Registrant's telephone number, including area code: (242) 356-0006

Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, par value (U.S.) $.01 per share

       Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  [X] Yes   [  ] No.

       Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [  ].

       Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)  Yes [X]   No [  ]

The aggregate market value of the registrant's common stock held by non-affiliates was approximately $194,142,790 as of June 28, 2002, based on the closing price of the common stock on the Nasdaq Stock Market. For purposes of this calculation, only executive officers and directors are deemed to be the affiliates of the registrant.

As of March 10, 2003, the registrant had 16,380,110 common shares issued and outstanding, which excludes 1,866,407 treasury shares.

       Portions of the registrant's definitive Proxy Statement for the Company's 2003 Annual Meeting of Shareholders, which will be filed on or before April 30, 2003, are incorporated by reference in Part III hereof.

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Steiner Leisure provides its shipboard services in treatment and fitness facilities located on cruise ships. On newer ships, our services are provided in enhanced, large "spa" facilities. Many of these facilities are in large fitness and treatment areas, generally located in a single passenger activity area. As of March 10, 2003, 67 of the 104 ships that we served had large spa facilities. Ships with large spas provided us with average weekly revenues of $44,199 in 2001 and $47,589 in 2002, as compared to average weekly revenues of $11,235 in 2001 and $11,375 in 2002 for the other ships we served. Our services include massage, water-based treatments, aromatherapy treatments, seaweed wraps, saunas, steam rooms, aerobic exercise, yoga, hair styling, manicures, pedicures and a variety of other specialized facial and body treatments. Our range of services is designed to capitalize on the growing consumer trend toward health awareness, personal care and fitness.

We also provide spa services similar to those we provide on cruise ships at resort hotels located in United States, the Caribbean, Asia, the Pacific and other locations and at our Elemis luxury day spas in Coral Gables, Florida and London, England.

We develop and sell a variety of high quality beauty products under our Elemis® and La Therapie® trademarks. The raw materials for these products are produced for us by a premier French manufacturer. We also sell products of third parties, including a variety of hair care products under the Steiner® name. We manufacture and private label a total of more than 233 different retail products. These products include beauty preparations, such as aromatherapy oils, cleansers and creams, other skin care preparations, hair care products, such as shampoos, moisturizers and lotions, and nail care products. Steiner Leisure sells its products on board the ships that we serve, at our land-based spas, through third party land-based retail and wholesale outlets, mail order and our web sites, including http://www.steinerleisure.com.

During 2002, services accounted for approximately 69% of our revenues and products accounted for approximately 31% of our revenues.

Steiner Leisure also owns and operates three post-secondary schools (comprised of a total of eight campuses) located in Florida, Virginia, Maryland and Pennsylvania. Offering degrees in massage therapy and skin care, these schools train and qualify spa professionals for health and beauty positions within the Steiner family of companies or other industry entities.

Steiner Leisure was organized as an international business company under the laws of The Bahamas in October 1995 as the successor to Steiner Group Limited, now known as STGR Limited, a family-owned business founded in 1934 in the United Kingdom. Steiner Leisure commenced operations in November 1995 with the contribution to its capital of substantially all of the cruise-related assets of the maritime division of Steiner Group and the outstanding common stock of Coiffeur Transocean (Overseas), Inc., a subsidiary of Steiner Group acquired in June 1994.

In December 2002, Steiner Leisure acquired the outstanding equity interests that it did not already own in the entities that operate our Mandara resort spas and cruise concessions. Steiner Leisure paid to the Shiseido entities a total of 400,000 of our common shares in consideration for the Mandara equity interests.

In July 2001, Steiner Leisure had acquired 60 percent of each of Mandara Spa LLC, which operates resort spas in the United States, the Caribbean and the Pacific and spas on ships of three cruise lines ("Mandara US"), and Mandara Spa Asia Limited, which operates resort spas in Indonesia, Thailand, Malaysia and the Maldives ("Mandara Asia"). At that time, the remaining 40 percent equity interests in Mandara Asia and Mandara US were owned, respectively, by Shiseido Co. Ltd., and its subsidiary, Shiseido Investment US, Inc. Shiseido Co. Ltd. is a leading international manufacturer of cosmetics and personal care products. In March 2002, as a result of prior capital contributions made by one of its subsidiaries, Steiner Leisure increased its equity ownership of Mandara US to approximately 80 percent.

In connection with the December 2002 acquisition of the Mandara minority interests, and issued a guarantee of a promissory note from Mandara US LLC to Shiseido in the amount of $4.1 million.

In July 2001, we purchased the assets of the Greenhouse Day Spa business. As a result, we acquired 11 luxury day spas under the "Greenhouse" name at various locations in the United States and acquired the "Greenhouse" mark. Also in July 2001, we purchased C.Spa, which operated six day spas in California. We opened an additional "Greenhouse" day spa in February 2002. In the fourth quarter of 2002, we decided to dispose of, or otherwise close 17 of those 18 day spas. The remaining day spa is located at a hotel and is continuing to operate as part of our resort spa operations. In that quarter, we began negotiations with potential third party acquirers of the assets of those day spas as well as with the landlords at the shopping centers and other venues where those day spas are locate. As of March 31, 2003, 13 of those day spas had been closed pursuant to agreements with landlords and/or agreements with third party acquirers of the spas' assets, including their leases. In addition, we are in negotiations with landlords and a proposed acquirer of the assets/assignee of the lease with respect to the remaining four day spas to be disposed of.

These transactions involved our paying to those landlords amounts representing various portions of the remaining terms of the leases involved. In the transactions involving transfers of spa assets and assignments of the leases, we typically have been required to make payments to those acquirers in consideration of their assuming both the leases 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.

Our loss on disposal in connection with these discontinued operations is estimated to be approximately $14.4 million in 2002. Our loss on operations in connection with these discontinued operations is approximately $10.0 million for 2002. Additional losses on disposal and operations will be incurred in 2003, but the amounts thereof are not currently known. If the transactions for the disposition of the remaining day spas are not completed on the terms currently proposed, that loss could increase. In addition, in connection with these discontinued operations, we anticipate that Celeste Dunn, President and Chief Executive Officer of our Steiner Day Spas, Inc. subsidiary, will be terminating her employment with us. In connection with that termination, Ms. Dunn may be entitled to receive a severance payment of $748,000. Ms. Dunn has also requested compensation in addition to that amount as well as the termination of her non-competition arrangements in connection with her departure. Any a mounts paid will be included in the loss on discontinued operations for 2003. No agreement has yet been reached with Ms. Dunn on this matter.

We now report our day spa operations as discontinued operations. See Note 5 in the Notes to "Consolidated Financial Statements" in Item 15 of this report beginning on page F-1.

The passenger cruise industry has experienced substantial growth over the past 35 years. The industry has evolved from a trans-ocean carrier service into a vacation alternative to land-based resorts and sightseeing destinations. The cruise market is comprised of luxury, premium and volume segments which appeal to a broad range of passenger tastes and budgets. Steiner Leisure serves ships in all of these segments. According to Cruise Lines International Association, a trade association ("CLIA"), passenger volume on cruises marketed primarily to North American consumers ("North American Cruises") grew from approximately 2.2 million in 1985 to approximately 7.6 million in 2002, representing a compound annual growth rate of approximately 7.6%. As of March 10, 2003, approximately 95 of the 104 ships we served offered North American Cruises.

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According to a study reported by CLIA in 2002, passengers ranked as one of their top reasons for preferring cruising to other vacation types that cruises "allow you to be pampered." Similarly, that study indicated that, in comparing cruise vacations to other vacations, customers of both ranked cruise vacations higher than other vacations in many categories. "Being pampered" achieved the greatest positive distinction. We believe our services offer a therapeutic and indulgent experience to passengers, and provide a memorable highlight of their cruise vacation. As a result, we believe our operations are an important part of the cruise ship experience.

In recent years, cruise lines have been building larger ships with large spas dedicated to the types of health, beauty and fitness services we offer. Generally, these large spas offer enlarged fitness and treatment facilities, are located on higher profile decks and have enriched décor. With respect to certain ships, we participate in the design of these facilities and provide unique branding for certain cruise lines. As of March 10, 2003, 67 of the ships that we served offered large spa facilities. The cruise lines we serve are scheduled to introduce a total of ten additional new ships through the end of 2003. Steiner Leisure expects to perform services on all of these ships, nine of which are currently covered by cruise line agreements. All ten of these will have large spa facilities.

As of March 10, 2003, Steiner Leisure provided its services and products to 19 cruise lines representing a total of 104 ships, including almost all of the major cruise lines offering North American Cruises.

The numbers of ships served as of March 10, 2003 under cruise line agreements with the respective cruise lines are listed below:

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1. Carnival Corporation, the parent company of Carnival Cruise Lines, also owns Costa, Holland America, and Windstar and a majority interest in Cunard/Seabourn. In January 2003, Carnival entered into an agreement to acquire P&O Princess.
2. Celebrity is owned by Royal Caribbean.
3. Our agreement with Fred Olsen terminated on March 17, 2003.
4. Norwegian and Orient are owned by Star Cruises.
5. P&O European Ferries and Princess are subsidiaries of P&O Princess Cruises. In January 2003, Carnival entered into an agreement to acquire P&O Princess.

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The cruise lines served by us are scheduled to introduce ten new ships into service through the end of 2003. Steiner Leisure expects to perform services on ten of these ships, nine of which are currently covered by cruise line agreements. All ten of these ships will have large spa facilities. The cruise lines for which these ships are scheduled to enter service are as follows: Carnival (one ship); Costa (two ships); Crystal (one ship); Holland America (one ship); Princess (two ships); Royal Caribbean (two ships) and Silversea (one ship).

Since November 1996, none of our cruise line agreements was terminated prior to its expiration date. Historically, almost all of our cruise line agreements that have expired have been renewed beyond their specified expiration dates. The total number of ships we serve is affected by cruise lines removing from service older ships as new ships are introduced.

Revenues from passengers of each of the following cruise companies accounted for more than ten percent of our revenues in 2002: Royal Caribbean (including Royal Caribbean and Celebrity lines): 24.0%; and Carnival (including Carnival, Costa, Holland America, Windstar and Cunard/Seabourn lines): 22.9%. In addition, passengers of P&O Princess (including Princess and P&O European Ferries) accounted for 9.9% of our revenue in 2002. In January 2003, Carnival entered into an agreement to acquire P&O Princess. These companies, combined, accounted for 80 of the 104 ships served by us as of March 10, 2003. If we cease to serve one of these cruise companies, or a substantial number of ships operated by a cruise company, it could materially adversely affect our business, results of operations and financial condition.

Our cruise line agreements give us the exclusive right to offer our services and the non-exclusive right to sell products on board ships. Services and products sold to passengers are billed to them by the cruise lines. The cruise lines retain a specified percentage of our gross receipts from such sales before remitting the remainder to us. Under the cruise line agreements, we are required to pay for the meals and accommodations of our employees. Most of the agreements cover all of the then-operating ships of a cruise line. New arrangements must often be negotiated between us and a cruise line as ships enter service. The agreements have specified terms ranging from one to six years, with an average remaining term per ship of approximately two years as of March 10, 2003. As of that date, cruise line agreements that expire within one year covered ten of the 104 ships served by us. These ten ships accounted for approximately 4.6% of our revenue in 2002.

The cruise line agreements provide for termination by the cruise lines with limited or no advance notice under certain circumstances, including, among other things, the withdrawal of a vessel from the cruise trade, the sale or lease of a vessel or our failure to achieve specified passenger service standards. As of March 10, 2003, agreements for two ships provide for termination for any reason by the cruise line on six months' notice, agreements for four ships provide for termination for any reason by the cruise line on 90 days' notice and with respect to one ship we received notice that our agreement would not be renewed after its March 17, 2003 termination date. Also, we have given notice to a cruise line that we do not wish to renew an agreement with respect to their ship.

Steiner Leisure is obligated to make minimum payments to certain cruise lines regardless of the amount of revenues we receive from customers. As of December 31, 2002, these payments are required by cruise line agreements covering a total of 30 ships served by us and two additional ships not yet in service. As of December 31, 2002, Steiner Leisure had guaranteed total minimum payments to cruise lines (excluding payments based on minimum passenger per diems applicable to certain ships served by us) of approximately: $26.0 million in 2003, $29.1 million in 2004 and $27.2 million in 2005. These amounts could increase under new, or renewed agreements.

In addition to the discontinued operations, our land-based activities have included the following:

• In February 1999, we began to operate the spa at the Atlantis Resort and Casino on Paradise Island in the Bahamas (after ceasing to operate that spa in January 2001, commencing in July 2001, we once again are operating the spa as a result of our acquisition of Mandara Spa).
• In October 2000, we entered into an agreement to build and operate a luxury spa facility, which opened in December 2001, at the Aladdin Resort and Casino in Las Vegas, Nevada.

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• In January 2001, we began operating our Elemis luxury day spa in Mayfair, London. Among other things, this day spa has assisted us in our distribution of Elemis products in the United Kingdom.
• In July 2001, we entered into an agreement to build and operate a luxury spa facility at the Mohegan Sun Resort in Uncasville, Connecticut, which spa opened in April 2002.
• In July 2001, we purchased a 60% equity interest in the companies that operate the Mandara Spa chain. During 2002, we acquired the balance of the equity interests in those companies. Mandara Spa operates luxury spas at 60 resorts, principally in Asia and the Pacific, the United States and the Caribbean. Mandara Spa also provides spa services for Silversea Cruises, Norwegian Cruise Line and Orient Lines.
• In December 2001, we began to operate the spa at the Ocean Club on Paradise Island in the Bahamas.
• In February 2003, we began operating our Elemis luxury day spa in Coral Gables, Florida. It is our goal that this day spa assists in our efforts to further distribute Elemis products within the U.S.

As a result of these activities, a substantial portion of our business now consists of the operation of 60 luxury spas at resorts throughout the world, and the operation of a luxury day spa in the United States and a luxury day spa in the United Kingdom.

We provide luxury spa services at 60 resorts in the following locations:

The resort spas we operate range in size from 2,000 square feet to 32,000 square feet.

We operate our land-based spas pursuant to lease arrangements with the owners of the properties involved. Our resort spas generally require rent based on the percentage of our revenues. In addition, as part of the percentage rental arrangements for some of our resort spas, we are required to pay a minimum annual rental amount whether or not such amount would be required to be paid under the percentage rent arrangement. In addition, in connection with our spas at the Atlantis Resort and Casino, the Ocean Club, the Aladdin Resort and Casino, the Hilton Hawaiian Village Resort and the Mohegan Sun Resort, in order to obtain the leases for these premises, we agreed to build out the spa facilities there at our

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expense. The costs of these build-outs have ranged from $3.0 million to $14.0 million. We believe that in order to procure leases for the large spas at resorts in the future, we may be required to build out, in whole or in part, the spa facilities at those resorts at our expense. Those build-outs also likely will involve expenditures per facility comparable to, or in excess of the expenditures we have spent to date on the build-out of resort spa facilities. The terms of the leases for our resort spas range from three to 16 years.

Certain of our resort spa agreements also require that we make minimum rental payments irrespective of the amount of our revenues. As of December 31, 2002, Steiner Leisure had guaranteed total minimum payments to resorts of approximately: $2.2 million in 2003, $2.1 million in 2004, $2.1 million in 2005, $1.8 million in 2006, $1.6 million in 2007, and $7.1 million in total thereafter.

Our business strategy is directed at maintaining and enhancing our position as a worldwide provider of spa services and products. To do so, we:

Recruit and Train High Quality Personnel. Steiner Leisure provides services to our customers on a personal basis. We employ staff who are professional, attentive and able to continue our tradition of catering to the needs of individual customers. We recruit our shipboard staff primarily from the British Isles, Australia, South Africa and continental Europe. Our land-based staff are recruited from the regions where the facilities at which they would work are located. We require prospective employees to be technically skilled and to possess a willingness to provide outstanding personal service. We train candidates in our philosophy of customer care. Our training emphasizes the importance of an individualized and therapeutic experience for our customers. We believe that our success is largely attributable to our ability to staff our operations with highly trained personnel who provide outstanding personal service.

Utilize Experienced and Empowered Management. Steiner Leisure's operations are supervised at the facility level by experienced managers who implement our philosophy of customer care. Our facility managers are selected based on performance as staff members or appropriate industry experience and receive specialized management training. Managers are granted substantial authority to make day-to-day decisions regarding operations, including those actions necessary to maximize revenues of the facility they manage. Our managers are responsible for efficient scheduling of personnel, inventory management, supervision of sales and marketing, maintenance of required discipline and communication with our senior management.

Develop and Deliver High Quality Services and Products. Steiner Leisure strives to create an engaging and therapeutic environment where customers can receive facial and body treatments and hair styling of the highest quality. We conduct our own research and respond to the needs and requests of our customers and have developed many of the techniques and products used by our staff. We continually update the range of techniques, services and products we offer to satisfy changing health, beauty and fitness trends. Through our attentive and highly trained staff and our premium quality beauty and hair products, Steiner Leisure provides its customers with what we believe is a richly rewarding experience that is a memorable highlight of a vacation or a relaxing interlude from the normal routine.

Effectively Market our Services and Products. Steiner Leisure uses a variety of marketing techniques to bring our services and products to the attention of customers. Our personnel individually inform our customers as to the services and products offered by us and also offer group promotions, seminars and demonstrations. We provide incentives to our employees to maximize sales of our services and products and train employees to cross-market services and products among our network of spas and other distribution channels. Steiner Leisure also promotes gift certificates and other pre-use purchases at certain of our locations.

Maintain Close Relationships with the Cruise Lines and Resort Operators. Steiner Leisure has developed strong relationships with the cruise lines as a result of the quality of our services and our staff, which has helped to generate significant revenues for the cruise lines and a high level of customer satisfaction with our services. We are also developing strong relationships with the operators of the resorts where we operate our luxury spas. These relationships are important to our future growth and, in the cruise industry, we believe that they have positioned us to obtain renewals of almost all of our cruise line agreements that have expired since 1990.

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Develop Recognizable Brands. We believe we have developed positive brand name recognition with "Steiner" for shipboard spas, "Elemis" and Mandara™ for land-based and shipboard spas, and "Elemis" and "La Therapie" for high quality beauty products. We also believe that the land-based spas we operate also have positive brand name recognition. We also have helped to develop and promote customized brands for the cruise lines we serve and we seek to continue to do so for the cruise lines as well as for operators of resorts at which we provide our services. We believe that by creating these brands for cruise lines and resorts, we can not only better promote our services and products, but also strengthen our relationships with those entities.

Steiner Leisure's strategy for continued growth includes the following principal elements:

Expand With Present Cruise Line and Resort Customers. We believe that our success in providing high quality services and products and generating revenues for the cruise lines will enable us to grow as our cruise line customers introduce new ships with large spas. From November 1996 to March 10, 2003, we commenced serving 58 new cruise ships brought into service by our cruise line customers. As of March 10, 2003, the cruise lines served by us were scheduled to introduce ten new ships into service through December 31, 2003. Steiner Leisure expects to perform services on all of these ships, nine of which are currently covered by our cruise line agreements. We also believe that the success we seek to achieve at our resort spas could help our growth since it could encourage the operators of those resorts to have us provide services at new resorts that they may open or acquire in the future.

Capitalize on Growth in Size and Quality of Shipboard Facilities. An increasing number of cruise ships offer large spa facilities. Many of these facilities include hydrotherapy treatments and enlarged fitness and treatment areas. Newer facilities are located on higher profile decks, have enriched décor and offer all of our services and products in a single passenger activity area. These enhanced facilities foster the cross-marketing of services and products and enable us to serve a larger number of passengers. We often assist cruise lines with the planning and design of spa facilities on new ships. We believe that our participation in the design of facilities has resulted in improved quality of service and increased revenues to us and the cruise lines. Through 2003, we are scheduled to begin serving an additional ten ships with large spa facilities.

Increase Product Sales. Sales of our products increased at a compound annual growth rate of 16.9% from 1998 through 2002. Steiner Leisure's products are sold primarily to our spa customers and through third party, land-based retail and wholesale channels. Our products are also offered through mail order and our web sites, including http://www.steinerleisure.com and http://www.timetospa.com. We have increased our retail product sales through third-party, land-based channels, marketing campaigns aimed at mail order customers, enhanced training of our employees with respect to new products and sales on the QVC television channel. We believe that there is a significant opportunity to increase our product retail sales from the growth in our customer base resulting from our land-based spa operations as well as through other distribution channels in the United States, although we cannot assure you that we will be able to successfully take advantage of this opportun ity.

Seek Additional Land-Based Opportunities. A number of the resorts we currently serve are well known and highly regarded. We believe that our successful affiliation with those resorts, as well as our reputation in the cruise industry, can assist us in our efforts to encourage other land-based resort operators to consider having us operate their spas. However our resources may be insufficient to enable us to take advantage of any of these opportunities at any given time.

Consider Strategic Acquisitions. Steiner Leisure will consider strategic acquisitions of land-based or maritime-based businesses which are compatible with our operations.

Our goal is to provide our customers with a therapeutic and indulgent experience in an atmosphere of individualized attention. Steiner Leisure provides a broad range of high quality personal services. The treatment techniques we use include those developed by us in response to the needs and requests of our customers. Our pricing is based on the nature of the services and the location of the facility where it is performed. Our services include the following:

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Massage and Other Body Treatments. We offer massages and a variety of other body treatments to women and men. Types of treatments include seaweed and other therapeutic wraps and aromatherapy treatments. On ships, the number of private treatment rooms available for these services ranges from one to fourteen, depending on the size of the ship. The number of our staff providing these services on a ship ranges from two to twenty-three. On several ships, Steiner Leisure provides certain specialty treatments including a body capsule that provides a multi-sensory, massage-like treatment in an individual, self-contained environment. At our land-based spas the number of treatment rooms varies from two to 36 and the number of our staff providing services varies from three to approximately 140.

Beauty and Hair. At all of our facilities we offer a broad variety of facial treatments including the Japanese Silk Booster facial and the anti-oxidant/glycolic facial. At all of our shipboard, and certain of our land-based, facilities we operate a hair styling salon which provides services to women, men and children and facilities for nail and beauty treatments. Steiner Leisure's facilities offer from one to twelve hair styling stations as well as stations for manicures and pedicures. We staff each facility with one to seven employees performing hair, nail and beauty services.

Shipboard Spas. Since the late 1980s, cruise lines increasingly have provided enlarged spa facilities which, in general, allow all of our services to be offered in a single passenger activity area. As of March 10, 2003, large spas were found on 67 of the ships that we served. We expect to serve an additional ten new ships with large spa facilities that are anticipated to begin service through the end of 2003. These spas provide enlarged fitness and treatment areas and on most ships include water-based treatments. These facilities are generally located on higher profile decks and have enriched decor. We believe that the location of our operations in a spa environment enhances enjoyment of our services by passengers, encourages increased passenger interest in our services and facilitates cross-marketing of our services and products. We believe that most of the ships currently under construction for our largest cruise line customers will include large spas. In 2002, our average weekly revenues on ships with large spas was, approximately four times our average weekly revenues on other ships.

Fitness Facilities. As of March 10, 2003, we operated fitness facilities on 84 of the ships we serve and eight of our resort spas. Fitness facilities typically include weightlifting equipment, cardiovascular equipment (including treadmills, exercise bicycles and rowing and stair machines) and facilities for fitness classes. On ships, Steiner Leisure provides from one to three fitness instructors, depending on ship size. At certain of our resorts spas we provide one or two instructors, depending on the size of the spa. These instructors are available to provide special services to our customers, such as personal nutritional and dietary advice, body composition analysis and personal training. Use of fitness facilities is generally available at no charge to cruise passengers, except for fees that are typically charged for special services, but generally require fees at our resort spas.

Saunas and Steam Rooms. We operate saunas and steam rooms at most of the facilities we serve.

In general, the shipboard facilities we operate have been designed by the cruise lines. However, several cruise lines have requested our assistance in the design of shipboard spas and other facilities. We have assisted, or are assisting in the design of facilities for more than 50 ships we have served. We also have designed some of the luxury spas at the resorts and day spas we operate. We believe that our participation in the design of these facilities has resulted in the construction of facilities permitting improved quality of service and increased revenues to us at these facilities. We believe that our involvement in the design of these facilities also has enabled us to obtain additional agreements with the cruise lines and resort hotels. However, we cannot assure you that we will be able to obtain agreements for the facilities for which we provide design assistance.

Our shipboard facilities generally are open each day during the course of a cruise from 8:00 a.m. to 8:00 p.m., except when a ship is in the territorial waters of a jurisdiction that would tax our sales or income from our spa activities. Our land-based spas have similar operating hours.

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Our continued success is dependent, in part, on our ability to attract qualified employees. Steiner Leisure's goal in recruiting and training new employees is to constantly have available a sufficient number of skilled personnel trained in our customer service philosophy. Steiner Leisure recruits prospective shipboard employees primarily from the British Isles, Australia, South Africa and continental Europe. Recruitment techniques for our shipboard employees include advertisements in trade and other publications, appearances at beauty, hair and fitness trade shows, meetings with students at trade schools and recommendations from our employees. All shipboard employment candidates are required to have received prior training in the services they are to perform for us and are tested with respect to their skills prior to being hired. Applicants for employment with Steiner Leisure must possess a willingness to provide outstanding personal service. Prospective employees for our land-ba sed operations are recruited by customary employee recruitment means within the region of the facility in question.

Each shipboard employment candidate must complete a rigorous training program at our facilities near London, England. We can train up to approximately 180 employees at a time, in various courses and stages of training, at these facilities. The training course for shipboard service personnel is typically conducted over a period of two to eight weeks, depending on the services to be performed by the employee. The training course emphasizes our culture of personalized, attentive, customer care. Our land-based spa employees are required to have had prior training. All shipboard and land-based employees also receive supplemental training in their area of specialization, including instruction in treatments and techniques developed by us. Each employee is educated with respect to all of our services and products to enable them to cross-market our services and products. We also train candidates to manage our spas. This training covers, among other things, maximization of revenues, personnel supervision, customer service and administrative matters, including interaction with cruise line and resort personnel.

Students trained at our United States massage therapy schools may be employed by us at our land-based facilities, as well as on cruise ships we serve.

Steiner Leisure sells high quality personal care products for men and women. We also offer our products through our land-based spas, the retail outlets of our massage therapy schools, and salons, retail stores and other third party land-based retail and wholesale outlets. We also sell products through mail order and our web sites including at http://www.steinerleisure.com and http://www.timetospa.com. The beauty products offered include aromatherapy oils as well as cleansers, creams and other skin care products and cleansing accessories. Hair care products offered include shampoos, moisturizers and lotions. Most of the products sold by us are from our "Elemis" and "La Therapie" product lines. As of March 10, 2003, Steiner Leisure sold 152 "Elemis" skin and hair care products made primarily from premium quality natural ingredients and 63 premium quality "La Therapie" skin care products. Almost all of the raw materials for "Elemis" and "La Therapie" products are sourced from a premier French manufacturer. If this manufacturer ceased producing these ingredients and other materials for our products, the transition to other manufacturers could result in significant production delays. Production, packaging and distribution of our "Elemis" and "La Therapie" products are conducted at our facilities in Bridgewater, England.

We train our prospective shipboard and land-based employees, as well as the students attending our massage therapy schools in the use of our Elemis products.

We also sell products under the "Mandara" name in connection with our Mandara resort spas and sell the products of third parties, including private label products manufactured by other companies and sold by us under the "Steiner" brand name.

We promote our services and products to cruise passengers and resort guests through on-site demonstrations and seminars, video presentations shown on in-cabin/in-room television, tours of our facilities and promotional discounts on lower volume days, such as when a ship is in a destination port. We also distribute illustrated brochures and order forms describing our services and products to passenger cabins and guest resort rooms at the resorts where we operate.

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We market our land-based spas primarily through public relations activities aimed at television and other media coverage and through local radio advertising. In addition, employees cross-market other services and products offered by us to their customers. As part of our marketing efforts we provide incentives to our employees to maximize sales of our services and products and instruct employees in cross-marketing among our network of spas and other distribution channels. We also offer gift certificates and other pre-use purchases. We benefit from advertising by the cruise lines and resorts we serve, and, increasingly, cruise lines and resorts are featuring their spa facilities and our services as part of their advertising campaigns.

We believe that our Elemis luxury day spa in London, England, has helped our Elemis product distribution in the United Kingdom as a result of the name recognition gained from that spa and the opportunity it has provided us to demonstrate the application of our products, and we believe that our new Elemis luxury day spa in Coral Gables, Florida can similarly assist our "Elemis" product distribution efforts in the United States.

In August 1999, we acquired a post-secondary school (comprised of four campuses) in Florida offering degree and non-degree courses in massage therapy, skin care and related areas. In April 2000, we acquired two post-secondary massage therapy schools (five campuses, including one which was closed in 2002) located in Maryland, Pennsylvania and Virginia. We sell our Elemis product line at our Florida schools. As of March 10, 2003, there were 1,409 students attending our schools. We are eligible to participate in student financial assistance programs administered by the U.S. Departments of Education and a majority of our students receive one or more forms of assistance under those programs. Accordingly, the success of our schools is dependent to a significant extent on our continued eligibility to participate in these programs.

We believe the schools have the potential to provide us with the services of skilled and trained staff for our land-based facilities and may assist us in creating new channels for distribution of our Elemis product range.

Steiner Leisure is a worldwide provider of spa services. However, both our shipboard and land-based services and products face competition.

On cruise ships we compete with passenger activity alternatives and with competing providers of services and products similar to ours seeking agreements with cruise lines. Gambling casinos, bars and a variety of shops are found on almost all of the ships served by us. In addition, the ships call on ports which provide opportunities for additional shopping as well as other activities that compete with us for passenger dollars. Cruise ships also typically offer swimming pools and other recreational facilities and activities, as well as musical and other entertainment, all without additional charge to the passengers. One cruise line has indicated that it intends to provide the shipboard services and products we currently provide with its own personnel and one or more additional cruise lines could elect to provide these services and products themselves in the future. There currently are several other entities offering services to the cruise industry similar to those provided by us.

Many of the resorts we serve, as well as any resorts that we may serve in the future, offer recreational entertainment facilities and activities, often without additional charge to guests, similar to those offered on cruise ships. A number of these resorts also offer casino gambling. Our day spas compete with other day spa chains and individual day spas which have operations in the vicinities of our day spas, as well as with other beauty, relaxation or other therapeutic alternatives that compete for consumer dollars. These include, with respect to hair and manicure and pedicure services, large, well-known national chains and independently owned salons that offer these services at prices significantly lower than those charged by us. We believe, however, that the prices charged by us are appropriate for the quality of the experience we provide to our customers. In addition, Steiner Leisure is relatively new to the land-based spa industry and our spas compete with spas and beauty salons owned or operated by companies that have offered land-based spa services longer than we have and which may enjoy greater name recognition with customers and prospective customers than the land-based spas operated by us.

The post-secondary education market is highly competitive. Our schools compete with providers of similar instruction in the states in which they are located and elsewhere in the United States, including many providers with greater resources than ours. Our schools face competition from, among others, traditional public and private two-year and four-year colleges and universities and other proprietary schools, including those that offer distance learning programs. Some public institutions are able to charge lower tuition than our schools, due in part to government subsidies, government and foundation

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grants, tax deductible contributions and other financial sources not available to proprietary schools such as ours. The recent slow-down in the technology sector is causing a number of our competitors who have traditionally offered instruction in that sector to modify their course offerings. A number of those schools are now offering or contemplating offering programs similar to ours. This will increase the competition for students.

Our land-based product sales compete with a variety of other brands, including those of manufacturers with greater resources than ours, and those with greater name recognition.

The cruise industry is subject to significant United States and international regulation relating to, among other things, financial responsibility, environmental matters and passenger safety. With respect to safety, enhanced passenger safety standards adopted as part of the Safety of Life at Sea Convention by the International Maritime Organization have been phased in and additional standards are required to be phased in by 2010 with respect to vessel structural requirements. These standards have caused the retirement of certain cruise ships and otherwise could adversely affect certain of the cruise lines, including those with which we have cruise line agreements. From time to time, various other regulatory and legislative changes have been or may in the future be proposed or enacted that could have an adverse effect on the cruise industry.

Steiner Leisure's advertising and product labeling practices in the United States are subject to regulation by the Federal Trade Commission and the Food and Drug Administration, as well as various other federal, state and local regulatory authorities. The contents of our products that are sold in the United States are subject to regulation in the United States. We are subject to similar regulations under the laws of the United Kingdom and certain European Union laws. Federal, state and local regulations in the United States and non-United States jurisdictions, including increasing regulation by the European Union designed to protect consumers or the environment, could adversely affect or increase the cost of advertising, marketing and packaging our products.

Steiner Leisure's land-based spa operations are subject to applicable regulations in the locations where such operations are conducted. These regulations could adversely affect our ability to sell, or could increase the cost of our services and products. Among other things, local immigration laws could impede our ability to obtain work permits needed for Steiner Leisure-trained employees at our land-based facilities.

Our massage therapy schools are subject to extensive regulation by governmental agencies. In particular, these operations are subject to the requirements of the Higher Education Act (the "HEA") and the regulations promulgated thereunder by the U.S. Department of Education (the "DOE"). Our schools must satisfy certain criteria in order to participate in various financial assistance programs under Title IV of the HEA. Any regulatory violation could be the basis for the initiation of a suspension, limitation or termination of the eligibility of Steiner Leisure or any of our schools to participate in such programs.

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Under applicable regulations, there are three financial ratios for an institution to quality for the Title IV Financial Assistance Program, each of which will be scored separately and which will then be combined to determine the institution's financial responsibility. If an institution's composite score is below the minimum requirement for unconditional approval but above a designated threshold level, such institution may take advantage of an alternative that allows it to continue to participate in the Title IV Programs for up to three years under additional monitoring procedures. If an institution's composite score falls below this threshold level or is between the minimum for unconditional approval and the threshold for more than three consecutive years, the institution will be required to post a letter of credit in favor of the DOE.

All of our schools are eligible for our students to receive federal funding, including loan funds. In order to operate and award degrees, diplomas and certificates and to participate in the Title IV Programs, a campus must be licensed or authorized to offer its programs by the appropriate states' Departments of Education. Additionally, each institution must be accredited by an agency recognized by the DOE.

The financial aid and assistance programs, in which most of our schools students participate, are subject to political and budgetary considerations. There is no assurance that such funding will be maintained at current levels. Administration of these programs is periodically reviewed by various regulatory agencies. The failure by our schools to comply with applicable federal, state or accrediting agency requirements could result in the limitation, suspension or termination of the ability to participate in Title IV Programs or the loss of the state licensure or accreditation. The loss of, or a significant reduction in, Title IV Program funds would have a material adverse effect on Steiner Leisure's revenues and cash flows because the schools' student enrollment would likely decline as a result of our students' inability to finance their education without the availability of Title IV Program funds.

As of March 10, 2003, Steiner Leisure had a total of 3,337 employees. Of that number, 2,653 worked in spa operations, 33 were involved in the recruiting and training of spa personnel, 113 were involved in teaching at our massage therapy schools, 89 were involved in the bottling, distributing, warehousing and shipping of our beauty products and 449 represented management and sales personnel and support staff. Shipboard and land-based employees typically are employed under agreements with terms generally of eight months. Depending on the size of the vessel and the nature of the facilities on board, Steiner Leisure has up to two managers on board each ship we serve. Shipboard employees' compensation consists of salary plus a commission based on the volume of revenues generated by the employee. Employees at our land-based spas generally are employed without contracts, on an at-will basis. None of our employees are covered by a collective bargaining agreement. We believe that our relations with our employees are satisfactory.

The following table sets forth certain information concerning the executive officers of Steiner Leisure.

Clive E. Warshaw has served as our Chairman of the Board since November 1995. From November 1995 to December 2001, Mr. Warshaw also served as our Chief Executive Officer. Mr. Warshaw joined Steiner Group, a predecessor of ours, in 1982. Mr. Warshaw resides in The Bahamas. Mr. Warshaw is the husband of Michèle Steiner Warshaw.

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Leonard I. Fluxman has served as our President and Chief Executive Officer since January 2001, and as a director since November 1995. From January 1999 to December 2000, Mr. Fluxman served as our President and Chief Operating Officer. From November 1995 through December 1998, he served as Chief Operating Officer and Chief Financial Officer of Steiner Leisure. Mr. Fluxman joined us in June 1994, in connection with our acquisition of Coiffeur Transocean (Overseas), Inc. ("CTO"). Mr. Fluxman served as CTO's Vice President - Finance from January 1990 until June 1994, and as its Chief Operating Officer from June 1994 until November 1996.

Glenn J. Fusfield was appointed our Chief Operating Officer in January 2001. Mr. Fusfield joined us in November 2000 as our Senior Vice President, Group Operations. Prior to joining us, Mr. Fusfield was with Carnival Cruise Lines for 12 years, serving as Director, Hotel Operations for Carnival from January 1995 until December 1998, and Vice President, Hotel Operations from January 1999 to October 2000.

Amanda Jane Francis has served as Senior Vice President - Operations of Steiner Transocean Limited, our subsidiary that conducts our shipboard operations, since November 1995, and of Steiner Group from June 1994 until November 1995. From 1989 until June 1994, Ms. Francis was the Director of Training for Steiner Group. From 1982 until 1989, Ms. Francis held other land-based and shipboard positions with Steiner Group.

Sean C. Harrington has served as Managing Director of our Elemis Limited subsidiary since January 1996 and also oversees our United Kingdom operations. From July 1993 through December 1995, he served as Sales Director, and from May 1991 until July 1993, as United Kingdom Sales Manager of Elemis Limited.

Carl S. St. Philip, Jr. has served as Senior Vice President and Chief Financial Officer of Steiner Leisure since July, 2002, and as Vice President and Chief Financial Officer from January 1999 until July 2002. He has announced that he will be resigning his position with the Company effective April 8, 2003 to join a family business. From July 1997 through December 1998, he served as our Vice President - Finance. From January 1997 through December 1998, Mr. St. Philip served as Vice President - Finance of our Steiner Management Services LLC subsidiary. Mr. St. Philip joined us in June 1994 when we acquired CTO. Mr. St. Philip served as Assistant Controller of CTO from June 1991 until June 1993, and as CTO's Controller from June 1993 until December 1996, when CTO was liquidated. Mr. St. Philip, a certified public accountant, was employed by Laventhol and Horwath from 1989 to 1991.

Robert C. Boehm has served as our Senior Vice President and General Counsel since September 2002. From May 1999 until joining us, he was a shareholder with the Miami office of the Akerman Senterfitt law firm. From May 1995 until May 1999, Mr. Boehm was a partner in the Miami and Washington, DC offices of Kelly, Drye and Warren, LLP, a New York-based law firm. Prior to joining Kelly, Drye, among other things, Mr. Boehm was a partner and associate in law firms in Washington, D.C. and Miami and served as an enforcement attorney with the Securities and Exchange Commission.

Thomas R. Posey has served as President and Chief Operating Officer of our Mandara Spa LLC subsidiary since July 2002. Mr. Posey was Executive Vice President and Chief Operating Officer of Mandara Spa LLC from its inception in September 1996 until July 2002. From June 1988 until March 2000, Mr. Posey also was Chief Operating Officer of Red Sail Sports, a worldwide provider of water sports and retail concessions. From August 1978 until June 1988, Mr. Posey was an executive with Hyatt Hotel and Resorts.

Melissa Wade has served as Executive Vice President of our Steiner Education Group, Inc. subsidiary, which operates our massage therapy schools ("SEG"), since November 2002. From January 2000 until October 2002 she served as Vice President of Compliance for SEG, and from January 1997 until October 2002 she served as Vice President of Compliance for FCNH, Inc., a subsidiary of SEG, and its predecessor company. From 1993 until December 1996, Ms. Wade served as Director of Operations of FCNH's predecessor and held various other positions with that entity from 1989 until 1993.

Jeffrey Matthews has served as President and Chief Operating Officer of our Mandara Spa Asia Limited ("Mandara Asia") subsidiary since July 2002. From February 2000 through June 2002, he served as Managing Director of Mandara Asia. From June 1998 until February 2000, Mr. Matthews was the Regional General Manager for Mandara Asia. From October 1997 until June 1998, he was the General Manager of Mandara Spa Indonesia. From February 1987 through September 1997, Mr. Matthews had held various positions with hotels in Indonesia and Australia.

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Our Internet web site can be found at http://www.steinerleisure.com. Information contained on our Internet web site is not part of this report.

The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available on our web site, free of charge, as soon as reasonably practicable after such reports are filed with or furnished to the SEC.

Alternatively, you may access these reports at the SEC's Internet web site: http://www.sec.gov.

All of our land-based spas are leased. In the case of our resort spas, our leases are with the operators of the resorts. In addition to our land-based spas, we maintain other facilities. In the case of our day spas, our leases are with the owners of the venues where they are located. Steiner Leisure's principal office is located in Nassau, The Bahamas, and the office of Steiner Management Services LLC (formerly, CT Maritime Services, L.C.), a Florida subsidiary of Steiner Leisure and our administrative headquarters, is located in Coral Gables, Florida. We also maintain warehouse and shipping facilities in Fort Lauderdale, Florida. Our Florida schools are located in Pompano Beach, Miami, Altamonte Springs and Sarasota. Our other U.S. Schools are located in Maryland (Baltimore), Pennsylvania (York) and Virginia (Charlottesville and Winchester). Our shipboard staff training facilities and the administrative offices of our Elemis Limited subsidiary are located in Harrow Weald, near London, England, in a building owned by the family of Clive Warshaw, our Chairman of the Board, and Michèle Steiner Warshaw, a director of Steiner Leisure and an officer of its Cosmetics Limited subsidiary. We also maintain a product production, packaging, warehousing and distribution facility in Bridgewater, England. Our day spa operations office in San Diego, California, was closed in February 2003 and our training facility for land-based spa employees in San Diego was closed in 2002. We administer our United States day spa operations from our Coral Gables offices and our London day spa from the offices of Elemis Limited. We administer Mandara's United States and Caribbean operations from our offices in Coral Gables and administer Mandara's Asian and Pacific operations from offices in Bali, Indonesia. All of the above office properties are leased, and Steiner Leisure believes that alternative sites are readily available on competitive terms in the event that any of our material leases are not renewed.

From time to time, in the ordinary course of business, the Company is party to various claims and legal proceedings. Currently, other than as described below, there are no such claims or proceedings which, in the opinion of management, would have a material adverse effect on the Company's operations or financial position.

On October 16, 2001, a personal injury action was filed in the New York Supreme Court by Kim McMillon, alleging that a dermatologist retained by the former owner and operator of the Greenhouse Day Spa in New York negligently performed a laser hair removal treatment that caused burns to the plaintiff. Plaintiff is alleging damages in excess of $50 million. While an amended complaint was filed removing our subsidiary that operates that spa as a defendant, the spa itself continues to be named as a defendant. The conduct in question took place prior to the time that the Company became the owner of the spa in question and the former owners of the spa are also named as defendants. While the Company is unable to provide an evaluation of the likelihood of an unfavorable outcome or provide an estimate of the amount or range of potential loss, the Company intends to vigorously defend against this claim based, in part, on the fact that the Company did not own the spa in question at the time of th e alleged injury.

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

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As of March 12, 2003, there were 30 holders of record of our common shares (including nominees holding shares on behalf of beneficial owners). As of that date, there were approximately 1,500 beneficial owners of the common shares.

Steiner Leisure has not paid dividends on its common shares and does not intend to pay cash dividends in the foreseeable future. The payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs as well as other factors that the board of directors may deem relevant.

Dividends and other distributions from Bahamas international business companies ("IBCs"), such as Steiner Leisure and its Bahamas IBC subsidiaries, are not subject to exchange control approval by the Central Bank of The Bahamas (the "Central Bank") except for those payable to residents of The Bahamas. In all other material respects the exchange control regulations do not apply to IBCs whose operations are exclusively carried on outside The Bahamas, such as our principal subsidiary. We cannot assure you that this exemption for IBC's will continue indefinitely, or for any particular length of time in the future.

On December 31, 2002, Steiner Leisure issued a total of 400,000 common shares, valued at approximately $5.6 million, in a privately negotiated transaction to Shiseido Co. Ltd. and its subsidiary, Shiseido Investment US, Inc., in exchange for the remaining 20% and 40% equity interests in Mandara Spa LLC and Mandara Spa Asia Limited, respectively, which we did not already own. Those shares are subject to a lock-up provision which permits sales of one-half of the shares beginning in one year and the balance of the shares one year later. The shares also have SEC registration rights which become effective upon termination of the one year lock-up period. Issuance of our common shares to the Shiseido entities was effectuated without registration under the Securities Act of 1933 in reliance upon the exemption from such registration provided by Section 4(2) of the Act.

The information required by Item 201(d) of Regulation S-K is included in Item 12 of Part III of this Report.

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Set forth below are the selected financial data for each of the years in the five-year period ended December 31, 2002. The balance sheet data as of December 31, 2001 and 2002 and the statement of operations data for the years ended December 31, 2001 and 2002 were derived from our financial statements which have been audited by Ernst & Young LLP, independent public accountants, as indicated in their report included elsewhere herein. The balance sheet data as of December 31, 1998, 1999 and 2000 and the statements of operations data for the years ended December 31, 1998, 1999 and 2000 were derived from our financial statements which have been audited by Arthur Andersen LLP, which is no longer our auditor and has ceased providing auditing services and, therefore, is unable to consent to the inclusion of their reports in this report. These financial statements, other than the statement of operations for the year ended December 31, 2000, are not included herein. T he information contained in this table should be read in conjunction with our Consolidated Financial Statements and the Notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein.

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