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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended May 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______ to _______
Commission file number 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)
Registrant's telephone number, including area code (212) 972-9700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock ($1 par value) American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of July 29, 1994, 6,131,106 shares of the registrant's common stock were
outstanding, and the aggregate market value of common stock held by
nonaffiliates of the registrant, computed by reference to the closing price for
the registrant's stock on the American Stock Exchange at that date was
$18,546,947.
DOCUMENTS INCORPORATED BY REFERENCE
1994 definitive proxy statement to be filed with the Commission-
incorporated by reference into Part III.
1994 Annual Report to Stockholders for the fiscal year ended May 31, 1994
to be filed with the Commission-incorporated by reference into Parts II and IV.
Item 1. The Company
Lazare Kaplan International Inc., which began its business in 1903, is
principally engaged in the cutting, polishing and selling of ideally
proportioned diamonds which it markets internationally under the brand name
"Lazare Diamonds(R)". Ideally proportioned diamonds are distinguished from
commercial cut diamonds by the symmetrical relationship of their facets, which
maximizes brilliance, sparkle and fire. Due to these characteristics, Lazare
Diamonds command a premium in the marketplace. The Company believes there are
only a few other companies worldwide engaged solely in the production of
ideally proportioned diamonds and that it is the largest producer in this
segment of the diamond industry. Additionally, the Company is engaged in the
buying and selling of rough uncut diamonds.
The Company's sales strategy is directed primarily toward quality
conscious consumers throughout the United States, the Pacific Rim and Europe.
The Company generally sells to select retail jewelers in each geographic market
in order to maintain an image of selectivity and prestige consistent with its
overall marketing strategy. The Company has developed a comprehensive grading
system for its ideal cut diamonds which allows jewelers to order inventory by
category rather than through the more cumbersome process of visual selection.
In addition, the Company designs, manufactures and sells a line of high quality
jewelry which features Lazare Diamonds.
An important element of the Company's strategy is the promotion of the
Lazare Diamonds brand name. Every Lazare Diamond bears a laser inscription on
its outer perimeter containing the Lazare Kaplan logo and an identification
number unique to the stone. This patented laser "signature", which is
invisible to the naked eye but visible when magnified at least ten times,
serves as the purchaser's assurance that he is buying an authentic Lazare
Diamond. This laser signature also allows consumers to register their Lazare
Diamonds with the Company under its unique program, The Lazare Diamond
Registry(R), thereby providing proof of ownership in case of loss or theft.
The Company has been expanding its activities abroad, particularly in
the Pacific Rim countries of Japan, Hong Kong, Singapore, Taiwan, Thailand,
Korea, Malaysia, Indonesia and Brunei. The Company believes there is
significant growth potential in the European market for Lazare Diamonds, and
has continued to review this area for expansion.
Each rough diamond purchased by the Company and considered for sale as
a polished diamond is evaluated against strict management standards designed to
maximize its potential economic contribution to the Company's profitability.
Expert technicians, assisted by proprietary computer software, determine
whether to cut the stone to ideal proportions, cut the stone as a commercial
diamond for sale through alternative distribution channels, or resell the stone
as rough. The shape of the rough stone, its color, clarity and overall
potential economic contribution, are among the criteria used in making such
determinations.
2
The Company's involvement in the purchase and sale of rough diamonds,
through its Antwerp, Belgium office, provides it with the ability to dispose of
those diamonds not selected for cutting and polishing, as well as access to
supplemental sources of supply. This activity allows the Company to maintain
quantities and qualities of inventory which best meet its customers' needs.
The Company's principal stockholder is Maurice Tempelsman, the Chairman
of the Board. Mr. Tempelsman and his son, Leon Tempelsman, are the sole general
partners of Leon Tempelsman & Son ("LTS"), a New York limited partnership. LTS
is the holder of 1,528,416 shares of common stock, all of which are deemed to
be owned indirectly by each of Leon Tempelsman and Maurice Tempelsman. In
addition, Maurice Tempelsman is the direct beneficial holder of 2,456,714
shares of common stock. The aggregate number of common shares held by Maurice
Tempelsman, directly and indirectly, is 3,985,130, constituting 65.0% of the
Company's issued and outstanding common stock.
Lazare Kaplan International Inc. was incorporated in 1972 under the
laws of the State of Delaware as the successor to a business which originated
in 1903.
Diamond Supply
Rough Diamonds
The Company's business is dependent upon the availability of rough
diamonds, the world's known sources of which are highly concentrated. Angola,
Australia, Botswana, Brazil, Ghana, Guinea, Namibia, Sierra Leone, South
Africa, Russia and Zaire account for more than 90% of present world rough gem
diamond production. The Central Selling Organization (the "CSO"), which is
affiliated with De Beers Centenary AG, a Swiss company, is the primary world-
wide marketing mechanism of the diamond industry. The CSO seeks to maintain an
orderly and stable market for diamonds by regulating the quantity and selection
of diamonds that reach the market. Sales for the CSO are made in London by the
Diamond Trading Company (the "DTC") to a select group of clients, including the
Company. Based upon published reports, the Company believes that approximately
80% of the world diamond output is purchased for resale by the DTC and its
affiliated companies. In order to maintain their purchasing relationship, the
DTC's clients have traditionally been expected to purchase all of the diamonds
offered to them by the DTC. Non-clients of the DTC must either purchase their
requirements from clients of the DTC or seek access to that limited portion of
the world supply not marketed by the DTC.
Historically, the Company's principal supplier of rough diamonds has
been the DTC, which periodically invites its clients to submit their
requirements as to the amount and type of stones they wish to purchase.
Employees of the Company attend offerings ("sights") held by the DTC
periodically during the year in London. At sights, the Company purchases, at
the DTC's stated price, an assortment of stones known as a "series", the
composition of which attempts to take into account the market in which the
Company operates and the Company's quantity requirements. The Company has been
a client of the DTC for more than 50 years.
3
In order to diversify its sources of supply, the Company has entered
into arrangements with other primary source suppliers, as well as established
an office in Antwerp to supplement its rough diamond needs by making purchases
in the secondary market. For each of the past three years ended May 31, the
Company purchased more than 50% of its diamond purchases from the DTC.
In November 1993, the Company reached an agreement with the Ghanaian
Government, Ghana Consolidated Diamonds Limited and De Beers Centenary pursuant
to which, the parties will, subject to a feasibility study, form a new company
to acquire, expand and operate the Akwatia/Birim Diamond and Gold Concessions
now owned by Ghana Consolidated Diamonds. The feasibility study is anticipated
to take a maximum of eighteen months.
In 1990, the Company and the Government of the Republic of Botswana,
through its Ministry of Mineral Resources and Water Affairs, reached a long
term agreement for the establishment of a diamond cutting and polishing factory
in Botswana. In 1992, the Government issued to the Company a long term
license for the construction and operation of the facility. On August 31,
1994, the Botswana Development Corporation ("BDC") agreed to make an
investment in Lazare Kaplan Botswana (Pty) Limited. As a result of that
investment, Lazare Kaplan Botswana (Pty) Limited is owned by the Company
(60%), the Government of Botswana (5.1%) and the Botswana Development
Corporation (34.9%). Lazare Kaplan Botswana moved into its new permanent
manufacturing facility in January, 1993, which it owns and operates in
Molepolole, Botswana. The factory is a state-of-the-art facility using both
automated and manual equipment, and will ultimately employ 500 skilled
employees. The facility currently operates with approximately 349 local
employee/trainees and 17 expatriates. Lazare Kaplan Botswana has been
given its own sight allocation from the DTC from which it selects rough
diamonds for manufacture in its facility. Botswana is widely regarded today
as the most important rough gem diamond producing country in the world.
Polished Diamonds
In addition to its purchase of rough diamonds, the Company also
purchases polished diamonds from a number of sources. These diamonds are
purchased with the intention either to resell them or to recut them to ideal
proportions at the Company's manufacturing facility in Puerto Rico.
Availability of Sources of Supply
The Company believes that it has good relations with its suppliers,
that its trade reputation and established customer base will continue to assure
access to primary sources of diamonds and that its sources of supply are
sufficient to enable the Company to meet its present and foreseeable needs.
However, the Company's sources of supply could be affected by political and
economic developments over which the Company has no control. While the Company
believes that alternative sources of supply may be available, any significant
disruption of the Company's access to its primary source suppliers could have a
material adverse effect on its ability to purchase rough diamonds.
4
Cutting and Polishing
The Company has two primary cutting and polishing operations; Lazare
Kaplan (Puerto Rico) Inc., located in Puerto Rico and Lazare Kaplan Botswana
(Pty) Ltd., located in Botswana. The Company's factory in Puerto Rico is
believed to be the largest cutting facility in the United States.
Each stone received in Puerto Rico is evaluated against strict
management standards designed to maximize its potential economic contribution
to the Company. Expert technicians, assisted by proprietary computer software,
determine whether to cut the stone to ideal proportions, cut the stone as a
commercial diamond or resell the stone as rough. The shape of the rough stone,
its color, clarity and overall potential economic contribution, are among the
criteria used in making such determinations. The Company has developed an
incentive program that rewards its factory managers and supervisors based on
maximizing the manufactured results of the following criteria: gross margin,
yield (rough weight to polished weight conversion) and efficiency.
Rough stones selected for cutting are analyzed and where desirable are
sorted for sawing or cleaving to achieve the desired shape and to eliminate
imperfections. They are then cut and polished into finished gems. Each
finished ideal cut gemstone which is marketed as a Lazare Diamond is then
inscribed with the Lazare Kaplan logo and its own identification number by the
Company's patented laser inscription process. All of these operations are
performed by the Company's employees. The Company believes its work force in
Puerto Rico is the most highly skilled in the diamond industry. The Company
has undertaken a worker training program at its facility in Puerto Rico to
ensure a constant flow of skilled labor to satisfy its needs for further
growth.
The Lazare Kaplan Botswana diamond cutting and polishing factory in
Molepolole, Botswana began operations in its newly constructed facility in
early 1993. The factory, which is a state-of-the- art facility, uses both
automated and manual equipment and is committed to train and employ Batswana
workers. The Company expects to employ up to 500 skilled technicians at the
facility. As of July 29, 1994, there were 366 employees, of which 141 were
trainees.
The new factory is intended to cut and polish rough diamonds to ideal
proportions in sizes which are presently not processed by the Company's
facility in Puerto Rico. In the beginning stages, the factory is concentrating
on the manufacture of rough stones of somewhat smaller size. The size range
manufactured will be expanded as the skills of its employees are developed.
Lazare Kaplan Botswana purchases rough on its own account directly from the
Diamond Trading Company for manufacture in the Botswana factory.
The Company believes that it is recognized in the diamond industry for
the high quality and brilliance of the gems it cuts and that it also enjoys a
reputation as an imaginative and innovative cutter of large and difficult
stones.
5
Pricing
Rough Diamond Prices
Through its control of approximately 80% of the world diamond output,
the DTC can exert significant control over the pricing of rough and polished
diamonds to maintain an orderly market by adjusting supplies in the
marketplace. Rough diamond prices established by the DTC have been
characterized historically by steady increases over the long term; however,
prices in the secondary market have experienced a greater degree of volatility,
particularly during the late 1970's. Traditionally, the Company has been able
to pass along such price increases to its customers. From time to time,
however, the Company has absorbed these price increases in the short term to
maintain an orderly pricing relationship with its customers. This has, in the
past, caused temporary adverse effects on the Company's earnings. However, a
large rapid increase in rough diamond prices could adversely affect the
Company's revenue and operating margins if the increased cost of rough diamonds
could not be passed along to its customers in a timely manner.
Polished Diamond Prices
Over the past 60 years, increases in the price of rough diamonds have
generally resulted in a corresponding increase in the price of polished
diamonds. During the period of high inflation in the late 1970's, investors
speculated in hard assets, driving polished diamond prices to exceptionally
high levels which in turn caused significant increases in the cost of rough
diamonds. However, the moderation of inflation during the 1980's resulted in a
sudden and massive shift of investments from hard assets to financial
instruments, resulting in dramatic price declines for polished diamonds which
caused a market liquidity crisis as prices of some categories of polished
diamonds fell below the inventory costs of such diamonds. Since this period in
the early 1980's, the Company believes the pricing of polished diamonds has
returned to its historical pattern of responding to increases in the pricing of
rough diamonds. However, there can be no assurance that volatility in the
price of polished diamonds could not occur again. Any rapid decrease in the
price of polished diamonds could have a material adverse effect on the Company
in terms of inventory losses, lower sales and lower margins.
The Company has implemented strict inventory, pricing and purchasing
controls which it believes could lessen the impact of fluctuations in the price
of rough and polished diamonds. These include computerized rough stone
evaluation programs, automatic economic order quantity models and inventory
utilization programs.
6
Marketing, Sales and Distribution
Marketing Strategy
The Company's sales strategy is directed primarily toward quality
conscious consumers throughout the United States, the Pacific Rim and Europe.
The Company generally sells to select retail jewelers in each geographic market
in order to maintain an image of selectivity and prestige consistent with its
overall marketing strategy. The Company also sells to certain jewelry and
diamond manufacturers and wholesalers. The Company has developed a
comprehensive grading system for its diamonds which allows jewelers to order
inventory by category rather than through the more cumbersome process of visual
selection. In addition, the Company designs, manufactures and sells a line of
high quality jewelry which features Lazare Diamonds.
A key element of the Company's strategy is the promotion of the Lazare
Diamonds brand name directly to consumers. The Company believes that ideal
cutting presents a clear competitive advantage over other diamonds in the
marketplace by providing the Company with the opportunity to establish a brand
name and to market its diamonds under this name through retailers. The
Company's decision to pursue the brand name strategy is reinforced by two
factors - a rising trend among informed consumers to purchase quality, brand
name products, and the need among upscale jewelers to set themselves apart in
an increasingly competitive market by carrying and promoting a highly
differentiated product. Each Lazare Diamond is inscribed with the Company's
logo and identification number using the Company's unique laser inscription
process, thus authenticating the diamond as a Lazare Diamond. This "labelling"
enables the Company to pursue the brand name diamond strategy. The Company
holds various domestic and international patents for this process.
Building awareness and acceptance of Lazare Diamonds is accomplished
through a comprehensive marketing program which includes co-op advertising,
sales promotion and public relations. The advertising includes a toll-free
number which consumers may call to receive additional information about the
product and to be referred to jewelers carrying Lazare Diamonds and Lazare
Diamond jewelry in their geographic area. A wide assortment of sales promotion
materials has been designed to facilitate jewelers' sales of the Company's
diamonds and fine jewelry line to consumers. Public relations events are
offered which help build traffic in retail stores. The Company believes these
marketing programs have been and will continue to be instrumental in increasing
sales. The Company does not intend to sell its diamonds directly to consumers
and plans to continue concentrating its marketing efforts towards the quality
retail jeweler.
The Lazare Diamond Registry program has been established by the Company
to enable consumers to register their Lazare Diamonds with the Company using
the laser inscribed identification number, thereby providing proof of ownership
in case of loss or theft.
While the purchase and sale of rough diamonds is concentrated among
relatively few parties, industry wide retailing of polished diamonds occurs
through over 39,000 jewelry stores in the United states, over 26,000 retailers
in Japan and over 48,000 retail stores in Europe. The Company's efforts for
its polished diamonds are directed primarily toward the fine quality segment of
these retailers, the majority of which are independently owned and operated.
Full time regional sales representatives located throughout the United States
and in Hong Kong and Antwerp, who are compensated on a commission basis, handle
sales throughout the United States, the Pacific Rim and Europe.
7
The Company's sales force is supported by a New York based
telemarketing department. Sales to certain of the Company's largest accounts
are handled by headquarters personnel. Most of the Company's major accounts
are customers of long standing.
The Company has been expanding its activities abroad, particularly in
the Pacific Rim countries of Japan, Hong Kong, Singapore, Taiwan, Thailand,
Korea, Malaysia, Indonesia and Brunei. In Japan, the Company has had a
marketing relationship since 1972 with Aiwa Co., Ltd., the Japanese importer-
marketer of Lazare Diamonds. Aiwa Co., with a distribution network of over 200
retailers and wholesalers, is an important customer of the Company's polished
diamonds. Additionally, the Company continues to believe there is significant
growth opportunity in the European market for Lazare Diamonds and has expanded
in this area.
The Company uses a comprehensive sorting and inventory classification
system for grading color and clarity of its ideal cut polished diamonds. This
system, combined with the fact that the Company's stones are uniformly cut to
ideal proportions, reduces and in some cases eliminates the need for customers
to view stones before placing orders. The system enables customers to
standardize their inventories, order by mail or telephone and minimize their
inventory investment.
The percentages of the Company's total domestic and foreign net sales
to its customers, which include a combination of both rough diamonds and
polished diamonds sales taken together, for the past three fiscal years are set
forth below:
Years ended May 31,
------------------------
1992 1993 1994
---- ---- ----
Percentage of Net Sales to Customers
Domestic 18% 16% 16%
Foreign 82% 84% 84%
The Company believes that due to the possible international resale of
diamonds by its customers, the above percentages may not represent the final
location of retail sales of its product. As all foreign sales are denominated
in United States dollars, the Company does not experience any foreign currency
exposure on its foreign revenue. A portion of all foreign polished sales are
accompanied by bank guarantees or are shipped on a C.O.D. basis. The
profitability of foreign sales of either polished or rough diamonds is
consistent with that of domestic sales of similar merchandise.
8
Competition
The polished and rough diamond business is highly competitive. While
the Company believes that it has achieved a reputation as a leading cutter and
distributor of high quality diamonds, it faces competition in sales to its
customers in the United States and abroad from many other suppliers. A
substantial number of cutters and merchants, some of which the Company believes
to be larger or to have greater financial resources than the Company, sell
diamonds of all qualities to such customers. The Company also sells rough
diamonds, primarily through its Antwerp office, in the competitive world
market.
The Company believes there are significant barriers to entry by
potential competitors into the business of manufacturing ideally proportioned
diamonds. Among the most important of these barriers are the need for
significant capital, the limited number of persons with the skills necessary
to cut ideally proportioned diamonds, the difficulty in obtaining access to
upscale channels of distribution, the importance of public recognition of an
established brand name and the establishment of computer systems to gauge and
monitor the manufacturing and distribution network.
Employees
At July 29, 1994, the Company had 547 full-time employees, which
includes 141 trainees in Botswana. The Company also has 9 regional sales
representatives. The Company maintains an apprenticeship program at its
facilities in Caguas, Puerto Rico, through which it trains its cutters, who are
highly skilled workmen. The Company also has a program in Botswana through
which it trains cutters and polishers to work at the Company's new facility.
The Company provides paid vacations, sick leave, group life, disability,
hospitalization and medical insurance for its employees. The Company has a
401(k) plan for its U.S. and Puerto Rico employees. The Company believes that
it has satisfactory relationships with its employees. None of the Company's
employees is represented by a union.
Item 2. Properties
The Company leases office space, a portion of which is devoted to sales
rooms, at 529 Fifth Avenue, New York City, for a term expiring September 30,
2003 at an annual rental rate of approximately $278,000 (subject to
escalations). The Company also subleases space at the same address to LTS for
a like term at a rental rate per square foot which is the same as the Company
is paying to the landlord.
The Company also owns a manufacturing facility in Caguas, Puerto Rico.
The Caguas facility consists of approximately 7,500 square feet, and is fully
equipped and adequate to fulfill the needs of the Company.
The Company leases office space in Antwerp, Belgium for a term expiring
May 31, 2003 at an annual rental rate of approximately $43,000 (1,500,000
Belgian francs).
The Company leases land in Botswana for a nominal amount for a term of
fifty years with the right to renew for an additional fifty years. The Company
has constructed its cutting and polishing factory on such land. The facility
is approximately 4,300 square meters.
9
Item 3. Legal Proceedings
The Company is not involved in any significant legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None
Executive Officers of the Registrant
The following table sets forth information regarding executive officers
of the Company.
NAME POSITION AGE
- - ---- -------- ---
Maurice Tempelsman Chairman of the Board 65
Leon Tempelsman Vice Chairman of the 38
Board and President
George R. Kaplan Vice Chairman of the 76
Board
Sheldon L. Ginsberg Vice President and 40
Chief Financial Officer
Robert Speisman Vice President - Sales 41
All officers were elected at the Annual Meeting of the Board of
Directors held in November 1993, and hold office until the next Annual Meeting
of the Board of Directors and until their respective successors have been duly
elected and qualified.
Maurice Tempelsman, Chairman of the Board and a director of the
Company, is a general partner of Leon Tempelsman & Son, a partnership with
interests in the international diamond and mining industries, positions he has
held since 1984. Maurice Tempelsman is the father of Leon Tempelsman and the
father-in-law of Robert Speisman.
Leon Tempelsman, Vice Chairman of the Board, President and a director
of the Company, is a general partner of Leon Tempelsman & Son, positions he has
held since 1984. Leon Tempelsman is the son of Maurice Tempelsman and the
brother-in-law of Robert Speisman.
The Company believes that neither the Tempelsmans nor LTS currently
engages directly or indirectly in any activities competitive with those of the
Company.
10
George R. Kaplan has been Vice Chairman of the Board since 1984 and a
director of the Company since 1972.
Sheldon L. Ginsberg has been Vice President and Chief Financial Officer
since April 1991. He was the Vice President-Finance from January 1986 until
April 1991. Mr. Ginsberg has been a director of the Company since 1989.
Robert Speisman has been the Vice President - Sales of the Company
since 1986. Mr. Speisman has been a director of the Company since 1989. Mr.
Speisman is the son-in-law of Maurice Tempelsman and the brother-in-law of Leon
Tempelsman.
Part II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
The Registrant's common stock (par value $1 per share) is traded on the
American Stock Exchange.
Market prices and other information with respect to the Registrant's
common stock are hereby incorporated by reference from the inside front cover
of the Registrant's Annual Report.
Item 6. Selected Financial Data
Selected financial data are hereby incorporated by reference from page
3 of the Registrant's Annual Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's discussion and analysis of financial condition and results
of operations is hereby incorporated by reference from pages 4 to 6 of the
Registrant's Annual Report.
Item 8. Financial Statements and Supplementary Data
The following financial statements and supplementary data are hereby
incorporated by reference from pages 7 to 16 of the Registrant's Annual Report.
(i) Report of Deloitte & Touche LLP.
(ii) Consolidated Statements of Operations for the three years
ended May 31, 1994.
(iii) Consolidated Statements of Stockholders' Equity for the three
years ended May 31, 1994.
11
(iv) Consolidated Balance Sheets as at May 31, 1994 and
May 31, 1993.
(v) Consolidated Statements of Cash Flows for the three years
ended May 31, 1994.
(vi) Notes to Consolidated Financial Statements.
Item 9. Change in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
Part III
Except for information regarding Executive Officers of the Registrant,
which, in accordance with Instruction G to Form 10-K, is included in Part I
hereof, the information called for by Part III (Items 10, 11, 12 and 13) is
incorporated by reference herein from the Registrant's definitive proxy
statement to be filed with the Commission within 120 days after the close of
its fiscal year ended May 31, 1994.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) 1. The response to this portion of Item 14 is set forth in
Item 8 of Part II hereof.
2. Financial Statement Schedules
Report on Financial Statement Schedules and Consent of
Deloitte & Touche LLP
Schedule VIII - Valuation and Qualifying Accounts
Schedule IX - Short-Term Borrowings
Schedule X - Supplementary Statements of Operations
Information
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
12
REPORT AND CONSENT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Lazare Kaplan
International Inc. and subsidiaries as of May 31, 1994 and 1993, and for each
of the three years in the period ended May 31, 1994, and have issued our report
thereon dated July 13, 1994 (August 31, 1994 as to Note 11); such financial
statements and report are included in the Company's 1994 Annual Report and are
incorporated herein by reference. Our audits also included the financial
statement schedules of Lazare Kaplan International Inc., listed in Item
14(a)(2). These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We consent to the incorporation by reference in Registration Statements
No. 2-70113 and No. 33-20528 of Lazare Kaplan International Inc. on Form S-8,
of our report dated July 13, 1994 (August 31, 1994 as to Note 11), incorporated
by reference in this Annual Report on Form 10-K for the year ended May 31,
1994.
Deloitte & Touche LLP
New York, New York
August 31, 1994
13
LAZARE KAPLAN INTERNATIONAL INC.
AND SUBSIDIAIRIES
SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Additions
--------------------------------
(1) (2)
Balance at Charged to Charged to Balance at
beginning costs and other accounts Deductions end
Description of period expenses describe describe of period
----------- --------- --------- ------------- --------- ---------
YEAR ENDED MAY 31, 1994:
Allowance for doubtful accounts $ 403,837 $ 10,000 $ - $ 248,668(C) $ 165,169
--------- --------- ---------- ---------- ----------
Sales returns and allowances $ 268,632 $(268,632)(B) $ - $ - $ -
--------- --------- ---------- ---------- ----------
YEAR ENDED MAY 31, 1993:
Allowance for doubtful accounts $ 379,364 $ 86,075 $ 169(A) $ 61,771(C) $ 403,837
--------- --------- ---------- ---------- ----------
Sales returns and allowances $ 473,781 $(205,149)(B) $ - $ - $ 268,632
--------- --------- ---------- ---------- ----------
YEAR ENDED MAY 31, 1992:
Allowance for doubtful accounts $ 251,651 $ 199,113 $ 2,431(A) $ 73,831(C) $ 379,364
--------- --------- ---------- ---------- ----------
Sales returns and allowances $ 449,656 $ 24,125(B) $ - $ - $ 473,781
--------- --------- ---------- ---------- ----------
- - ----------
(A) Recoveries of previously written off accounts
(B) Adjustments to reserve balance
(C) Amounts written off
14
LAZARE KAPLAN INTERNATIONAL INTERNATIONAL INC.
AND SUBSIDIAIRIES
SCHEDULE IX-SHORT-TERM BORROWINGS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- -------- -------- -------- -------- --------
Maximum Average Weighted
Weighted Amount amount average
Balance average outstanding outstanding interest
Category of aggregate at end interest during during rate during
short-term borrowings of period rate the period the period the period
--------------------- --------- -------- ---------- ---------- ----------
(A) (B)
MAY 31, 1994:
Notes payable - banks $ 9,900,000 7.28% $ 16,834,000 $ 11,371,000 6.18%
------------ ----- ------------ ------------ -----
Notes payable - other $ 3,000,000 4.40% $ 3,000,000 $ 3,000,000 4.04%
------------ ----- ------------ ------------ -----
MAY 31, 1993:
Notes payable - banks $ 9,005,000 6.06% $ 11,220,000 $ 3,175,000 6.07%
------------ ----- ------------ ------------ -----
Notes payable - other $ 3,000,000 3.92% $ 3,000,000 $ 3,000,000 4.30%
------------ ----- ------------ ------------ -----
MAY 31, 1992:
Notes payable - banks $ - - $ 3,550,000 $ 94,000 7.90%
------------ ----- ------------ ------------ -----
Notes payable - other $ 3,000,000 4.80% $ 3,000,000 $ 3,000,000 6.24%
------------ ----- ------------ ------------ -----
- - --------
(A) Average amount outstanding during the period is computed
by dividing the weighted average of daily amounts outstanding
by total days outstanding.
(B) Average interest rate for the year is computed by dividing
the short-term interest expense by the average short-term
debt outstanding.
15
SCHEDULE X
LAZARE KAPLAN INTERNATIONAL INC.
AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY
STATEMENTS OF OPERATIONS INFORMATION
Column A Column B
-------- --------
Charged to
costs and
Item expenses
---- --------
YEAR ENDED MAY 31, 1994:
Advertising costs $ 848,565
----------
YEAR ENDED MAY 31, 1993:
Advertising costs $1,602,756
----------
YEAR ENDED MAY 31, 1992:
Advertising costs $1,669,151
----------
Other items are not listed because they were either not applicable
or not present in sufficient amounts to require inclusion.
16
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the fourth quarter of the fiscal year ended May 31, 1994.
(c) Exhibits
(3) (a) Certificate of Incorporation, as amended - incorporated
herein by reference to Exhibit 3(a) to Report on Form 10-K of
the Registrant for the fiscal year ended May 31, 1987 filed
with the Commission on August 26, 1987, as amended on
January 14, 1988.
(b) Certificate of Amendment of Certificate of Incorporation
filed with the Secretary of State of the State of Delaware on
November 1, 1990 - incorporated herein by reference to
Exhibit (3)(b) to Report on Form 10-K of the Registrant for
the fiscal year ended May 31, 1992 filed with the Commission
on August 28, 1992.
(c) By-laws, as amended - incorporated herein by reference to
Exhibit 3(b) to Report on Form 10-K of the Registrant for
the fiscal year ended May 31, 1987 filed with the Commission
on August 26, 1987, as amended on January 14, 1988.
(10) Material Contracts
(a) Lazare Kaplan International Inc. Amended and Restated 1988
Stock Option Incentive Plan - incorporated herein by
reference to Exhibit 4.1 to Registration Statement on
Form S-8 of the Registrant filed with the Commission on
November 5, 1990.
(b) Stockholders' Agreement, dated September 16, 1983, by and
among the Registrant, Maurice Tempelsman, Leon Tempelsman,
Leo L. Kaplan, George R. Kaplan, Howard Herzog, Consolidated
African Selection Trust Limited and Jatel PLC - incorporated
herein by reference to Exhibit 28(b) to Report on Form 8-K
dated September 16, 1983 filed with the Commission on
September 28, 1983.
17
(c) Note Agreement dated as of May 15, 1991 by and between the
Registrant, Allstate Life Insurance Company, Monumental
Insurance Company and PFL Life Insurance Company -
incorporated herein by reference to Exhibit 28 to Report on
Form 8-K dated May 23, 1991 filed with the Commission on
June 4, 1991.
(d) First Amendment to Note Agreement, dated as of February 28,
1992, by and between the Registrant, Allstate Life Insurance
Company, Monumental Life Insurance Company and PFL Life
Insurance Company incorporated herein by reference to Exhibit
10(d) to Report on Form 10-K of the Registrant for the fiscal
year ended May 31, 1992 filed with the Commission on August
28, 1992.
(e) Second Amendment to Note Agreement, dated as of March 25,
1992 by and between the Registrant, Allstate Life Insurance
Company, Monumental Life Insurance Company and PFL Life
Insurance Company incorporated herein by reference to Exhibit
10(e) to Report on Form 10-K of the Registrant for the fiscal
year ended May 31, 1992 filed with the Commission on August
28, 1992.
(f) Third Amendment to the Note Agreement, dated as of December
1, 1992 by and between the Registrant, Allstate Life
Insurance Company, Monumental Life Insurance Company and PFL
Life Insurance Company incorporated herein by reference to
Exhibit 10(f) to Report on Form 10-K of the Registrant for
the fiscal year ended May 31, 1993 filed with the Commission
on August 30, 1993.
(g) Agreement, dated December 5, 1990, by and between the
Registrant and the Government of the Republic of Botswana -
incorporated herein by reference to Exhibit 10(f) to Report
on Form 10-K of the Registrant for the fiscal year ended May
31, 1992 filed with the Commission on August 28, 1992.
(h) Subscription Agreement, dated August 24, 1994, among the
Registrant and the Botswana Development Corporation.
(13) 1994 Annual Report to Security Holders - incorporated herein by
reference to the 1994 Annual Report to Stockholders of the
Registrant to be filed with the Commission.
(21) Subsidiaries
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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) Leon Tempelsman
-----------------------------------------
Leon Tempelsman, Vice Chairman and President
(principal executive officer)
By (s) Sheldon L. Ginsberg
-----------------------------------------
Sheldon L. Ginsberg, Vice President and
Chief Financial Officer
(principal financial officer)
Dated: August 31, 1994
19
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
(s) Maurice Tempelsman
- - -------------------------- Chairman of the August 31, 1994
(Maurice Tempelsman) Board of Directors
(s) Leon Tempelsman
- - -------------------------- Vice Chairman of the August 31, 1994
(Leon Tempelsman) Board of Directors
(s) George R. Kaplan
- - ------------------------- Vice Chairman of the August 31, 1994
(George R. Kaplan) Board of Directors
(s) Lucien Burstein
- - ------------------------- Director August 31, 1994
(Lucien Burstein)
(s) Myer Feldman
- - ------------------------- Director August 31, 1994
(Myer Feldman)
(s) Michael W. Butterwick
- - ------------------------- Director August 31, 1994
(Michael W. Butterwick)
(s) Sheldon L. Ginsberg
- - ------------------------- Director August 31, 1994
(Sheldon L. Ginsberg)
(s) Robert Speisman
- - ------------------------- Director August 31, 1994
(Robert Speisman)
20
LAZARE KAPLAN INTERNATIONAL INC.
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXHCANGE ACT OF 1934
For the fiscal year ended Commission File No. 1-7848
May 31, 1994
EXHIBIT INDEX
-------------
Exhibit Page No.
- - ------- --------
(3) (a) Certificate of Incorporation, as amended -
incorporated herein by reference to Exhibit 3(a) to
Report on Form 10-K of the Registrant for the fiscal
year ended May 31, 1987 filed with the Commission
on August 26, 1987, as amended on January 14, 1988.
(b) Certificate of Amendment of Certificate of
Incorporation filed with the Secretary of State of the
State of Delaware on November 1, 1990 -
incorporated herein by reference to Exhibit (3)(b) to
Report on Form 10-K of the Registrant for the fiscal
year ended May 31, 1992 filed with the Commission
on August 28, 1992.
(c) By-laws, as amended - incorporated herein by
reference to Exhibit 3(b) to Report on Form 10-K of
the Registrant for the fiscal year ended May 31,
1987 filed with the Commission on August 26, 1987,
as amended on January 14, 1988.
(10) Material Contracts
(a) Lazare Kaplan International Inc. Amended and
Restated 1988 Stock Option Incentive Plan -
incorporated herein by reference to Exhibit 4.1 to
Registration Statement on Form S-8 of the
Registrant filed with the Commission on November
5, 1990.
21
Exhibit Page No.
- - ------- --------
(b) Stockholders' Agreement, dated September 16, 1983,
by and among the Registrant, Maurice Tempelsman,
Leon Tempelsman, Leo L. Kaplan, George R.
Kaplan, Howard Herzog, Consolidated African
Selection Trust Limited and Jatel PLC - incorporated
herein by reference to Exhibit 28(b) to Report on
Form 8-K dated September 16, 1983 filed with
the Commission on September 28, 1983.
(c) Note Agreement dated as of May 15, 1991 by and
between the Registrant, Allstate Life Insurance
Company, Monumental Insurance Company and
PFL Life Insurance Company - incorporated herein
by reference to Exhibit 28 to Report on Form 8-K
dated May 23, 1991 filed with the Commission on
June 4, 1991.
(d) First Amendment to Note Agreement, dated as of
February 28, 1992, by and between the Registrant,
Allstate Life Insurance Company, Monumental Life
Insurance Company and PFL Life Insurance
Company incorporated herein by reference to Exhibit
10(d) to Report on Form 10-K of the Registrant for
the fiscal year ended May 31, 1992 filed with the
Commission on August 28, 1992.
(e) Second Amendment to Note Agreement, dated as of
March 25, 1992 by and between the Registrant,
Allstate Life Insurance Company, Monumental Life
Insurance Company and PFL Life Insurance Company
incorporated herein by reference to Exhibit 10(e)
to Report on Form 10-K of the Registrant for the
fiscal year ended May 31, 1992 filed with the
Commission on August 28, 1992.
22
Exhibit Page No.
- - ------- --------
(f) Third Amendment to the Note Agreement, dated
as of December 1, 1992 by and between the
Registrant, Allstate Life Insurance Company,
Monumental Life Insurance Company and PFL
Life Insurance Company incorporated herein by
reference to Exhibit 10(f) to Report of Form 10-K
of the Registrant for the fiscal year ended May 31,
1993 filed with the Commission on August 30, 1993.
(g) Agreement, dated December 5, 1990, by and
between the Registrant and the Government of
the Republic of Botswana - incorporated herein by
reference to Exhibit 10(f) to Report on Form 10-K
of the Registrant for the fiscal year ended May 31,
1992 filed with the Commission on August 28, 1992.
(h) Subscription Agreement, dated August 24, 1994, among
the Registrant and the Botswana Development Corporation. 24
(13) 1994 Annual Report to Security Holders - incorporated
herein by reference to the 1994 Annual Report to Stock-
holders of the Registrant to be filed with the Commission. 38
(21) Subsidiaries 64
23
Exhibit 10(h)
SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, dated as of August 24, 1994, among:
(1) BOTWSWANA DEVELOPMENT CORPORATION LIMITED,
a company incorporated under the laws of
the Republic of Botswana, whose registered
office is at Plot 6377, Madirelo House,
Mmanaka Road, Gaborone, Botswana
("Botswana Development Corporation"), by
its duly authorized representative
Mr. M.O. Molefane in his capacity as
Managing Director of Botswana Development
Corporation;
(2) LAZARE KAPLAN INTERNATIONAL INC., a
company incorporated under the laws of the
State of Delaware in the United States of
America, whose principal office is at 529
Fifth Avenue, New York, New York 10017,
United States of America ("Lazare Kaplan
International"), represented by James L.
Barnes in his capacity as authorised
signatory of Lazare Kaplan International;
and
(3) LAZARE KAPLAN BOTSWANA (PTY) LIMITED, a
company incorporated under the laws of the
Republic of Botswana, whose registered
office is at the offices of Deloitte &
Touche, Barclays House, Khama Crescent,
Gaborone, Botswana (the "Company"),
represented by James L. Barnes in his
capacity as Managing Director of the
Company.
R E C I T A L S :
A. The Company wishes to sell to Botswana
Development Corporation, and Botswana Development
Corporation wishes to subscribe to, shares of capital
stock of the Company.
B. The Company wishes to issue to Lazare
Kaplan International, in consideration for the conversion
of part of the loans made by Lazare Kaplan International
to the Company into, shares of capital stock of the
Company.
C. At the Closing (as defined below), the
Company will have an authorized share capital of Pula
70,000,000 comprised of 35,000,000 ordinary shares, each
having a par value of Pula 1 per share and ranking pari
passu with one another (the "Ordinary Shares"); and
35,000,000 cumulative redeemable non-voting participating
preference shares, each having a par value of Pula 1 per
share, each bearing a dividend entitlement of 10%
annually for an initial five years and 12.5% annually
thereafter, each with such further participating
interest, if any, in dividends as the Company may in its
sole discretion determine, and none carrying or at any
time giving rise to voting rights for its holder (the
"Preference Shares").
D. Immediately prior to consummation, at the
Closing, of the transactions hereunder, Lazare Kaplan
International will be the beneficial holder of 5,369,447
Ordinary Shares and the Government of Botswana will be
the beneficial holder of 947,550 Ordinary Shares.
Accordingly, in consideration of the agreements
and obligations herein contained, the parties hereby
agree as follows:
1. PURCHASE OF SHARES BY BOTSWANA DEVELOPMENT
CORPORATION. Subject to the terms and conditions set
forth in this Agreement, the Company hereby agrees to
issue to Botswana Development Corporation, and Botswana
Development Corporation hereby agrees to subscribe from
the Company, 7,660,000 Ordinary Shares and 14,117,000
Preference Shares (together, the "BDC Shares") for the
aggregate purchase price of Pula 21,777,000 (the
"Purchase Price"), consisting of (i) Pula 7,660,000 for
the Ordinary Shares, and (ii) Pula 14,117,000 for the
Preference Shares.
2. CONVERSION OF LOANS BY LAZARE KAPLAN
INTERNATIONAL. Subject to the terms set forth in this
Agreement, Lazare Kaplan International agrees (i) to
convert the outstanding principal amount of Pula
7,971,427 of the loans that it has heretofore made to the
Company into 7,971,427 Ordinary Shares (the "LKI
Ordinary Shares") and (ii) to convert the outstanding
principal amount of Pula 14,117,000 of the loans that it
has heretofore made to the Company into 14,117,000
Preference Shares (the "LKI Preference Shares", and
together with the LKI Ordinary Shares, the "LKI Shares"),
and in consideration therefor the Company hereby agrees
to issue the LKI Shares to Lazare Kaplan International.
3. CLOSING.
(a) The closing of the transactions
contemplated hereby shall take place at the offices of
Botswana Development Corporation, Plot 6377, Madirelo
House, Mmanaka Road, Gaborone, Botswana, on the first
business day following satsifaction of the Conditions
Precedent set forth in Section 5(a), or at such other
early date thereafter as the parties hereto shall
mutually agree (the "Closing").
(b) At the Closing, the Company shall (i)
deliver to Botswana Development Corporation duly executed
share certificates representing the BDC Shares, and
Botswana Development Corporation shall pay the Purchase
Price to the Company by cheque in the amount of
Pula 21,777,000; and (ii) deliver to Lazare Kaplan
International duly executed share certificates
representing the LKI Shares, and Lazare Kaplan
International shall deliver to the Company an instrument
acknowledging the conversion of Pula 7,971,427 and Pula
14,117,000 of outstanding loans made by Lazare Kaplan
International to the Company into the LKI Ordinary Shares
the LKI Share Premium and the LKI Preference Shares,
respectively.
4. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.
(a) The Company represents and warrants to
Botswana Development Corporation and Lazare Kaplan
International that:
(i) The Company is a corporation duly
incorporated and validly existing under the laws of
the Republic of Botswana, and has the requisite
corporate power and authority to execute and deliver
this Agreement and to perform its obligations
hereunder; and
(ii) The execution, delivery and
performance of this Agreement, and the execution,
issuance and delivery of the BDC Shares and the LKI
Shares have been duly authorized by all necessary
corporate action on the part of the Company. The
BDC Shares and LKI Shares, when issued, shall be
validly issued, fully paid and nonassessable.
(b) LKI and the Company, jointly and
severally, represent and warrant to Botswana Development
Corporation that:
(i) The audited financial statements of
the Company as of May 31, 1994 were audited by
Deloitte & Touche using generally accepted
accounting principles and fairly and accurately
reflected the assets and liabilities actual or
contingent and financial status of the Company as of
the date thereof;
(ii) There has been no material change in
the assets and liabilities and financial status of
the Company since the date of such financial
statements to the date of signature hereof, except
as may have resulted from (A) the normal and
ordinary course of the Company's operations; and (B)
implementation of the Restructuring Agreement of
even date hereof among the parties hereto and the
Government of Botswana in accordance with its terms;
(iii) Neither LKI nor the Company is aware
of any material facts or circumstances with respect
to the Company's affairs which if known to a
reasonable potential investor in the Company would
cause such investor to withdraw from involvement in
the Company, which have not been disclosed to
Botswana Development Corporation;
(iv) All the material facts on which the
projections submitted by the Company up to the date
of signature hereof for use by Botswana Development
Corporation to evaluate its investment in the
Company and the terms thereof were based were, to
the best of LKI and the Company's knowledge,
materially correct when such projections were so
submitted;
(v) All the material assumptions made in
the projections submitted by the Company up to date
of signature hereof for use by Botswana Development
Corporation to evaluate its investment in the
Company and the terms thereof were, to the best of
LKI and the Company's knowledge, bona fide, fair and
reasonable when such projections were so submitted;
and
(vi) Neither LKI nor the Company is aware
of any material facts or circumstances which have
occurred since submission of the aforementioned
projections to Botswana Development Corporation
which have not been disclosed to Botswana
Development Corporation which would render the
material facts referred to in Section 4(b)(iv)
materially incorrect or cause the material
assumptions referred to in Section 4(b)(v) to be
rendered otherwise than bona fide, fair and
reasonable.
5. CONDITIONS PRECEDENT TO CLOSING.
(a) The Closing shall be subject to
satisfaction of the following conditions precedent (each
a "Condition Precedent"):
(i) The making available by the
Government of Botswana to Botswana Development
Corporation of funding specifically for and adequate
to enable the investment of Botswana Development
Corporation in the Company specified in Section 1;
and
(ii) The granting by the Bank of
Botswana of such approvals as may be necessary for
the transactions contemplated by this Agreement.
(b) Each party hereto shall use its best
efforts to procure the expeditious satisfaction of the
Conditions Precedent.
6. MISCELLANEOUS.
(a) RULES OF CONSTRUCTION. In this
Agreement, unless the context otherwise requires, words
in the singular number or in the plural number shall each
include the singular number and the plural number, words
of the masculine gender shall include the feminine and
the neuter, and, when the sense so indicates, words of
the neuter shall refer to any gender.
(b) FURTHER ASSURANCES. Each party
hereto shall do and perform or cause to be done and
performed all further acts and shall execute and deliver
all other agreements, certificates, instruments and
documents as the other parties hereto reasonably may
request in order to carry out the intent and accomplish
the purposes of this Agreement and the consummation of
the transactions comtemplated hereby.
(c) GOVERNING LAW. This Agreement and
the rights and obligations of the parties hereto shall be
governed by, and construed and enforced in accordance
with, the laws of the Republic of Botswana.
(d) SPECIFIC PERFORMANCE. In the event
of any party hereto committing a breach of this
Agreement, and failing to remedy such breach within seven
(7) days of receipt by the party so in breach from the
aggrieved party of written notice of breach, then
notwithstanding any previous waiver, the aggrieved party
shall be entitled to claim specific performance, damages
(if applicable) and, subject to the immediately
succeeding sentence, such other remedies as may be
available. It is specifically agreed that neither party
shall have the right to cancel this Agreement or to claim
restitution (whether the breach is material or not).
(e) NOTICES. (i) Any notices or
communications given to the parties hereto for the
purposes of this Agreement shall be in writing and
addressed as follows:
Botswana Development Corporation:
Botswana Development Corporation Limited
Private Bag 160
Gaborone
Botswana
Attention: Company Secretary
Telex: 2251BD
Cable Address:
Telefax: (267) 373-539; 359-354 or 304-393
Lazare Kaplan International:
Lazare Kaplan International Inc.
529 Fifth Avenue
New York, New York 10017
United States of America
Attention: The Chief Financial Officer
Telex: RCA 222746
Cable Address: MAIDENCAP
Telefax: (212) 972-8561
The Company:
Lazare Kaplan Botswana (Pty) Limited
Private Bag 00334
Gaborone
Botswana
Attention: The Managing Director
Telefax: (267) 320-814
Notices or communications given to either Lazare Kaplan
International or to the Company for the purposes of this
Agreement shall be deemed also to have been served upon
the Company or Lazare Kaplan International (as the case
may be).
(ii) Any notice or communication shall be
duly given or made when delivered addressed to the party
to whom it is made or to whom it is deemed given at its
address as specified in Section 6(e)(i), or at such other
address or cable address or telex or telefax number, as
such party may specify to the other parties in writing,
provided that any such notice of change of address or
cable address or telex or telefax number shall be
effective only upon receipt. If sent by prepaid
registered post, it shall be deemed to have been
delivered five days after posting; or if by telegram,
three days after dispatch; or if by hand, at the time of
delivery, in which case a written receipt must be
obtained; or if by telex or telefax, at the time such
telex or telefax is sent and acknowledged.
(f) BINDING EFFECT. This Agreement shall
inure to the benefit of and shall be binding upon the
parties hereto and their respective successors and
assigns.
(g) HEADINGS. The headings and captions
contained in this Agreement are inserted only as a matter
of convenience and in no way define, limit or extend the
scope or intent of this Agreement or any provisions
hereof.
(h) ENTIRE AGREEMENT. This Agreement
contains the entire understanding of the parties hereto
respecting the subject matter hereof, and supersedes all
prior agreements, discussions and understandings with
respect to the subject matter hereof.
(i) COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which when
so executed shall be deemed an original and all of which,
when taken together, shall constitute one and the same
Agreement.
IN WITNESS WHEREOF, the parties have signed
this Agreement as of the date first above written.
AS WITNESSES:
1.
----------------------------------------
For and on behalf of
BOTSWANA DEVELOPMENT CORPORATION LIMITED
2.
AS WITNESSES:
1.
----------------------------------------
For and on behalf of
LAZARE KAPLAN INTERNATIONAL INC.
2.
AS WITNESSES:
1.
----------------------------------------
For and on behalf of
LAZARE KAPLAN BOTSWANA (PTY) LIMITED
2.
Exhibit 13
LAZARE KAPLAN INTERNATIONAL INC.
-------------------------------------
The leader
in ideal cut
diamonds for
over 90 years.
LOGO
ANNUAL
REPORT
1994
-------------------------------------
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
LAZARE KAPLAN INTERNATIONAL INC. 1994 ANNUAL REPORT
Lazare Kaplan International Inc. is engaged in the cutting and polishing of
ideal cut diamonds, which it laser inscribes and distributes to quality retail
jewelers internationally under the brand name "Lazare Diamonds(R)". Each diamond
cut and polished by Lazare Kaplan craftsmen, whatever its size, is finished to
precise proportions, bringing out all of the diamond's natural brilliance, fire
and luster. Lazare Kaplan is also engaged in the trading of uncut rough diamonds
and non-ideal cut, commercial quality diamonds.
American Stock Exchange
The Company's common stock is traded on the American Stock Exchange under the
ticker symbol LKI.
Form 10-K
Upon written request, a copy of the Company's Form 10-K Annual Report without
exhibits for the year ended May 31, 1994 as filed with the Securities and
Exchange Commission, will be made available to stockholders without charge.
Requests should be directed to the Controller, Ms. James, Lazare Kaplan
International Inc., 529 Fifth Avenue, New York, New York 10017.
Annual Meeting
November 3, 1994
11 A.M.
Chemical Banking Corp.
270 Park Avenue
Third Floor, Auditorium
New York, New York 10017
Market Prices of Common Stock
by Fiscal Quarter
- - -----------------------------------
Fiscal 1994
--------------------
High Low
- - -----------------------------------
First 8 3/4 5 3/4
Second 6 7/8 5 7/8
Third 9 5/8 6 7/8
Fourth 9 3/8 8 1/8
- - -----------------------------------
Fiscal 1993
--------------------
High Low
- - -----------------------------------
First 6 3/8 5
Second 6 3/4 4 3/4
Third 7 5 3/8
Fourth 6 7/8 5 5/8
- - -----------------------------------
As of June 30, 1994 there were approximately 239 stockholders of record of the
6,131,106 issued and outstanding shares of the common stock of the Company.
To Our Stockholders:
Our Company's performance in the fiscal year ended May
31, 1994 showed marked improvement in revenues and net income
- - -- a continuation of last year's progress. Net revenues in
1994 were $204,047,000. This represents an increase of 29%
over revenues of $158,075,000 in fiscal 1993. Net income for
the period was $3,024,000 compared to a loss of $903,000 in
the previous fiscal year. The strategic deployment of
resources for future growth continued to be a priority for the
Company.
Management maintained its rigorous cost controls and
carefully monitored productivity. On a comparable basis,
selling, general and administrative costs increased 1% for the
year. Including the effects of costs associated with the
Company's foreign operations, S, G & A increased 9.5% for the
year. As an example of cost containment measures, recent
renegotiation of the lease for the New York headquarters
office has resulted in a 50% reduction in rent.
The U.S. market for diamonds and jewelry showed
considerable improvement as the domestic economy recovered and
consumers gained confidence that the recession was over. The
extensive nationwide network of quality jewelers who stock and
market Lazare Diamonds(R) continued to gain market share. Our
domestic sales increased by over 50%. Our jewelers and we
remain committed to the quality and value represented in the
brand name Lazare Diamonds(R). We continue to provide our
customers with a full package of marketing and point of sale
support. We were encouraged by the results of the steps we
took last year to help our customers meet the challenges of
the competitive environment that now prevails.
The Japanese economy, on the other hand, continued to
lag, as have our sales in that market. Early indications
point to a slow economic recovery. Our Company is well
positioned to participate in future growth in that important
market for quality diamonds. Our distributor of long
standing, AIWA Co. Ltd., showed great imagination and
tenacity in confronting the challenges of the Japanese
recession. They have made the necessary adjustments to meet
prevailing competitive conditions. The strengthening yen,
in time, should favorably impact sales in Japan as it lowers
the yen cost of diamonds to Japanese consumers.
Our revenues and income from sales in the Pacific Rim
showed significant increases. This area represents an
important growth market for our company. Additional quality
distribution outlets were added in Hong Kong, Taiwan and
Thailand. We have also initiated steps to participate, as
soon as practicable, in the new market for diamonds that is
developing in the People's Republic of China.
Our rough trading operation in Belgium continued to
perform well and contributed to our profitability. It also
enabled us to overcome, in part, the margin pressure on the
manufacture of rough to polished that we and others in the
industry confront. We remain concerned about this problem
created to some extent by the structural changes now taking
place in the industry.
The manufacturing operation in Puerto Rico performed
well. Productivity, costs, and yields were closely monitored
and managed. Management is staying abreast of new
technological developments and is alert to their possible
economic impact. Great support was also given by Puerto Rico
management to the new facility in Botswana and to our efforts
in Russia.
Our new facility in Molepolole, Botswana, completed its
first year of operations. It presently employs 350 workers,
including 330 local employees. The careful, meticulous
training program is increasingly achieving the targeted
productivity objective as well as the quality criteria
required by the demanding tolerances of Lazare Diamonds(R).
When the operation is on stream it will also provide us with
a reliable, consistent supply of smaller sizes (melee) of
ideal cut stones, as an additional line we can offer to our
existing customers and to quality jewelry manufacturers.
Marketing efforts for this new product line were started in
the course of last year. Botswana is the world's leading
producer of rough diamonds. Its mines are some of the
lowest cost producers with reserves going well into the next
century. We have received the fullest cooperation and
support from the Botswana Government in line with its
publicly stated policy to encourage the establishment of a
domestic cutting industry. On April 14, 1994 the Botswana
Development Corporation Limited (BDC) and Lazare Kaplan
International Inc. jointly announced a new investment by the
BDC in Lazare Kaplan Botswana. On August 31, 1994 the
Company completed its transaction with BDC whereby BDC has
invested 21.8 million pula (approximately $8.0 million) for
an equity position in Lazare Kaplan Botswana (Pty) Ltd.
The feasibility study and the interim rehabilitation of
the Akwatia diamond mine in Ghana, leading to its eventual
privatization, are proceeding. On August 2, 1994, the
Ghanaian parliament ratified the Establishment Agreement
between the Government of Ghana, De Beers Centenary and the
Company, establishing a new jointly owned diamond mining
operation -- Birim River Diamonds Ltd.
Recent press reports have indicated that rough diamonds
of alleged Russian origin have appeared on the Antwerp and
Israeli markets. These reports also allude to tensions
between the Central Selling Organization (the marketing arm of
De Beers) and Roskomdragmet (the Russian Government
organization responsible for diamond exports) on
interpretation of the existing sales contract for rough
diamonds as well as the terms for renewal of that agreement
when it expires in 1995. It is difficult to assess the full
accuracy of the reports, or to estimate the impact of such
sales on future market conditions. We are attentive to these
developments, and will continue to monitor them. Our venture
with Roskomdragmet has recently been expanded. We have
provided expert management, skilled technicians, and marketing
facilities from our New York and Puerto Rico operations to
work with the highly skilled Russian technicians. Good
results have been achieved that provide a sound basis for
further cooperation.
The managers and employees of the Company, in all
departments at home and abroad, deserve full credit for the
results that were achieved last year. We appreciate their
continued commitment and professionalism, so critical to the
company's continued growth in this difficult competitive
period.
---------------------- ---------------------
Maurice Tempelsman Leon Tempelsman
Chairman of the Board Vice Chairman and
President
2
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
- - ----------------------------------------------------------------------------------------
(In thousands, except per share data) 1994 1993 1992 1991 1990
- - ----------------------------------------------------------------------------------------
Net Sales $204,047 $158,075 $151,875 $133,016 $100,012
- - -----------------------------------------------------------------------------------------
Income/(loss) before income tax
provision, minority interest and
extraordinary item $ 2,803 $ (728) $(2,287) $ 4,349 $ 5,376
- - ----------------------------------------------------------------------------------------
Extraordinary item, utilization of net
operating loss carryforward - - - $ 1,821 $ 1,688
- - ----------------------------------------------------------------------------------------
Net income/(loss) $ 3,024 $ (903) $(2,951) $ 4,073 $ 5,268
- - ----------------------------------------------------------------------------------------
Income/(loss) per share (based on the
weighted average number of shares
outstanding)(1) $ .49 $ (.15) $ (.48) $ .80 $ 1.65
- - ----------------------------------------------------------------------------------------
Fully diluted income/(loss) per share(2) $ .49 $ (.15) $ (.48) $ .80 $ 1.07
- - ----------------------------------------------------------------------------------------
At May 31:
Total assets $ 93,178 $ 86,452 $ 77,977 $ 79,695 $ 60,552
- - ----------------------------------------------------------------------------------------
Short-term debt $ 17,185 $ 12,005 $ 3,000 $ 3,000 $ 22,455
- - ----------------------------------------------------------------------------------------
Long-term debt $ 25,715 $ 30,000 $ 30,000 $ 30,000 $ 15,000
- - ----------------------------------------------------------------------------------------
Working capital $ 52,333 $ 53,011 $ 61,079 $ 66,565 $ 28,599
- - ----------------------------------------------------------------------------------------
Stockholders' equity $ 38,751 $ 35,671 $ 36,573 $ 39,525 $ 16,081
- - ----------------------------------------------------------------------------------------
(1) The effect on earnings per share for the utilization of net operating
loss carryforward was $.36 for 1991, $.53 for 1990.
(2) The effect on earnings per share fully diluted for the utilization of
net operating loss carryforward was $.34 for 1990.
Note: No cash dividends were declared or paid by the Company during the past
five fiscal years.
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Net Sales and Net Income tables are bar charts in the printed version
of this document.
Net Sales
($Millions)
- - ------------------------------------------------------------------------------
1990 1991 1992 1993 1994
- - ------------------------------------------------------------------------------
Net Sales $100,012 $133,016 $151,875 $158,075 $204,047
- - ------------------------------------------------------------------------------
Net Income (Loss)
($Millions)
- - ------------------------------------------------------------------------------
1990 1991 1992 1993 1994
- - ------------------------------------------------------------------------------
Net Income $5,268 $4,073 $(2,951) $ (903) $3,024
- - ------------------------------------------------------------------------------
This discussion and analysis should be read in conjunction with the
Selected Financial Data on page 3 and the audited financial statements and
related notes of the Company commencing on page 7 of this report. In this
discussion, the years "1994", "1993" and "1992" refer to the fiscal years ended
May 31, 1994, 1993 and 1992, respectively.
Results of Operations
Net Sales
Net sales in 1994 of $204,047,000 were $45,972,000 or 29% above the net
sales of $158,075,000 in 1993.
The Company's net revenue from the sale of polished diamonds of $51,349,000
in 1994 increased 18% compared to 1993 polished sales of $43,409,000. The
increase was a result of increased polished diamond sales in the United States
and Pacific Rim (excluding Japan) due to increased demand and strengthening
local economies and was partially offset by a weaker market in Japan.
During fiscal 1994, the Company changed its method of selling from using a
gross price list (allowing various discounts and allowances to be earned by its
customers) to net pricing. While this change did not have a significant impact
on the results of operations, the Company believes that it greatly enhanced
selling efficiency and facilitated increased sales.
Rough diamond sales increased 33% in 1994. This increase was due to the
Company's continued expansion of its rough trading operation and also its
continued efforts to match the quality of its raw materials manufactured with
the requirements of its customers. Those rough diamonds not selected based on
economic or quality analysis were promptly sold in the marketplace.
Net sales in 1993 of $158,075,000 represented an increase of $6,200,000 or
4% over net sales of $151,875,000 in 1992.
The Company's net revenue from the sale of polished diamonds in 1993 of
$43,409,000 increased $1,887,000 or 5% from $41,522,000 in 1992. The higher
polished diamond sales for 1993 were due to increased demand in Europe and the
overall comparatively lower level of polished diamond sales in the prior year.
Sales of rough diamonds increased 4% in 1993.
Gross Profit
The Company's gross margin on net sales of polished diamonds includes all
overhead costs associated with the purchase, sale and manufacture of rough
stones (the "Polished Diamond Gross Margin"). Polished Diamond Gross Margin was
24%, an increase of 4% from 1993 level of 20%. The increase was due to the mix
of polished diamonds sold wherein a greater proportion of higher quality stones
and large stones were sold during 1994 than in 1993.
4
The gross margin on sales of rough stones not selected for manufacturing,
including an allocation of overhead costs estimated to be associated with the
purchase and sale of rough stones, has been traditionally below 3%.
During 1994, the combined gross margin on net sales of both polished
diamonds and rough diamonds was 8.0%. This compares to 7.1% in 1993 and 7.6% in
1992. The higher margin in 1994 was attributable to a higher gross margin on
polished sales and slightly higher margin on overall sales of rough stones.
Polished Diamond Gross Margin was 20% in 1993, a decrease of 2% from the
1992 level of 22%. The decrease was primarily due to the mix of polished
diamonds sold as well as the inability of the Company to pass along to its
customers a price increase from its principal supplier.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in 1994 of $9,833,000
increased 9% or $856,000 compared with expenses of $8,977,000 in 1993. The
increase was primarily due to the inclusion of expenses associated with the
Company's operations in Botswana of approximately $749,000. In 1993 these
expenses were being deferred until the commencement of full operations at that
location. On a comparable basis, excluding the costs associated with the
Botswana operation, selling, general and administrative costs were up 1% in
1994.
In 1993, selling, general and administrative expenses of $8,977,000
decreased 15% or $1,581,000 compared with expenses of $10,558,000 in 1992. The
decrease was due to an overall reduction in the Company's general operating
expenses, including legal and consulting ($342,000), lower selling and marketing
expenses ($222,000), and decreased payroll costs of $722,000 which included the
capitalization of costs ($285,000) associated with the start-up of the Botswana
operation.
During 1992 the Company closed its rough diamond buying operation in Sierra
Leone. This was due to poor performance and the ultimate poor outlook for this
venture. In 1992 the Company incurred costs of $422,000 associated with this
operation. These costs were primarily composed of payroll, travel expenditures
and fixed assets.
Interest Expense
In 1994, interest expense was $4,003,000 which was offset by $256,000 of
interest income as compared to interest expense of $3,197,000 offset by $190,000
of interest income in 1993 and interest expense of $3,191,000 in 1992 offset by
$357,000 of interest income. The increase in interest expense in 1994 was due to
higher average short-term borrowings of $14,371,000 in 1994 as compared to
$6,175,000 in 1993, and a full year of the higher interest rate charged on the
Senior Notes (See Note 6 to the Financial Statements).
The increase in interest expense in 1993 was due to increased short-term
borrowings in 1993 as compared to 1992 and the higher interest rate charged on
the Senior Notes (See Note 6 to the Financial Statements) which was partially
offset by a capitalization of interest costs in Botswana related to the
construction of the new factory.
Taxes
During 1992, the Internal Revenue Service ("IRS") completed its examination
of the Company's Puerto Rico Federal tax returns for the taxable years ended May
31, 1987 and May 31, 1988. The IRS made an adjustment relating to the imputation
of interest on intercompany account balances resulting in an assessment of
$503,000. The Company agreed to this settlement and paid this assessment during
December, 1991. Beginning in 1989, the Company began to file a consolidated
Federal income tax return with its Puerto Rico operation and on November 1,
1993, the Puerto Rico subsidiary was merged into the Company. Therefore, the
Company does not believe that the adjustments made by the IRS for these years
will reoccur.
Income/(Loss) Per Share
During 1994, 1993 and 1992 income/(loss) per share was computed based on
the weighted average number of shares outstanding including, as appropriate, the
exercise of stock options during the period. For 1994, income per share was $.49
as compared to loss per share of $.15 in 1993 and loss per share of $.48 in
1992.
Foreign Operations
International business represents a major portion of the Company's revenues
and profits. All foreign sales are denominated in U.S. dollars and all pur-
5
MANAGEMENT'S DISCUSSION AND ANALYSIS
(Continued)
chases of rough diamonds worldwide are denominated in U.S. dollars. Therefore,
the Company does not experience any foreign currency exposure on its
international business. In addition, the functional currency for Lazare Kaplan
Botswana (Pty) Ltd. is the U.S. dollar and therefore, it is not affected by any
foreign currency translation adjustments.
Liquidity-Capital Resources
The Company's working capital at May 31, 1994 was $52,333,000, a decrease
of $677,000 from 1993. This decrease was due primarily to the
reclassification, for the first time, to current liabilities of the portion of
the Senior Notes which are due within one year. Without the inclusion of this
item, working capital increased by $3,608,000 reflecting higher inventory
levels associated with the Company's new operation in Botswana, and higher
accounts receivable levels.
The Company's working capital at May 31, 1993 was $53,011,000, a decrease
of $8,068,000 from 1992. The decrease in working capital was attributable to an
increase in short-term borrowings in 1993 of $9,005,000 as compared to a minimal
amount of borrowings in 1992 and the net loss incurred during the fiscal year.
These borrowings were used primarily to finance the operations of the Company's
Botswana facility.
Net fixed asset additions totaled $1,033,000, $3,500,000 and $2,000,000 in
1994, 1993 and 1992, respectively. The increase in net fixed asset additions in
1993 compared to 1992 was primarily attributable to the construction by the
Company of a cutting and polishing factory and a training facility in Botswana.
The factory, completed during 1993, is a state-of-the-art facility, using both
automated and manual equipment and will ultimately be able to employ 500 skilled
workers. During 1994, $735,000 of fixed assets were placed in service in
Botswana. During 1993, $1,019,000 of fixed assets were placed in service and
$2,385,000 was added to the cost of the newly constructed building.
During August, 1994, the Company completed its transaction with the
Botswana Development Corporation ("BDC") whereby the BDC invested 21.8
million pula (approximately $8.0 million) for an equity position in Lazare
Kaplan Botswana (Pty) Ltd. The investment is in the form of common shares
and cumulative, redeemable, non-voting, participating preference shares.
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%.
In May, 1991, the Company, through a private placement, issued $30,000,000
of 9.97% Senior Notes, due May 15, 2001. A portion of the net proceeds of the
Senior Notes were used to repay the Company's short-term bank indebtedness
outstanding and the balance was invested in a money market fund. These Senior
Notes were amended on December 1, 1992 to revise the consolidated fixed charge
ratio and increase the interest rate to 10.47% through August 31, 1994.
The Company has short-term lines of credit with three banks. The agreements
provide that the Company may borrow up to $20.0 million, in the aggregate. Two
of the facilities carry an interest rate at each respective bank's prime rate
and the third facility carries an interest rate of one-eighth of a percent above
the bank's prime rate. The term of one of the agreements is until September 30,
1994, the second expires October 31, 1994, and the third expires on November 30,
1994. As of May 31, 1994 there was a $9,900,000 balance outstanding on these
facilities. The Company believes that each credit facility will be extended on
its respective renewal date.
The Company has a $3.0 million credit facility, payable on demand, at a
rate of one-half of one percent above the six-month London Interbank Offered
Rate for Eurodollars. At May 31, 1994, the full amount of this facility had been
drawn upon.
Management believes the Company has the ability to meet its current and
anticipated financing needs.
Stockholders' equity was $38,751,000 at May 31, 1994, $35,671,000 at May
31, 1993 and $36,573,000 at May 31, 1992. The increase in 1994 is attributable
to the net income earned during the period. The decrease in 1993 is attributable
to the net loss during the period. Stockholders received no dividends in 1994,
1993 or 1992.
6
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended May 31
- - -------------------------------------------------------------------------------
(In thousands, except per share data) 1994 1993 1992
- - -------------------------------------------------------------------------------
Net Sales (Note 1) $ 204,047 $ 158,075 $ 151,875
Cost of Sales (Note 1) 187,664 146,819 140,348
- - -------------------------------------------------------------------------------
16,383 11,256 11,527
- - -------------------------------------------------------------------------------
Selling, general and administrative
expenses 9,833 8,977 10,558
Sierra Leone expenses - - 422
Interest expense--net of interest income
of $256, 1994, $190, 1993 and $357, 1992 3,747 3,007 2,834
- - -------------------------------------------------------------------------------
13,580 11,984 13,814
- - -------------------------------------------------------------------------------
Income/(loss) before income tax provision
and minority interest 2,803 (728) (2,287)
Income tax provision (Notes 1 and 3) 118 175 664
- - -------------------------------------------------------------------------------
Income/(loss) before minority interest 2,685 (903) (2,951)
Minority interest in loss of consolidated
subsidiary 339 - -
- - -------------------------------------------------------------------------------
NET INCOME/(LOSS) $ 3,024 $ (903) $ (2,951)
- - -------------------------------------------------------------------------------
INCOME/(LOSS) PER SHARE (NOTE 1) $0.49 $(0.15) $(0.48)
- - -------------------------------------------------------------------------------
Weighted average number of shares
outstanding 6,226,708 6,121,680 6,121,680
- - -------------------------------------------------------------------------------
See notes to consolidated financial statements.
7
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Additional Total
Common Paid-in Retained Stockholders'
(In thousands) Stock Capital Earnings Equity
- - --------------------------------------------------------------------------------
Balance, May 31, 1991 $6,122 $25,837 $ 7,566 $39,525
Net Loss - - (2,951) (2,951)
- - --------------------------------------------------------------------------------
Balance, May 31, 1992 6,122 25,837 4,615 36,574
Net Loss - - (903) (903)
- - --------------------------------------------------------------------------------
Balance, May 31, 1993 6,122 25,837 3,712 35,671
Net Income - - 3,024 3,024
Exercise of Stock Options,
9,426 shares issued 9 47 - 56
- - --------------------------------------------------------------------------------
Balance, May 31, 1994 $6,131 $25,884 $ 6,736 $38,751
- - --------------------------------------------------------------------------------
See notes to consolidated financial statements.
8
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31,
- - --------------------------------------------------------------------------------
(In thousands) 1994 1993
- - --------------------------------------------------------------------------------
Assets
CURRENT ASSETS:
Cash $ 914 $ 553
Notes and accounts receivable, less allowance
for doubtful accounts and sales returns and
allowances ($165, 1994 and $672, 1993) 23,200 20,159
Inventories (Note 1):
Rough stones 14,467 11,943
Polished stones 39,019 36,550
-------------------------
Total inventories 53,486 48,493
Prepaid expenses and other current assets 3,255 4,058
- - --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 80,855 73,263
PROPERTY, PLANT AND EQUIPMENT, net (Notes 1 and 2) 6,253 6,314
OTHER ASSETS 6,070 6,875
- - --------------------------------------------------------------------------------
$93,178 $86,452
- - --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Notes payable--banks (Note 5) $ 9,900 $ 9,005
Notes payable--other (Note 5) 3,000 3,000
Current portion of long-term debt (Note 6) 4,285 -
Accounts payable and other current liabilities
(Notes 1 and 4) 11,337 8,247
- - --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 28,522 20,252
SENIOR NOTES (Note 6) 25,715 30,000
- - --------------------------------------------------------------------------------
TOTAL LIABILITIES 54,237 50,252
- - --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 8)
MINORITY INTEREST (Note 1) 190 529
STOCKHOLDERS' EQUITY (Note 7)
Common Stock, par value $1 per share:
Authorized, 10,000,000 shares
Outstanding, 6,131,106 shares, 1994
and 6,121,680 shares, 1993 6,131 6,122
Additional paid-in capital 25,884 25,837
Retained earnings 6,736 3,712
- - --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 38,751 35,671
- - --------------------------------------------------------------------------------
$93,178 $86,452
- - --------------------------------------------------------------------------------
See notes to consolidated financial statements.
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended May 31,
- - --------------------------------------------------------------------------------
(In thousands) 1994 1993 1992
- - --------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net income (loss) $ 3,024 $ (903) $ (2,951)
Adjustments to reconcile net income/
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,899 893 742
Provision for uncollectible accounts 170 86 199
Minority interest in loss of
consolidated subsidiary (339) - -
Gain on sale of fixed assets - - (109)
(Increase)/decrease in assets and
increase/(decrease) in liabilities:
Notes and accounts receivable (3,211) (5,138) (3,385)
Inventories (4,993) 111 5,813
Prepaid expenses and other
current assets 803 (1,061) (1,092)
Other assets - (4,510) (1,335)
Accounts payable and other
current liabilities 3,029 (405) 1,234
-------------------------------------
Net cash provided by (used in)
operating activities 382 (10,927) (884)
- - --------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Proceeds from sale of fixed assets - - 167
Capital expenditures (972) (3,300) (2,000)
-------------------------------------
Net cash used in investing activities (972) (3,300) (1,833)
- - --------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Increase in short-term borrowings 895 9,005 -
Proceeds from exercise of stock options 56 - -
-------------------------------------
Net cash provided by financing activities 951 9,005 -
- - --------------------------------------------------------------------------------
Net increase/(decrease) in cash 361 (5,222) (2,717)
Cash at beginning of year 553 5,775 8,492
-------------------------------------
Cash at end of year $ 914 $ 553 $ 5,775
- - --------------------------------------------------------------------------------
Supplemental Disclosures of
Cash Flow Information:
Cash paid during the year for:
Interest expense $ 4,003 $ 3,197 $ 3,191
Income taxes 239 209 782
- - --------------------------------------------------------------------------------
Supplemental Schedule of
Non-Cash Financing Activities:
Capitalized Leases $ 61 $ 249 -
Land - 64 -
License fee - 465 -
- - --------------------------------------------------------------------------------
See notes to consolidated financial statements.
10
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended May 31, 1994, 1993 and 1992
1. Accounting Policies
a. The Company and its principles of consolidation
The Company and its subsidiaries are engaged in the cutting, polishing
and selling of diamonds and the trading of uncut rough diamonds. The
consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned except for Lazare Kaplan Botswana
(Pty) Ltd. which was owned 85% by the Company at May 31, 1994, 1993 and 1992.
Minority interest represents the minority stockholders' proportionate share of
the equity of Lazare Kaplan Botswana (Pty) Ltd. All material intercompany
balances and transactions have been eliminated.
b. Sales, sales returns and allowances
The Company records sales when title to stones passes to the customer. A
provision for returns and allowances is provided concurrent with the recording
of sales. The provision is based upon historical trends and management's
estimate of industry conditions.
The Company's net sales to customers in each of the following regions
for the years ended May 31, 1994, 1993 and 1992 are set forth below:
1994 1993 1992
- - ----------------------------------------------------
United States 16% 16% 18%
Pacific Rim 6% 10% 13%
Europe, Israel & other 78% 74% 69%
- - ----------------------------------------------------
100% 100% 100%
- - ----------------------------------------------------
No single customer of the Company accounted for 10% or more of the
Company's net sales for the fiscal years ending May 31, 1994, 1993 and 1992.
c. Inventories
Inventories are stated at the lower of cost, using the first-in, first-
out method, or market.
d. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and amortization. Depreciation and amortization is provided by the
straight-line method over the shorter of asset lives or lease terms.
e. Deferred costs
The Company deferred the recognition of certain costs for professional
fees, travel and total staffing incurred during the construction and training
period of the Company's cutting and polishing facility in Botswana. Such costs
included only direct and incremental costs incurred during the start-up period.
These costs are being amortized over a five year period which began on June 1,
1993.
f. Foreign currency
All foreign sales of the Company are denominated in U.S. dollars and all
purchases of rough diamonds worldwide are denominated in U.S. dollars.
Therefore, the Company does not experience any foreign currency exposure on its
international business. In addition, the functional currency for Lazare Kaplan
Botswana (Pty) Ltd. is the U.S. dollar and therefore, it is not affected by any
foreign currency translation adjustments.
g. Income taxes
For the years ended May 31, 1993 and 1992, the Company and its
subsidiary operating in the United States including Puerto Rico filed a
consolidated income tax return. On November 1, 1993, the Puerto Rican subsidiary
was merged into the Company. The Company's foreign subsidiaries are not subject
to Federal income taxes and their provisions for income taxes have been computed
based on the effective tax rates, if any, in the foreign countries.
There were no taxable dividends paid to the Company from foreign
subsidiaries during 1994.
h. Income/(loss) per share
Income/(loss) per share is computed based on the weighted average number
of shares outstanding, including, as appropriate, the exercise of stock options,
during each period.
i. Accounting Standards
In late 1992, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits,"
requiring that a liability be recorded for postemployment benefits which meet
certain conditions. Typical postemployment benefits include salary continuation,
supplemental unemployment benefits, severance benefits, disability related
benefits (including workers' compensation), job training and counseling, and
continuation of benefits such as health care and life insurance coverage. The
adoption of this Statement, which is not required until fiscal 1995, is not
expected to have a material effect on the Company's consolidated financial
statements.
11
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
2. Property, Plant and Equipment
Property, plant and equipment consists of (in thousands):
May 31,
- - --------------------------------------------------
1994 1993
- - --------------------------------------------------
Land and buildings $ 4,126 $ 4,145
Leasehold improvements 1,114 1,114
Machinery, tools and equipment 4,612 3,767
Furniture and fixtures 898 838
Computer installation 2,118 1,988
- - --------------------------------------------------
12,868 11,852
Less accumulated depreciation
and amortization 6,615 5,538
- - --------------------------------------------------
$ 6,253 $ 6,314
- - --------------------------------------------------
Depreciation and amortization rates:
- - --------------------------------------------------
Buildings 2 to 3.7%
Leasehold improvements 3.7 to 20%
Machinery, tools and equipment 10 to 25%
Furniture and fixtures 10 to 20%
Computer installation 10 to 33%
- - --------------------------------------------------
3. Income Taxes
Effective June 1, 1993, the Company has provided for deferred income
taxes in accordance with SFAS No. 109, "Accounting for Income Taxes", whereby
deferred income taxes are determined based upon the enacted income tax rates for
the years in which these taxes are estimated to be payable or recoverable. The
Company had previously accounted for income taxes under Accounting Principles
Board Opinion No. 11. The adoption of SFAS No. 109 did not have a material
impact on the Company's consolidated financial statements. 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
items comprising the Company's net deferred tax liabilities as of May 31, 1994
are as follows (in thousands):
Deferred tax liabilities:
Depreciation $1,500
Deferred tax assets:
Operating loss and other carryforwards 13,200
Other 300
- - --------------------------------------------------
12,000
Less: Valuation allowance (12,000)
- - --------------------------------------------------
Net deferred-tax liabilities $0
- - --------------------------------------------------
The income tax provision is comprised of the following (in thousands):
Year ended May 31,
- - --------------------------------------------------
1994 1993 1992
- - --------------------------------------------------
Current:
Federal $ 68 $ - $449
State and local 185 130 86
Foreign 70 45 129
- - --------------------------------------------------
323 175 664
- - --------------------------------------------------
Deferred:
Federal (68) - -
State and local (137) - -
- - --------------------------------------------------
(205) - -
- - --------------------------------------------------
$ 118 $175 $664
- - --------------------------------------------------
The tax provision is different from amounts computed by applying the
Federal income tax rate to the income before taxes as follows (in thousands):
- - --------------------------------------------------
1994 1993 1992
- - --------------------------------------------------
Tax provision (benefit)
at statutory rate $ 953 $(247) $(778)
(Decrease)/increase in
taxes resulting from:
Net (income)/loss
from foreign
subsidiaries not sub-
ject to Federal tax 694 (60) 127
IRS prior years
assessment - - 503
Foreign taxes paid 70 45 129
State and local taxes,
net of Federal benefit 48 130 86
Refund of prior
years tax - - (54)
Net operating loss
carryforward arising
in current year not
resulting in current
benefit - 307 651
Utilization of
net operating loss
carryforwards (1,647) - -
- - --------------------------------------------------
Actual tax provision $ 118 $ 175 $ 664
- - --------------------------------------------------
12
The Company has available Federal net operating losses to offset future
taxable income which expire as follows (in thousands):
Net
operating
Year losses
- - --------------------------------------------------
1998 $ 12,100
1999 4,200
2000 4,300
2001 3,500
2002 500
2007 1,000
2008 1,500
- - --------------------------------------------------
$ 27,100
- - --------------------------------------------------
In addition, the Company has New York State and New York City net
operating loss carryforwards of approximately $29,700,000 each, expiring from
1997 to 2008. The Company has Puerto Rico net operating loss carryforwards of
approximately $4,900,000 expiring from 1996 through 2001 and Botswana net
operating loss carryforwards of approximately $4,400,000 expiring from 1998
through 1999.
During 1992, the Internal Revenue Service ("IRS") completed its
examination of the Company's Puerto Rico Federal tax return for the taxable
years ended May 31, 1987 and May 31, 1988. The IRS made an adjustment relating
to the imputation of interest on intercompany account balances resulting in an
assessment of $503,000, which was paid by the Company.
4. Accounts Payable and Other
Current Liabilities
Accounts payable and other current liabilities consist of (in
thousands):
1994 1993
- - --------------------------------------------------
Accounts payable $ 4,422 $4,861
Accrued expenses and
income taxes 6,915 3,386
- - --------------------------------------------------
$11,337 $8,247
- - --------------------------------------------------
5. Lines of Credit
The Company has unsecured lines of credit with three banks. The
agreements provide that the Company may borrow up to $20.0 million, in the
aggregate. Two of the facilities carry an interest rate at the bank's prime rate
and the third facility carries an interest rate of one-eighth of a percent above
the bank's prime rate (which was 7.25% on May 31). The term of the first
agreement is until September 30, 1994, the second expires on October 31, 1994
and the third expires on November 30, 1994. At May 31, 1994, $9,900,000 was
outstanding.
The Company has a $3.0 million credit facility, payable on demand, at a
rate of one-half of one percent above the six-month London Interbank Offered
Rate (which was 5.38% on June 12). At May 31, 1994, the full amount of this
facility had been drawn upon.
6. Senior Notes
In May, 1991 the Company, through a private placement, issued
$30,000,000 of unsecured 9.97% Senior Notes, due May 15, 2001. Interest is
payable semi-annually every May 15 and November 15. Repayments of $4,285,000
annually on May 15 will commence in 1995 and end in 2000 with the remaining
principal of $4,290,000 payable on May 15, 2001. A portion of the net proceeds
of the Senior Notes was used to repay the Company's short-term bank indebtedness
outstanding after the closing. The remaining proceeds were invested in short-
term interest bearing funds and were used for working capital and expansion.
Provisions of the Senior Notes require, among other things, (a)
maintenance of defined levels of consolidated tangible net worth and current
working capital, (b) limitation of borrowing levels and (c) limitations on
restricted payments, including the amount of dividends. Under the provision of
the Senior Notes, the Company is not permitted to declare or pay any dividends
either in cash or property through August 31, 1994. Commencing September 1,
1994, this restriction will be modified to allow the declaration of dividends
subject to certain limitations set forth in the Senior Note Agreement.
13
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
On February 28, 1992, certain provisions of the Senior Notes were
amended to modify the limitations relating to the incurrence of indebtedness,
the making of restricted payments and to revise the consolidated fixed charge
ratio. On March 25, 1992, the Senior Notes were again amended to modify the
level of consolidated tangible net worth required to be maintained by the
Company.
On December 1, 1992, the Senior Notes were amended to revise the
consolidated fixed charge ratio and increase the interest rate to 10.47% through
August 31, 1994.
7. Stock Option Incentive Plan
A Stock Option Incentive Plan was approved by the Board of Directors on
March 11, 1988 (the "1988 Plan"). The Plan has reserved 650,000 shares of the
common stock of the Company for issuance to key employees of the Company and its
subsidiaries.
The purchase price of each share of common stock subject to an incentive
option under the 1988 Plan is not to be less than 100 percent of the fair market
value of the stock on the day the option is granted (110 percent for 10 percent
beneficial owners). The Compensation Committee determines the period or periods
of time during which an option may be exercised by the participant and the
number of shares as to which the option is exercisable during such period or
periods, provided that the option period shall not extend beyond ten years (five
years in the case of 10 percent beneficial owners) from the date the option is
granted.
A summary of the Plan's activity for the three years ended May 31, 1994
is as follows:
Number
of shares Option price
- - -------------------------------------------------------------
Outstanding-June 1, 1991 239,558 $5.000-$11.275
Options issued 142,500 $6.000-$ 7.625
Options cancelled (2,750) $8.000-$10.875
- - -------------------------------------------------------------
Outstanding-May 31, 1992 379,308 $5.000-$11.275
Options surrendered (212,117) $5.500-$11.275
Options reissued 212,117 $5.125-$ 5.638
Options cancelled (3,725) $5.000-$10.875
Options issued 144,950 $6.000-$ 6.600
- - -------------------------------------------------------------
Outstanding-May 31, 1993 520,533 $5.000-$ 7.625
Options issued 101,750 $6.000-$ 8.387
Options exercised (11,434) $5.000-$ 8.000
Options cancelled (10,601) $5.125-$ 7.625
- - -------------------------------------------------------------
Outstanding-May 31, 1994 600,248 $5.000-$ 8.387
(exercisable 293,605)
- - -------------------------------------------------------------
8. Commitments and Contingencies
Future minimum payments under noncancelable operating leases with
initial terms of more than one year consist of the following at May 31, 1994 (in
thousands):
Operating
Year leases
- - --------------------------------------------------
1995 $ 507
1996 436
1997 340
1998 321
1999 321
Thereafter 1,377
- - --------------------------------------------------
$3,302
- - --------------------------------------------------
Rental expenses, including additional charges paid for increases in real
estate taxes, etc., for the years ended May 31, 1994, 1993 and 1992, were
approximately $565,000, $438,000 and $476,000, respectively.
9. Profit Sharing Plan
During 1990, the Company adopted a profit sharing and retirement plan
subject to Section 401(k) of the Internal Revenue Code. The plan covers all
full-time employees who complete at least one year of service, or were
full-time employees at January 1, 1990. Participants may contribute up to a
defined percentage of their annual compensation through salary deductions. The
Company intends to match contributions in an amount equal to $0.50 for every
pretax dollar contributed up to the first 6% on the first $20,000 of
compensation providing the Company's pretax earnings for that fiscal year
exceeds $3,500,000. The Company contributed approximately $54,000 in February,
1992 for calendar 1991. The Company did not make matching contributions for
calendar 1993 or 1992.
14
10. Geographic Segment Information
Revenue, operating profit and income/(loss) before income tax provision
and minority interest for the three years ended May 31, 1994 and identifiable
assets at the end of each of those years, classified by geographic area which
was determined by where sales originated from and where identifiable assets are
held, were as follows (in thousands):
United Elimi- Consoli-
States Europe Africa nations dated
- - -------------------------------------------------------------------------------------------
Year ended May 31, 1994
- - -----------------------
Net sales to unaffiliated customers $130,070 $73,921 $ 56 $ - $204,047
Transfers between geographic areas 22,092 13,984 8,737 (44,813) -
---------------------------------------------------
Total revenue $152,162 $87,905 $ 8,793 $(44,813) $204,047
---------------------------------------------------
Operating profit $ 15,663 $ 772 $ 85 $ (137) $ 16,383
---------------------------------------------------
Income/(loss) before income tax
provision and minority interest $ 4,990 $ 420 $(2,461) $ (146) $ 2,803
---------------------------------------------------
Identifiable assets at May 31, 1994 $ 92,628 $ 8,386 $20,374 $(28,210) $ 93,178
- - -------------------------------------------------------------------------------------------
Year ended May 31, 1993
- - -----------------------
Net sales to unaffiliated customers $106,550 $51,474 $ 51 $ - $158,075
Transfers between geographic areas 3,353 2,401 4,575 (10,329) -
---------------------------------------------------
Total revenue $109,903 $53,875 $ 4,626 $(10,329) $158,075
---------------------------------------------------
Operating profit $ 10,491 $ 711 $ 129 $ (75) $ 11,256
---------------------------------------------------
(Loss)/income before income tax
provision $ (828) $ 209 $ (34) $ (75) $ (728)
---------------------------------------------------
Identifiable assets at May 31, 1993 $ 84,839 $ 3,645 $14,795 $(16,827) $ 86,452
- - -------------------------------------------------------------------------------------------
Year ended May 31, 1992
- - -----------------------
Net sales to unaffiliated customers $119,122 $32,753 - $ - $151,875
Transfers between geographic areas 218 8 - (226) -
---------------------------------------------------
Total revenue $119,340 $32,761 - $ (226) $151,875
---------------------------------------------------
Operating profit $ 11,237 $ 290 - $ - $ 11,527
---------------------------------------------------
(Loss) before income tax provision $ (1,958) $ (329) - $ - $ (2,287)
---------------------------------------------------
Identifiable assets at May 31, 1992 $ 83,165 $ 4,366 - $ (9,554) $ 77,977
- - -------------------------------------------------------------------------------------------
The identifiable assets which are included in the eliminations primarily
represent advances to affiliates. These advances are included therein since the
Company, which is the parent company, finances the operations of these
affiliates.
11. Subsequent Event
On August 31, 1994, the Company completed its transaction with the
Botswana Development Corporation ("BDC") whereby the BDC invested 21.8
million pula (approximately $8.0 million) for an equity position in Lazare
Kaplan Botswana (Pty) Ltd. The investment is in the form of common shares
and cumulative, redeemable, non-voting, participating preference shares.
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%.
15
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Lazare Kaplan International Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Lazare
Kaplan International Inc. and subsidiaries as of May 31, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended May 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Lazare Kaplan International
Inc. and subsidiaries as of May 31, 1994 and 1993 and the results of their
operations and their cash flows for each of the three years in the period ended
May 31, 1994 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
July 13, 1994
(August 31, 1994 as to Note 11)
16
LAZARE KAPLAN INTERNATIONAL INC. AND SUBSIDIARIES
CORPORATE INFORMATION
Corporate Headquarters
529 Fifth Avenue
New York, New York 10017
Telephone (212) 972-9700
Subsidiaries
Lazare Kaplan (Sierra Leone) Limited
Lazare Kaplan Japan Inc.
Lazare Kaplan Belgium, N.V.
Lazare Kaplan Europe Inc.
Lazare Kaplan Africa Inc.
Lazare Kaplan Botswana (Pty) Limited
Lazare Kaplan Ghana Ltd.
Lazare Kaplan (Bermuda) Ltd.
Kaplan Offshore Trading Company
Supreme Gems N.V.
Lazare Kaplan Belgium Jewelry N.V.
Directors and Officers
Maurice Tempelsman
Director;
Chairman of the Board
Leon Tempelsman
Director;
Vice Chairman of the Board
and President
George R. Kaplan
Director;
Vice Chairman of the Board
Michael W. Butterwick
Director;
Business Consultant
Lucien Burstein
Director;
Secretary
Partner
Warshaw Burstein Cohen
Schlesinger & Kuh
(attorneys)
Myer Feldman
Director;
Partner
Ginsburg, Feldman and Bress,
Chartered (attorneys)
Sheldon L. Ginsberg
Director;
Chief Financial Officer and
Vice President
Robert Speisman
Director;
Vice President-Sales
Registrar and Transfer Agent
Mellon Bank N.A.
P.O. Box 444
Pittsburgh, PA 15230
Counsel
Warshaw Burstein Cohen
Schlesinger & Kuh
555 Fifth Avenue
New York, New York 10017
Accountants
Deloitte & Touche LLP
1633 Broadway
New York, New York 10019
EXHIBIT 21
LIST OF SUBSIDIARIES OF
LAZARE KAPLAN INTERNATIONAL INC.
NAME ORGANIZED UNDER LAWS OF
- - ---- -----------------------
Lazare Kaplan (Sierra Leone) Limited Sierra Leone
Lazare Kaplan Japan Inc. Delaware
Lazare Kaplan Europe Inc. Delaware
Lazare Kaplan Belgium, N.V. Belgium
Lazare Kaplan Africa Inc. Delaware
Lazare Kaplan Botswana (Pty) Limited Botswana
Lazare Kaplan Ghana Ltd. Bermuda
Lazare Kaplan (Bermuda) Ltd. Bermuda
Kaplan Offshore Trading Company Bermuda
Supreme Gems N.V. Belgium
Lazare Kaplan Belgium Jewelry N.V. Belgium