-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UVZr6n+w4hW2KL3nDJ7xs6qjfHQovruM6IKHhosmHjwUQRkADaeunh+hLrqOVfIk jwqwXHkmo62Z42BHgjq99w== /in/edgar/work/0000950144-00-013548/0000950144-00-013548.txt : 20001114 0000950144-00-013548.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950144-00-013548 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEINER LEISURE LTD CENTRAL INDEX KEY: 0001018946 STANDARD INDUSTRIAL CLASSIFICATION: [7200 ] IRS NUMBER: 980164731 STATE OF INCORPORATION: C5 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28972 FILM NUMBER: 761644 BUSINESS ADDRESS: STREET 1: STE 104 A SAFFREY SQUARE CITY: NASSAU STATE: C5 ZIP: 00000 BUSINESS PHONE: 8093560006 MAIL ADDRESS: STREET 1: STE 104A STREET 2: SAFFREY SQ CITY: NASSAU STATE: C5 ZIP: 00000 10-Q 1 g65300e10-q.txt STEINER LEISURE LIMITED 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ STEINER LEISURE LIMITED ------------------------------------------------------ (Exact name of Registrant as Specified in its Charter) COMMISSION FILE NUMBER: 0-28972 COMMONWEALTH OF THE BAHAMAS 98-0164731 - ---------------------------- ---------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) SUITE 104A, SAFFREY SQUARE NASSAU, THE BAHAMAS NOT APPLICABLE - ---------------------------------------- -------------- (Address of principal executive offices) (Zip Code) (242) 356-0006 ---------------------------------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check [X] 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. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OUTSTANDING ----- ----------- Common Shares, par value (U.S.) $.01 16,628,300 shares as of per share November 10, 2000 ================================================================================ 2 STEINER LEISURE LIMITED INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION ITEM 1. Unaudited Financial Statements Condensed Consolidated Balance Sheets as of December 31, 1999 and September 30, 2000 ..................................................................... 3 Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 1999 and 2000................................................... 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999 and 2000........................................................... 5 Notes to Condensed Consolidated Financial Statements........................................ 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................... 9 PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K............................................................ 14 SIGNATURES ............................................................................................ 15 EXHIBIT INDEX........................................................................................... 16
-2- 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STEINER LEISURE LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30, 1999 2000 ------------ ------------ (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 23,893,000 $ 31,652,000 Marketable securities 6,261,000 5,153,000 Accounts receivable 6,924,000 5,154,000 Accounts receivable - students, net 2,503,000 7,141,000 Inventories 7,514,000 9,113,000 Other current assets 2,542,000 2,787,000 ------------ ------------ Total current assets 49,637,000 61,000,000 ------------ ------------ PROPERTY AND EQUIPMENT, net 8,111,000 8,978,000 ------------ ------------ GOODWILL, net 8,571,000 13,492,000 ------------ ------------ OTHER ASSETS: Trademarks and product formulations, net 261,000 218,000 License rights, net 733,000 720,000 Other 1,361,000 1,576,000 ------------ ------------ Total other assets 2,355,000 2,514,000 ------------ ------------ Total assets $ 68,674,000 $ 85,984,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 2,368,000 $ 3,241,000 Accrued expenses 9,019,000 8,877,000 Current portion of deferred tuition revenue 2,141,000 7,875,000 Current portion of capital lease obligations 2,000 -- Income taxes payable 1,002,000 798,000 ------------ ------------ Total current liabilities 14,532,000 20,791,000 ------------ ------------ LONG TERM DEFERRED TUITION REVENUE 144,000 189,000 ------------ ------------ MINORITY INTEREST 1,000 7,000 ------------ ------------ SHAREHOLDERS' EQUITY: Preferred shares, $.0l par value; 10,000,000 shares authorized, none issued and outstanding -- -- Common shares, $.0l par value; 100,000,000 shares authorized, 16,616,000 shares issued at December 31, 1999 and 16,628,000 shares issued at September 30, 2000, respectively 166,000 166,000 Additional paid-in capital 13,338,000 13,426,000 Accumulated other comprehensive income (65,000) (645,000) Retained earnings 57,074,000 74,583,000 Treasury shares, at cost, 1,017,000 shares in 1999 and 1,382,000 shares in 2000 (16,516,000) (22,533,000) ------------ ------------ Total shareholders' equity 53,997,000 64,997,000 ------------ ------------ Total liabilities and shareholders' equity $ 68,674,000 $ 85,984,000 ============ ============
The accompanying notes to condensed consolidated financial statements are an integral part of these balance sheets. -3- 4 STEINER LEISURE LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000 (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------- ------------------------------- 1999 2000 1999 2000 ------------ ------------ ------------ ------------- REVENUES: Services $ 20,599,000 $ 27,395,000 $ 54,787,000 $ 75,641,000 Products 13,808,000 15,137,000 38,907,000 44,321,000 ------------ ------------ ------------ ------------- Total revenues 34,407,000 42,532,000 93,694,000 119,962,000 ------------ ------------ ------------ ------------- COST OF SALES: Cost of services 15,865,000 20,729,000 42,265,000 57,251,000 Cost of products 9,595,000 11,219,000 27,006,000 32,814,000 ------------ ------------ ------------ ------------- Total cost of sales 25,460,000 31,948,000 69,271,000 90,065,000 ------------ ------------ ------------ ------------- Gross profit 8,947,000 10,584,000 24,423,000 29,897,000 ------------ ------------ ------------ ------------- OPERATING EXPENSES: Administrative 1,515,000 2,119,000 4,379,000 6,208,000 Salary and payroll taxes 1,535,000 2,041,000 4,343,000 5,891,000 Goodwill amortization 49,000 203,000 49,000 490,000 ------------ ------------ ------------ ------------- Total operating expenses 3,099,000 4,363,000 8,771,000 12,589,000 ------------ ------------ ------------ ------------- Income from operations 5,848,000 6,221,000 15,652,000 17,308,000 ------------ ------------ ------------ ------------- OTHER INCOME (EXPENSE): Interest income 412,000 403,000 1,294,000 1,185,000 Gain on sale of marketable securities -- -- 11,000 -- Interest expense (2,000) (1,000) (5,000) (2,000) ------------ ------------ ------------ ------------- Total other income (expense) 410,000 402,000 1,300,000 1,183,000 ------------ ------------ ------------ ------------- Income before provision for income taxes and minority interest 6,258,000 6,623,000 16,952,000 18,491,000 PROVISION FOR INCOME TAXES 384,000 342,000 1,051,000 976,000 ------------ ------------ ------------ ------------- Income before minority interest 5,874,000 6,281,000 15,901,000 17,515,000 MINORITY INTEREST -- -- -- (6,000) ------------ ------------ ------------ ------------- Net income $ 5,874,000 $ 6,281,000 $ 15,901,000 $ 17,509,000 ============ ============ ============ ============= EARNINGS PER COMMON SHARE: Basic $ 0.36 $ 0.41 $ 0.98 $ 1.14 ============ ============ ============ ============= Diluted $ 0.35 $ 0.40 $ 0.95 $ 1.10 ============ ============ ============ =============
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. -4- 5 STEINER LEISURE LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 2000 (UNAUDITED)
Nine Months Ended September 30, ------------------------------- 1999 2000 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 15,901,000 $ 17,509,000 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 1,890,000 1,776,000 Gain on sale of marketable securities (11,000) -- Minority interest -- 6,000 (Increase) decrease in- Accounts receivable (1,776,000) (624,000) Inventories 17,000 (1,834,000) Other current assets (141,000) (202,000) Other assets (995,000) (322,000) Increase (decrease) in- Accounts payable (1,326,000) 737,000 Accrued expenses 1,525,000) (204,000) Deferred tuition revenue 743,000 2,356,000 Income taxes payable 4,000 (163,000) ------------ ------------ Net cash provided by operating activities 15,831,000 19,035,000 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities (6,820,000) (2,635,000) Proceeds from maturities of marketable securities 3,730,000 2,785,000 Proceeds from sale of marketable securities 6,304,000 995,000 Capital expenditures (3,294,000) (2,075,000) Acquisitions, net of cash acquired (7,759,000) (4,149,000) ------------ ------------ Net cash used in investing activities (7,839,000) (5,079,000) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments on capital lease obligations (19,000) (2,000) Payments on long-term debt (14,000) -- Purchases of treasury shares -- (6,017,000) Net proceeds from stock option exercises 106,000 88,000 ------------ ------------ Net cash provided by (used in) financing activities 73,000 (5,931,000) ------------ ------------ EFFECT OF EXCHANGE RATE CHANGES ON CASH (22,000) (266,000) ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 8,043,000 7,759,000 CASH AND CASH EQUIVALENTS, beginning of period 10,058,000 23,893,000 ------------ ------------ CASH AND CASH EQUIVALENTS, end of period $ 18,101,000 $ 31,652,000 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for- Interest $ 5,000 $ 3,000 ============ ============ Income taxes $ 1,048,000 $ 1,114,000 ============ ============
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. -5- 6 STEINER LEISURE LIMITED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: The unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 1999 and 2000 reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly present the results of operations for the interim periods. The results of operations for any interim period are not necessarily indicative of results for the full year. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. (2) ORGANIZATION: Steiner Leisure Limited (including its subsidiaries, where the context requires; "Steiner Leisure," "we," "us," "our," and the "Company" refer to Steiner Leisure Limited) provides spa services and skin and hair care products to passengers on board cruise ships worldwide. Commencing in February 1999, the Company began operating the luxury health spa at the Atlantis Resort on Paradise Island in The Bahamas (the "Atlantis Spa"). In connection with the operation of the Atlantis Spa, the Company pays the resort's owner the greater of a minimum monthly rental and an amount based on its revenues at the Atlantis Spa. As the result of an acquisition in August 1999, the Company operates, through a wholly-owned subsidiary, four post-secondary schools in Florida offering degree and non-degree programs in massage therapy and skin care and related areas (the "Florida Schools"). As the result of an acquisition in April 2000, the Company operates, through a wholly-owned subsidiary, a total of five post-secondary massage therapy schools in Maryland, Pennsylvania and Virginia (the "Additional Schools"). On October 19, 2000, Steiner Leisure entered into an agreement to build and operate a luxury spa facility at the Aladdin Resort and Casino in Las Vegas, Nevada. The term of the lease of the facilities will be for 15 years with a five year renewal option if certain sales levels are achieved. (3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (a) MARKETABLE SECURITIES- Marketable securities consist of investment grade commercial paper. The Company accounts for marketable securities in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and, accordingly, all such instruments are classified as "available for sale" securities which are reported at fair value, with unrealized gains and losses reported as a separate component of shareholders' equity. (b) GOODWILL- Goodwill represents the excess of cost over the fair market value of identifiable net assets acquired. Goodwill is amortized on a straight-line basis over its estimated useful life of 20 years. The Company continually evaluates intangible assets and other long-lived assets for impairment whenever circumstances indicate that carrying amounts may not be recoverable. When factors indicate that the assets acquired in a business purchase combination and the related goodwill may be impaired, we recognize an impairment loss if the undiscounted future cash flows expected to be generated by the asset (or acquired business) are less than the carrying value of the related asset. (c) INCOME TAXES- Steiner Leisure files separate tax returns for its domestic subsidiaries. In addition, our foreign subsidiaries file income tax returns in their respective countries of incorporation, where required. Steiner Leisure follows Statement of -6- 7 Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS 109 utilizes the liability method and deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. SFAS 109 permits the recognition of deferred tax assets. Deferred income tax provisions and benefits are based on the changes to the asset or liability from period to period. (d) TRANSLATION OF FOREIGN CURRENCIES- Assets and liabilities of foreign subsidiaries are translated at the rate of exchange in effect at the balance sheet date; income and expenses are translated at the average rates of exchange prevailing during the year. The related translation adjustments are reflected in the accumulated other comprehensive income section of the consolidated balance sheets. Foreign currency gains and losses resulting from transactions, including intercompany transactions, are included in the condensed consolidated statements of operations. (e) EARNINGS PER SHARE- Basic earnings per share is computed by dividing the net income available to shareholders by the weighted average number of outstanding common shares. The calculation of diluted earnings per share is similar to basic earnings per share except that the denominator includes dilutive common share equivalents such as share options. The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share is as follows:
Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ------------------------------ 1999 2000 1999 2000 ------------ -------------- ------------ -------------- Weighted average shares outstanding used in calculating basic earnings per share 16,312,000 15,264,000 16,299,000 15,404,000 Dilutive common share equivalents 502,000 520,000 521,000 475,000 ----------- ----------- ----------- ----------- Weighted average common and common equivalent shares used in calculating diluted earnings per share 16,814,000 15,784,000 16,820,000 15,879,000 =========== =========== =========== =========== Options and warrants outstanding which are not included in the calculation of diluted earnings per share because their impact is antidilutive 431,000 744,000 431,000 906,000 =========== =========== =========== ===========
(f) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS- In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 provides guidance on applying generally accepted accounting principles to revenue recognition issues in financial statements. We will adopt SAB 101 as required in the fourth quarter of 2000. Management does not expect the adoption of SAB 101 to have a material impact on the Company's consolidated results of operations and financial position. In June 1999, the Financial Accounting Standards Board ("FASB") issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of Effective Date of FASB Statement No. 133." SFAS No. 137 defers for one year the effective date of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as amended by SFAS No. 138, will now apply to all fiscal quarters of all fiscal years beginning after June 15, 2000 and requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. The Company will adopt SFAS No. 133 as required in fiscal year 2001. The Company believes the adoption of this Statement will not have a material effect on the earnings and financial position of the Company. (4) ACQUISITIONS: In August 1999, the Company acquired the assets that now constitute the Florida Schools in consideration of approximately $7.9 million (including purchase price adjustments) in cash and $1,000,000 of the Company's common shares. The transaction was accounted for under the purchase method of accounting. The purchase price exceeded the fair market value of net assets acquired resulting in goodwill of approximately $8.7 million. -7- 8 In April 2000, the Company acquired the assets that now constitute the Additional Schools in consideration of approximately $4.1 million (including purchase price adjustments) in cash. The transaction was accounted for under the purchase method of accounting. The purchase price exceeded the fair market value of net assets acquired resulting in goodwill of approximately $5.3 million. Unaudited pro forma consolidated results of operations assuming the Florida Schools and the Additional Schools acquisitions had occurred at the beginning of the periods presented are as follows: NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- 1999 2000 ------------ ------------- Revenue $ 101,680,000 $ 121,390,000 Net income 15,406,000 17,622,000 Basic earnings per share 0.94 1.14 Diluted earnings per share 0.91 1.11 The above pro forma consolidated statement of operations are based upon certain assumptions and estimates which the Company believes are reasonable. The unaudited pro forma consolidated results of operations may not be indicative of the operating results that would have been reported had the acquisitions been consummated on January 1, 1999, nor are they necessarily indicative of results which will be reported in the future. (5) ACCRUED EXPENSES: Accrued expenses consist of the following: December 31, September 30, 1999 2000 ------------- --------------- (Unaudited) Operative commissions $ 1,638,000 $ 1,871,000 Guaranteed minimum rentals 3,117,000 2,981,000 Bonuses 750,000 689,000 Staff shipboard accommodations 397,000 443,000 Earnout 500,000 -- Other 2,617,000 2,893,000 ------------ ----------- Total $ 9,019,000 $ 8,877,000 =========== =========== (6) COMPREHENSIVE INCOME: Steiner Leisure adopted SFAS No. 130, "Reporting Comprehensive Income," effective January 1, 1998. SFAS No. 130 establishes standards for reporting and disclosure of comprehensive income and its components in financial statements. The components of Steiner Leisure's comprehensive income are as follows:
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------- ----------------------------------- 1999 2000 1999 2000 -------------- -------------- --------------- ---------------- Net income $ 5,874,000 $ 6,281,000 $ 15,901,000 $ 17,509,000 Unrealized gain (loss) on marketable securities, net of income taxes 435,000 25,000 (23,000) 37,000 Foreign currency translation adjustments, net of income taxes (201,000) (231,000) (474,000) (616,000) ------------- ------------- ------------- ------------- Comprehensive income $ 6,108,000 $ 6,075,000 $ 15,404,000 $ 16,930,000 ============= ============= ============= =============
-8- 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL Steiner Leisure Limited (including its subsidiaries and predecessors, "Steiner Leisure," "we," "us" and "our" refer to Steiner Leisure) is the leading worldwide provider of spa services and skin and hair care products on board cruise ships. Payments to cruise lines are based on a percentage of our passenger revenues and, in certain cases, a minimum annual rental or a combination of both. In general, Steiner Leisure has experienced increases in rent payments as a percentage of revenue upon entering into new agreements with cruise lines. Steiner Leisure also sells its services and products through land-based channels, including a luxury spa at the Atlantis Resort on Paradise Island in The Bahamas ("Atlantis Spa") and has entered into an agreement to build and operate a luxury spa facility at the Aladdin Resort and Casino in Las Vegas, Nevada. Steiner Leisure also operates nine post secondary schools in the United States offering degree and non-degree programs in massage therapy and related courses. Steiner Leisure, Steiner Transocean Limited, our subsidiary that conducts our shipboard operations, and Cosmetics Limited, our subsidiary that owns the rights to, and distributes our Elemis and La Therapie products, are Bahamian international business companies ("IBCs"). The Bahamas does not tax Bahamian IBCs. We believe that income from our maritime operations will be foreign source income that will not be subject to United States, United Kingdom or other taxation. Approximately 86% of our income for the first nine months of 2000 was not subject to United States or United Kingdom income tax. The income from our United States subsidiaries, including those that perform administrative services for us, operate our massage therapy schools and sell our products in the United States, are subject to U.S. federal income tax at regular corporate rates (generally up to 35%) and may be subject to additional U.S. federal, state and local taxes. Earnings from Steiner Training and Elemis Limited, our United Kingdom subsidiaries which accounted for a total of 9% of our pre-tax income for the first nine months of 2000, will be subject to U.K. tax rates (generally up to 31%). Our Bahamas subsidiary that conducts our Atlantis Spa operations is not an IBC and is subject to tax on its revenues of approximately one percent. To the extent that our income from non-maritime operations in jurisdictions that impose income taxes increases more rapidly than any increase in our maritime-related income, the percentage of our income subject to tax would increase. On October 31, 2000, Steiner Leisure was advised by Norwegian Cruise Line that our agreement to serve Norwegian's vessels would not be renewed after its expiration on December 31, 2000. -9- 10 RESULTS OF OPERATIONS The following table sets forth for the periods indicated, certain selected income statement data expressed as a percentage of revenues:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ------------------- 1999 2000 1999 2000 ------ ------ ------ ------ Revenues: Services 59.9% 64.4% 58.5% 63.0% Products 40.1 35.6 41.5 37.0 ------ ------ ------ ------ Total revenues 100.0 100.0 100.0 100.0 ------ ------ ------ ------ Cost of sales: Cost of services 46.1 48.7 45.1 47.7 Cost of products 27.9 26.4 28.8 27.4 ------ ------ ------ ------ Total cost of sales 74.0 75.1 73.9 75.1 ------ ------ ------ ------ Gross profit 26.0 24.9 26.1 24.9 Operating expenses: Administrative 4.4 5.0 4.7 5.2 Salary and payroll taxes 4.5 4.8 4.6 4.9 Amortization of goodwill 0.1 0.5 0.1 0.4 ------ ------ ------ ------ Total operating expenses 9.0 10.3 9.4 10.5 ------ ------ ------ ------ Income from operations 17.0 14.6 16.7 14.4 Other income 1.2 0.9 1.4 1.0 ------ ------ ------ ------ Income before provision for income taxes and minority interest 18.2 15.5 18.1 15.4 Provision for income taxes 1.1 0.8 1.1 0.8 ------ ------ ------ ------ Income before minority interest 17.1 14.7 17.0 14.6 Minority interest -- -- -- -- ------ ------ ------ ------ Net income 17.1% 14.7% 17.0% 14.6% ====== ====== ====== ======
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 REVENUES. Revenues increased approximately 24.0%, or $8.1 million, to $42.5 million in the third quarter of 2000 from $34.4 million in the third quarter of 1999. Of this increase, $6.8 million was attributable to an increase in services revenues and $1.3 million was attributable to an increase in products revenues. The increase in revenues was primarily attributable to an average of seven additional spa ships in service in the third quarter of 2000 compared to the third quarter of 1999, the commencement of operations at our Florida Schools on August 25, 1999, and the commencement of operations at our Additional Schools in April 2000. We had an average of 1,097 shipboard staff members in service in the third quarter of 2000 compared to an average of 988 shipboard staff members in service in the third quarter of 1999. Revenues per shipboard staff per day increased by 4.3% to $365 in the entire third quarter of 2000 from $350 in the third quarter of 1999. COST OF SERVICES. Cost of services as a percentage of services revenue decreased to 75.7% in the third quarter of 2000 from 77.0% in the third quarter of 1999. This decrease was due to increases in productivity of shipboard staff during the third quarter of 2000 compared to the third quarter of 1999, a decrease in the rent allocable to services revenues on cruise ships covered by agreements which were renewed after the third quarter of 1999 and became effective during the third quarter of 2000, and the effect of the lower cost of services as a percentage of services revenues at our Florida Schools (which were owned by us for a portion of the third quarter of 1999) and Additional Schools (which were not owned by us during the third quarter of 1999). COST OF PRODUCTS. Cost of products as a percentage of products revenue increased to 74.1% in the third quarter of 2000 from 69.5% in the third quarter of 1999. This increase was due to increases in rent allocable to products sales on cruise ships covered by agreements which were renewed after the third quarter of 1999 and became effective during the third quarter of 2000. OPERATING EXPENSES. Operating expenses as a percentage of revenues increased to 10.3% in the third quarter of 2000 from 9.0% in the third quarter of 1999 as a result of the operating expenses and goodwill amortization at our Florida Schools (which were owned by us for a portion of the third quarter of 1999) and Additional Schools (which were not owned by us during the entire third quarter of 1999). -10- 11 PROVISION FOR INCOME TAXES. The provision for income taxes decreased to an overall effective rate of 5.2% for the third quarter of 2000 from an overall effective rate of 6.1% for the third quarter of 1999 primarily due to the income earned in jurisdictions that do not tax our income being greater than our income earned in jurisdictions that tax our income. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 REVENUES. Revenues increased approximately 28.0%, or $26.3 million, to $120.0 million for the nine months ended September 30, 2000 from $93.7 million for the nine months ended September 30, 1999. Of this increase, $20.9 million was attributable to increases in services provided on cruise ships and $5.4 million was attributable to increases in sales of products. The increase in revenues for the first nine months of 2000 compared to the same period in the prior year was primarily attributable to an average of seven additional spa ships in service, the increase in revenues at the Atlantis Spa, the commencement of operations at our Florida Schools on August 25, 1999, and the commencement of operations at our Additional Schools in April 2000. The Company had 1,063 shipboard staff members in service on average during the nine months ended September 30, 2000 compared to 920 shipboard staff members in service on average during the nine months ended September 30, 1999. Revenues per staff per day increased by 3.2% in the first nine months of 2000 compared to the comparable period of 1999. COST OF SERVICES. Cost of services as a percentage of services revenue decreased to 75.7% in the first nine months of 2000 from 77.1% for the first nine months of 1999. This decrease was due to an increase in productivity of onboard staff during the first nine months of 2000 compared to the same period in prior year, a decrease in the rent allocable to services revenues on cruise ships covered by agreements which were renewed after the first quarter of 1999 and became effective during the first quarter of 2000, and the effect of the lower cost of services as a percentage of services revenues at our Florida Schools (which were owned by us during a portion of 1999) and Additional Schools (which were not owned by us during all of 1999). COST OF PRODUCTS. Cost of products as a percentage of products revenue increased to 74.0% in the first nine months of 2000 from 69.4% for the first nine months of 1999. This increase was primarily due to increases in rent allocable to products sales on cruise ships covered by agreements which were renewed after the first quarter of 1999 and became effective during the first quarter of 2000. OPERATING EXPENSES. Operating expenses as a percentage of revenues increased to 10.5% for the first nine months of 2000 from 9.4% for the first nine months of 1999 as a result of the operating expenses and goodwill amortization at our Florida Schools (which were owned by us during a portion of 1999) and Additional Schools (which were not owned by us during the first nine months of 1999). PROVISION FOR INCOME TAXES. The provision for income taxes decreased to an overall effective rate of 5.3% for the first nine months of 2000 from an overall effective rate of 6.2% for the first nine months of 1999 primarily due to the income earned in jurisdictions that do not tax our income being greater than our income earned in jurisdictions that tax our income. SEASONALITY Although certain cruise lines have experienced moderate seasonality, we believe that the introduction of cruise ships into service throughout a year has mitigated the effect of seasonality on our results of operations. In addition, decreased passenger loads during slower months for the cruise industry has not had a significan impact on our revenues. However, due to our dependence on the cruise industry, revenues may in the future be affected by seasonality. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operating activities during the first nine months of 2000 was $19.0 million compared to $15.8 million in the first nine months of 1999. This increase is primarily due to the increase in our net income. Steiner Leisure had working capital of approximately $40.2 million at September 30, 2000 compared to $35.1 million at December 31, 1999. On October 19, 2000, Steiner Leisure entered into an agreement to build and operate a luxury spa facility at the Aladdin Resort and Casino in Las Vegas, Nevada. The term of the lease of the facilities will be for 15 years with a five -11- 12 year renewal option if certain sales levels are achieved. We estimate that the build-out will cost approximately $13.5 million and the spa will open in September 2001. The build-out will be funded from our working capital. In April 2000, Steiner Leisure acquired the assets of a total of five post-secondary massage therapy schools located in Maryland, Pennsylvania and Virginia. The purchase price of approximately $4.1 million in cash was funded from our working capital. Through November 5, 2000, we purchased a total of 365,000 of our common shares in 2000 in the open market for an aggregate purchase price of approximately $6.0 million. The cash used to make such purchases was funded from our working capital. These purchases were made pursuant to a share purchase program authorized by our Board of Directors. We believe that cash generated from operations is sufficient to satisfy the cash required to operate our business. Any significant acquisition may require outside financing. We currently do not have an agreement with respect to an acquisition. INFLATION Steiner Leisure does not believe that inflation has had a material adverse effect on revenues or results of operations. However, public demand for leisure activities, including cruises, is influenced by general economic conditions, including inflation. Periods of economic recession or high inflation, particularly in North America where a number of cruise passengers reside, could have a material adverse effect on the cruise industry upon which we are dependent. -12- 13 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS From time to time, including herein, Steiner Leisure may publish "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "may," "will," "intend," "expect," "proposed," "anticipate," "believe," "estimate" and similar expressions are intended to identify such forward-looking statements. Such forward looking statements include, among others, statements regarding: o our proposed activities pursuant to agreements with cruise lines or land-based operators; o our future land-based activities; o scheduled introductions of new ships by cruise lines; o our ability to generate sufficient cash flow from operations; and o the extent of the taxability of our income. Such statements involve known and unknown risks, uncertainties and other factors which may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the following: o negotiations with cruise lines resulting in agreements which may not be as beneficial to us as anticipated or non-renewals of agreements; o our dependence on cruise line concession agreements of specified terms and that are terminable by cruise lines with limited or no advance notice under certain circumstances; o our dependence on the cruise industry and our being subject to the risks of that industry; o our obligation to make minimum payments to certain cruise lines and the Atlantis Resort irrespective of the revenues received by us from customers and increase in rent payments accompanying new cruise line agreements; o our dependence on a limited number of cruise companies and on a single product manufacturer; o our dependence for success on our ability to recruit and retain qualified personnel; o changes in the taxation of our Bahamas subsidiaries; o changing competitive conditions, including increased competition from providers of shipboard spa services; o changes in laws and government regulations applicable to us and the cruise industry; o our limited experience in land-based operations including with respect to the integration of acquired businesses; o uncertainties beyond our control that could effect our ability to timely and cost-effectively construct land-based spa facilities; o product liability or other claims against us by customers of our products or services; and o our failure, or the failure of a cruise line customer or supplier, to correct a material Year 2000 problem. We assume no duty to update these forward-looking statements. The risks to which we are subject are more fully described under "Certain Factors That May Affect Future Operating Results" in Steiner Leisure's Annual Report on Form 10-K for the fiscal year ended December 31, 1999, filed with the Securities and Exchange Commission. -13- 14 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS The exhibits listed below have been filed as part of this Quarterly Report on Form 10-Q. 10.7 Amended and Restated Non-Employee Directors' Share Option Plan 27 Financial Data Schedule (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed by Steiner Leisure during the quarter ended September 30, 2000. -14- 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: November 13, 2000 STEINER LEISURE LIMITED ----------------------------------- (Registrant) /s/ CLIVE E. WARSHAW ----------------------------------- Clive E. Warshaw Chairman of the Board and Chief Executive Officer /s/ LEONARD I. FLUXMAN ----------------------------------- Leonard I. Fluxman President and Chief Operating Officer /s/ CARL S. ST. PHILIP ----------------------------------- Carl S. St. Philip Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) -15- 16 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 10.7 Amended and Restated Non-Employee Directors' Share Option Plan 27 Financial Data Schedule -16- EX-10.7 2 g65300ex10-7.txt AMENDED NON-EMPLOYEE DIRECTORS' SHARE OPTION PLAN 1 EXHIBIT 10.7 AMENDED AND RESTATED STEINER LEISURE LIMITED NON-EMPLOYEE DIRECTORS' SHARE OPTION PLAN APRIL 27, 2000 2 STEINER LEISURE LIMITED NON-EMPLOYEE DIRECTORS' SHARE OPTION PLAN 1. INTRODUCTION. This plan shall be known as the "Steiner Leisure Limited Non-Employee Directors' Share Option Plan" (this "Plan"). This Plan sets forth the terms of grants of options (each, an ""ption") to purchase the common shares (the "Shares") of Steiner Leisure Limited (the "Company") to Non-Employee Directors (as defined below) of the Company. The purpose of this Plan is to advance the interests of Company and its shareholders by promoting an identity of interest between the Company's non-employee directors and its shareholders, providing non-employee directors with a proprietary stake in the Company's success and strengthening the Company's ability to attract and retain qualified non-employee directors by affording such persons an opportunity to share in the future success of the Company. 2. DEFINITIONS. (a) ACT means the Securities Act of 1933, as amended. (b) BOARD means the Board of Directors of the Company. (c) COMPANY means Steiner Leisure Limited. (d) DATE OF GRANT means the date as of which an Option is granted to a Non-Employee Director pursuant to Section 5 of this Plan. (e) EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. (f) FAIR MARKET VALUE means, on the date in question, or if the prices described in clauses (i) and (ii), below, are not available on such date, on the latest date preceding the date in question on which such prices are available, (i) the closing sales price per share of the Shares underlying an Option on the Nasdaq Stock Market ("Nasdaq") or, if the Shares are not then traded on Nasdaq, on any national securities exchange, or (ii) if the Shares are not then traded on Nasdaq or such exchange, and are then traded on an over-the-counter market, the average of the closing bid and asked prices for the Shares in such over-the-counter market or (iii) if the Shares are then not listed on Nasdaq or such exchange, or traded in an over-the-counter market, such value as the Board may determine. (g) NON-EMPLOYEE DIRECTOR means a member of the Board of Directors of the Company who is not an employee of the Company or any subsidiary (as defined under Rule 12b-2 under the Exchange Act) of the Company on a date in question. (h) OPTIONS means the options to purchase Shares granted pursuant to this Plan. (i) PLAN means this Steiner Leisure Limited Directors' Share Option Plan. (j) SHARES means the common shares of the Company, par value (U.S.) $.01 per share. 3. ADMINISTRATION. This Plan shall be administered by the Board or a committee of the Board so designated by the Board to administer this Plan. Where the context so requires, references to the Board herein shall refer to any such committee. Subject to the provisions of this Plan, the Board shall be authorized to interpret this Plan, to establish, amend and rescind any rules and regulations relating to this Plan and to make all other determinations necessary or advisable for the administration of this Plan; provided, however, that the Board shall have no discretion with respect to the selection of directors to receive Options, the number of Shares to be received upon exercise of Options or the timing of grants of Options, all of which shall be determined in accordance with -1- 3 the provisions of this Plan. Notwithstanding the foregoing, the Board may amend this Plan pursuant to Section 8, below. The determinations of the Board in the administration of this Plan, as described herein, shall be final and conclusive. The Chairman of the Board and the Chief Operating Officer of the Company, and either of them, shall be authorized to implement this Plan in accordance with its terms and to take such actions of a ministerial nature as shall be necessary to effectuate the intent and purposes thereof. Except as otherwise provided herein, the validity, construction and effect of this Plan and any rules and regulations relating to this Plan shall be determined in accordance with the laws of the Commonwealth of the Bahamas subject to any applicable requirements under United States federal or state securities laws. 4. ELIGIBILITY; OPTION AGREEMENT. Only Non-Employee Directors shall be eligible to receive Options under this Plan. Options shall be evidenced by written option agreements in such form as the Board shall approve. 5. GRANTS OF OPTIONS. Options shall be granted to Non-Employee Directors, subject to Section 5(o), below, and the limitation on the number of Shares that may be issued under this Plan as described in Section 6, below, as follows: (a) GRANTS TO INITIAL DIRECTORS. Each of the initial four Non-Employee Directors (the "Initial Directors") shall be granted, on the effective date of the appointment or election of such Initial Director (the "Initial Effective Date") without the need for further action by the Board, an Option to purchase that number of Shares equal to 2,813 (which reflects adjustment for splits of the Shares after the grant thereof) multiplied by a fraction, the numerator of which is the number of days from the Initial Effective Date until the scheduled date of the then next annual meeting of Shareholders of the Company ("Annual Meeting") (or, if such date has not yet been scheduled, a date approximating the date of the next Annual Meeting as determined in good faith by the Board), and the denominator of which is 365. (b) ANNUAL GRANTS. Commencing with the 2001 Annual Meeting, on the date of each Annual Meeting during the term of this Plan (an "Annual Meeting Date") each individual elected or re-elected as a Non-Employee Director at such meeting or continuing as a Non-Employee Director shall be granted, without the need for further action by the Board, an Option to purchase 5,000 Shares. In addition, any Non-Employee Director who serves as Chairman of a committee of the Board shall be granted on each Annual Meeting Date an Option to purchase an additional 1,250 Shares for each such Chairmanship held. (c) OTHER GRANTS. Any new Non-Employee Director who is appointed by the Board to fill a vacancy on the Board, or who is otherwise appointed or elected to the Board otherwise than at an Annual Meeting shall be granted, on the effective date of such appointment or election (the "Effective Date"), without the need for further action by the Board, an Option to purchase that number of Shares equal to 5,000 (plus any additional Shares as may be required by the last sentence of Section 5(b), above) multiplied by a fraction, the numerator of which is the number of days from the Effective Date until the scheduled date of the then next Annual meeting (or, if such date has not yet been scheduled, the anniversary date of the then immediately preceding Annual Meeting or, in the absence of such date, a date approximating the date of the next Annual Meeting as determined in good faith by the Board), and the denominator of which is 365. (d) EXTRAORDINARY GRANTS. On April 27, 2000, each Non-Employee Director shall receive Options to purchase 10,000 Shares. In addition, the Non-Employee Director who serves as Chairman of each committee of the Board shall receive, on April 27, 2000, an Option to purchase an additional 1,250 Shares for each such Chairmanship held. (e) EXERCISE PRICE. The exercise price of each Option shall be the Fair Market Value of the Shares on the Date of Grant. (f) DURATION OF OPTIONS. Except as otherwise provided herein or in the option agreement with respect to an Option grant, the latest date on which an Option may be exercised (the "Final Exercise Date") shall be the date which is ten years from the Date of Grant. -2- 4 (g) EXERCISE OF OPTIONS. Except as otherwise provided herein or in the option agreement with respect to an Option grant, an Option shall become exercisable one year after the Date of Grant. An Option may be exercised by giving written notice to the Secretary of the Company specifying the number of Shares to be purchased, accompanied by the full purchase price for the Shares to be purchased. An Option may not be exercised for a fraction of a Share. (h) PAYMENT FOR SHARES. Shares purchased pursuant to the exercise of an Option granted under this Plan shall be paid for as follows: (i) in cash or by certified check, bank draft or money order payable to the order of the Company, (ii) through the delivery of Shares having a Fair Market Value on the last business day preceding the date of exercise equal to the purchase price, provided that, in the case of Shares acquired directly from the Company, such Shares have been held for at least six months, or (iii) by a combination of cash and Shares, as provided in clauses (i) and (ii), above. (i) WITHHOLDING TAXES. Prior to issuance of the Shares upon exercise of an Option, the Option holder shall pay or make adequate provision for any applicable United States federal or state, or other tax withholding obligations of the Company. Where approved by the Board in its sole discretion, the Option holder may provide for the payment of withholding taxes upon exercise of the Option by requesting that the Company retain Shares with a Fair Market Value equal to the amount of taxes required to be withheld. In such case, the Company shall issue the net number of Shares to the Option holder by deducting the Shares retained from the Shares with respect to which the Option was exercised. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by Option holders to have Shares withheld for this purpose shall be made in writing in form acceptable to the Board. (j) DELIVERY OF SHARE CERTIFICATES. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the certificate evidencing the Shares underlying an Option, an Option holder shall not have any rights as a shareholder of the Company. A certificate for the number of Shares purchased pursuant to the exercise of an Option shall be issued as soon as practicable after exercise of the Option. However, the Company shall not be obligated to deliver a certificate evidencing Shares issuble under an Option (i) until, in the opinion of the Company's counsel, all applicable Bahamas and United States federal and state laws and regulations have been complied with and any applicable taxes have been paid, (ii) if the Shares are at the time traded on Nasdaq or any national securities exchange, until the Shares represented by the certificate to be delivered have been listed or are authorized to be listed on Nasdaq or such exchange, and (iii) until all other legal matters in connection with the issuance and delivery of such certificate have been approved by the Company's counsel. If the sale of Shares has not been registered under the Act, the Company may require, as a condition to exercise of the Option, such representations or agreements as counsel for the Company may consider appropriate to avoid violation of the Act and may require that the certificate evidencing such Shares bear an appropriate legend restricting transfer. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares. (k) ASSIGNMENT OR TRANSFER. Except as set forth in this Section 5(j), no Option may be transferred other than by will or by the laws of descent and distribution, and during a Non-Employee Director's lifetime an Option may be exercised only by the Non-Employee Director to whom it was granted. An Option may be transferred to a (i) Non-Employee Director's spouse, children or grandchildren (referred to herein as "Family Members"), (ii) a trust or trusts for the exclusive benefit of Family Members or (iii) a partnership in which Family Members are the only partners. Any transfer pursuant to this Section 5 (j) shall be subject to the following: (i) there shall be no consideration for such transfer, (ii) there may be no subsequent transfers without the approval of the Board and (iii) all transfers shall be made so that no liability under Section 16(b) of the Exchange Act arises as a result of such transfer. Following any transfer, an Option shall continue to be subject to the same terms and conditions as were applicable to the Non-Employee Director immediately prior to transfer, with the transferee being deemed to be the Non-Employee Director for such purposes, except that the events of death and termination of service described in Sections 5(k) and 5(l), below, shall continue to apply with respect to the Non-Employee Director. -3- 5 (l) DEATH. Upon the death of a Non-Employee Director, all Options held by such Non-Employee Director that are not then exercisable shall immediately become exercisable. All Options held by such Non-Employee Director immediately prior to death may be exercised by his or her executor or administrator, or by the person or persons to whom the Option is transferred by will or the applicable laws of descent and distribution, at any time within the three years following the date of death (but not later than the Final Exercise Date); provided, however, that the Company shall be under no obligation to deliver a certificate representing Shares that may be issued pursuant to such exercise until the Company is satisfied as to the authority of the person or persons exercising the Option. (m) OTHER TERMINATION OF STATUS OF NON-EMPLOYEE DIRECTOR. If a Non-Employee Director ceases to be a member of the Board for any reason other than death, all Options held by such Non-Employee Director that are not then exercisable shall terminate three years following the date they first become exercisable. Options that are exercisable on the date of such termination shall continue to be exercisable for a period of three years following the date of termination (or until the Final Exercise Date, if earlier). Notwithstanding the foregoing, all Options held by a Non-Employee Director shall terminate immediately upon the termination of such Non-Employee Director's membership on the Board if such termination was based on the misconduct of such Non-Employee Director. After completion of the aforesaid three-year periods, such Options shall terminate to the extent not previously exercised, expired or terminated. (n) CHANGE IN CONTROL. In the event of a Change in Control (as defined below) of the Company, any Options outstanding as of the date of such Change in Control is determined to have occurred that are not yet exercisable on such date shall become fully exercisable. For purposes of this Section 5(m) a "Change in Control" means the happening of any of the following: (i) any transaction as a result of which a change in control of the Company would be required to be reported in response to Item 1(a) of the Current Report on Form 8-K as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Exchange Act, whether or not the Company is then subject to such reporting requirement, otherwise than through an arrangement or arrangements consummated with the prior approval of the Board; (ii) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act (a) becomes the "beneficial owner," as defined in Rule 13d-3 under the Exchange Act, of more than 20% of the then outstanding voting securities of the Company, otherwise than through a transaction or transactions arranged by, or consummated with the prior approval of, the Board or (b) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Company or for any other matter or question, more than 20% of the then outstanding voting securities of the Company, otherwise than through an arrangement or arrangements consummated with the prior approval of the Board; (iii) during any period of 24 consecutive months (not including any period prior to the adoption of this Plan), Present Directors and/or New Directors cease for any reason to constitute a majority of the Board. For purposes of the preceding sentence, "Present Directors" shall mean individuals who, at the beginning of such consecutive 24 month period, were members of the Board and "New Directors" shall mean any director whose election by the Board or whose nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the Directors then still in office who were Present Directors or New Directors; or (iv) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act that is the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act of 20% or more of the then outstanding voting securities of the Company commences soliciting proxies. -4- 6 (n) RULE 16B-3. Options granted hereunder are required to comply with the applicable provisions of Rule 16b-3 under the Exchange Act and the award thereof shall contain such additional conditions or restrictions as may be required thereunder to qualify to the maximum extent for the exemption from Section 16(b) of the Exchange Act available pursuant to Rule 16b-3. 6. SHARES AUTHORIZED. (a) Subject to adjustment as provided below, the aggregate number of Shares that may be issued pursuant to Options granted under this Plan is 185,625. Such Shares may be authorized, but unissued Shares, or may be Shares reacquired by the Company and held in treasury. If any Option granted under this Plan terminates without being exercised in full, the number of Shares as to which such Option was not exercised shall be available for future grants within the limits set forth in this Section 6(a). (b) Subject to any required action by the shareholders of the Company in the event of any reorganization, recapitalization, share split, share dividend, combination of shares, issuance of rights or any other change in the capital or corporate structure of the Company, the number of Shares covered by each outstanding Option and the number of Shares available for issuance under this Plan, but as to which Options have not been granted or which have been returned to the Plan upon cancellation or expiration of an Option, as well as the exercise price per Share under outstanding Options, shall be adjusted equitably to reflect the occurrence of such event; provided, however, that no adjustments shall be made except as shall be necessary to preserve, rather than enlarge or reduce the value of awards under this Plan. Any such adjustment shall be made by the Board. 7. EFFECT AND DISCONTINUANCE. Neither adoption of this Plan nor the grant of Options to a Non-Employee Director hereunder shall confer upon any person any right to continued status as a director of the Company or affect in any way the right of the Company to terminate a director at any time. The Board may at any time discontinue granting Options under this Plan. 8. EFFECTIVE DATE; TERMINATION AND AMENDMENT OF PLAN. (a) The effective date of this Plan shall be the date of its adoption by the Board of Directors and shareholders of the Company as indicated on the cover page of this Plan. The final award under this Plan shall be made on the date of the Annual Meeting in 2006, but the pertinent terms of this Plan shall continue thereafter while previously awarded Options remain outstanding. (b) The Board may terminate or amend this Plan as it shall deem advisable or to conform to any change in any law or regulation applicable thereto; provided, however, that the Board may not make any amendment that would reduce any award previously made under this Plan. 9. GENERAL PROVISIONS. (a) Nothing in this Plan is intended to be a substitute for, or shall preclude or limit the establishment or continuation of, any other plan, practice or arrangement for the payment of compensation or benefits to Non-Employee Directors that the Company now has or may hereafter put into effect. (b) Options awarded hereunder and Shares underlying such Options shall be held by the Non-Employee Director for such period of time required so as to avoid liability under Section 16(b) of the Exchange Act. (c) Headings are given to sections of this Plan solely as a convenience to facilitate reference and are not intended to affect the meaning of any provision hereof. The references herein to any statute, regulation or other provision of law shall be construed to refer to any amendment or successor to such provisions. -5- EX-27 3 g65300ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) AT, AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-2000 JUL-01-2000 SEP-30-2000 31,652,000 5,153,000 12,770,000 475,000 9,113,000 61,000,000 15,247,000 6,269,000 85,984,000 20,791,000 0 0 0 166,000 64,831,000 85,984,000 44,321,000 119,962,000 32,814,000 90,065,000 0 0 0 18,491,000 976,000 17,515,000 0 0 0 17,509,000 1.14 1.10
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