2

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

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

4

(Continued)

5

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

6

The accompanying unaudited condensed consolidated financial statements for each period include the condensed consolidated balance sheets, statements of income and cash flows of Steiner Leisure Limited (including its subsidiaries, "Steiner Leisure," the "Company," "we" and "our"). All significant intercompany items and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted pursuant to the SEC's rules and regulations. However, management believes that the disclosures contained herein are adequate to make the information presented not misleading. In the opinion of management, the unaudited condensed consolidated financial statements reflect all material adjustments (which include normal recurring adjustments) necessary to present fairly our unaudited financial position, results of operations and cash flows. The unaudited results of operations for the three and nine months ended September 30, 2010 and cash flows for the nine months ended September 30, 2010 are not necessarily indicative of the results of operations or cash flows that may be expected for the remainder of 2010. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2009. The December 31, 2009 Condensed Consolidated Balance Sheet included herein was extracted from the December 31, 2009 audited Consolidated Balance Sheet included in our 2009 Annual Report on Form 10-K.

The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the assessment of the realization of accounts receivables and recovery of long-lived assets and goodwill and other intangible assets, the determination of deferred income taxes, including valuation allowances, the useful lives of definite-lived intangible assets and property and equipment, the determination of fair value of assets and liabilities in purchase price allocations, the determination of gift certificate breakage revenue and the assumptions related to the determination of stock-based compensation.

Steiner Leisure Limited (including its subsidiaries where the context requires, "Steiner Leisure," "we" "us" or "our") is a worldwide provider of spa services. We provide spa services in treatment and fitness facilities located on cruise ships and at hotels and day spas located in the United States, Caribbean, Asia, the Pacific and other locations. We sell our products on board the ships we serve, at our hotel and land-based spas, through third party department stores, wholesale outlets, mail order and through our websites. We also own and operate five post-secondary schools (comprised of a total of 17 campuses) located in Arizona, Colorado, Connecticut, Florida, Maryland, Nevada, Pennsylvania, Utah and Virginia. These schools offer programs in massage therapy and, in some cases, beauty and skin care.

On December 31, 2009, we acquired all of the stock of Bliss World Holdings, Inc. (including its subsidiaries, "Bliss Inc.") from Starwood Hotels & Resorts Worldwide, Inc. ("Starwood"). Bliss Inc. is a spa and skincare company with urban hotel and day spa locations, offering services under the Bliss and Remède brands and products under the Bliss and Laboratoire Remède brands. Bliss Inc. also operates an e-commerce and catalog business and distributes its products through Bloomingdales, Harrods, Harvey Nichols, Macy's, Neiman Marcus, Nordstrom, Saks Fifth Avenue and other department stores, as well as Sephora stores and other domestic and international retail locations. The purchase price for Bliss Inc. was $100.0 million in cash less cash acquired. In connection with this acquisition, Bliss and Remède spas and amenities will remain exclusive to Starwood in the hotel category at W Hotels and St. Regis Hotels, respectively. See Note 4.

7

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 (in thousands):

We review long-lived assets for impairment whenever events or changes in circumstances indicate, based on estimated future cash flows, that the carrying amount of these assets may not be fully recoverable. In certain cases, the determination of fair value is highly sensitive to differences between estimated and actual cash flows and changes in the related discount rate used to determine the fair value of the assets under evaluation. As of September 30, 2010, management was not aware of any indicators of impairment of the Company's long-lived assets. Unexpected changes in cash flows could result in impairment charges in the future.

Goodwill and other indefinite-lived intangible assets are 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 and other indefinite-lived intangible assets are less than the carrying or book value. As of each of January 1, 2010 and 2009, the Company performed its annual goodwill impairment test and determined there was no impairment. The Company believes that, as of September 30, 2010, no indicators of impairment were present which would warrant an interim impairment test. We have five operating segments: (1) Maritime, (2) Land-Based Spas, (3) Product Distribution, (4) Training, and (5) Schools. The Maritime, Land-Based Spas, Product Distribution ("Products") and Schools operating segments have associated goodwill and each of them has been determined to be a reporting unit.

The change in goodwill during the nine months ended September 30, 2010, further described in Note 4, was as follows (in thousands):

8

We file a consolidated tax return for our U.S. subsidiaries other than those domiciled in U.S. territories which file specific returns. In addition, our foreign subsidiaries file income tax returns in their respective countries of incorporation, where required. We utilize the liability method and deferred income 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. Deferred income tax provisions and benefits are based on the changes to the asset or liability from period to period. A valuation allowance is provided on deferred tax assets if it is determined that it is more likely than not that the deferred tax asset will not be realized. The majority of our income is generated outside of the United States. We believe a large percentage of our shipboard services income is foreign-source income, not effectively connected to a business we conduct in the United States and, therefore, not subject to United States income taxation.

For currency exchange rate purposes, assets and liabilities of our foreign subsidiaries are translated at the rate of exchange in effect at the balance sheet date. Equity and other items are translated at historical rates and 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 Loss caption of our Condensed Consolidated Balance Sheets. Foreign currency gains and losses resulting from transactions, including intercompany transactions, are included in the results of operations. The transaction (losses) gains included in the Administrative expenses caption of our Condensed Consolidated Statements of Income were approximately $1.2 million and ($0.2 million) for the three months ended September 30, 2010 and 2009, respectively, and approximately ($0.9 million) and $1.7 million for the nine months ended September 30, 2010 and 2009, respectively. The transaction gains (losses) in the Cost of Products caption of our Condensed Consolidated Statements of Income were approximately ($1.5 million) and $1.0 million for the three months ended September 30, 2010 and 2009, respectively, and approximately $0.1 million and ($2.6 million) for the nine months ended September 30, 2010 and 2009, respectively.

9

Basic earnings per share is computed by dividing the net income available to common shareholders by the weighted average number of outstanding common shares. The calculation of diluted earnings per share is similar to basic earnings per share except that the denominator includes dilutive common share equivalents such as share options, restricted shares and restricted share units. A reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share data):

In July 2009, the Company entered into a transaction with the holders of the SEG options pursuant to which the SEG options were exchanged for restricted share units of the Company.

The Company issued 4,000 of its common shares upon the exercise of share options during the three months ended September 30, 2010 and 2009, respectively and issued 76,000 and 23,000 of its common shares upon the exercise of share options during the nine months ended September 30, 2010 and 2009, respectively.

The Company granted approximately 10,000 restricted shares or restricted share units, as the case may be, during the three months ended September 30, 2010 and approximately 32,000 and 8,000 restricted shares and restricted share units during the nine months ended September 30, 2010 and 2009, respectively. No other stock-based compensation was granted during the three and nine months ended September 30, 2010 and 2009, respectively.

10

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 $4.2 million and $3.4 million for the three months ended September 30, 2010 and 2009, respectively. Of these amounts, $2.5 million are included in cost of revenues in the accompanying Condensed Consolidated Statements of Income for the three months ended September 30, 2010 and 2009, respectively. Advertising costs were approximately $12.2 million and $10.2 million for the nine months ended September 30, 2010 and 2009, respectively. Of these amounts, $7.4 million and $7.3 million, respectively, are included in cost of revenues in the accompanying Condensed Consolidated Statements of Income for the nine months ended September 30, 2010 and 2009, respectively. At September 30, 2010 and December 31, 2009, the amounts of advertising costs included in prepaid expenses were not material.

In October 2009, the FASB issued accounting guidance that amends the criteria for allocating a contract's consideration to individual services or products in multiple deliverable arrangements. This guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. We will adopt this guidance beginning on January 1, 2011 and do not expect a material impact on our condensed consolidated unaudited financial statements from such adoption.

In January 2010, authoritative guidance was issued requiring enhanced disclosures for fair value measurements. Entities are required to separately disclose the amounts and reasons of significant transfers in and out of the first two levels of the fair value hierarchy. Entities are also required to present information about purchases, sales, issuances and settlements of fair value measurements within the third level of the fair value hierarchy on a gross basis. We adopted this authoritative guidance, with the exception of the disclosures about purchases, sales, issuance and settlements which will be effective for our fiscal year 2011 interim and annual consolidated financial statements. The adoption of this guidance did not have an impact on our consolidated financial statements. The remaining disclosures will be added to our future filings when applicable.

11

We recognize revenues earned as services are provided and as products are sold or shipped, as the case may be. Revenue from gift certificate sales is recognized upon gift certificate redemption and upon recognition of breakage. We do not charge administrative fees on unused gift cards, and our gift cards do not have an expiration date. Based on historical redemption rates, a relatively stable percentage of gift certificates will never be redeemed, referred to as "breakage."  We use the redemption recognition method for recognizing breakage related to certain gift certificates for which we have sufficient historical information. Under the redemption recognition method, revenue is recorded in proportion to, and over, the time period gift cards are actually redeemed. Breakage is recognized only if we determine that we do not have a legal obligation to remit the value of unredeemed gift certificates to government agencies under the unclaimed property laws in the relevant jurisdictions. We determine our gift certificate breakage rate based upon historical redemption patterns. At least three years of historical data, which will be updated annually, is used to determine actual redemption patterns. Gift certificate breakage income is included in Services Revenue in our Condensed Consolidated Statement of Income for the three and nine months ended September 30, 2010.

Tuition revenue and revenue related to certain nonrefundable fees and charges at our massage and beauty schools are recognized monthly on a straight-line basis over the term of the course of study. At the time a student begins attending a school, a liability (unearned tuition) is recorded for all academic services to be provided and a tuition receivable is recorded for the portion of the tuition not paid up front in cash. Revenue related to sales of program materials, books and supplies are, generally, recognized when the program materials, books and supplies are delivered. We include the revenue related to sales of program materials, books and supplies in the Services Revenue financial statement caption in our Condensed Consolidated Statements of Income. If a student withdraws from one of our schools prior to the completion of the academic term, we refund the portion of the tuition already paid that, pursuant to our refund policy and applicable federal and state law and accrediting agency standards, we are not entitled to retain.

Our land-based spas, generally, are required to pay rent based on a percentage of our revenues.  In addition, for certain of our land-based spas, we are required to pay a minimum rental amount regardless of whether such amount would be required to be paid under the percentage rent agreement.  Rent escalations are recorded on a straight-line basis over the terms of the lease agreements. We record contingent rent at the time it becomes probable it will exceed the minimum rent obligation per the lease agreements. Previously recognized rental expense is reversed into income at such time that it is not probable that the specified target will be met.

Cash and cash equivalents, accounts receivable, accounts receivable - students and accounts payable are reflected in the accompanying Condensed Consolidated Financial Statements at cost, which approximated fair value due to the short maturity of these instruments. The fair values of the term and revolving loans were determined using applicable interest rates as of the balance sheet date and approximate the carrying value of such debt because the underlying instruments were at variable rates that are repriced frequently.

12

On December 31, 2009, we completed the acquisition of all of the issued and outstanding capital stock of Bliss Inc. We acquired Bliss Inc. to expand our land-based spa operations and products distribution and to assist in their future growth. The purchase price of the acquisition, funded from existing cash and through borrowings under Steiner's new credit facility, was $100.0 million in cash less cash acquired. The results of operations of Bliss Inc. are included in our results of operations for periods subsequent to December 31, 2009.

We applied the purchase method of accounting to record this transaction. The preliminary purchase price allocation for the acquisition, which reflects the finalization of a post-closing working capital adjustment described below, is as follows (in thousands):

The purchase price and initial recording of the transaction was based on preliminary estimates of fair values and is subject to change. The purchase price allocation is not complete for inventory, property and equipment and deferred taxes. Additional information is necessary to complete the purchase price allocation, including replacement cost information. None of the Goodwill and intangible assets above are tax deductible.

In the second quarter of 2010, we received from the previous owner of Bliss Inc. approximately $3.9 million related to the finalization of a post-closing working capital adjustment. This amount was recorded in the preceding table as a decrease to goodwill initially recorded as of December 31, 2009.

The intangible assets of Bliss Inc. that we acquired are as follows (in thousands):

The fair values of the leases were based on the current market for similar leases; the fair values of the trade names were based on the relief from royalty method.

13

The following is a summary of the unaudited pro forma historical results, as if Bliss Inc. had been acquired at January 1, 2009 (in thousands, except per share data).

The unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had this acquisition occurred at January 1, 2009, nor are they necessarily indicative of future operating results.

From time to time, in the ordinary course of business, we are party to various claims and legal proceedings. There have been no material changes with respect to legal proceedings previously reported in our annual report on Form 10-K for the year ended December 31, 2009 and our quarterly report on Form 10-Q for the quarter ended June 30, 2010, except as described below.

As previously reported, in December 2004, a personal injury action was filed against us in the Circuit Court in Miami-Dade County, Florida by Vennila Amaran as guardian of Preetha Amaran (the "Plaintiff") alleging that the Plaintiff suffered serious injuries in connection with her use of an exercise machine in a spa operated by us. The Plaintiff is alleging an unspecified amount of damages. We are unable to provide an evaluation of the likelihood of an unfavorable outcome, or provide an estimate of the amount of range or potential loss in this matter. Should we be found liable in this matter, and the amount of any such liability exceeds the limits of our applicable insurance coverage or if such insurance coverage were to be unavailable, the amount that we may be required to pay in connection with such liability could have a material adverse effect on our financial condition and results of operations.

The Company may be liable for employment-related taxes for certain past and current employees. Management currently believes that the amount of such liability, if any, would not be material to the Company's financial condition or results of operations.

In March 2009, we received a tax assessment from the Mexican tax authorities for approximately $2.3 million. We are disputing the assessment and are uncertain as to when it will be resolved. Based on the advice of our Mexican Counsel, we believe that it is more likely than not that our position will be sustained; therefore, we have not established an accrual with respect to that assessment as of September 30, 2010.

14

Accrued expenses consists of the following (in thousands):

Our land-based spas, generally, are required to pay rent based on a percentage of our revenues. In addition, for certain of our land-based spas, we are required to pay a minimum rental amount regardless of whether such amount would be required to be paid under the percentage rent agreement. Rent escalations are recorded on a straight-line basis over the term of the lease agreement. We record contingent rent at the time it becomes probable that it will exceed the minimum rent obligation per the lease agreement. Previously recognized rental expense is reversed into income at such time that it is not probable that the specified target will be met.

Long-term debt consists of the following (in thousands):

In connection with our acquisition of Bliss Inc., in November 2009, we entered into a new credit facility (the "Credit Facility") with a group of lenders including SunTrust Bank, our existing lender, consisting of a $60 million revolving credit facility, with $5.0 million swingline and $5.0 million letter of credit sub-facilities, and a delayed draw term loan facility of $50.0 million, both maturing November 2, 2012. The delayed draw term loan was fully funded at the closing of the Bliss Inc. acquisition. Extensions of credit under the Credit Facility will also be used (i) to pay certain fees and expenses associated with the Bliss Inc. acquisition, (ii) to refinance existing indebtedness, (iii) for capital expenditures, (iv) to finance possible future acquisitions permitted under the Credit Agreement and (v) for working capital and general corporate purposes, including letters of credit. The new credit facility replaces our 2007 credit facility, which has been terminated. As of September 30, 2010, there was $60.0 million available under the revolving credit facility. Interest on borrowings under the Credit Facility accrues at Base Rate, LIBOR or Index Rate, depending on which rate is lowest at the time, plus, in each case, a spread of between 3.00% - 3.50%, based on the Company's financial performance. At September 30, 2010, our borrowing rate was 3.76%. Our obligations under the Credit Facility are secured by substantially all of the Company's present and future tangible and intangible assets.

15

Our Credit Facility 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 September 30, 2010, and through the date of this report, 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.

In February 2008, our Board of Directors approved a share repurchase plan under which up to $100.0 million of common shares can be purchased, and terminated the prior plan. During the nine months ended September 30, 2010 and 2009, respectively, we purchased approximately 102,000 and 35,000 shares, with a value of approximately $3.9 million and $0.8 million, respectively. Of those shares purchased, 26,000 and 35,000 shares for the nine months ended September 30, 2010 and 2009, respectively, were surrendered by our employees in connection with the vesting of restricted shares and used by us to satisfy payment of our minimum federal income tax withholding obligations in connection with these vestings. These share purchases were outside of our repurchase plan.

We operate in three reportable segments: (1) Spa Operations, which provides spa services onboard cruise ships and land-based spas; (2) Products, which sells a variety of high quality beauty products to third parties; and (3) Schools, which offers programs in massage therapy and skin care. Amounts included in "Other" include various corporate items such as unallocated overhead and intercompany transactions.

Information about our segments is as follows (in thousands):

Included in Spa Operations, Products and Schools is goodwill of $49.8 million, $25.1 million and $42.4 million, respectively, as of September 30, 2010, and $51.6 million, $27.6 million and $42.4 million, respectively, as of December 31, 2009.

Set forth below is information relating to countries in which we have material operations. We are not able to identify the country of origin for the customers to which revenues from our cruise ship operations relate. Geographic information is as follows (in thousands):