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SECURITIES AND EXCHANGE COMMISSION |
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FORM 10-Q |
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(Mark One) |
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x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended September 30, 2003 |
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OR |
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from |
_____________ |
to ______________ |
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STEINER LEISURE LIMITED (Exact name of Registrant as Specified in its Charter) |
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Commission File Number: 0-28972 |
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Commonwealth of The Bahamas |
98-0164731 |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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Suite 104A, Saffrey Square |
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Nassau, The Bahamas |
Not Applicable |
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(Address of principal executive offices) |
(Zip Code) |
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(242) 356-0006 |
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(Former name , former address and former fiscal year, if changed since last report) |
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Indicate by check 4 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. [4 ] Yes [ ] No |
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Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). [4 ] Yes [ ] No |
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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. |
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Class |
Outstanding |
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Common Shares, par value (U.S.) $.01 per share |
16,463,745, which excludes 1,866,406 treasury shares as of November 10, 2003 |
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2
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STEINER LEISURE LIMITED AND SUBSIDIARIES |
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December 31, |
September 30, |
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2002 |
2003 |
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ASSETS |
(Unaudited) |
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CURRENT ASSETS: |
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Cash and cash equivalents |
$ |
15,175,000 |
$ |
22,345,000 |
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Accounts receivable, net |
12,348,000 |
10,410,000 |
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Accounts receivable - students, net |
4,481,000 |
4,747,000 |
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Inventories |
16,637,000 |
15,066,000 |
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Assets held for sale |
322,000 |
745,000 |
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Other current assets |
6,210,000 |
5,082,000 |
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Total current assets |
55,173,000 |
58,395,000 |
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PROPERTY AND EQUIPMENT, net |
49,087,000 |
48,986,000 |
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GOODWILL, net |
46,340,000 |
46,590,000 |
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OTHER ASSETS: |
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Intangible assets, net |
5,980,000 |
5,510,000 |
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Deferred financing costs, net |
1,083,000 |
810,000 |
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Other |
1,948,000 |
1,821,000 |
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Total other assets |
9,011,000 |
8,141,000 |
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Total assets |
$ |
159,611,000 |
$ |
162,112,000 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
$ |
7,981,000 |
$ |
5,543,000 |
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Accrued expenses |
15,524,000 |
17,520,000 |
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Current portion of long-term debt |
14,528,000 |
13,878,000 |
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Liabilities related to assets held for sale |
8,378,000 |
3,620,000 |
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Current portion of deferred tuition revenue |
5,286,000 |
6,039,000 |
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Gift certificate liability |
542,000 |
577,000 |
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Income taxes payable |
2,017,000 |
1,980,000 |
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Total current liabilities |
54,256,000 |
49,157,000 |
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LONG-TERM DEBT, net of current portion |
27,713,000 |
19,119,000 |
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LONG-TERM DEFERRED RENT |
1,050,000 |
937,000 |
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LONG-TERM DEFERRED TUITION REVENUE |
96,000 |
90,000 |
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MINORITY INTEREST |
50,000 |
42,000 |
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SHAREHOLDERS' EQUITY: |
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Preferred shares, $.0l par value; 10,000,000 shares authorized, none |
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issued and outstanding |
-- |
-- |
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Common shares, $.0l par value; 100,000,000 shares authorized, |
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18,248,000 shares issued in 2002 and 18,330,000 shares issued |
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in 2003 |
182,000 |
183,000 |
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Additional paid-in capital |
39,701,000 |
40,851,000 |
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Accumulated other comprehensive income |
614,000 |
1,583,000 |
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Retained earnings |
65,320,000 |
79,521,000 |
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Treasury shares, at cost, 1,866,000 shares in 2002 and 2003 |
(29,371,000 |
) |
(29,371,000 |
) |
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Total shareholders' equity |
76,446,000 |
92,767,000 |
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Total liabilities and shareholders' equity |
$ |
159,611,000 |
$ |
162,112,000 |
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The accompanying notes to condensed consolidated financial statements are an integral part of these balance sheets.
3
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
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FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2003 |
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(Unaudited) |
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Three Months Ended September 30, |
Nine Months Ended September 30, |
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2002 |
2003 |
2002 |
2003 |
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REVENUES: |
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Services |
$ |
45,932,000 |
$ |
52,717,000 |
$ |
127,956,000 |
$ |
144,489,000 |
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Products |
21,088,000 |
22,246,000 |
57,844,000 |
61,471,000 |
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Total revenues |
67,020,000 |
74,963,000 |
185,800,000 |
205,960,000 |
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COST OF SALES: |
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Cost of services |
36,664,000 |
42,156,000 |
101,219,000 |
116,238,000 |
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Cost of products |
15,807,000 |
16,631,000 |
43,384,000 |
46,049,000 |
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Total cost of sales |
52,471,000 |
58,787,000 |
144,603,000 |
162,287,000 |
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Gross profit |
14,549,000 |
16,176,000 |
41,197,000 |
43,673,000 |
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OPERATING EXPENSES: |
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Administrative |
3,274,000 |
3,777,000 |
9,361,000 |
10,482,000 |
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Salary and payroll taxes |
3,510,000 |
4,199,000 |
10,414,000 |
12,616,000 |
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Total operating expenses |
6,784,000 |
7,976,000 |
19,775,000 |
23,098,000 |
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Income from operations |
7,765,000 |
8,200,000 |
21,422,000 |
20,575,000 |
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OTHER INCOME (EXPENSE): |
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Interest expense |
(946,000 |
) |
(832,000 |
) |
(2,836,000 |
) |
(2,651,000 |
) |
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Other income |
21,000 |
68,000 |
106,000 |
493,000 |
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Total other income (expense) |
(925,000 |
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(764,000 |
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(2,730,000 |
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(2,158,000 |
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Income from continuing operations before |
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provision for income taxes, minority |
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interest and equity investment |
6,840,000 |
7,436,000 |
18,692,000 |
18,417,000 |
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PROVISION FOR INCOME TAXES |
346,000 |
562,000 |
718,000 |
1,204,000 |
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Income from continuing operations before |
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minority interest and equity investment |
6,494,000 |
6,874,000 |
17,974,000 |
17,213,000 |
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MINORITY INTEREST |
(461,000 |
) |
2,000 |
(1,220,000 |
) |
8,000 |
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INCOME IN EQUITY INVESTMENT |
88,000 |
109,000 |
234,000 |
249,000 |
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Income from continuing operations before |
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discontinued operations and cumulative effect |
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of a change in accounting principle |
6,121,000 |
6,985,000 |
16,988,000 |
17,470,000 |
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LOSS FROM DISCONTINUED OPERATIONS |
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(which includes loss on disposal in 2003 of |
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$94,000 and $1,642,000 for the three |
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and nine months ended September 30, 2003, |
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respectively), net of taxes |
(2,083,000 |
) |
(135,000 |
) |
(7,525,000 |
) |
(3,269,000 |
) |
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CUMULATIVE EFFECT OF A CHANGE IN |
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ACCOUNTING PRINCIPLE, net of taxes |
-- |
-- |
(29,643,000 |
) |
-- |
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Net income (loss) |
$ |
4,038,000 |
$ |
6,850,000 |
$ |
(20,180,000 |
) |
$ |
14,201,000 |
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Income (loss) per share-basic: |
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Income before discontinued operations and |
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cumulative effect of a change in accounting |
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principle |
$ |
0.38 |
$ |
0.43 |
$ |
1.07 |
$ |
1.07 |
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Loss from discontinued operations |
(0.13 |
) |
(0.01 |
) |
(0.48 |
) |
(0.20 |
) |
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Cumulative effect of a change in accounting |
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principle |
-- |
-- |
(1.86 |
) |
-- |
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$ |
0.25 |
$ |
0.42 |
$ |
(1.27 |
) |
$ |
0.87 |
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Income (loss) per share-diluted: |
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Income before discontinued operations and |
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cumulative effect of a change in accounting |
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principle |
$ |
0.38 |
$ |
0.41 |
$ |
1.05 |
$ |
1.05 |
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Loss from discontinued operations |
(0.13 |
) |
-- |
(0.46 |
) |
(0.20 |
) |
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Cumulative effect of a change in accounting |
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principle |
-- |
-- |
(1.83 |
) |
-- |
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$ |
0.25 |
$ |
0.41 |
$ |
(1.24 |
) |
$ |
0.85 |
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The accompanying notes to condensed consolidated financial statements are an integral part of these statements.
4
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2003
(Unaudited)
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Nine Months Ended |
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September 30, |
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2002 |
2003 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income (loss) |
$ |
(20,180,000 |
) |
$ |
14,201,000 |
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Loss from discontinued operations |
7,525,000 |
1,627,000 |
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Loss on disposal of discontinued operations |
- |
1,642,000 |
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Cumulative effect of a change in accounting principle |
29,643,000 |
-- |
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Income from continuing operations |
16,988,000 |
17,470,000 |
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Adjustments to reconcile income from continuing |
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Depreciation and amortization |
4,152,000 |
5,765,000 |
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Provision for doubtful accounts |
729,000 |
193,000 |
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Minority interest |
1,220,000 |
(8,000 |
) |
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Income in equity investment |
(234,000 |
) |
(249,000 |
) |
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(Increase) decrease in: |
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Accounts receivable |
(1,979,000 |
) |
1,834,000 |
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Inventories |
(879,000 |
) |
1,797,000 |
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Other current assets |
(3,276,000 |
) |
1,517,000 |
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Other assets |
952,000 |
378,000 |
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Increase (decrease) in: |
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Accounts payable |
(1,597,000 |
) |
(2,511,000 |
) |
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Accrued expenses |
1,653,000 |
2,858,000 |
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Income taxes payable |
323,000 |
(55,000 |
) |
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Deferred tuition revenue |
(446,000 |
) |
747,000 |
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Gift certificate liability |
(75,000 |
) |
35,000 |
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Net cash provided by operating activities of |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Proceeds from maturities of marketable securities |
515,000 |
-- |
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Capital expenditures |
(5,209,000 |
) |
(4,798,000 |
) |
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Acquisition, net of cash acquired |
(971,000 |
) |
(250,000 |
) |
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Net cash used in investing activities of |
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(Continued)
5
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2003
(Unaudited)
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Nine Months Ended |
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September 30, |
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2002 |
2003 |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from long-term debt |
$ |
6,683,000 |
$ |
-- |
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Payments on long-term debt |
(10,571,000 |
) |
(9,997,000 |
) |
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Debt issuance costs |
(248,000 |
) |
(468,000 |
) |
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Proceeds from share option exercises |
2,026,000 |
1,051,000 |
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Net cash used in financing activities |
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EFFECT OF EXCHANGE RATE |
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CHANGES ON CASH |
57,000 |
211,000 |
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NET CASH USED IN DISCONTINUED OPERATIONS |
(6,393,000 |
) |
(8,350,000 |
) |
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NET INCREASE IN CASH |
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AND CASH EQUIVALENTS |
3,420,000 |
7,170,000 |
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CASH AND CASH EQUIVALENTS, |
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Beginning of period |
10,242,000 |
15,175,000 |
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CASH AND CASH EQUIVALENTS, |
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End of period |
$ |
13,662,000 |
$ |
22,345,000 |
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SUPPLEMENTAL DISCLOSURES OF |
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Cash paid during the period for: |
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