10-Q

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 10-Q
(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
OR
o	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 of incorporation or organization)				(I.R.S. Employer 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 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
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).             [4 ]  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 per share			16,590,602, which excludes 1,866,406 treasury shares as of May 5, 2004

STEINER LEISURE LIMITED
INDEX
PART I. FINANCIAL INFORMATION		Page No.
ITEM 1.	Unaudited Financial Statements
	Condensed Consolidated Balance Sheets as of December 31, 2003 and March 31, 2004		3
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2004		4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2004		5
	Notes to Condensed Consolidated Financial Statements		7
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		14
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk		23
ITEM 4.	Controls and Procedures		24
PART II. OTHER INFORMATION
ITEM 6.	Exhibits and Reports on Form 8-K		25
SIGNATURES AND CERTIFICATIONS			26

2

PART I. - FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

STEINER LEISURE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,			March 31,
	2003			2004
ASSETS					(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	20,434,000		$	19,285,000
Accounts receivable, net		14,118,000			14,004,000
Accounts receivable - students, net		4,409,000			4,889,000
Inventories		16,644,000			18,997,000
Assets held for sale		557,000			557,000
Other current assets		3,848,000			4,447,000
Total current assets		60,010,000			62,179,000
PROPERTY AND EQUIPMENT, net		49,838,000			51,590,000
GOODWILL, net		46,590,000			46,590,000
OTHER ASSETS:
Intangible assets, net		4,936,000			4,774,000
Deferred financing costs, net		637,000			415,000
Other		3,594,000			3,527,000
Total other assets		9,167,000			8,716,000
Total assets	$	165,605,000		$	169,075,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	8,687,000		$	8,653,000
Accrued expenses		16,577,000			16,350,000
Current portion of long-term debt		9,214,000			9,892,000
Liabilities related to assets held for sale		2,921,000			2,433,000
Current portion of deferred tuition revenue		5,516,000			5,622,000
Gift certificate liability		962,000			893,000
Income taxes payable		2,115,000			2,117,000
Total current liabilities		45,992,000			45,960,000
LONG-TERM DEBT, net of current portion		19,158,000			13,896,000
LONG-TERM DEFERRED RENT		910,000			888,000
LONG-TERM DEFERRED TUITION REVENUE		213,000			212,000
MINORITY INTEREST		47,000			--
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,
18,330,000 shares issued in 2003 and 18,382,000 shares issued
in 2004		183,000			184,000
Additional paid-in capital		40,850,000			41,513,000
Accumulated other comprehensive income		1,881,000			1,995,000
Retained earnings		85,742,000			93,798,000
Treasury shares, at cost, 1,866,000 shares in 2003 and 2004		(29,371,000	)		(29,371,000	)
Total shareholders' equity		99,285,000			108,119,000
Total liabilities and shareholders' equity	$	165,605,000		$	169,075,000

The accompanying notes to condensed consolidated financial statements are an integral part of these balance sheets.

3

STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2004

(Unaudited)

	Three Months Ended
	March 31,
	2003				2004
REVENUES: REVENUES:
Services		$	45,875,000			$	55,967,000
Products			19,290,000				24,938,000
Total revenues			65,165,000				80,905,000
COST OF REVENUES:
Cost of services			36,732,000				44,249,000
Cost of products			14,468,000				18,262,000
Total cost of revenues			51,200,000				62,511,000
Gross profit			13,965,000				18,394,000
OPERATING EXPENSES:
Administrative			3,368,000				4,304,000
Salary and payroll taxes			4,220,000				4,827,000
Total operating expenses			7,588,000				9,131,000
Income from operations			6,377,000				9,263,000
OTHER INCOME (EXPENSE):
Interest expense			(967,000	)			(654,000	)
Other income			13,000				16,000
Total other income (expense)			(954,000	)			(638,000	)
Income from continuing operations before provision        for income taxes, minority interest and equity        investment			5,423,000				8,625,000
PROVISION FOR INCOME TAXES			333,000				613,000
Income from continuing operations before minority        interest and equity investment			5,090,000				8,012,000
MINORITY INTEREST			2,000				--
INCOME IN EQUITY INVESTMENT			102,000				116,000
Income from continuing operations before        discontinued operations			5,194,000				8,128,000
LOSS FROM DISCONTINUED OPERATIONS (which includes loss on disposal of $833,000 and $5,000 in 2003 and 2004, respectively), net of taxes			(1,831,000	)			(72,000	)
Net income		$	3,363,000			$	8,056,000
Income (loss) per share-basic:
Income before discontinued operations		$	0.32			$	0.49
Loss from discontinued operations			(0.11	)			--
		$	0.21			$	0.49
Income (loss) per share-diluted:
Income before discontinued operations		$	0.32			$	0.48
Loss from discontinued operations			(0.12	)			--
		$	0.20			$	0.48

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 THREE MONTHS ENDED MARCH 31, 2003 AND 2004

(Unaudited)

	Three Months Ended
	March 31,
	2003			2004
CASH FLOWS FROM OPERATING ACTIVITIES   OF CONTINUING OPERATIONS:
Net income	$	3,363,000		$	8,056,000
Loss from discontinued operations		998,000			67,000
Loss on disposal of discontinued operations		833,000			5,000
Income from continuing operations		5,194,000			8,128,000
Adjustments to reconcile income from continuing   operations to net cash provided by operating activities   of continuing operations:
Depreciation and amortization		1,770,000			2,114,000
Provision for doubtful accounts		60,000			134,000
Minority interest		(2,000	)		--
Income in equity investment		(102,000	)		(116,000	)
(Increase) decrease in:
Accounts receivable		1,724,000			(189,000	)
Inventories		886,000			(2,199,000	)
Other current assets		(14,000	)		(591,000	)
Other assets		19,000			216,000
Increase (decrease) in:
Accounts payable		(2,565,000	)		(151,000	)
Accrued expenses		(1,887,000	)		(303,000	)
Income taxes payable		(45,000	)		(5,000	)
Deferred tuition revenue		364,000			105,000
Gift certificate liability		13,000			(69,000	)
Net cash provided by operating activities of    continuing operations		5,415,000			7,074,000
CASH FLOWS FROM INVESTING ACTIVITIES   OF CONTINUING OPERATIONS:
Capital expenditures		(1,337,000	)		(3,408,000	)
Net cash used in investing activities of    continuing operations		(1,337,000	)		(3,408,000	)

(Continued)

5

STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2004

(Unaudited)

	Three Months Ended
	March 31,
	2003			2004
CASH FLOWS FROM FINANCING ACTIVITIES   OF CONTINUING OPERATIONS:
Payments on long-term debt	$	(1,385,000	)	$	(4,617,000	)
Debt issuance costs		(277,000	)		(26,000	)
Proceeds from share option exercises		--			664,000
Net cash used in financing activities    of continuing operations		(1,662,000	)		(3,979,000	)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH		31,000			(276,000	)
NET CASH USED IN DISCONTINUED OPERATIONS		(3,661,000	)		(560,000	)
NET DECREASE IN CASH
AND CASH EQUIVALENTS		(1,214,000	)		(1,149,000	)
CASH AND CASH EQUIVALENTS,
Beginning of period		15,175,000			20,434,000
CASH AND CASH EQUIVALENTS,
End of period	$	13,961,000		$	19,285,000
SUPPLEMENTAL DISCLOSURES OF    CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	634,000		$	455,000
Income taxes	$	580,000		$	510,000

The accompanying notes to consolidated financial statements are an integral part of these statements.

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 of Steiner Leisure Limited  (including its subsidiaries, "Steiner Leisure," the "Company," "we" and "our")  for the three months ended March 31, 2003 and 2004 reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly present the results of operations for these 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 accounting principles generally accepted in the United States. 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, 2003 and the Company's other filings with the Securities and Exchange Commission.

(2) ORGANIZATION:

Steiner Leisure is a worldwide provider of spa services. The Company, incorporated in the Bahamas, commenced operations effective November 1995 with the contributions of substantially all of the assets and certain of the liabilities of the Maritime Division (the "Maritime Division") of Steiner Group Limited, now known as STGR Limited ("Steiner Group"), a U.K. company and an affiliate of the Company, and all of the outstanding common stock of Coiffeur Transocean (Overseas), Inc. ("CTO"), a Florida corporation and a wholly owned subsidiary of Steiner Group. These operations consisted almost entirely of offering spa services and products on cruise ships. The contributions of the net assets of the Maritime Division and CTO were recorded at historical cost in a manner similar to a pooling of interests.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(a) Inventories

Inventories, consisting principally of beauty products, are stated at the lower of cost (first-in, first-out) or market. Manufactured finished goods include the cost of raw material, labor and overhead. Inventories consist of the following:

		December 31,		March 31,
		2003		2004
Finished Goods	$	13,117,000	$	15,808,000
Raw Materials		3,527,000		3,189,000
	$	16,644,000	$	18,997,000

(b) Goodwill

Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," goodwill is subject to at least an annual assessment for impairment by applying a fair value-based test.  The impairment loss is the amount, if any, by which the implied fair value of goodwill is less than the carrying or book value. In January 2004, the Company performed the required annual impairment test and determined there was no impairment.

7

(c) Income Taxes

The Company files a consolidated tax return for its domestic subsidiaries. In addition, the Company's foreign subsidiaries file income tax returns in their respective countries of incorporation, where required. The Company follows SFAS 109, "Accounting for Income Taxes." 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. For any partnership interest (including limited liability companies), the Company records its allocable share of income, gains, losses, deductions and credits of the partnership.

(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 in the condensed consolidated balance sheets. Foreign currency gains and losses resulting from transactions, including intercompany transactions, are included in the condensed consolidated statements of operations. The transaction gains (losses) reflected in administrative expenses were approximately $27,000 and ($102,000) for the three months ended March 31, 2003 and 2004, respectively. The majority of the Company's income is generated outside of the United States.

(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 that of 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
March 31,

	2003	2004
Weighted average shares outstanding used in
calculating basic earnings per share	16,386,000	16,479,000
Dilutive common share equivalents	84,000	468,000
Weighted average common and common equivalent
shares used in calculating diluted earnings per share	16,470,000	16,947,000
Options outstanding which are not included in the
calculation of diluted earnings per share because
their impact is anti-dilutive	3,770,000	1,356,000

(f) Stock-Based Compensation

The Company follows the provisions of SFAS 123, "Accounting for Stock-Based Compensation," in accounting for stock-based transactions with non-employees and, accordingly, records compensation expense in the consolidated statements of operations for such transactions. The Company applies the provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations for stock-based transactions with employees, as permitted by SFAS 123.

8

The Company applies APB 25 and related interpretations in accounting for options granted to employees. Accordingly, no compensation cost has been recognized related to such grants. Had compensation cost for the Company's shares been based on fair value at the grant dates for awards under the Company's option plan consistent with the methodologies of SFAS 123, the Company's three months ended March 31, 2003 and 2004 net income and diluted earnings per share would have been reduced to the pro forma amounts indicated below:

			Three Months Ended
			March 31,
			2003		2004
Compensation expense	As reported	$	-	$	-
	Pro forma		2,172,000		1,427,000
Net income	As reported		3,363,000		8,056,000
	Pro forma		1,191,000		6,629,000
Basic earnings per share	As reported		0.21		0.49
	Pro forma		0.07		0.40
Diluted earnings per share	As reported		0.20		0.48
	Pro forma		0.07		0.39

The fair value of each option grant is estimated on the date of grant using the Black-Scholes model with the following assumptions: expected volatility of 59.3% and 57.7%, risk-free interest rate of 6.0% and 4.0%, expected dividends of $0 and expected term of 6.5 years and 6 years for the three months ended March 31, 2003 and 2004, respectively.

(g) Advertising Costs

Substantially all of our advertising costs are charged to expense as incurred, except costs which result in tangible assets, such as brochures, which are recorded as prepaid expenses and charged to expense as consumed. Advertising costs were approximately $1,435,000 and $1,485,000 for the three months ended March 31, 2003 and 2004, respectively. At December 31, 2003 and March 31, 2004, the amounts of advertising costs included in prepaid expenses were not material.

(h) Recent Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities on Interpretation of ARB No. 51" ("FIN 46"), to expand upon and strengthen existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. In December 2003, the FASB issued FIN 46(R) to clarify certain provisions of FIN 46 and to modify the effective date of such provisions for public companies. Previously, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 changed that by requiring a variable interest entity, as defined, to be consolidated by a company if that company is subject to a majority of the expected losses (as defined) from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. FIN 46 also requires disclosures about variab le interest entities that the company is not required to consolidate but in which it has a significant variable interest. Based on the revised guidance, all public companies must apply the provisions of FIN 46(R) to variable interests commonly referred to as special-purpose entities (an "SPE"), where such interests were created prior to February 1, 2003, no later than periods ending after December 15, 2003. Interests created in non-SPE variable interest entities after January 31, 2003 but before December 31, 2003 are subject to the provisions of the original FIN 46 in 2003, but the provisions of FIN 46(R) must be adopted no later than the first reporting period ending after March 15, 2004. The provisions of FIN 46(R) must be applied to all variable interests created after December 31, 2003 upon initial involvement with the variable interest entity. We have determined that we have no variable interest entities. As a result, the adoption of FIN 46 did not have an effect on our consolidated financial posit ion or results of operations.

9

(4) DISCONTINUED OPERATIONS:

In 2002 and 2003, the Company sold and/or disposed of its day spa segment, with the exception of two of its day spas. The day spa segment primarily consisted of the financial position and results of operations of the Greenhouse and C.Spa day spa chains. In accordance with SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the operating results of the day spa segment, excluding the day spas that are being kept, are reported in discontinued operations and the remaining assets and liabilities are classified as assets held for sale and liabilities related to assets held for sale, respectively, in the condensed consolidated balance sheets as of December 31, 2003 and March 31, 2004.

Additional information regarding the Company's discontinued day spa operations is as follows:

	Three Months Ended
	March 31,
	2003		2004
Revenues	$	2,648,000	$	--
Loss from operations, net of taxes		998,000		67,000
Loss on disposal, net of taxes		833,000		5,000

		December 31,		March 31,
		2003		2004
Assets held for sale
Current assets	$	557,000	$	557,000
	$	557,000	$	557,000
Liabilities related to assets held for sale
Accounts payable & accrued expenses	$	1,279,000	$	977,000
Gift certificate liability		1,351,000		1,292,000
Other liabilities		291,000		164,000
	$	2,921,000	$	2,433,000

In connection with the sales of the Company's day spa assets to third parties, the Company remains liable under certain leases for those day spas in the event third party lease assignees fail to pay rent under such leases. The total amount that the Company remains liable for under such assigned leases, if the assignees fail to make the required payments, was approximately $3.8 million as of March 31, 2004.

In connection with the discontinued day spa operations, the President and Chief Executive Officer of the day spas segment terminated her employment with the Company and received options to purchase 100,000 common shares of the Company and a severance payment of $748,000 during the second quarter of 2003.

10

(5) DERIVATIVE FINANCIAL INSTRUMENT:

Effective September 28, 2003, the Company entered into an interest rate swap agreement to reduce its exposure to market risks from changing interest rates. Under the swap agreement, the Company agrees to exchange the difference between fixed and variable interest amounts calculated by reference to a notional principal amount. Any differences paid or received on interest rate swap agreements are recognized as adjustments to interest expense over the life of each swap, thereby adjusting the effective interest rate on the underlying obligation. The Company does not hold or issue such financial instruments for trading purposes. Derivatives used for hedging purposes must be designated as, and effective as, a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in the fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge cont ract.

The interest rate swap has a notional amount of $2.3 million as of March 31, 2004 and matures on July 2, 2004. The interest rate swap agreement effectively converts a portion of the Company's London Interbank Offered Rate ("LIBOR") based variable rate borrowings into fixed rate borrowings with a pay rate of 4.1%. The Company recorded unrealized gains of $81,000 and $4,000 in accumulated other comprehensive income for the three months ended March 31, 2003 and 2004, respectively, in connection with this swap. There was no gain or loss on the swap as a result of ineffectiveness. Prepayment of the loan, changes in counterparty creditworthiness and changing market conditions could result in the reclassification into earnings of gains and losses that are reported in accumulated other comprehensive income (loss). The Company reclassified losses of $136,000 and $5,000 related to the interest rate swap into interest expense in the first three months ended March 31, 2003 and 2004, respectively. Approximately $3,000 in losses are expected to be reclassified into earnings within the next 12 months as interest payments occur.

(6) ACCRUED EXPENSES:

Accrued expenses consists of the following:

		December 31,		March 31,
		2003		2004
Operative commissions	$	2,821,000	$	2,861,000
Minimum line commissions		4,952,000		5,286,000
Payroll and bonuses		3,454,000		2,887,000
Rent		884,000		894,000
Interest		123,000		122,000
Other		4,343,000		4,300,000
Total	$	16,577,000	$	16,350,000

(7) LONG-TERM DEBT:

Long-term debt consists of the following:

		December 31,			March 31,
		2003			2004
Term loan	$	9,000,000		$	4,500,000
Revolving loan		9,796,000			9,796,000
Subordinated notes		5,170,000			5,255,000
Note payable		4,100,000			4,100,000
Other debt		306,000			137,000
Total long-term debt		28,372,000			23,788,000
Less: current portion		(9,214,000	)		(9,892,000	)
Long-term debt, net of current portion	$	19,158,000		$	13,896,000

11

In July 2001, the Company entered into a credit agreement with a syndicate of banks that provides for a term loan of $45 million and a revolving facility of up to $10 million. Borrowings under the credit agreement are secured by substantially all of the assets of the Company and bear interest primarily at LIBOR based rates plus a spread that is dependent upon the Company's financial performance. Borrowings under the term loans were used to fund the Company's July 2001 acquisitions of land-based spas and under the revolving facility have been used for working capital needs. In the first quarter of 2003, the credit agreement was amended to permit the Company to forego making a portion of the principal payments under the term loan during the quarter. Those unpaid principal payments were amortized over the remainder of the term of the loan. In December 2003, the Company entered into an amended and restated credit agreement. The terms and conditions of the new agreement are substantially the same as the former agreement except that the maturity date of the revolving loan has been extended one year to July 2, 2005. The maturity date of the term loan is July 2, 2004. The interest rate as of March 31, 2004 was 3.7% for both the term loan and the revolving facility. As of March 31, 2004, there was no availability under the revolving facility.

The credit agreement contains customary affirmative, negative and financial covenants, including limitations on dividends, capital expenditures and funded debt, and requirements to maintain prescribed interest expense and fixed charge coverage ratios. As of March 31, 2004, the Company was in compliance with all of these financial covenants.

The subordinated notes are due to the former owners of a 60% interest in Mandara Spa. Interest on the $3.9 million notes accrues quarterly, but is payable on the maturity date. Interest on the $1.4 million notes accrues and is payable quarterly. The interest rate on all of the notes is 9% per annum and they all mature on January 2, 2005.

The note payable is due to the company that formerly owned a 40% minority interest in Mandara Spa. That note bears interest at the rate of approximately 9%, per annum, payable quarterly and matures on various dates through March 31, 2006.

All of the long-term debt is denominated in US dollars.

(8) COMPREHENSIVE INCOME:

SFAS 130, "Reporting Comprehensive Income," establishes standards for reporting and disclosure of comprehensive income and its components in financial statements. The components of the Company's comprehensive income are as follows:

Three Months Ended March 31,
	2003	2004

Net income	$	3,363,000		$	8,056,000
Unrealized gain on interest rate
swap, net of taxes		81,000			4,000
Foreign currency translation adjustments,
net of taxes		(169,000	)		110,000
Comprehensive income	$	3,275,000		$	8,170,000

12

(9) SEGMENT INFORMATION:

Information about the Company's Spa Operations and Schools segments for the three months ended March 31, 2003 and 2004 is as follows:

	Three Months Ended March 31,
2003		2004

Revenues:
Spa Operations	$	61,160,000	$	76,549,000
Schools		4,005,000		4,356,000
	$	65,165,000	$	80,905,000
Operating Income:
Spa Operations	$	6,081,000	$	8,504,000
Schools		296,000		759,000
	$	6,377,000	$	9,263,000

		December 31,		March 31,
		2003		2004
Identifiable Assets:
Spa Operations	$	142,180,000	$	144,485,000
Schools		23,425,000		24,590,000
	$	165,605,000	$	169,075,000

Included in identifiable assets of the Spa Operations segment at December 31, 2003 and March 31, 2004 are assets held for sale of $557,000.

13

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

Steiner Leisure Limited is a worldwide provider of spa services. We sell our services and products to cruise passengers and at luxury resort and day spas primarily in the United States, the Caribbean, the Pacific, Asia and Mexico. Payments to cruise lines, resort spa owners and day spa landlords are based on a percentage of our revenues and, in certain cases, a minimum annual rental or a combination of both. In 2003, we completed the disposition of our discontinued day spa operations, leaving us with our two Elemis flagship luxury day spas - one in London, England and one in Coral Gables, Florida.

Our revenues are generated principally from our cruise ship operations. Accordingly, our success and our growth is dependent to a significant extent on the success and growth of the travel and leisure industry in general and on the cruise industry in particular.

The cruise industry is subject to significant risks that could affect our results of operations. Accidents and other incidents involving cruise ships and other unscheduled withdrawals of ships from service, adverse international developments reducing travel generally, delays in new ship introductions, restricted access of cruise ships to environmentally sensitive regions, possible increases in fuel costs, shipboard illness outbreaks and potential overcapacity could materially adversely impact the cruise industry.

Our resort spas are dependent on the resort hotel industry for their success. The hotel resort industry is subject to risks that are, in many ways, similar to that of the cruise industry, including the following risks: changes in the national, regional and local economic climate (including major national or international terrorism, hostilities or other events), local conditions, including oversupply of hotel properties, illnesses, labor unrest, changes in popular travel patterns and other causes of reduced hotel occupancy.

A significant factor in our financial results are the amounts we are required to pay under our agreements with the cruise lines. Certain cruise line agreements provide for increases in percentages of revenues payable over the terms of those agreements. These payments may also be increased under new agreements with cruise lines (and land-based lessors) that replace expiring agreements. In general, we have experienced increases in these payments as a percentage of revenues upon renewing new agreements with cruise lines.

An increasing amount of revenues has come from our third party retail product sales. We distribute these products through mail order, our web sites, third party retail outlets and other channels.

We also offer post secondary degree and non-degree programs in massage therapy, skin care and related areas at our schools in Florida (comprised of four campuses) and our two schools (comprised of a total of three campuses) in Maryland, Pennsylvania and Virginia.

A significant portion of our operations is conducted on ships through entities that are not subject to income taxation. Historically, a significant amount of our income has not been subject to tax in the United States or other jurisdictions. To the extent that our non-shipboard revenues increase as a percentage of our overall revenues, the amount of our income that will be subject to tax would increase.

Key Performance Indicators

Cruise Industry Operations. A measure of performance we have used in connection with our periodic financial disclosure relating to our cruise line operations is that of revenue per staff per day. In using that measure we have differentiated between our revenue per staff per day on ships with large spas and other ships we serve. Our revenue per staff per day has been affected by the increasing requirements of cruise lines that we place additional non-revenue producing staff on ships with large spas to help maintain a high quality guest experience. We also utilize, as measures of performance for our cruise line operations, our average revenue per week and our revenue per passenger per day.

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Resort Spas. With respect to our resort spas we measure our results primarily through average weekly revenue over applicable periods of time.

Schools. With respect to the performance of our massage therapy schools, we measure performance by the number of new student enrollments. A new student enrollment occurs each time a new student commences classes at one of our schools.

Products. With respect to sales of our products other than on cruise ships and at our resort and day spas, we measure performance by revenues.

Critical Accounting Policies

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The listing is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment in their application. The impact on our business operations and any associated risks related to these policies is discussed under results of operations, below, where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the Notes to the Consolidated Financial Statements in Item 15 of Steiner Leisure's Annual Report on Form 10-K for 2003 filed with the Securities and Exchange Commission. Note that our pre paration of this Form 10-Q requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Cost of revenues includes:

• cost of services, including an allocable portion of wages paid to shipboard and land-based spa employees, payments to cruise lines and land-based spa lessors and other staff-related shipboard expenses, spa facilities depreciation, as well as, with respect to our schools, directly attributable campus costs such as rent and employee wages; and
• cost of products, including an allocable portion of wages paid to shipboard and land-based spa employees, payments to cruise lines and land-based spa lessors and other staff-related shipboard expenses, as well as costs associated with development, manufacturing and distribution of products.

Cost of revenues may be affected by, among other things, sales mix, production levels, exchange rates, changes in supplier prices and discounts, purchasing and manufacturing efficiencies, tariffs, duties, freight and inventory costs. Certain cruise line agreements provide for increases in the percentages of services and products revenues and/or, as the case may be, the amount of minimum annual line commissions payable over the terms of such agreements. These payments may also be increased under new agreements with cruise lines and land-based lessors that replace expiring agreements.

Cost of products includes the cost of products sold through our various methods of distribution. To a lesser extent, cost of products also includes the cost of products consumed in rendering services. This amount would not be a material component of the cost of services rendered and would not be practicable to identify separately.

Operating expenses include administrative expenses, salary and payroll taxes. In addition, operating expenses include amortization of intangibles relating to our acquisitions of resort spas in 2001.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets in question. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease. For certain properties, leasehold improvements are amortized over the lease term which includes renewal periods that may be obtained at our option

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and that are considered significant to the continuation of our operations and to the existence of leasehold improvements the value of which would be impaired by our discontinuing use of the leased property. We perform ongoing evaluations of the estimated useful lives of our property and equipment for depreciation purposes. The estimated useful lives are determined and continually evaluated based on the period over which services are expected to be rendered by the asset, industry practice and asset maintenance policies. Maintenance and repair items are expensed as incurred.

Goodwill

Pursuant to SFAS 142 goodwill is subject to at least an annual assessment for impairment by applying a fair value-based test. The impairment loss is the amount, if any, by which the implied fair value of goodwill is less than the carrying or book value. As of March 31, 2004, we had unamortized goodwill and intangibles of $51.4 million. In January 2004, we performed the required annual impairment test and determined there was no impairment.

Accounting for Income Taxes

As part of the process of preparing our interim consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves our estimating our actual current tax exposure together with an assessment of temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are included in our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have recorded a valuation allowance of $24.5 million as of March 31, 2004, due to uncertainties related to our ability to utilize some of our deferred tax assets, primarily consisting of net operating losses carried forward, before they expire. The valuation allowance is based on our estimates of taxable income and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish an additional valuation allowance which could impact our financial position and results of operations.

Recently Issued Accounting Standards

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities on Interpretation of ARB No. 51" ("FIN 46"), to expand upon and strengthen existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. In December 2003, the FASB issued FIN 46(R) to clarify certain provisions of FIN 46 and to modify the effective date of such provisions for public companies. Previously, a company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN 46 changed that by requiring a variable interest entity, as defined, to be consolidated by a company if that company is subject to a majority of the expected losses (as defined) from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. FIN 46 also requires disclosures about va riable interest entities that the company is not required to consolidate but in which it has a significant variable interest. Based on the revised guidance, all public companies must apply the provisions of FIN 46(R) to variable interests commonly referred to as special-purpose entities (an "SPE"), where such interests were created prior to February 1, 2003, no later than periods ending after December 15, 2003. Interests created in non-SPE variable interest entities after January 31, 2003 but before December 31, 2003 are subject to the provisions of the original FIN 46 in 2003, but the provisions of FIN 46(R) must be adopted no later than the first reporting period ending after March 15, 2004. The provisions of FIN 46(R) must be applied to all variable interests created after December 31, 2003 upon initial involvement with the variable interest entity. We have determined that we have no variable interest entities. As a result, the adoption of FIN 46 did not have an effect on our consolidated financial p osition or results of operations.

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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
	March 31,
	2003		2004
Revenues:
Services	70.4	%	69.2	%
Products	29.6		30.8
Total revenues	100.0		100.0
Cost of Revenues:
Cost of services	56.4		54.7
Cost of products	22.2		22.6
Total cost of revenues	78.6		77.3
Gross profit	21.4		22.7
Operating expenses:
Administrative	5.1		5.3
Salary and payroll taxes	6.5		6.0
Total operating expenses	11.6		11.3
Income from operations	9.8		11.4
Other income (expense):
Interest expense	(1.5	)	(0.8	)
Other income	--		--
Total other income (expense)	(1.5	)	(0.8	)
Income from continuing operations before provision for     income taxes, minority interest and equity investment	8.3		10.6
Provision for income taxes	0.5		0.7
Income from continuing operations before minority     interest and equity investment	7.8		9.9
Minority interest and equity investment	0.2		0.2
Income from continuing operations before discontinued     operations	8.0		10.1
Loss from discontinued operations, net of taxes	(2.8	)	(0.1	)
Net income	5.2	%	10.0	%

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2004

Revenues. Revenues increased approximately 24.2%, or $15.7 million, to $80.9 million in the first quarter of 2004 from $65.2 million in the first quarter of 2003. Of this increase, $10.1 million was attributable to an increase in services revenues and $5.6 million was attributable to an increase in products revenues. The increase in revenues was attributable to an improving leisure industry in the first quarter of 2004 compared to the first quarter of 2003, during which the hostilities in Iraq and the SARS illness had a more significant adverse effect on the leisure industry and our business. Additionally, the increase in revenues was attributable to an average of seven additional spa ships in service in the first quarter of 2004 compared to the first quarter of 2003. We had an average of 1,421 shipboard staff members in service in the first quarter of 2004 compared to an average of 1,283 shipboard staff members in service in the first quarter of 2003. Revenues per shipboa rd staff per day increased 7.1% to $409 in the first quarter of 2004 from $382 in the first quarter of 2003.

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Cost of Services. Cost of services increased $7.5 million to $44.2 million in the first quarter of 2004 from $36.7 million in the first quarter of 2003. Cost of services as a percentage of services revenues decreased to 79.1% in the first quarter of 2004 from 80.1% in the first quarter of 2003. This decrease was primarily attributable to increases in staff productivity partially offset by increases in commissions allocable on cruise ships covered by agreements that provide for increases in commissions in the first quarter of 2004 compared to the first quarter of 2003.

Cost of Products. Cost of products increased $3.8 million to $18.3 million in the first quarter of 2004 from $14.5 million in the first quarter of 2003. Cost of products as a percentage of products revenue decreased to 73.2% in the first quarter of 2004 from 75.0% in the first quarter of 2003. This decrease was primarily attributable to the introduction and sale of new products with higher margins, partially offset by the increases in commissions allocable to products sales on cruise ships covered by agreements which provide for increases in commissions in the first quarter of 2004 compared to the first quarter of 2003.

Operating Expenses. Operating expenses increased $1.5 million to $9.1 million in the first quarter of 2004 from $7.6 million in the first quarter of 2003. Operating expenses as a percentage of revenues decreased to 11.3% in the first quarter of 2004 from 11.6% in the first quarter of 2003. This decrease was primarily attributable to increases in staff productivity.

Other Income (Expense). Other income (expense) decreased $0.4 million to expense of $0.6 million in the first quarter of 2004 from expense of $1.0 million in the first quarter of 2003. This decrease was primarily attributable to a reduction in interest expense as a result of a reduction in the outstanding principal amount of our term loan.

Provision for Income Taxes. Provision for income taxes increased $0.3 million to $0.6 million in the first quarter of 2004 from $0.3 million in the first quarter of 2003. The provision for income taxes increased to an overall effective rate of 7.1% for the first quarter of 2004 from an overall effective rate of 6.1% for the first quarter of 2003. These increases were primarily due to the income earned in jurisdictions that tax our income increasing to a greater extent than our income earned in jurisdictions that do not tax our income.

Loss from Discontinued Operations, Net of Taxes. The loss from discontinued operations decreased $1.7 million to ($0.1) million in the first quarter of 2004 from ($1.8) million in the first quarter of 2003. The loss on disposal for the first quarter of 2004 was $5,000 compared to $833,000 for the comparable quarter of 2003. The $1.0 million loss from discontinued operations in the first quarter of 2003, which included the $833,000 loss on disposal, reflected the impact of the 10 day spas which were disposed of in that quarter.

Liquidity and Capital Resources

Sources and Uses of Cash

During the quarter ended March 31, 2004, cash provided by operating activities of continuing operations was $7.1 million compared with $5.4 million for the quarter ended March 31, 2003. This increase was primarily attributable to an increase in net income.

During the quarter ended March 31, 2004, cash used in investing activities was $3.4 million compared with $1.3 million for the quarter ended March 31, 2003. We incurred costs of approximately $2.3 million to complete the buildout of our luxury spa facility at the One&Only Palmilla Resort during the quarter ended March 31, 2004.

Steiner Leisure had working capital of approximately $14.0 million at December 31, 2003, compared to working capital of approximately $16.2 million at March 31, 2004.

In October 2003, our premier resort spa division, Mandara Spa, entered into agreements to develop and operate luxury spa facilities at the One&Only Palmilla, a resort in Los Cabos, Mexico, and at the Westin Rio Mar Beach Resort in Puerto Rico. The build-out of the Palmilla spa cost $3.5 million and we estimate that the Westin build-out will cost approximately $1.25 million. The Palmilla spa opened in February 2004 and we estimate that the Westin spa will open by October 2004. We funded the Palmilla build-out, and anticipate funding the Westin build-out, from working capital.

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In October 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. That luxury spa opened in November 2001. The term of the lease of the facility is 15 years with a five-year renewal option if certain sales levels are achieved. The build-out of the luxury spa cost approximately $13.7 million. The build-out was funded from our working capital and a term loan. The operator of the Aladdin Resort and Casino has filed for protection under Chapter 11 of the Bankruptcy Code. That resort continues to conduct its operations and we have taken steps in the bankruptcy court to protect our leasehold interest at the resort. While the purchase of the Aladdin by a group that includes, among others, Starwood Hotels and Resorts, has been approved by the bankruptcy court, certain approvals have not yet been obtained and we cannot assure you that our operations at the Aladdin Resort and Casino will not be adversel y affected by Aladdin's bankruptcy filing.

In the fourth quarter of 2002, we decided to dispose of, or otherwise close, 17 of the 18 day spas we acquired in 2001. The remaining day spa is located at a hotel and is continuing to operate as part of our resort spa operations. As of April 15, 2003, all of those 17 day spas had been closed or otherwise disposed of pursuant to agreements with landlords and/or, in some cases, agreements with third party acquirers of the spas' assets, including the leases.

These transactions involved our paying to those landlords amounts representing various portions of the rent for the remaining terms of the leases involved. In the transactions involving transfers of spa assets and assignments of the leases, we typically were required to make payments to those acquirers in consideration of their assuming both the lease in question and certain gift certificate liabilities related to the spas in question. The lease assignments to third parties generally do not include a release from the landlords of the spas in question and, accordingly, to the extent that these third parties fail to pay rent under the leases, we would remain liable for that rent. We would, in those instances, have a cause of action for such rental amounts against those third parties. We remain liable for approximately $3.8 million as of March 31, 2004 under such assigned leases, to the extent the assignees fail to make the required payments.

In addition, in connection with these discontinued operations, Celeste Dunn, the former President and Chief Executive Officer of our Steiner Day Spas, Inc. subsidiary, terminated her employment with us. In connection with that termination, Ms. Dunn received a severance payment of $748,000 and options to purchase 100,000 of our common shares.

Financing Activities

In July 2001, we entered into a credit agreement with a syndicate of banks that provides for a term loan of $45 million and a revolving credit facility of up to $10 million. In the first quarter of 2003, the credit agreement was amended to permit us to forego making a portion of the principal payments under the term loan during that quarter. Those unpaid principal payments were amortized over the remainder of the term of that loan, which comes due in July 2004. As a result, we have been, and will be, required to make greater principal payments than would otherwise have been the case had the principal payments for the first quarter of 2003 not been postponed. In December 2003, we entered into an amended and restated credit agreement. The terms and conditions of the new agreement are substantially the same as the former agreement except that the maturity date of the revolving loan is extended one year to July 2, 2005. Borrowings under the credit agreement are secured by substan tially all of our assets and bear interest primarily at LIBOR based rates plus a spread that is dependent upon our financial performance. Borrowings under the term loan were used to fund acquisitions and under the revolving facility have been used for working capital needs. As of March 31, 2004, $4.5 million was outstanding under the term loan and approximately $9.8 million was outstanding under the revolving facility. At March 31, 2004, the effective rates on the term loan and revolving facility were approximately 3.9% and 3.7%, respectively. We anticipate repaying the term loan from working capital.

The credit agreement contains customary affirmative, negative and financial covenants, including limitations on dividends, capital expenditures and funded debt, and requirements to maintain prescribed interest expense and fixed charge coverage ratios. As of March 31, 2004, we were in compliance with these covenants.

Other limitations on capital expenditures, or on other operational matters, could apply in the future under the credit agreement.

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Effective September 28, 2003, we entered into an interest rate swap agreement to reduce our exposure to market risks from changing interest rates. Under the swap agreement, we agree to exchange the difference between fixed and variable interest amounts calculated by reference to a notional principal amount. Any differences paid or received on interest rate swap agreements are recognized as adjustments to interest expense over the life of each swap, thereby adjusting the effective interest rate on the underlying obligation. We do not hold or issue such financial instruments for trading purposes. Derivatives used for hedging purposes must be designated as, and effective as, a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in the fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.

The interest rate swap has a notional amount of $2.3 million as of March 31, 2004 and matures on July 2, 2004. The interest rate swap agreement effectively converts a portion of our LIBOR-based variable rate borrowings into fixed rate borrowings with a pay rate of 4.1%. We recorded gains of $81,000 and $4,000 in accumulated other comprehensive income for the three months ended March 31, 2003 and 2004, respectively. We reclassified losses of $136,000 and $5,000 related to the interest rate swap into interest expense in the first three months ended March 31, 2003 and 2004, respectively.

We believe that cash generated from operations is sufficient to satisfy the cash required to operate our current business for the next 12 months. To the extent there is a significant slow-down in travel resulting from terrorist attacks, the war in Iraq, other hostilities, or any other reasons, cash generated from operations may not satisfy the cash required to operate our business. In that case we would need additional outside financing which may not be available on commercially acceptable terms, or at all.

Inflation and Economic Conditions

We do not believe that inflation has had a material adverse effect on our revenues or results of operations. However, public demand for activities, including cruises, is influenced by general economic conditions, including inflation. Periods of economic recession or high inflation, particularly in North America where a substantial number of cruise passengers reside, could have a material adverse effect on the cruise industry upon which we are dependent. Recurrence of the recent softness of the economy in North America and over-capacity in the cruise industry could have a material adverse effect on our business, results of operations and financial condition.

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Cautionary Statement Regarding Forward-Looking Statements

From time to time, including in this report, we 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. These forward-looking statements reflect our current views about future events and are subject to 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.

Such forward-looking statements include statements regarding:

• our proposed activities pursuant to agreements with cruise lines or land-based operators;
• our future land-based activities;
• our ability to secure renewals of agreements with cruise lines upon their expiration;
• scheduled introductions of new ships by cruise lines;
• our ability to generate sufficient cash flow from operations;
• the extent of the taxability of our income;
• the effects of acquisitions and new projects;
• our market sensitive financial instruments;
• our future financial results; and
• our ability to increase sales of our products.

Factors that could cause actual results to differ materially from those expressed or implied by our forward-looking statements include the following:

• our dependence on cruise line concession agreements of specified terms that are, in some cases, terminable by cruise lines with limited or no advance notice under certain circumstances;
• our dependence on the cruise industry and the resort industry and our being subject to the risks of those industries, including operation of facilities in countries with histories of economic and/or political instability;
• increasing numbers of days during cruises when ships are in port, which results in lower revenues to us;
• reductions in revenues during periods of major renovations or closures of resorts where we operate spas;
• economic downturns that could reduce the number of customers on cruise ships and at resorts and that could otherwise reduce consumer demand for our products and services and the continuing effect on the economy in general and the travel and leisure segment in particular of the events of September 11, 2001, the hostilities in Iraq, the bombings in Indonesia in October 2002 and August 2003 and the threat of future terrorist attacks and armed hostilities;
• our dependence on a limited number of companies in the cruise industry and further consolidation of companies in the cruise industry;
• our obligation to make minimum payments to certain cruise lines and lessors of land-based spas, irrespective of the revenues received by us from customers;

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• increases in our payment obligations accompanying renewals of expiring cruise line agreements and land-based spa agreements, or the securing of new agreements;

• our dependence on the continued viability of the cruise lines we serve and the resorts where we operate our land-based spas;
• delays in new ship introductions, a reduction in new spa ship introductions and unscheduled withdrawals from service of ships we serve;
• the effects of outbreaks of illnesses, such as SARS, or the perceived risk of such outbreaks, on our resort spa operations in Asia and in other locations, as well as on our cruise ship operations;
• our dependence for success on our ability to recruit and retain qualified personnel;
• our dependence on a single product manufacturer;
• changes in the taxation of our Bahamas subsidiaries and increased amounts of our income being subject to taxation;
• changing competitive conditions, including increased competition from cruise lines that desire to provide spa services themselves and competition from third party providers of shipboard spa services;
• our limited experience in land-based operations including with respect to the integration of acquired businesses;
• risks relating to our non-U.S. operations;
• possible labor unrest or changes in economics based on collective bargaining activities;
• uncertainties beyond our control that could affect our ability to timely and cost-effectively construct land-based spa facilities;
• our need to seek additional financing and the risk that such refinancing may not be available on satisfactory terms, or at all;
• changes in laws and government regulations applicable to us and the cruise industry;
• product liability or other claims against us by customers of our products or services;
• restrictions imposed on us as a result of our credit facility; and
• currency risk.

These risks and other risks are detailed in our Annual Report on Form 10-K for 2003 filed with the Securities and Exchange Commission. That report contains important cautionary statements and a discussion of many of the factors that could materially affect the accuracy of our forward-looking statements and/or adversely affect our business, results of operations and financial position.

Forward-looking statements should not be relied upon as predictions of actual results. Subject to any continuing obligations under applicable law, we expressly disclaim any obligation to disseminate, after the date of this report, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Our major market risk exposure is changing interest rates. Our policy is to manage interest rate risk through the use of a combination of fixed and floating rate debt and interest rate derivatives based upon market conditions. Our objective in managing the exposure to interest rate changes is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives, we use interest rate swaps to manage net exposure to interest rate changes to our borrowings. These swaps are entered into with a group of financial institutions with investment grade credit ratings, thereby reducing the risk of credit loss.

Effective September 28, 2003, we entered into an interest rate swap agreement to reduce our exposure to market risks from changing interest rates. Under the swap agreement, we agreed to exchange the difference between fixed and variable interest amounts calculated by reference to a notional principal amount. Any differences paid or received on interest rate swap agreements are recognized as adjustments to interest expense over the life of each swap, thereby adjusting the effective interest rate on the underlying obligation. We do not hold or issue such financial instruments for trading purposes. Derivatives used for hedging purposes must be designated as, and effective as, a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in the fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.

The interest rate swap has a notional amount of $2.3 million as of March 31, 2004 and matures on July 2, 2004. The interest rate swap agreement effectively converts a portion of the Company's LIBOR-based variable rate borrowings into fixed rate borrowings with a pay rate of 4.1%. The Company recorded unrealized gains of $81,000 and $4,000 in accumulated other comprehensive income for the three months ended March 31, 2003 and 2004, respectively, in connection with this swap. There was no gain or loss on the swap as a result of ineffectiveness. Prepayment of the loan, changes in counterparty credit worthiness and changing market conditions could result in the reclassification into earnings of gains and losses that are reported in accumulated other comprehensive income (loss). The Company reclassified losses of $136,000 and $5,000 related to the interest rate swap into interest expense in the first three months ended March 31, 2003 and 2004, respectively. Approximately $3,000 in losses are expected to be reclassified into earnings within the next 12 months as interest payments occur.

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Item 4.  Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

Our Chief Executive Officer and Chief Financial and Accounting Officer have evaluated our disclosure controls and procedures and have concluded, as of March 31, 2004, that they are effective as described above.

There has been no change in our internal control over financial reporting during the quarter ended March 31, 2004, identified in connection with an evaluation performed by management, including our Chief Executive Officer and our Chief Financial and Accounting Officer, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

It should be noted that any system of internal control over financial reporting, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our internal control over financial reporting will succeed in achieving its goals under all potential future conditions.

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PART II. - OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K
		(a) Exhibits
10.7		Amended and Restated Non-Employee Directors' Share Option Plan
10.29		Employment Agreement, dated September 23, 2002, between Steiner Leisure Limited and Robert C. Boehm.
10.30		Amendment, dated May 30, 2003, to Employment Agreement between Steiner Leisure Limited and Robert C. Boehm.
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
		(b) Reports on Form 8-K
		We filed or furnished the following reports on Form 8-K during the fiscal quarter ended March 31, 2004: Report dated February 26, 2004 furnished on Item 12 disclosing our reported earnings for the fiscal quarter and year ended December 31, 2003. This Report on Form 8-K is not deemed to be incorporated by reference into any of our filings with the Securities and Exchange Commission.

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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: May 10, 2004

STEINER LEISURE LIMITED

(Registrant)

/s/ Clive E. Warshaw

Clive E. Warshaw
Chairman of the Board

/s/ Leonard I. Fluxman

Leonard I. Fluxman
President and Chief Executive Officer
(principal executive officer)

/s/ Stephen B. Lazarus

Stephen B. Lazarus
Chief Financial Officer
(principal accounting officer)

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1. The following is a list of all exhibits filed as a part of this report:

Exhibit Number	Description
10.7		Amended and Restated Non-Employee Directors' Share Option Plan
10.29		Employment Agreement, dated September 23, 2002, between Steiner Leisure Limited and Robert C. Boehm.
10.30		Amendment, dated May 30, 2003, to Employment Agreement between Steiner Leisure Limited and Robert C. Boehm.
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

27

EX-10

Exhibit 10.7

STEINER LEISURE LIMITED

AMENDED AND RESTATED

NON-EMPLOYEE DIRECTORS' SHARE

OPTION PLAN

Adopted February 23, 2004

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 "Option") 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 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 President 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. 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 3,000 Shares. In addition, any Non-Employee Director who serves as Chair of a committee of the Board shall be granted on each Annual Meeting Date an Option to purchase an additional 1000 Shares for each such Chair 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 3,000 (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) Exercise Price. The exercise price of each Option shall be the Fair Market Value of the Shares on the Date of Grant.

(e) 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.

(f) 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.

(g) 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.

(h) 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.

(i) 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 issuable 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.

(j) 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.

(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.

(o) 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) General. 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) Certain Adjustments. 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) Term. 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) Termination and Amendment. 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) Other Compensation. 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) Section 16. 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. 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.

EX-10

Exhibit 10.2930

EMPLOYMENT AGREEMENT

This Employment Agreement (the ""Agreement"") is made this __23____ day of September, 2002 by and between Steiner Leisure Limited, a Bahamas international business company (the ""Company""), and Robert C. Boehm (""Employee"").

W I T N E S S E T H:

WHEREAS, the Company and Employee desire to provide for the terms of the services to be performed by Employee for the Company.

NOW THEREFORE, in consideration of the premises and mutual agreements hereinafter contained, the parties hereto agree as follows:

1. Employment; Duties. The Company hereby employs Employee as Senior Vice President and General Counsel of the Company and Employee hereby accepts such employment. Employee shall have such duties and responsibilities consistent with the position as may be determined from time to time by the Board of Directors of the Company (the ""Board"") or the President of the Company (the ""President""), including duties with respect to affiliates (as defined in Rule 405 under the Securities Act of 1933, as amended) of the Company (each, an ""Affiliate""). During the term of this Agreement, Employee shall devote all his working time and effort to the conduct of his duties hereunder. During the term of this Agreement, Employee shall devote all his working time and effort to the conduct of his duties hereunder, provided that Employee may (i) serve on corporate, civic and charitable boards or committees, (ii) provide services on a pro bono basis to civic and chari table organizations and (iii) provide instruction at academic institutions in the evenings or weekends provided that such instruction does not interfere with the performance of Employee''s duties hereunder. Employee shall be based at the principal offices of the Company''s Steiner Management Services, LLC Affiliate, which offices currently are located in Coral Gables, Florida. In the event of a relocation of Employee by the Company as a result of the relocation of such principal offices, the terms of Section 3(d), below, shall govern.

2. Effective Date; Term. This Agreement is for a term September__23rd_, 2002 and terminating on December 31, 2007, unless terminated sooner in accordance with the terms and conditions in Section 5, below.

3. Compensation.

(a) Salary; Bonus; Etc. Except as otherwise provided herein, the Company (or any Affiliate) shall pay to Employee during the term hereof compensation as described in this Section 3(a), all of which shall be subject to such deductions as may be required by applicable law or regulation:

(i) Base Salary. (A) a base salary at the rate of Two Hundred Thirty-Three Thousand Three Hundred Thirty-Three Dollars (U.S. $233,333) per year for 2002 and (B) a base salary at the rate of not less than Two Hundred Thirty-Three Thousand Three Hundred Thirty-Three Dollars (U.S. $233,333) per year for each calendar year (""Year"") thereafter during the term of this Agreement, subject to review annually, and possible increase in the sole discretion of the Board, by the Board payable in bi-weekly installments (the ""Base Salary"").

(ii) Incentive Bonus. Employee is eligible to receive a bonus (the ""Incentive Bonus"") equal to fifty percent (50%) of Base Salary tied to achieved Company budgeted Net Earnings (as defined below) for the respective year in the term. With respect to each Year during the term hereof, the Incentive Bonus shall be based on a budget for the four fiscal quarters of each Year hereunder, which budget includes an estimate of the Net Earnings for such Year and which budget shall have been approved for the purpose of the compensation payable hereunder by the Compensation Committee of the Board (the ""Budget""). At the end of the Year , if the Company shall have met seventy-five percent (75%) of the Net Earnings set forth in the Budget (""Budgeted Net Earnings""), for the Year to date Employee shall be entitled to receive an amount equal to 0.250 times the Base Salary then in effect for the Year in question. During the term of this Agreement, in the event at the end of any Year in question, the Company has exceeded seventy-five percent (75%), up to and including one-hundred twenty-five percent (125%) of Budgeted Net Earnings for such Year , then for each one percent (1%) increase over seventy-five percent (75%) up to one hundred twenty-five percent (125%), the Employee shall be entitled to receive an additional amount equal to 0.010 times the Base Salary then in effect for the Year in question. In the event at the end of any such Year, the Company has exceeded one hundred twenty-five percent (125%) of Budgeted Net Earnings for such Year , then for each one percent (1%) increase over one hundred twenty-five percent (125%), the Employee shall be entitled to receive, in addition to the amounts payable for exceeding seventy-five percent (75%) of Budgeted Net Earnings, an amount equal to 0 .0050 times the Base Salary then in effect for the Year in question. Notwithstanding the foregoing, Employee shall not be entitled to receive any amount in excess of two and one-half percent (2.5%) of the Budgeted Net Earnings pursuant to this Section 3(a)(ii) for such Year. Any amount which Employee is entitled to receive herein, shall be payable within sixty (60) days after the end of the Year in question. For purposes of this Section 3(a)(ii), ""Net Earnings"" shall mean earnings of the Company before taxes, interest, depreciation and amortization. By way of clarification, except as otherwise provided herein, Employee shall not be entitled to receive the Incentive Bonus for any Year unless Employee is employed by the Company at the close of business on December 31st of that Year.

(iii) Disability Insurance. During each Year during the term hereof, up to Four Thousand Three Hundred Twenty Dollars (U.S. $4,320.00) (the ""Maximum Disability Payment"") (pro-rated for partial years hereunder) to be used toward the payment of the premium on a disability insurance policy (a ""Policy"") covering Employee, upon delivery to the Company of evidence reasonably satisfactory to the Company of the purchase by Employee of a Policy with an annual premium due during such Year in an amount at least equal to the amount requested by Employee under this Section 3(a)(ii). The Maximum Disability Payment shall be increased proportionately to the extent, and at the time of any increase in the Base Salary during the term hereof. The Maximum Disability Payment shall be payable in equal installments at the times that the Base Salary is paid to Employee and shall be subject to such deductions as may be required by applicable law or regulation.

(b) Deferred Compensation. Employee may elect, in accordance with the provisions of any deferred compensation plan agreement that may be entered into between, Employee and the Company (a ""Deferred Plan""), to defer all or a portion of the amount of the Incentive Bonus payable to Employee. Any and all amounts that Employee elects to defer shall be held and administered in accordance with the terms and provisions of any such Deferred Plan.

(c) Other Benefits. During the term hereof, the Company shall provide to Employee all other benefits currently provided to the executive officers (as defined for purposes of the Securities Exchange Act of 1934, as amended) of the Company, as well as those which the Company may, in the future, provide to its executive officers, including, without limitation, life insurance, medical coverage, benefits under any 401(k) plan of the Company or any Affiliate and the right to participate in share option or similar plans. To the extent employee elects not to accept the medical coverage to which Employee is entitled to receive from the Company, Employee shall be entitled to receive an amount in cash equal to the amount the Company would otherwise pay for such medical coverage, payable with each periodic payment of Base Salary. The Company also shall provide Employee with a private office and an annual allowance of Seven Thousand Dollars ($7,000) for the use by Employee in purchasing or leasing an automobile and for the payment of insurance, maintenance and other expenses in connection with such automobile.

(d) Expense Reimbursement; Relocation. The Company shall reimburse Employee for all ordinary and necessary business expenditures made by Employee in connection with, or in furtherance of, his employment hereunder upon presentation by Employee of expense statements, receipts, vouchers or such other supporting information as may from time to time be reasonably requested by the President or the Board. When traveling for business of the Company, Employee, at his sole discretion and at the Company''s expense, shall travel via ""Business"" or ""Club"" class accommodations. In the event Employee is relocated outside of the United States, or more than fifty (50) miles from Employee''s principal place of business with the Company in Coral Gables, Florida, then, in each case, the Company shall (i) reimburse Employee for all reasonable moving expenses necessitated by such relocation and (ii) shall make such adjustments, if any, in the compensation of Employee hereunder so that after such relocation, Employee''s compensation shall be no less than Employee''s compensation prior to such relocation.

(e) Share Options. The Company will cause Messrs. Warshaw and Fluxman to recommend to the Compensation Committee of the Board that it meet within thirty (30) days after the date hereof and that such committees shall see award at such meeting to Employee options to purchase 75,000 of the Company''s common shares, exercisable in three (3) equal annual installments commencing on the first anniversary of the date of grant and with a term of ten (10) years, and, generally, with terms similar to those awarded to other senior executives of the Company. In addition, Employee shall be eligible for the 2002 annual grant of options to employees of the Company, based on the formula used by the Company to determine the number of options granted to various officer and employee positions with the Company, and prorated to reflect that portion of 2002 during which Employee was employed hereunder. Subject to the one year post-grant employment requirement of Section 6.3 of the Company''s amend ed and restated 1996 Share Option and Incentive Plan, all share options granted to Employee under this Agreement, or otherwise during the term of his employment with the Company, shall vest immediately in the event of (i) Employee''s termination by the Company without cause (as provided in Section 5(c), below); (ii) Employee''s termination of employment for Good Reason (as hereinafter defined), or (iii) a Change in Control (as hereinafter defined).

4. Vacation; Professional Licenses, etc.

(a) Vacation. Employee shall be entitled to (i) four (4) weeks paid vacation per Year prorated for partial years hereunder (the ""Vacation Days"") and (ii) additional vacation days on each day that is a United States federal holiday. Notwithstanding the foregoing, Employee shall not be entitled to take in excess of two (2) consecutive weeks of vacation without the prior written consent of the President. The vacation provided for in this Section 4 shall be coextensive with, and not cumulative with, vacations allowed pursuant to any employment agreements or other arrangements with any Affiliates of the Company. The Company shall pay to Employee on or before January 30th of the following Year, an amount representing the Base Salary (at the rate in effect for the Year during which the Vacation Days were to have been taken) with respect to the Vacation Days not taken by Employee during a Year; provided, however, that no payment shall be made with respect to more than ten (1 0) Vacation Days for any one Year. In the event that Employee''s employment hereunder is terminated other than pursuant to Section 5(c) or Section 5(f) below, then the Company shall pay to Employee within fifteen (15) days after the date of such termination an amount representing the Base Salary (at the rate in effect for the Year during which such termination occurs) with respect to the Vacation Days not taken by Employee during that Year, pro rated, if appropriate, to reflect the Year in question through the termination date being less than a full year.

(b) Professional Licenses, etc. During each Year during the term hereof, the Company shall pay the cost of Employee''s (i) State Bar memberships as in effect on the date hereof and (ii) American Bar Association membership as in effect on the date hereof. In addition, Employee shall be entitled to attend, as part of his duties hereunder, and the Company shall pay the cost of, such continuing legal education programs as are necessary for Employee to maintain in good standing Employee''s bar memberships. In addition, Company shall maintain a listing under the Company''s name in the Martindale Hubbell Legal Directory identifying Employee and this position with the Company.

5. Termination and Non-Renewal.

(a) Death. In the event of Employee''s death during the term hereof, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee''s estate (i) within ten (10) days after the date of Employee''s death any (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and (B) Incentive Bonus pursuant to Section 3(a)(ii), above (including the amount that would have been payable after the end of the Year in question), in each case to which Employee was entitled on the date of death pursuant to the terms of those Sections and (C) any amount due to Employee as of the date of death as reimbursement of expenses under Section 3(d), above; and (ii) within sixty (60) days after the end of the Year in which Employee died, if the Budgeted Net Earnings are met for the Period in question, an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, which would have been payable to Employ ee for the Year during which Employee died had Employee been employed by the Company on the last day of that Year (including the amount that would have been payable after the end of the Year in question). In addition, the Company shall pay within sixty (60) days after the date of Employee''s death to Employee''s surviving spouse, or to Employee''s estate if there is no surviving spouse, an amount equal to the sum of (i) 100% of Base Salary, at the annual rate in effect on the date of Employee''s death, and (ii) the ""Average Bonus"" (as defined below), such sum to be payable in bi-weekly installments for a period of one year following Employee''s death. Employee''s estate shall be entitled to immediate vesting of the Options and any share options held by Employee on the date of his death which were granted on or after the date hereof, all of which shall remain exercisable until the earlier of one year following the Employee''s death or the date (or dates) the Option (and other options) would otherwise expi re in the absence of Employee''s death.

(b) Disability. If Employee becomes physically or mentally disabled during the term hereof so that he is unable to perform the services required of Employee pursuant to this Agreement for an aggregate of six (6) months in any twelve (12) month period (a ""Disability""), the Company, at its option, may terminate Employee''s employment hereunder (the date of such termination, the ""Disability Date"") and, thereafter, Employee shall not be deemed to be employed hereunder (except that Employee''s obligations under Section 6, below, shall remain in full force and effect) and the Company shall have no further obligations to make payments or otherwise under this Agreement, except as provided in this Section 5(b). In determining Disability under this Section 5(b) the Company shall rely upon the written opinion of the physician regularly attending Employee in determining whether a Disability is deemed to exist. If the Company disagrees with the opinion of such physician , the Company may choose a second physician, the two (2) physicians shall choose a third physician, and the written opinion of a majority of the three (3) physicians shall be conclusive as to Employee''s Disability. The expenses associated with the utilization of any physician other than the physician regularly attending Employee shall be borne solely by the Company. Employee hereby consents to any required medical examination and agrees to furnish any medical information requested by the Company and to waive any applicable physician/patient privilege that may arise because of such determination. In the event of a Disability, the Company shall pay to Employee (i) within ten (10) days after the Disability Date (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and (B) any Incentive Bonus payable pursuant to Section 3(a)(ii), above (including the amount that would have been payable after the end of the Year in question), in each case to which Employee was entitled on the Disability Date pursuant to the terms of those Sections and (C) any amount due to Employee as of the Disability Date as reimbursement of expenses under Section 3(d), above; and (ii) within sixty (60) days after the end of the year in which the Disability Date occurs, if the Budgeted Net Earnings are met for the Year in question, an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, which Employee would have been entitled to receive during the Year in which the Disability Date occurs had Employee been employed by the Company on the last day of that Year (including the amount that would have been payable after the end of the Year in question). Nothing in this Agreement is intended to cause the Company to be in violation of the Americans with Disabilities Act.

(c) For Cause by Company. The Company may at any time during the term hereof, without any prior notice, terminate Employee''s employment hereunder upon the occurrence of any of the following events: (i) a material breach by Employee of this Agreement; (ii) a material violation by Employee of any lawful written policy or directive of the Company or any Affiliate applicable to Employee specifically, or to officers or employees of the Company or any Affiliate generally;(iii) Employee''s excessive alcoholism or drug abuse that substantially impairs the ability of Employee to perform Employee''s duties hereunder; (iv) gross negligence by Employee in the performance of his duties under this Agreement that results in material damage to the Company or any Affiliate; (v) violation by Employee of any lawful direction from the Board provided such direction is not inconsistent with Employee''s duties and responsibilities to the Company or any Affiliate hereunder; (vi) fraud, embezzlement or other criminal conduct by Employee that results in material damage to the Company or any Affiliate, or could reasonably be expected to result in material damage to the Company or any Affiliate; (vii) intentional or reckless conduct that results in material damage to the Company or any Affiliate, or could reasonably be expected to result in material damage to the Company; or (viii) the committing by Employee of an act involving moral turpitude that results in material damage to the Company, or could reasonably be expected to result in material damage to the Company or any Affiliate. If the Company terminates Employee''s employment under this Agreement pursuant to this Section 5(c), the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee within sixty (60) days after the date that the Company gives written notice of such termination to Employee (the ""Termination Notice Date"") any (i) unpaid accrued Base Salary pur suant to Section 3(a)(i), above, through the date that is thirty (30) days after the Termination Notice Date, (ii) Incentive Bonus that is accrued pursuant to Section 3(a)(ii), above, and unpaid and (iii) amounts due to Employee as of the date of such termination as reimbursement of expenses under Section 3(d), above. Notwithstanding the foregoing, Employee shall, for all purposes, cease to be deemed to be employed by the Company as of the date of any termination of Employee pursuant to this Section 5(c), irrespective of whether written notice of termination is given on such date.

(d) For Cause by Employee. Employee may at any time during the term hereof, without any prior notice, terminate this Agreement upon the occurrence of any of the following events: (i) a material breach by the Company of this Agreement or (ii) a ""Change in Control"" of the Company (as defined below), subject to the terms of this Section 5(d). In the event that Employee terminates this Agreement pursuant to clause (i) above, then the Company shall pay to Employee within ten (10) days after the date of such termination an amount equal to (A) the Base Salary then payable, but then unpaid, for the full term of this Agreement pursuant to Section 3(a)(i), above; (B) any Incentive Bonus then payable, pursuant to Section 3(a)(ii), above (including the amount that would have been payable after the end of the Year in question), but unpaid, (C) any amount due to Employee as of the date of such termination including as reimbursement of expenses under Section 3(d), above; and (D) an a mount equal to the Average Bonus, as defined in Section 5(e), below, for each full Year during the remainder of the term of this Agreement which would have occurred in the absence of such termination and a ratable portion thereof for any partial Year.

For purposes of this Section 5(d), a ""Change in Control"" of the Company shall be deemed to occur if (i) all or substantially all of the assets of the Company are sold or otherwise disposed of or the Company is liquidated or dissolved or adopts a plan of liquidation, (ii) during any period of twelve (12) consecutive months, Present Directors and/or New Directors cease for any reason to constitute at least half of the Board (for purposes of the preceding clause, ""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 (iii) any of the following circumstances has occurred (A) 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 Securities Exchange Act of 1934, as amended (the ""Exchange Act""), whether or not the Company is then subject to such reporting requirement, (B) any ""person"" or ""group"" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act; (x) becomes the ""beneficial owner"" (as defined in Rule 13d-3 under the Exchange Act) of twenty percent (20%) or more of the combined voting power of then outstanding securities of the Company, or (y) 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, except that a person or group shall be deemed to be a beneficial owner of all securities that such person or group has the right to acquire regardless of wheth er such right is immediately exercisable or only exercisable after the passage of time or (C) 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.

In the event of a Change in Control, this Agreement shall continue in effect until December 31, 2007 unless the Employee terminates this Agreement as provided below. In the event a Change in Control occurs on or before January 1, 2007, Employee may terminate this Agreement within one (1) year after the date of such Change in Control. In the event a Change in Control occurs after January 1, 2007, Employee may terminate this Agreement on or before the date that represents three-fourths of the number of days between the date of the Change in Control and December 31, 2007. Any such termination shall be by written notice to the Board at least thirty (30) days prior to the proposed termination date; provided, however, that if the Change in Control is on or after December 1, 2007, then the aforesaid notice shall be given at any time on or after the Change in Control and prior to or on the termination date. The period of time between the Change in Control and the date of th e notice of termination referenced in the preceding sentence is referred to herein as the ""Change in Control Period."" In the event that Employee so notifies the Company that he wishes to terminate this Agreement, then Employee shall be entitled to receive from the Company, within ten (10) days after the end of the Change in Control Period, an amount equal to (i) the greater of (A) the Base Salary then in effect pursuant to Section 3(a)(i), above, for the remainder of the term of this Agreement which would have occurred in the absence of such termination and (B) twice the Base Salary then in effect pursuant to Section 3(a)(i), above; (ii) any Incentive Bonus then payable, pursuant to Section 3(a)(ii), above (including the amount that would have been payable after the end of the Year in question), but unpaid; (iii) an amount equal to the Average Bonus for each full Year during the remainder of the term of this Agreement which would have occurred in the absence of such termination and a ratable portion there of for any partial Year; and (iv) any amount due to Employee as of the date of such termination including as reimbursement of expenses under Section 3(d), above. The exercise of any rights under this paragraph would be in lieu of any rights the Employee might have under Section 5(g), below.

(e) Without Cause By Company. In the event that during the term hereof the Company terminates Employee''s employment hereunder other than for cause pursuant to Section 5(c) above, then the Company shall pay to Employee within ten (10) days after the date of such termination (except as otherwise provided herein) an amount equal to (i) any unpaid accrued Base Salary then in effect pursuant to Section 3(a)(i), above, (ii) an amount equal to the Base Salary pursuant to Section 3(a)(i), above then in effect with respect to a period equal to the longer of twelve (12) months or the remainder of the term of this Agreement which would have occurred in the absence of such termination; (iii) any Incentive Bonus then payable, but unpaid pursuant to Section 3(a)(ii), above; (iv) an amount equal to the Average Bonus for each full Year during the remainder of the term of this Agreement which would have occurred in the absence of such termination and a ratable portion thereof for any partial Ye ar; (v) any amount due to Employee as of the date of termination as reimbursement of expenses under Section 3(d), above; and (vi) an amount equal to the cost of Employee''s health insurance provided by the Company as in effect at the time of such termination for a period of one (1) year after the date of such termination. For purposes of this Agreement, the term ""Average Bonus,"" when calculated with reference to any date, shall mean, the arithmetic average of Employee''s annual Incentive Bonus for the three preceding Years, with any Incentive Bonus related to a partial Year hereunder prorated based on the amount that would have been paid for a full Year. Each payment described in this Section 5(e) with respect to an Incentive Bonus shall include the amount that would have been payable with respect to that Incentive Bonus after the end of the year in question. Notwithstanding the foregoing, with respect any of the preceding three Years referenced above that would include Years prior to the commencement of Employee''s employment with the Company hereunder, the Incentive Bonus for any such preceding Year shall be deemed to be an amount equal to the Incentive Bonus that would have been payable to Employee assuming the Budgeted Net Earnings were met but not exceeded for the year in question multiplied by the Same Percentage (as defined below). For purposes of this Section 5(e), the ""Same Percentage"" means, for the Year in question, (i) the percentage of the incentive bonus (with 100% being equal to the incentive bonus payable if the Budgeted Net Earnings are met but not exceeded for the Year in question) payable to the other executive officers of the Company who were entitled to receive incentive bonuses calculated identically to the Incentive Bonus (the ""Same Formula"") or (ii) for any period when no other executive officer of the Company had the Same Formula, the percentage of the incentive bonus payable to Carl St. Philip.

(f) By Employee for Illness. In the event that during the term hereof Employee becomes ill such that, in the written opinion of a physician reasonably acceptable to the Company, it would not be advisable for Employee to continue his employment with the Company hereunder, Employee may terminate his employment hereunder upon reasonable notice to the Company and, in such event, Employee shall not be deemed to have breached this Agreement as a result of such termination. In the event of such termination by Employee, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee (i) within ten (10) days after the date of such termination (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above and (B) any Incentive Bonus then payable, but unpaid, pursuant to Section 3(a)(ii), above, in each case to which Employee is entitled on the date of such termination pursuant to the terms of those Sec tions, (ii) any amounts due to Employee as of the date of termination of Employee as reimbursement of expenses under Section 3(d), above, and (iii) within sixty (60) days after the end of the Year in which Employee died, if the Budgeted Net Earnings are met for the Year in question, an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, which Employee would have been entitled to receive during the quarter in which Employee terminated employment pursuant to this Section 5(e) had Employee been employed by the Company on the last day of that quarter (including the amount that would have been payable after the end of the Year in question).

(g) By Employee Without Cause. Employee may terminate this Agreement by giving written notice (the ""Voluntary Notice"") thereof at least sixty (60) days in advance of such termination to a member of the Board of Directors of the Company other than Employee. In the event of such voluntary termination by Employee, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that Employee shall be entitled to receive (i) any unpaid accrued Base Salary through the date of such termination, (ii) Incentive Bonus then payable, but that is unpaid pursuant to Section 3(a)(ii), above, as of the date of termination and (iii) any other amounts due to Employee as of the date of termination, including, but not limited to, reimbursement of expenses under Section 3(d) above, pursuant to Section 3(a)(iii), above, to the terms of such Sections. Such amounts shall be paid to Employee within sixty (60) days after the date of such termination.

(h) No Offset - No Mitigation. Employee shall not be required to mitigate any damages under this Agreement by seeking other comparable employment. The amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by or provided to Employee as a result of his employment by another employer.

(i) Non-Renewal. In the event that the employment of Employee hereunder continues for the full term of this Agreement and Employee''s employment with the Company is not renewed as of the date of termination of this Agreement for a period of at least one year on terms no less favorable to Employee than the terms of this Agreement, Employee shall be entitled to receive from the Company, within fifteen (15) days after the date of such termination, an amount equal to (i) the Base Salary pursuant to Section 3(a)(i), above, in effect as of the date of termination of this Agreement; (ii) any Incentive Bonus pursuant to Section 3(a)(ii), above (including the amount that would have been payable after the end of the Year in question), in each case to which Employee was entitled on the date of termination pursuant to the terms of those Sections and (iii) any amount due to Employee as of the date of termination as reimbursement of expenses under Section 3(d), above.

6. Non-Competition; Confidentiality; etc. All references to the ""Company"" in this Section 6 shall include all Affiliates where the context permits.

(a) Acknowledgment. Employee acknowledges and agrees that (i) in the course of Employee''s employment by the Company, it will be necessary for Employee to acquire information which could include, in whole or in part, information concerning the sales, products, services, customers and prospective customers, sources of supply, computer programs, system documentation, software development, manuals, formulae, processes, methods, machines, compositions, ideas, improvements, inventions or other confidential or proprietary information belonging to the Company or relating to the affairs of the Company (collectively, the ""Confidential Information""), (ii) the restrictive covenants set forth in this Section 6 are reasonable and necessary in order to protect and maintain such proprietary interests and the other legitimate business interests of the Company and that such restrictive covenants in this Section 6 shall survive the termination of this Agreement for any reason and (iii) t he Company would not have entered into this Agreement unless such covenants were included herein.

(b) Non-Competition. Employee covenants and agrees that during the term hereof and for a period of one (1) year following the termination of Employee''s employment with the Company for any reason, Employee shall not on any vessel or within one hundred (100) miles of any non-vessel venue where or from which the Company is then offering its services or products or had in the then preceding two (2) years offered its services or products, business, engage, directly or indirectly, whether as an individual, sole proprietor, or as a principal, agent, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise in any Competing Business. For purposes of this Agreement, the term ""Competing Business"" shall mean any individual, sole proprietorship, partnership, firm, corporation or other entity or group which offers or sells or attempts to offer or sell (i) spa services, skin or ha ir care products, or degree or non-degree educational programs in massage therapy, skin care or related courses or (ii) any other services or products then offered or sold, or which had in the then preceding two (2) years been offered or sold by the Company. Notwithstanding the foregoing, Employee is (i) not precluded from (A) maintaining a passive investment in publicly held entities provided that Employee does not have more than a five percent (5%) beneficial ownership in any such entity; or (B) serving as an officer or director of any entity, the majority of the voting securities of which is owned, directly or indirectly, by the Company; or (ii)  after the termination of this Agreement, precluded from, or limited in any way in connection with, engaging in the private practice of law (collectively, a ""Permitted Activity"").

(c) Non-Solicitation of Customers and Suppliers. Employee agrees that during his employment with the Company, he shall not, whether as an individual or sole proprietor, or as a principal, agent, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise, directly or indirectly, solicit the trade or business of, or trade, or conduct business with, any customer, prospective customer, supplier, or prospective supplier of the Company for any purpose other than for the benefit of the Company. Employee further agrees that for two (2) years following termination of his employment hereunder with the Company for any reason, Employee shall not, directly or indirectly, solicit the trade or business of, or trade, or conduct business with any customers or suppliers, or prospective customers or suppliers of the Company. Notwithstanding the foregoing, Employee is not precluded from a Permitt ed Activity.

(d) Non-Solicitation of Employees, Etc. Employee agrees that during the term of his employment hereunder and thereafter for a period of two (2) years, he shall not directly or indirectly, as an individual or sole proprietor or as a principal, agent, employee, employer, consultant, independent contractor, officer, director, shareholder or partner of any person, firm, corporation or other entity or group otherwise, without the prior express written consent of the Company approach, counsel or attempt to induce any person who is then in the employ of, or then serving as independent contractor with, the Company to leave the employ of, or terminate such independent contractor relationship with, the Company or employ or attempt to employ any such person or persons who at any time during the preceding six (6) months was in the employ of, the Company. Notwithstanding the foregoing, Employee is not precluded from a Permitted Activity.

(e) Non-Disclosure of Confidential Information. Employee agrees to hold and safeguard the Confidential Information in trust for the Company and its successors and assigns, and only use the Confidential Information for purposes of performing his duties hereunder, and agrees that he shall not, without the prior written consent of the Board, misappropriate or disclose or make available to anyone for use outside the Company''s organization at any time, either during his employment hereunder or subsequent to the termination of his employment hereunder for any reason, any of the Confidential Information, whether or not developed by Employee, except as required in the performance of Employee''s duties to the Company or as required by applicable law. In the event that Employee is requested or required by, or under applicable law or court, or administrative order to disclose any of the Confidential Information, Employee shall provide the Company with prompt written notice of any such re quest or requirement so that the Company may seek a protective order or other appropriate remedy. If Employee is legally compelled to disclose Confidential Information, Employee shall disclose only that portion of the Confidential Information which Employee is legally required to disclose.

(f) Disclosure of Works and Inventions/Assignment of Patents. Employee shall disclose promptly to the Company any and all works, publications, inventions, discoveries and improvements authored, conceived or made by Employee during the period of his employment with the Company and related to the business or activities of the Company (the ""Rights""), and hereby assigns and agrees to assign all his interest therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments which the Company shall deem necessary to apply for and obtain Letters of Patent or Copyrights, or similar documents or rights, of the United States or any foreign country or to otherwise protect the Company''s interest in the Rights. Such obligations shall continue beyond the termination of Employee''s employment with the Company for any reason with respect to works, inventions, discoveries and improvements autho red, conceived or made by Employee during the period of Employee''s employment under this Agreement.

(g) Return of Materials. Upon the termination of Employee''s employment with the Company for any reason, Employee shall promptly deliver to the Board all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, financial records, reports, flowcharts, programs, proposals and any other documents concerning the Company''s business, including, without limitation, its customers or suppliers or concerning its products, services or processes and all other documents or materials containing or constituting Confidential Information; provided, however, that nothing in this Section 6(g) shall require Employee to deliver to the Board any property that is owned by Employee and that contains no Confidential Information.

(h) Limitation on Restrictions. Notwithstanding anything to the contrary in this Section 6, the restrictions set forth in (i) Sections 6(a) through 6(g), above, shall not apply if Employee terminates this Agreement under Section 5(d), above, unless Employee receives as a result of such termination the amount required to be paid to Employee pursuant to the last paragraph in Section 5(d), above, within thirty (30) days after the date of such termination above, in which case the restrictions in this Section 6 shall apply until the last date that this Agreement would have been in effect had it not been terminated as aforesaid and (ii) Section 6(b) shall not apply if Employee''s employment is terminated after a Change in Control that is not approved by the Board.

7. Non-Assignment; Successors; etc. The Company may assign any of its rights, but not its obligations under this Agreement, without the prior written consent of Employee, which shall not be unreasonably withheld. The successors of the Company shall be bound by the terms hereof, and where the context permits, references to the ""Company"" herein shall be deemed to refer to such successors. Employee may assign his rights, but not his obligations, hereunder and the obligations of Employee hereunder, other than the obligations set forth in Section 1, above, shall continue after the termination of his employment hereunder for any reason and shall be binding upon his estate, personal representatives, designees or other legal representatives, as the case may be (""Heirs""), and all of Employee''s rights hereunder shall inure to the benefit of his Heirs. All of the rights of the Company hereunder shall inure to the benefit of, and be enforceable by the successors of the Company.

8. Notices. Except as set forth in Section 5(c), above, any notices or demands given in connection herewith shall be in writing and deemed given when (i) personally delivered, (ii) sent by facsimile transmission to a number provided in writing by the addressee and a confirmation of the transmission is received by the sender or (iii) three (3) days after being deposited for delivery with a recognized overnight courier, such as FedEx, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate:

If to Employee:

Robert C. Boehm

9940 SW 57^th Place

Miami, Fl.33156

Fax: 305 - 669-8512

If to the Company:

Leonard I. Fluxman

c/o Steiner Management Services

770 South Dixie Highway, Suite #200

Coral Gables, FL 33146

Facsimile Number: (305) 372-9310

9. Entire Agreement; Certain Terms. This Agreement constitutes and contains the entire agreement of the parties with respect to the matters addressed herein and supersedes any and all prior negotiations, correspondence, understandings and agreements between the parties respecting the subject matter hereof, including, but not limited to all other agreements and arrangements relating to the payment of any compensation to Employee with respect to any services performed, or to be performed on behalf of the Company or any Affiliate. No waiver of any rights under this Agreement, nor any modification or amendment of this Agreement shall be effective or enforceable unless in writing and signed by the party to be charged therewith. When used in this Agreement, the terms ""hereof,"" ""herein"" and ""hereunder"" refer to this Agreement in its entirety, including any exhibits or schedules attached to this Agreement and not to any particular provisions of this A greement, unless otherwise indicated.

10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11. Governing Law, etc. This Agreement shall be governed by and construed in accordance with the laws of Florida without regard to choice of law provisions and the venue for all actions or proceedings brought by Employee arising out of or relating to this Agreement shall be in the state or federal courts, as the case may be, located in Miami-Dade County, Florida (collectively, the ""Courts""). Employee hereby irrevocably waives any objection which he now or hereafter may have to the laying of venue of any action or proceeding arising out of or relating to this Agreement brought in any of the Courts and any objection on the ground that any such action or proceeding in any of the Courts has been brought in an inconvenient forum. Nothing in this Section 11 shall affect the right of the Company or an Affiliate to bring any action or proceeding against Employee or his property in the courts of other jurisdictions. In the event of any litigation between the part ies hereto with respect to this Agreement, the prevailing party therein shall be entitled to receive from the other party all of such prevailing party''s expenses in connection with such litigation, including, but not limited, to reasonable attorneys'' fees at the trial and appellate court levels.

12. Severability. It is the intention of the parties hereto that any provision of this Agreement found to be invalid or unenforceable be reformed rather than eliminated. If any of the provisions of this Agreement, or any part thereof, is hereinafter construed to be invalid or unenforceable, the same shall not affect the remainder of such provision or the other provisions of this Agreement, which shall be given full effect, without regard to the invalid portions. If any of the provisions of Section 6, above, or any portion thereof, is held to be unenforceable because of the duration of such provision or portions thereof, the area covered thereby or the type of conduct restricted therein, the parties hereto agree that the court making such determination shall have the power to modify the duration, geographic area and/or, as the case may be, other terms of such provisions or portions thereof, and, as so modified, said provisions or portions thereof shall then be enforceabl e. In the event that the courts of any one or more jurisdictions shall hold such provisions wholly or partially unenforceable by reason of the scope thereof or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company''s rights provided for herein in the courts of any other jurisdictions as to breaches or threatened breaches of such provisions in such other jurisdictions, the above provisions as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.

13. Non-Waiver. Failure by either the Company or Employee to enforce any of the provisions of this Agreement or any rights with respect hereto, or the failure to exercise any option provided hereunder, shall in no way be considered to be waiver of such provisions, rights or options, or to in any way affect the validity of this Agreement.

14. Headings. The headings preceding the text of the paragraphs of this Agreement have been inserted solely for convenience of reference and neither constitute a part of this Agreement nor affect its meaning, interpretation, or effect.

[SIGNATURE LINES ARE ON NEXT PAGE]

IN WITNESS WHEREOF, the parties have executed these presents as of the day and year first above written.

        s/s Robert C. Boehm Robert C. Boehm STEINER LEISURE LIMITED     By:s/s Leonard I. Fluxman Leonard I. Fluxman President and Chief Executive Officer

EX-10

Exhibit 10.30

AMENDMENT No. 1

TO EMPLOYMENT AGREEMENT

This Amendment No. 1 to Employment Agreement (this "Amendment") is made the 30th day of May 2003, to be effective as of the years indicated, by and between Robert C. Boehm ("Employee") and Steiner Leisure Limited, a Bahamas international business company (the "Company").

WITNESSETH:

WHEREAS, the Company and Employee entered into an Employment Agreement dated September 23, 2002 (the "Employment Agreement");

WHEREAS, it was determined by the Compensation Committee of the Board of Directors of the Company as reflected in resolutions on January 21, 2003 and dated March 7, 2003, respectively, that the Employment Agreement should be amended to exclude from the calculations of the incentive bonus thereunder the effect of the discontinued operations charge for 2002 and 2003 relating to the disposition of the Company's day spa assets; and

WHEREAS, the Company and Employee desire to amend the Employment Agreement to reflect the foregoing.

NOW, THEREFORE, in consideration of the foregoing premises and mutual agreements hereinafter contained, the parties hereto agree as follows:

1. Compensation.

Section 3(a)(ii) of the Employment Agreement is hereby amended so that, as amended, it shall read as follows:

(ii) Incentive Bonus. Employee is eligible to receive a bonus (the "Incentive Bonus") equal to fifty percent (50%) of Base Salary tied to achieved Company budgeted Net Earnings (as defined below) for the respective year in the term. With respect to each Year during the term hereof, the Incentive Bonus shall be based on a budget for the four fiscal quarters of each Year hereunder, which budget includes an estimate of the Net Earnings for such Year and which budget shall have been approved for the purpose of the compensation payable hereunder by the Compensation Committee of the Board (the "Budget"). At the end of the Year , if the Company shall have met seventy-five percent (75%) of the Net Earnings set forth in the Budget ("Budgeted Net Earnings"), for the Year to date Employee shall be entitled to receive an amount equal to 0.250 times the Base Salary then in effect for the Year in question. During the term of this Agreement, in the event at the end of any Year i n question, the Company has exceeded seventy-five percent (75%), up to and including one-hundred twenty-five percent (125%) of Budgeted Net Earnings for such Year , then for each one percent (1%) increase over seventy-five percent (75%) up to one hundred twenty-five percent (125%), the Employee shall be entitled to receive an additional amount equal to 0.010 times the Base Salary then in effect for the Year in question. In the event at the end of any such Year, the Company has exceeded one hundred twenty-five percent (125%) of Budgeted Net Earnings for such Year , then for each one percent (1%) increase over one hundred twenty-five percent (125%), the Employee shall be entitled to receive, in addition to the amounts payable for exceeding seventy-five percent (75%) of Budgeted Net Earnings, an amount equal to 0 .0050 times the Base Salary then in effect for the Year in question. Notwithstanding the foregoing, Employee shall not be entitled to receive any amount in excess of two and one-half percent (2.5%) o f the Budgeted Net Earnings pursuant to this Section 3(a)(ii) for such Year. Any amount which Employee is entitled to receive herein, shall be payable within sixty (60) days after the end of the Year in question. For purposes of this Section 3(a)(ii), "Net Earnings" shall mean earnings of the Company before taxes, interest, depreciation and amortization determined in accordance with generally accepted accounting principles consistently applied, except that the calculation of Net Earnings shall not take into account the effect of the loss on disposal related to the discontinued operations charge for 2002 or 2003 in connection with the disposition of the Company's day spa assets. By way of clarification, except as otherwise provided herein, Employee shall not be entitled to receive the Incentive Bonus for any Year unless Employee is employed by the Company at the close of business on December 31st of that Year.

2. Effective Date. The effective date of the amendments to the Employment Agreement contained in this Amendment shall be January 1, 2003 (including with respect to the Incentive Bonus payment for 2002, which is payable after that date).

3. No Other Amendment. Except as set forth in this Amendment, all provisions of the Employment Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Amendment 1 as of the day and year first above written.

Steiner Leisure Limited Employee

By:____________________________ _________________________

Name: Leonard I. Fluxman Robert C. Boehm

Title: President and Chief Executive Officer

EX-31

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Leonard I. Fluxman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Steiner Leisure Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
3. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2004

/s/ Leonard I. Fluxman

Leonard I. Fluxman
President and Chief Executive Officer

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EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a),

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Stephen B. Lazarus, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Steiner Leisure Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
3. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 10, 2004

/s/ Stephen B. Lazarus

Stephen B. Lazarus
Senior Vice President and Chief Financial Officer

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EXHIBIT 32

CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), the undersigned officers of Steiner Leisure Limited certify that (1) this Quarterly Report of Steiner Leisure Limited (the "Company") on Form 10-Q for the period ended March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (this "Report"), fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Leonard Fluxman

Leonard Fluxman

President and Chief Executive Officer

/s/ Stephen B. Lazarus

Stephen B. Lazarus

Senior Vice President and Chief Financial Officer

Date: May 10, 2004