STEINER LEISURE Ltd - FORM 10-Q

Attached files

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EX-32.1 - EXHIBIT 32.1 - STEINER LEISURE Ltd	ex32-1.htm
EX-32.2 - EXHIBIT 32.2 - STEINER LEISURE Ltd	ex32-2.htm
EX-31.1 - EXHIBIT 31.1 - STEINER LEISURE Ltd	ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - STEINER LEISURE Ltd	ex31-2.htm
EXCEL - IDEA: XBRL DOCUMENT - STEINER LEISURE Ltd	Financial_Report.xls

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-Q
(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015
or
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from	_____________	To ______________

Commission File Number: 0-28972

STEINER LEISURE LIMITED (Exact name of Registrant as Specified in its Charter)


Commonwealth of The Bahamas			98-0164731
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

Suite 104A, Saffrey Square
P.O. Box N-9306
Nassau, The Bahamas			Not Applicable
(Address of principal executive offices)			(Zip Code)

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

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

On April 29, 2015, the registrant had 12,837,722 common shares, par value (U.S.) $.01 per share, outstanding.

STEINER LEISURE LIMITED

INDEX

		Page No.
PART I FINANCIAL INFORMATION

ITEM 1.	Unaudited Financial Statements

	Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	3

	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2015 and 2014	5

	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014	6

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014	7

	Notes to Condensed Consolidated Financial Statements	9

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25

ITEM 4.	Controls and Procedures	25

PART II OTHER INFORMATION

ITEM 1.	Legal Proceedings	26

ITEM 1A.	Risk Factors	26

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

ITEM 6.	Exhibits	27

SIGNATURES AND CERTIFICATIONS		28

PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

	March 31,		December 31,
	2015		2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	36,492	$	59,736
Accounts receivable, net		61,818		59,359
Accounts receivable - students, net		26,037		20,531
Inventories		53,513		52,102
Prepaid expenses and other current assets		20,360		18,129
Total current assets		198,220		209,857
PROPERTY AND EQUIPMENT, net		100,272		96,509
GOODWILL		148,815		148,815
OTHER ASSETS:
Intangible assets, net		68,948		69,184
Deferred financing costs, net		2,287		2,481
Deferred customer acquisition costs		9,201		8,723
Other		18,653		17,274
Total other assets		99,089		97,662
Total assets	$	546,396	$	552,843
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	20,885	$	26,162
Accrued expenses		45,740		43,302
Current portion of long-term debt		4,462		1,405
Current portion of deferred rent		2,392		2,392
Current portion of deferred tuition revenue		27,507		22,337
Current portion of deferred revenue		95,889		88,086
Gift certificate liability		15,337		16,364
Income taxes payable		1,684		1,972
Total current liabilities		213,896		202,020
NON-CURRENT LIABILITIES:
Deferred income tax liabilities, net		29,174		28,304
Long-term debt		108,119		127,177
Long-term deferred rent		14,529		14,674
Long-term deferred tuition revenue		240		113
Long-term deferred revenue		7,775		7,660
Total non-current liabilities		159,837		177,928

(Continued)

STEINER LEISURE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS - (CONTINUED)

(in thousands)

Commitments and contingencies
SHAREHOLDERS' EQUITY:
Preferred shares, $.0l par value; 10,000 shares authorized, none issued and outstanding		--			--
Common shares, $.0l par value; 100,000 shares authorized, 24,204 shares issued in 2015 and 24,191 shares issued in 2014		242			242
Additional paid-in capital		198,273			196,156
Accumulated other comprehensive loss		(3,543	)		(2,571	)
Retained earnings		382,010			373,898
Treasury shares, at cost, 11,357 shares in 2015 and 11,153 shares in 2014		(404,319	)		(394,830	)
Total shareholders' equity		172,663			172,895
Total liabilities and shareholders' equity	$	546,396		$	552,843

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

STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(Unaudited)

(in thousands, except per share data)

	Three Months Ended
	March 31,
	2015			2014
REVENUES:
Services	$	151,805		$	155,294
Products		64,299			61,442
Total revenues		216,104			216,736
COST OF REVENUES:
Cost of services		126,329			129,257
Cost of products		41,645			42,568
Total cost of revenues		167,974			171,825
Gross profit		48,130			44,911
OPERATING EXPENSES:
Administrative		17,994			14,912
Salary and payroll taxes		19,946			20,438
Total operating expenses		37,940			35,350
Income from operations		10,190			9,561
OTHER INCOME (EXPENSE), NET:
Interest expense		(771	)		(756	)
Other income		278			143
Total other income (expense), net		(493	)		(613	)
Income before provision for income taxes		9,697			8,948
PROVISION FOR INCOME TAXES		1,585			1,587
Net income	$	8,112		$	7,361
INCOME PER SHARE:
Basic	$	0.62		$	0.50
Diluted	$	0.62		$	0.50

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

STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(Unaudited)
(in thousands)

	Three Months Ended
	March 31,
	2015			2014

Net income	$	8,112		$	7,361
Other comprehensive loss, net of tax:
Foreign currency translation adjustments		(972	)		(2	)
Total other comprehensive loss, net of tax		(972	)		(2	)
Comprehensive income	$	7,140		$	7,359

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

STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(Unaudited, in thousands)

	Three Months Ended
	March 31,
	2015			2014

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	8,112		$	7,361
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		5,346			5,867
Stock-based compensation		2,115			2,550
Provision for doubtful accounts		2,497			1,979
Deferred income tax provision		870			870

Changes in:
Accounts receivable and accounts receivable-students		(11,665	)		(10,994	)
Inventories		(1,996	)		(480	)
Prepaid expenses and other current assets		(2,325	)		(923	)
Other assets		(1,855	)		(110	)
Accounts payable		(4,981	)		(7,337	)
Accrued expenses		2,521			(13,134	)
Deferred tuition revenue		5,297			7,793
Deferred revenue		7,918			(2,502	)
Deferred rent		(145	)		94
Gift certificate liability		(980	)		(851	)
Net cash provided by (used in) operating activities		10,729			(9,817	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(8,881	)		(2,064	)
Net cash used in investing activities		(8,881	)		(2,064	)

(Continued)

STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(Unaudited, in thousands)

	Three Months Ended
	March 31,
	2015			2014
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury shares	$	(9,489	)	$	(893	)
Payments for long-term debt		(20,000	)		--
Proceeds from long-term debt		4,000			--
Net cash used in financing activities		(25,489	)		(893	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		397			(101	)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(23,244	)		(12,875	)
CASH AND CASH EQUIVALENTS, Beginning of period		59,736			75,252
CASH AND CASH EQUIVALENTS, End of period	$	36,492		$	62,377
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:

Interest	$	577		$	497

Income taxes	$	1,004		$	823

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

STEINER LEISURE LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015
(Unaudited)

(1)

BASIS OF PRESENTATION OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

The accompanying unaudited condensed consolidated financial statements for each period include the condensed consolidated balance sheets, statements of income, comprehensive 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 adjustments (which are of a normal recurring nature) necessary to present fairly our unaudited financial position, results of operations and cash flows. The unaudited results of operations and cash flows for the three months ended March 31, 2015 are not necessarily indicative of the results of operations or cash flows that may be expected for the remainder of 2015. 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, 2014 (the "2014 Annual Report"). The December 31, 2014 Condensed Consolidated Balance Sheet included herein was extracted from the December 31, 2014 audited Consolidated Balance Sheet included in our 2014 Annual Report.

The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") 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, accounts receivable-students, student notes receivable, 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, gift certificate breakage revenue, the assumptions related to the determination of share based compensation, and for Ideal Image cosmetic services center sales and related deferred customer acquisition costs, the determination of the average number of treatments provided, and the allocation of arrangement consideration between services and products for treatment packages that include our products.

(2)

ORGANIZATION:

Steiner Leisure Limited is a global provider and innovator in the fields of beauty, wellness and education. Steiner Leisure was incorporated in The Bahamas as a Bahamian international business company in 1995. In our facilities on cruise ships, at land-based spas, including at resorts and urban hotels (referenced collectively below as “hotels”), luxury Elemis® day spas, Bliss® premium urban day spas and at our Ideal Image cosmetic services centers (the “Ideal Image centers”), we strive to create a relaxing and therapeutic environment where guests can receive beauty and body treatments of the highest quality. Our services include traditional and alternative massage, body and skin treatment options, fitness, acupuncture, medi-spa treatments, cosmetic services, laser hair removal, facial rejuvenation and body contouring services. We also develop and market premium quality beauty products which are sold at our facilities, through e-commerce and through third party retail outlets and other channels, and we also operate post-secondary schools offering massage therapy and related courses.

(3)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Our significant accounting policies were described in Note 2 to our consolidated financial statements included in our 2014 Annual Report. There have been no significant changes in our significant accounting policies for the three months ended March 31, 2015, unless otherwise described below.

(a)

Principles of Consolidation and Basis of Presentation

We hold variable interests in physician-owned entities that provide cosmetic services to the Ideal Image centers’ guests. These entities were set up for regulatory compliance purposes. We bear the benefits and risks of loss from operating those entities through contractual agreements. Our consolidated financial statements include the operating results of those entities. The assets and liabilities of these entities are not material to the consolidated balance sheets.

(b)

Inventories

Inventories, consisting principally of beauty products, are stated at the lower of cost (first-in, first-out) or market. Inventories consist of the following (in thousands):

	March 31,		December 31,
	2015		2014

Finished goods	$	50,305	$	48,736
Raw materials		3,208		3,366
	$	53,513	$	52,102

(c)

Income Taxes

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.

(d)

Translation of Foreign Currencies

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 gains (losses) included in the Administrative expenses caption of our Condensed Consolidated Statements of Income were approximately ($1.6 million) and $0.4 million for the three months ended March 31, 2015 and 2014, respectively. The transaction gains (losses) in the Cost of Products caption of our Condensed Consolidated Statements of Income were approximately $0.5 million and ($0.1 million) for the three months ended March 31, 2015 and 2014, respectively.

(e)

Earnings Per Share

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 and restricted share units. Reconciliation between basic and diluted earnings per share is as follows (in thousands, except per share data):

	Three Months Ended
	March 31,
	2015		2014

Net income	$	8,112	$	7,361

Weighted average shares outstanding used in calculating basic earnings per share		13,001		14,681
Dilutive common share equivalents		87		87
Weighted average common and common share equivalents used in calculating diluted earnings per share		13,088		14,768

Income per common share:
Basic	$	0.62	$	0.50

Diluted	$	0.62	$	0.50

Options and restricted share units outstanding which are not included in the calculation of diluted earnings per share because their impact is anti-dilutive		42		157

No options were exercised during the three months ended March 31, 2015 and 2014, respectively.

(f)

Stock-Based Compensation

No stock-based awards were granted during the three months ended March 31, 2015 or 2014, respectively.

(g)

Recent Accounting Pronouncements

In April 2014, amended guidance was issued changing the requirements for reporting discontinued operations and enhancing the disclosures in this area. The new guidance requires a disposal of a component of an entity or a group of components of an entity to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results. The adoption of this guidance did not have an impact on our consolidated financial statements.

In January 2015, amended GAAP guidance was issued changing the requirements for reporting extraordinary and unusual items in the income statement. The update eliminates the concept of extraordinary items. The presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. A reporting entity may apply the amendments prospectively or retrospectively to all periods presented in the financial statements. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this newly issued guidance is not expected to have an impact on our consolidated financial statements.

In February 2015, amended GAAP guidance was issued affecting current consolidation guidance. The guidance changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance must be applied using one of two retrospective application methods and will be effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in any interim period. We are currently evaluating the impact, if any, that the adoption of this newly issued guidance would have on our consolidated financial statements.

In April 2015, amended GAAP guidance was issued simplifying the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by these amendments. This guidance will be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The guidance will be effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The adoption of this newly issued guidance is not expected to be material to our consolidated financial statements.

In April 2015, amended GAAP guidance was issued to clarify a customer’s accounting for fees paid in a cloud computing arrangement. The amendments provide guidance to customers about whether a cloud computing arrangement includes a software license or if the arrangement should be accounted for as a service contract. This guidance will impact the accounting of software licenses but will not change a customer’s accounting for service contracts. The guidance will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Early adoption is permitted. An entity can elect to adopt the amendments either prospectively or retrospectively. We are currently evaluating the impact, if any, that the adoption of this newly issued guidance would have on our consolidated financial statements.

(h)

Fair Value Measurements

US GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. The three levels of inputs used to measure fair value are as follows:

●

Level 1 - Quoted prices in active markets for identical assets and liabilities.

●

Level 2 - Observable inputs other than quoted prices included in Level 1. This includes dealer and broker quotations, bid prices, quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable market data.

●

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

We have no assets or liabilities that are adjusted to fair value on a recurring basis. We did not have any assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2015, or 2014.

Cash and cash equivalents is reflected in the accompanying Condensed Consolidated Financial Statements at cost, which approximated fair value estimated using Level 1 inputs as they are maintained with high-quality financial institutions and having original maturities of three months or less. The fair values of our term and revolving loans were estimated using Level 2 inputs based on quoted prices for those or similar instruments. The fair values of the term and revolving loans were determined using applicable interest rates as of March 31, 2015 and December 31, 2014 and approximate the carrying value of such debt because the underlying instruments were at variable rates that are repriced frequently. It is not practicable to estimate the fair value of the student receivables, since observable market data is not readily available, and no reasonable estimation methodology exists.

(i)

Concentrations of Credit Risk

A roll-forward of the allowance for doubtful accounts for student notes receivables at March 31, 2015 is as follows (in thousands):

Balance at beginning of period	$	3,494
Provision		1,090
Write-offs		(1,187	)
Balance at end of period	$	3,397

As of March 31, 2015, the delinquency status of gross notes receivable was as follows (in thousands):

Current	$	5,646
1-30		510
31-60		774
61-90		256
91+		543
	$	7,729

(j)

Seasonality

A significant portion of our revenues are generated from our cruise ship spa operations. Certain cruise lines, and, as a result, Steiner Leisure, has experienced varying degrees of seasonality as the demand for cruises is stronger in the Northern Hemisphere during the summer months and during holidays. Accordingly, generally, the third quarter and holiday periods result in the highest revenue yields for us. Historically, the revenues of Ideal Image were weakest during the third quarter and, if this trend continues, this could offset to some extent the strength of our shipboard operations during the summer months. Our product sales are strongest in the third and fourth quarters as a result of the December holiday shopping period.

(4)

COMMITMENTS AND CONTINGENCIES:

Legal Proceedings

From time to time, in the ordinary course of business, we are a party to various claims and legal proceedings. Currently, there are no such claims or proceedings which, in the opinion of management, could have a material adverse effect on our results of operations, financial condition and cash flows, except as follows:

On April 7, 2014, a former student at our Schools Division’s Denver School of Massage Therapy brought a putative class action against our Schools Division, Nesbitt v. FCNH, Inc. et al., in the U.S. District Court for the District of Colorado, alleging violations of the Fair Labor Standards Act (“FLSA”) and various state wage and hour laws. The plaintiff alleges that, in performing certain therapies on individuals from the public as part of the requirements that students perform clinical services (required for a massage therapy license), she was acting as an employee for purposes of the FLSA and applicable state law and was entitled to wages for those services. The complaint seeks unspecified damages. The plaintiff brought the action on behalf of herself and all others similarly situated at the schools operated by our Schools Division. At this time, we are unable to provide an evaluation of the likelihood of an unfavorable outcome, or provide an estimate of the amount or range of potential loss in this matter. Should we be found liable in this matter, 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.

On November 17, 2014, a former sales consultant brought a putative collective action against Ideal Image Development Corporation, Marlow v. Ideal Image Development Corp., in the U.S. District Court for the Eastern District of Tennessee, alleging violations of the FLSA. The plaintiff alleges that she and others working as sales consultants were not paid the applicable minimum wage for certain training and travel work and were not paid overtime for hours worked over 40 in a workweek. The complaint seeks unspecified damages. The plaintiff brought the action on behalf of herself and others similarly situated across the country. Twenty individuals have joined the lawsuit to date. At this time, we are unable to provide an evaluation of the likelihood of an unfavorable outcome, or provide an estimate of the amount or range of potential loss in this matter. Should we be found liable in this matter, 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.

(5)

SHAREHOLDERS' EQUITY:

On February 18, 2015, the board of directors of Steiner Leisure (the “Board”) approved a new share repurchase plan under which up to $100.0 million of Steiner Leisure common shares can be purchased. In connection with the new repurchase authorization, the repurchase plan approved by the Board in February 2013 was terminated. During the three months ended March 31, 2015 and 2014, respectively, we purchased approximately 204,000 and 20,000 shares, with a value of approximately $9.4 million and $0.9 million, respectively. Of those shares purchased, 5,000 and 20,000 shares for the three months ended March 31, 2015 and 2014, respectively, were surrendered by our employees in connection with the vesting of restricted share units 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.

(6)

CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS:

The following table presents the changes in accumulated other comprehensive loss by component for the quarter ended March 31, 2015 and 2014 (in thousands):

	Foreign Currency Translation Adjustments
	2015			2014
Accumulated comprehensive loss at beginning of the year	$	(2,571	)	$	(258	)
Other comprehensive income before reclassifications		(972	)		(2	)
Amounts reclassified from accumulated other comprehensive loss		--			--
Net current-period other comprehensive loss		(972	)		(2	)
Ending balance	$	(3,543	)	$	(260	)

All amounts are after tax. Amounts in parenthesis indicate debits.

(7)

SEGMENT INFORMATION:

Our Maritime and Land-Based Spas operating segments are aggregated into a reportable segment based upon similar economic characteristics, products, services, customers and delivery methods. Additionally, the operating segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief executive officer in determining how to allocate the Company's resources and evaluate performance.

We operate in four reportable segments: (1) Spa Operations, which sells spa services and beauty products onboard cruise ships, on land at hotels and at day spas; (2) Products, which sells a variety of high quality beauty products to third parties through channels other than those above; (3) Schools, which offers programs in massage therapy and skin care; and (4) Ideal Image, which sells laser hair removal and other services and certain of our products. Amounts included in "Other" include various corporate items such as unallocated overhead and intercompany transactions.

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

	Three Months Ended
	March 31,
	2015			2014
Revenues:
Spa Operations	$	118,605		$	125,834
Products		45,189			42,201
Schools		20,135			19,664
Ideal Image		41,078			38,814
Other		(8,903	)		(9,777	)
Total	$	216,104		$	216,736
Income from Operations:
Spa Operations	$	9,585		$	10,147
Products		3,270			2,420
Schools		315			(116	)
Ideal Image		(1,687	)		(1,109	)
Other		(1,293	)		(1,781	)
Total	$	10,190		$	9,561

	March 31,			December 31,
	2015			2014
Identifiable Assets:
Spa Operations	$	189,682		$	191,218
Products		204,240			199,803
Schools		85,392			99,981
Ideal Image		159,403			147,933
Other		(92,321	)		(86,092	)
Total	$	546,396		$	552,843

Included in Spa Operations, Products, Ideal Image and Schools is goodwill of $51.0 million, $23.7 million, $43.4 million and $30.7 million, respectively, as of March 31, 2015 and December 31, 2014.

Products segment revenues excluding intercompany transactions were $35.9 million and $32.0 million for the three months ended March 31, 2015 and March 31, 2014, respectively.

(8)

GEOGRAPHIC INFORMATION:

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):

	Three Months Ended
	March 31,
	2015		2014
Revenues:
United States	$	95,480	$	91,122
United Kingdom		17,340		16,242
Not connected to a country		96,543		101,576
Other		6,741		7,796
Total	$	216,104	$	216,736

	March 31,		December 31,
	2015		2014
Property and Equipment, net:
United States	$	78,031	$	74,781
United Kingdom		7,092		6,088
Not connected to a country		2,176		2,231
Other		12,973		13,409
Total	$	100,272	$	96,509

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

Overview

Steiner Leisure Limited is a global provider and innovator in the fields of health, wellness and education. We operate our business through four reportable segments: Spa Operations, Products, Schools and Ideal Image.

Through our Spa Operations segment, we offer massages and a variety of other body treatments, as well as a broad variety of beauty treatments to women, men and teenagers on cruise ships and at land-based spas. We conduct our activities pursuant to agreements with cruise lines and owners of our land-based venues that, generally, give us the exclusive right to offer these types of services at those venues. The cruise lines and land-based venue owners, generally, receive compensation based on a percentage of our revenues at these respective locations and, in certain cases, a minimum annual rental or combination of both.

Through our Products segment, we develop and sell a variety of high quality beauty products under our Elemis, La Thérapie™, Bliss, BlissLabs™, Remède® and Laboratoire Remède® brands, and also sell products of third parties, both under our packaging and labeling and otherwise. The ingredients for these products are produced for us by several suppliers, including highly regarded and premier United States and European manufacturers. We sell our products at our shipboard and land-based spas pursuant to the same agreements under which we provide spa services at those locations, as well as through our Ideal Image centers, third party outlets and our catalogs and websites.

Through our Schools segment, we own and operate 12 post-secondary schools (comprised of a total of 32 campuses) located in Arizona, Colorado, Connecticut, Florida, Illinois, Maryland, Massachusetts, Nevada, New Jersey, Pennsylvania, Texas, Utah, Virginia and Washington. These schools offer programs in massage therapy and, in some cases, beauty and skin care, and train and qualify spa professionals for health and beauty positions. Among other things, in conjunction with skin care programs, we train the students at our schools in the use of our Elemis, Bliss and La Thérapie products. We offer full-time programs as well as part-time programs for students who work or who otherwise desire to take classes outside traditional education hours. Revenues from our massage and beauty schools, which consist almost entirely of student tuition payments, are derived to a significant extent from the proceeds of loans issued under the Title IV Programs, authorized by Title IV of the Higher Education Act of 1965 (the “HEA”) and administered by the U.S. Department of Education (the “DOE”). We must comply with a number of regulatory requirements in order to maintain the eligibility of our students and prospective students for loans under these programs. Rules of the DOE, effective July 1, 2011, increased our regulatory compliance obligations, have adversely affected our Schools segment's enrollments and continue to adversely affect our enrollment and our results of operations. We are taking steps to address this decline in enrollments through changes in our marketing strategy and tactics. However, we cannot assure you that these efforts will be successful in addressing this matter, and, if they are not successful, our results of operations and financial condition would be adversely affected.

During the three months ended March 31, 2015, the severe winter weather experienced in multiple regions of the United States has adversely affected us by requiring us to close a number of our Schools campuses, Ideal Image centers and Bliss locations for varying periods of time.

Through our Ideal Image segment, we offer a non-invasive procedure for the removal of unwanted facial and body hair in a relaxing setting. Ideal Image is a leader in the growing consumer cosmetic category of laser hair removal. We operate 110 cosmetic service centers and are party to agreements with franchisees, who operate 17 cosmetic service centers offering services under the Ideal Image brand, all in upscale retail settings. Ideal Image is subject to regulation in the states in which its facilities are located, related to, among other things, corporate entities such as Ideal Image "practicing medicine" and to the provision of the laser hair removal services.

We are continuing to evaluate whether to continue to expand our Ideal Image segment. If we decide to expand this segment, the Ideal Image centers will either be company-owned or physician-owned, depending on the applicable regulations in the jurisdiction in which the respective Ideal Image center will be opened. In connection with the opening of any new Ideal Image center, we incur expenses, among other things, for leasehold improvements, marketing and training of new personnel. Accordingly, even new Ideal Image centers that are successful do not become cash flow positive until several months after opening.

Even after a new Ideal Image center becomes cash flow positive, however, under applicable U.S. GAAP rules, it takes an additional period of time for the positive cash flow (assuming the Ideal Image center is successful) to be reflected in the operating income of the segment with respect to that Ideal Image center. This is primarily because the services for which payments are received are not fully performed for a period of several months and revenue cannot be recognized until the related treatment is performed. Accordingly, operating income of the Ideal Image segment trails behind the related cash flow of the segment. This applies to both new Ideal Image centers and existing Ideal Image centers. To the extent that more new Ideal Image centers are opened, and, therefore, each new Ideal Image center becomes a smaller portion of the segment as a whole, the trailing of operating income behind the related cash flows will decline because established Ideal Image centers typically have a regular base of customers and receive new customers at a more regular rate than newly opened Ideal Image centers and, therefore, have a stronger revenue base than new Ideal Image centers.

A significant portion of our revenues are generated from our cruise ship operations. Historically, we have been able to renew almost all of our cruise line agreements that expired or were scheduled to expire. As of December 31, 2013, our agreement with Celebrity expired and we were notified that it would not be renewed.

Our success and our growth are 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. Our hotel land-based spas are dependent on the hospitality industry for their success.

The success of the cruise and hospitality industries, as well as our business, is impacted by economic conditions. The economic slowdown experienced in recent years in the United States and other world economies created a challenging environment for the cruise and hospitality industries and our business, including our retail beauty products sales. In order for the cruise industry to maintain its market share in difficult economic environments, cruise lines have at times offered discounted fares to prospective passengers. Passengers who are cruising solely due to discounted fares may reflect their cost consciousness by not spending on discretionary items, such as our services and products. While economic conditions have shown some improvement, a number of countries and business sectors continue to experience adverse economic conditions. The impact on consumers of periodic increases in fuel costs also adversely affected consumers and business entities. The recurrence of the more severe aspects of these challenging economic conditions could have a material adverse effect on the cruise and hospitality industries and also could have a material adverse effect on our results of operations and financial condition for 2015 and thereafter.

Despite the general historic trend of growth in the volume of cruise passengers, in 2015 and future years, the global economic environment could cause the number of cruise passengers to decline or be maintained through discounting, which could result in an increased number of passengers with limited discretionary spending ability. A significant decrease in passenger volume could have a material adverse effect on our results of operations and financial condition.

Other factors also can adversely affect our financial results. Fluctuations in currency exchange rates compared to the U.S. Dollar can impact our results of operations, most significantly because we pay for the administration of recruitment and training of our shipboard personnel and the ingredients and manufacturing of many of our products in U.K. Pounds Sterling and Euros, respectively. Accordingly, while the relative strength of the U.S. Dollar has improved recently, renewed weakness of the U.S. Dollar against those currencies can adversely affect our results of operations, as has occurred from time to time in recent years.

Key Performance Indicators

Spa 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 continuing requirement 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 a measure of performance for our cruise line operations, our average revenue per week. We use these measures of performance because they assist us in determining the productivity of our staff, which we believe is a critical element of our operations. With respect to our land-based spas, we measure our performance primarily through average weekly revenue over applicable periods of time.

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

Schools. With respect to our massage and beauty schools, we measure performance primarily by revenues.

Ideal Image. With respect to our Ideal Image centers, we measure performance primarily through revenues.

Growth

We seek to grow our business by attempting to obtain contracts for new cruise ships brought into service by our existing cruise line customers and for existing and new ships of other cruise lines, seeking new venues for our land-based spas, developing new products and services, seeking additional channels for the distribution of our retail products and seeking to increase the student enrollments at our post-secondary massage and beauty schools, including through the opening of new school campuses. We also consider growth, among other things, through appropriate strategic transactions, including acquisitions.

Critical Accounting Policies

Management's discussion and analysis of financial condition and results of operations is based upon our condensed consolidated unaudited financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated unaudited financial statements and the reported amount of revenues and expenses during the reporting period. Actual results may differ from these estimates under different assumptions or conditions. At least quarterly, management reevaluates its judgments and estimates, which are based on historical experience, current trends and various other assumptions that are believed to be reasonable under the circumstances.

Our critical accounting policies are included in our 2014 Annual Report. We believe that there have been no significant changes during the quarter ended March 31, 2015 to the critical accounting policies disclosed in our 2014 Annual Report.

Recent Accounting Pronouncements

Refer to Note 3(g) to the Condensed Consolidated Financial Statements in this report for a discussion of recent accounting pronouncements.

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,
	2015			2014
Revenues:
Services		70.2	%		71.7	%
Products		29.8			28.3
Total revenues		100.0			100.0
Cost of revenues:
Cost of services		58.5			59.6
Cost of products	19.3			19.7
Total cost of revenues		77.8			79.3
Gross profit		22.2			20.7
Operating expenses:
Administrative		8.3			6.9
Salary and payroll taxes		9.2			9.4
Total operating expenses		17.5			16.3
Income from operations		4.7			4.4
Other income (expense), net:
Interest expense		(0.3	)		(0.4	)
Other income		0.1			0.1
Total other income (expense), net		(0.2	)		(0.3	)
Income before provision for income taxes		4.5			4.1
Provision for income taxes		0.7			0.7
Net income		3.8	%		3.4	%

Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014

REVENUES

Revenues of our reportable segments for the three months ended March 31, 2015 and 2014, respectively, were as follows (in thousands):

	Three Months Ended March 31,						% Change
Revenue:	2015			2014
Spa Operations	$	118,605		$	125,834			(5.7%)
Products		45,189			42,201			7.1%
Schools		20,135			19,664			2.4%
Ideal Image		41,078			38,814			5.8%
Other		(8,903	)		(9,777	)		N/A
Total	$	216,104		$	216,736			(0.3%)

Total revenues decreased approximately 0.3%, or $0.6 million, to $216.1 million in the first quarter of 2015 from $216.7 million in the first quarter of 2014. This decrease was attributable to a $3.5 million decrease in services revenues which was partially offset by a $2.9 million increase in products revenues.

Spa Operations Revenues. Spa Operations segment revenues decreased approximately 5.7%, or $7.2 million, to $118.6 million in the first quarter of 2015 from $125.8 million in the first quarter of 2014. Average weekly revenues for our land-based spas decreased 6.3% to $27,226 in the first quarter of 2015 from $29,051 in the first quarter of 2014. We had an average of 2,589 shipboard staff members in service in the first quarter of 2015, compared to an average of 2,766 shipboard staff members in service in the first quarter of 2014. Revenues per shipboard staff per day increased by 1.5% to $414 in the first quarter of 2015 from $408 in the first quarter of 2014. Average weekly revenues for our shipboard spas increased by 0.3% to $51,549 in the first quarter of 2015 from $51,398 in the first quarter of 2014. More than 50% of the decrease in revenues was attributable to the non-renewal of the Celebrity agreement. In addition, revenues also decreased due to increased discounting at our land-based spas to offset promotions from our competitors.

Products Revenues. Product segment revenues increased approximately 7.1% or $3.0 million to $45.2 million in the first quarter of 2015 from $42.2 million in the first quarter of 2014. Excluding intercompany product sales, product revenues increased $3.9 million to $35.9 million for the three months ended March 31, 2015 from $32.0 million in the three months ended March 31, 2014. This increase was primarily attributable to increased sales of products through third party retail channels, including a substantial amount of products being sold for the first time to Kohl’s department stores.

Schools Revenues. Schools segment revenues increased approximately 2.4%, or $0.4 million to $20.1 million in the first quarter of 2015 from $19.7 million in the first quarter of 2014. Student population during a period is determined by the number of continuing students that are enrolled as of the beginning of the period combined with the number of new students that first become enrolled during that period, and as reduced by the number of students that graduate or otherwise cease to be enrolled at our schools as of the end of the period. As of December 31, 2014, which was the starting point for 2015 enrollments, there were 3,977 students enrolled in our schools, an increase of 258 students compared to the number of students as of December 31, 2013, the starting point for 2014 enrollments. As of March 31, 2015, 4,702 students were enrolled in our schools, compared to 4,665 students enrolled at our schools at March 31, 2014. The increase in revenues was primarily attributed to the higher student population at the beginning of 2015. This higher population was offset during the quarter by a lower number of new enrollments due to the closing of some of our campuses due to the severe winter weather experienced during the three months ended March 31, 2015.

Ideal Image Revenues. The increase in revenues was primarily attributable to the offering of new services during the three months ended March 31, 2015, which services were not offered during the three months ended March 31, 2014.

Cost of Services

Cost of services decreased $3.0 million to $126.3 million in the first quarter of 2015 and 2014. Cost of services as a percentage of services revenues was 83.2% in the first quarter of 2015 and 2014.

Cost of Products

Cost of products decreased $1.0 million to $41.6 million in the first quarter of 2015 from $42.6 million in the first quarter of 2014. Cost of products as a percentage of products revenue decreased to 64.8% in the first quarter of 2015 from 69.3% in the first quarter of 2014. These decreases were primarily attributable to higher margin products that were sold in the first quarter of 2015 compared to the first quarter of 2014. A substantial amount of these products were sold for the first time to Kohl’s department stores during the first quarter of 2015.

OPERATING EXPENSES

Operating expenses increased $2.6 million to $37.9 million in the first quarter of 2015 from $35.3 million in the first quarter of 2014. Operating expenses as a percentage of revenues was 17.5% in the first quarter of 2015 and 16.3% in the first quarter of 2014. This increase is primarily attributable to a foreign exchange loss of $1.6 million due to the strengthening of the U.S. Dollar against the Euro and the U.K. Pound Sterling and higher bad debt expense due to the expansion of in-house loan programs at our Schools and Ideal Image segments.

INCOME FROM OPERATIONS

Income from operations of our reportable segments for the three months ended March 31, 2015 and 2014, respectively, was as follows (in thousands):

	For the Three Months Ended March 31,						% Change
Income from Operations:	2015			2014
Spa Operations	$	9,585		$	10,147			(5.5%)
Products		3,270			2,420			35.1%
Schools		315			(116	)		371.6%
Ideal Image		(1,687	)		(1,109	)		(52.1%)
Other		(1,293	)		(1,781	)		N/A
Total	$	10,190		$	9,561			6.6%

More than 50% of the decrease in operating income in the Spa Operations segment was attributable to the non-renewal of the Celebrity agreement. In addition, increased discounting at our land-based spas led to lower revenues at those spas. The increase in operating income in the Products segment was primarily attributable to the sale of higher margin products through third-party channels and, for the first time, to Kohl’s department stores. The increase in operating income in the Schools segment was primarily attributable to higher average student population, which resulted in higher revenues and, commensurately, higher operating income. The decrease in operating income in the Ideal Image segment was primarily attributed to lower treatment counts as a result of the severe winter weather during the three months ended March 31, 2015, which caused a number of our centers to be closed during that period of time.

Other Income (Expense)

Other income (expense) decreased due to increased interest expense due to additional draws on our revolving term loan for general corporate purposes offset by an increase in interest income.

Provision for Income Taxes

Provision for income taxes was $1.6 million in the first quarter of 2015 and 2014. Provision for income taxes reflected an overall effective rate of 16.3% in the first quarter of 2015 compared to 17.7% in the first quarter of 2014. The decrease was primarily due to the income earned in jurisdictions where we were required to pay tax representing a lower percentage of our total income earned in the first quarter of 2015 than such income represented in the first quarter of 2014.

NET INCOME

Net income was $8.1 million in the first quarter of 2015 compared to $7.4 million in the first quarter of 2014. This increase was primarily attributable to our improved performances at most of our businesses as discussed above.

Liquidity and Capital Resources

Sources and Uses of Cash

During the three months ended March 31, 2015, net cash provided by (used in) operating activities was approximately $10.7 million compared with ($9.8 million) for the three months ended March 31, 2014. This change was attributable to increases in net income and in a number of working capital changes.

During the three months ended March 31, 2015, cash used in investing activities was $8.9 million compared with $2.1 million for the three months ended March 31, 2014. This increase was primarily attributable to an increase in capital expenditures primarily related to equipment purchased for Ideal Image that is used for new services.

During the three months ended March 31, 2015, cash used in financing activities was $25.5 million compared with $0.9 million for the three months ended March 31, 2014. This increase in cash used in financing activities was primarily attributable to greater payments of long-term debt and to the purchase of a substantially greater number of treasury shares during the three months ended March 31, 2015 as compared to March 31, 2014.

Steiner Leisure had a working capital deficit of approximately $15.7 million at March 31, 2015, compared to working capital of approximately $7.8 million at December 31, 2014. This was primarily attributable to the increases in deferred revenues related to our Ideal Image and Schools segments.

In February 2015, 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 share repurchase plan. During the three months ended March 31, 2015 and 2014, respectively, we purchased approximately 204,000 and 20,000 shares, with a value of approximately $9.5 million and $0.9 million, respectively. Of those shares purchased, 5,000 and 20,000 shares for the three months ended March 31, 2015 and 2014, respectively, were surrendered by our employees in connection with the vesting of restricted share units 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.

Financing Activities

On June 21, 2013, we entered into an amendment to our Credit Facility. As a result, among other things, our restrictive payment limits were increased, certain of our financial covenants were modified, we received improved pricing on our interest rate and the maturity date of the term loan was extended from November 1, 2016 to June 21, 2018. In connection with entering into the amendment, we incurred $0.4 million of lender and third-party costs.

On June 3, 2014, our credit facility was amended to limit the total of dividends and share repurchases to no greater than $75 million in fiscal year 2014, and no greater than $35 million in subsequent years.

The 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. We are in compliance with these covenants as of the date of this report. Our prior credit agreement contained similar covenants and, through the termination of that facility, we were in compliance with those covenants. Other limitations on capital expenditures, or on other operational matters, could apply in the future under the credit agreement.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

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 softness, such as has been experienced in recent years, particularly in North America where a substantial number of cruise passengers reside, could have a material adverse effect on the cruise industry and hospitality industry upon which we are dependent, and has had such an effect in recent years. Such a slowdown had adversely affected our results of operations and financial condition in recent years. Continuance of the more severe aspects of the recent adverse economic conditions, as well as periods of fuel price increases, in North America and elsewhere, could have a material adverse effect on our results of operations and financial condition during the period of such continuance. Recurrence of the weakness in the U.S. Dollar compared to the U.K. Pound Sterling and the Euro also could have a material adverse effect on our results of operations and financial condition.

Cautionary Statement Regarding Forward-Looking Statements

From time to time, including in this report and other disclosures, we may issue "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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. We attempt, whenever possible, to identify these statements by using words like "will," "may," "could," "should," "would," "believe," "expect," "anticipate," "forecast," "future," "intend," "plan," "estimate" and similar expressions of future intent or the negative of such terms.

Such forward-looking statements include statements regarding:

	●	our future financial results;

	●	our proposed activities pursuant to agreements with cruise lines or land-based spa operators;

	●	our ability to secure renewals of agreements with cruise lines upon their expiration;

	●	scheduled introductions of new ships by cruise lines;

	●	our future land-based spa activities;

	●	our ability to generate sufficient cash flow from operations;

	●	the extent of the taxability of our income;

	●	the financial and other effects of acquisitions and new projects;

	●	our market sensitive financial instruments;

	●	our ability to increase sales of our products and to increase the retail distribution of our products;

	●	the profitability of one or more of our business segments;

	●	the number, anticipated opening dates, and anticipated costs related to new spas, schools and other Company facilities;

	●	the anticipated enrollments of students at our schools; and

	●	future channels for distribution of our products.

These risks and other risks are detailed in our Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC. That section 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 condition.

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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

For a discussion of our market risks, refer to Part II, Item 7A. - Quantitative and Qualitative Disclosures about Market Risk is in our 2014 Annual Report.

Item 4. Controls and Procedures

We carried out an evaluation, under the supervision, and with the participation, of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15(d)-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2015.

There has been no change in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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 2014 Annual Report.

Item 1A. Risk Factors

There were no material changes during the first quarter of 2015 in the risk factors previously disclosed in our 2014 Annual Report, except as follows:

The portion of the risk factor entitled “Possible Adverse Changes in United States or Foreign Tax Laws or Changes in our Business Could Increase our Taxes – The Risks to Us,” with respect to the discussion of the United Kingdom Diverted Profits Tax, which was previously disclosed in our 2014 Annual Report, is modified to reflect updated information regarding the legislation in question, as follows:

On March 26 2015, the United Kingdom enacted its Diverted Profits Tax legislation (the "DPT"), which was effective April 1, 2015. Under the DPT, profits of certain multinational enterprises (such as the Company) deemed to have been artificially diverted from the United Kingdom will be taxed at a rate of 25%. The DPT applies in two situations:

●

Where a non-U.K. company has artificially avoided having a taxable presence in the U.K., and

●

Where a group of affiliated companies have entered into a tax-advantageous structure or a transaction lacking "economic substance."

While we believe that all of our affiliated entities and the transactions among them have the required economic substance, we cannot assure you that our U.K.-connected related party transactions and entities will be outside the scope of these rules. If we are, in fact, subject to this new tax, this could have a material adverse effect on our results of operations and financial condition unless we are able to effectuate a change in our current U.K. or other operations to comply with the new requirements. In such instance, we cannot assure you that we would be able to successfully effectuate such changes without adversely affecting our results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) The following table provides information about purchases by Steiner Leisure of our common shares during the three month period ended March 31, 2015:

	Total Number of Shares Purchased⁽¹⁾		Average Price Paid per Share⁽²⁾	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs⁽¹⁾
January 1, 2015 through January 31, 2015	--	$	--	--	$	100,000,000

February 1, 2015 through February 28, 2015	21,978		46.08	17,469		99,192,752

March 1, 2015 through March 31, 2015	181,821		46.63	181,821		90,806,291

Total	203,799	$	46.57	199,290	$	90,806,291

(1) During the first quarter, no shares were purchased through the Company's only repurchase plan, which was approved on February 18, 2015 (the "Repurchase Plan") and replaced the then-existing plan. The Repurchase Plan authorizes the purchase of up to $100.0 million of our common shares in the open market or other transactions, of which $9,286,259 of our common shares have been purchased to date.

(2) Includes commissions paid.

Item 6.	Exhibits

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.*
32.1		Section 1350 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2		Section 1350 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS		XBRL Instance Document.
101.SCH		XBRL Taxonomy Extension Schema Document.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

*		Filed herewith.

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 8, 2015	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/ Robert H. Lazar
	Robert H. Lazar Chief Accounting Officer (principal accounting officer)

Exhibit Index

Exhibit Number	Description

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.*
32.1	Section 1350 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Section 1350 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

*	Filed herewith.

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