands) 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.
4 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 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 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 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 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 -----END PRIVACY-ENHANCED MESSAGE-----