SECURITIES AND EXCHANGE COMMISSION                       
                             Washington, D.C. 20549

                                    FORM 10-Q

[X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                                   Act of 1934

              For the quarterly period ended September 30, 1998                

                                       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 1-12271                         



                                  CARSON, INC.



             (Exact name of registrant as specified in its charter)


                               DELAWARE 06-1428605
(State or  other jurisdiction  of incorporation (I.R.S.  Employer Identification
                           or organization)Number)


                     64 Ross Road, Savannah Industrial Park
                             Savannah, Georgia 31405
          (Address, including zip code, of principal executive offices)



 Registrant's telephone number, including area code:(912) 651-3400




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.
                                                     Yes x No 


At November 1, 1998, 5,000,170 shares of the registrant's  Class A Common Stock,
par value $0.01 per share,  1,859,677 shares of the registrant's Class B  Common
Stock, par value $0.01 per share, and 8,127,937 shares of the registrant's Class
C Common Stock, par value $0.01 per share were outstanding.


<PAGE>




                                  CARSON, INC.

                                      INDEX

Part I.  Financial Information                                              Page

         Item 1.

         Condensed Consolidated Balance Sheets
         September 30, 1998 and December 31, 1997............................  3

         Condensed Consolidated Statements of Operations
         Three Months and Nine Months Ended September 30, 1998 and 1997......  4

         Condensed Consolidated Statements of Cash Flow
         Nine Months Ended September 30, 1998 and 1997........................ 5

         Notes to Condensed Consolidated Financial Statements.............. 6-14

         Item 2.

         Management's Discussion and Analysis of Financial Condition
         and Results of Operations........................................ 15-22


Part II. Other Information....................................................23
         Item 6.

         (a) Exhibits ........................................................23

         (b) Reports on Form 8-K..............................................23

         Signatures...........................................................24


                                                         2


<PAGE>
                                 CARSON, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS  
                   SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
                                (In thousands)
<TABLE>             
<S>                                                                             <C>                     <C>    
                                                                                 September 30,            December 31,
                                            ASSETS                                   1998                       1997
                                                                                 (Unaudited)
                                                                                 -------------            ------------
CURRENT ASSETS:                              
       Cash and cash equivalents                                                 $   21,509               $  14,043
       Accounts receivable (less allowance for doubtful accounts
          and returns of $11,651 and $3,881 at September 30, 1998
       and December 31, 1997, respectively)                                          35,907                  28,148
       Inventories, net                                                              31,704                  24,861
       Other current assets                                                           4,048                     832
                                                                                 -------------           -------------
              Total current assets                                                   93,168                  67,884

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation                       34,282                  22,202

INVESTMENT IN AM COSMETICS                                                               --                   3,587

INTANGIBLES, net                                                                    167,236                 100,385

OTHER ASSETS                                                                          6,176                   7,366
                                                                                 -------------           -------------
                      TOTAL ASSETS                                               $  300,862              $  201,424
                                                                                 =============           =============


                                   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
       Notes payable                                                             $   50,000              $       -- 
       Accounts payable                                                              12,168                   8,567
       Due for A&J Cosmetics                                                          3,275                   5,416
       Accrued expenses                                                              19,847                   7,413
       Income taxes payable                                                          10,940                   1,544
                                                                                 -------------           -------------
            Total current liabilities                                                96,230                  22,940

LONG-TERM DEBT                                                                      100,377                 103,623
     
DUE FOR A&J COSMETICS                                                                   --                    4,088
          
DEFERRED INCOME TAXES AND OTHER LIABILITIES                                           1,655                   1,742

MINORITY INTEREST IN SUBSIDIARY                                                      19,547                   7,500

STOCKHOLDERS' EQUITY:
       Preferred stock, $.01 par value, 10,000,000 shares authorized,            
         none outstanding                                                                --                      --
       Common stock:                                             
               Class A, voting, $.01 par value, 150,000,000 shares authorized,
                    5,042,384 and 5,033,248 shares issued as of September 30,  
                    1998 and December 31, 1997, respectively                             50                      50
               Class B, nonvoting, $.01 par value, 2,000,000 shares authorized
                    and 1,859,677 shares issued and outstanding                          19                      19
               Class C, voting, $.01 par value, 13,000,000 shares authorized
                    and 8,127,937 shares issued and outstanding                          81                      81

       Paid-in capital                                                               80,650                  69,022
       Retained earnings (accumulated deficit)                                        9,607                  (4,011)
       Accumulated other comprehensive losses                                        (6,301)                 (2,170)
       Note receivable from employee shareholders, net of discount                     (716)                 (1,353)
       Treasury stock, Class A common stock, 42,214 shares at September 30, 1998
               and 13,245 shares at December 31, 1997, respectively                    (337)                   (107)
                                                                                 -------------           -------------
            Total stockholders' equity                                               83,053                  61,531

                                                                                 -------------           -------------
            TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $  300,862              $  201,424
                                                                                 =============           =============

</TABLE>
     See notes to condensed consolidated financial statements.



                                                         3
<PAGE>

                                 CARSON, INC.
         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)     
                    (In thousands, except per share data)
<TABLE>
<S>                                                           <C>                 <C>                 <C>                 <C>

                                                              Three Months Ended September 30,       Nine Months Ended September 30,
                                                                 1998                1997                1998                 1997
                                                              ----------          ----------          ----------          ----------
Net sales                                                     $  44,563           $  29,625           $ 105,534           $  77,791
Cost of goods sold                                               21,983              13,555              58,436              35,431
                                                              ----------          ----------          ----------          ----------
Gross profit                                                     22,580              16,070              47,098              42,360

Expenses:
     Marketing and selling                                       12,708               7,325              30,225              19,602
     General and administrative                                   6,428               4,544              22,404              11,691
     Restructuring charges                                          914                  --               5,751                  --
                                                              ----------          ----------          ----------          ----------
                                                                 20,050              11,869              58,380              31,293
                                                              ----------          ----------          ----------          ----------

Operating income (loss)                                           2,530               4,201             (11,282)             11,067

Interest expense                                                 (3,786)             (1,809)             (9,633)             (3,924)
Gain on sale of subsidiary stock                                     --                  --              49,140                  --
Loss on write-off of investment                                  (3,768)                 --              (3,768)                 --
Other income, net                                                 1,057                 400               2,761               1,116
                                                              ----------          ----------          ----------          ----------
(Loss) income before income taxes, minority interest
  and extraordinary item                                         (3,967)              2,792              27,218               8,259

Benefit from (provision for) income taxes                         2,011              (1,113)            (11,015)             (3,310)
                                                              ----------          ----------          ----------          ----------
(Loss) income before minority interest and extraordinary item    (1,956)              1,679              16,203               4,949

Minority interest in earnings of subsidiary                        (708)               (186)             (1,652)               (508)
                                                              ----------          ----------          ----------          ----------
(Loss) income before extraordinary item                          (2,664)              1,493              14,551               4,441

Extraordinary item, net of tax benefit                             (933)                 --                (933)                 --
                                                              ----------          ----------          ----------          ----------
Net (loss) income                                             $  (3,597)          $   1,493           $  13,618           $   4,441
                                                              ==========          ==========          ==========          ==========
 
Basic and diluted net (loss) income  per common share:
     Before extraordinary item                                $   (0.18)          $     0.10          $    0.97           $    0.30
     Extraordinary item, net of tax benefit                       (0.06)                  --              (0.06)                 --
                                                              ----------          ----------          ----------          ----------
     Net (loss) income                                        $   (0.24)          $     0.10          $    0.91           $    0.30
                                                              ==========          ==========          ==========          ==========
 
Weighted average common shares outstanding                       14,988              15,021              14,990              15,005
                                                              ==========          ==========          ==========          ==========
</TABLE>
                                                                                
   See notes to condensed consolidated financial statements.


                                                         4

<PAGE>
                                CARSON, INC.
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
            FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                               (In thousands)

<TABLE>
<S>                                                                    <C>                    <C>    
                                                                          Nine Months Ended September 30,
                                                                             1998                   1997
                                                                       ================       ================
                                                                                                              
OPERATING ACTIVITIES:
     Net income                                                        $    13,618            $     4,441
     Adjustments to reconcile net income to
       net cash used in operating activities:
            Gain on sale of subsidiary stock                               (49,140)                    --
            Non-cash special charges                                        14,695                     --
            Depreciation and amortization                                    4,776                  2,686
            Provision for doubtful accounts                                    634                    287
            Extraordinary item, net of tax benefit                             933                     --
            Loss on write-off of investment                                  3,768                     --
            Other, net                                                       2,251                   (952)
            Changes in operating assets and liabilities,
              net of acquisitions in 1997:
                   Accounts receivable                                      (3,956)               (10,317)
                   Inventories                                              (5,396)                (5,897)
                   Other current assets                                     (3,171)                (1,547)
                   Accounts payable                                         (3,058)                   261
                   Accrued liabilities                                       2,350                  2,577
                   Income taxes payable                                     10,385                  1,501
                                                                       ----------------       ----------------
                        Total adjustments                                  (24,929)               (11,401)
                                                                       ----------------       ----------------
            Net cash used in operating activities                           (11,311)               (6,960)
                                                                       ----------------       ----------------

INVESTING ACTIVITIES:
     Additions to property, plant and equipment                             (8,242)                (5,108)
     Acquisitions of business assets, net of cash acquired                 (35,000)               (49,406)
                                                                       ----------------       ----------------
            Net cash used in investing activities                          (43,242)               (54,514)
                                                                       ----------------       ----------------

FINANCING ACTIVITIES:
     Proceeds from long-term borrowings                                      9,500                 62,979
     Principal payments on long-term debt                                  (12,633)                (2,162)
     Payment on A&J Cosmetics payable                                       (5,416)                    --
     Proceeds from equity rights offering                                       --                  1,525
     Proceeds from sale of subsidiary stock                                 74,450                     --
     Other, net                                                               (197)                   (72)
                                                                       ----------------       ----------------
            Net cash provided by financing activities                       65,704                 62,270
                                                                       ----------------       ----------------

EFFECT OF EXCHANGE RATE CHANGES                                             (3,685)                    --

NET INCREASE IN CASH AND CASH EQUIVALENTS                                    7,466                    796
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                            14,043                  4,191
                                                                       ----------------       ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                             $    21,509            $     4,987
                                                                       ================       ================

</TABLE>
       See notes to condensed consolidated financial statements.   





                                                         5

<PAGE>







                                   CARSON, INC
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.  Basis of Presentation

    The accompanying  condensed  consolidated  interim  financial  statements of
Carson, Inc. (the "Company") presented herein have been prepared by the Company,
without  audit,  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Certain  information  and footnote  disclosures  normally
included in annual  financial  statements  prepared in accordance with generally
accepted  accounting  principles  have  been  omitted  from  these  consolidated
financial  statements  pursuant  to  applicable  rules  and  regulations  of the
Securities and Exchange Commission. These financial statements should be read in
conjunction  with the audited  Consolidated  Financial  Statements and the notes
thereto of the  Company's  1997  Annual  Report on Form 10-K.  In the opinion of
management,  the accompanying  unaudited financial statements contain all normal
recurring  adjustments  necessary  to  present  fairly the  Company's  financial
position,  results of operations and cash flows at the dates and for the periods
presented.  Interim results of operations are not necessarily  indicative of the
results to be expected for a full year.  Certain prior period  amounts have been
reclassified to conform with the current period presentation.


2.  Acquisition

    On  July  14, 1998, the Company  acquired  all of the  outstanding shares of
Johnson Products Co., Inc. ("Johnson Products"), a Florida  corporation. Johnson
Products  is  a major  manufacturer  of personal  care  products  for the ethnic
market.  The purchase price  approximated  $85.0 million with $35.0 million paid
in cash. The Company  entered  into a Credit  Agreement with  IVAX  Corporation,
d/b/a IVX Bioscience,  Inc., for the remaining $50.0 million purchase price. The
senior secured term loan  provided  by IVAX and  subsequently assigned  to other
lenders matures  on  December 15, 1998  and  bears  interest  at 9.0% per annum,
payable monthly.  Any overdue  principal and interest bear interest at 12.0% per
annum and are payable upon demand.

      In  conjunction  with the IVAX Credit  Agreement,  the Company  terminated
its senior secured  credit facility  with Credit Agricole  Indosuez.  During the
third quarter  of 1998, the  Company  recognized an  extraordinary  loss of $0.9
million (net of tax, or $0.06 per  basic and  diluted  share) for the  write-off
of $1.6 million of debt financing costs related to this credit facility.

         The  acquisition  is being  accounted for under the purchase  method of
accounting.  The results of operations  of Johnson  Products are included in the
Company's  condensed   consolidated  financial  statements  since  the  date  of
acquisition.  The acquisition costs of the assets and liabilities  acquired  are
as follows  (in thousands):

Accounts receivable, net of reserves of $5,952...........................$ 7,890
Inventories, net  .......................................................  8,813
Other current assets.....................................................     63
Property, plant & equipment.............................................. 10,135
Goodwill          ....................................................... 71,853
Other assets      .......................................................    517
Assets acquired   ....................................................... 99,271
Accounts payable ........................................................(6,830)
Accrued expenses.........................................................(7,441)
         Purchase price..................................................$85,000

          The fair market value of property,  plant and equipment was determined
by independent  appraisal.  The carrying  values of other assets and liabilities
have been estimated to approximate fair market value.  Final allocations will be
made on the basis of continuing  valuations giving effect to economic and market
factors.  Accordingly,  the purchase price allocation is currently  preliminary.
Any purchase price adjustments will be made within one year from the acquisition
date and are not expected to be material to the financial  statements taken as a
whole.



                                                         6

<PAGE>



         Immediately  prior to the Company's  acquisition  of Johnson  Products,
Johnson  Products  sold one of its  subsidiaries,  Flori  Roberts,  Inc.,  to an
outside third party.  The  Dermablend  line  of corrective cosmetics(part of the
Flori Roberts business) was purchased by the Company at the time of the  Johnson
Products acquisition, but management  intends  to sell this business  within one
year from such acquisition.  Until the sale occurs,  the assets and  liabilities
related to Dermablend are included in the consolidated  balance sheet.  However,
since Dermablend  was  purchased  with the intent to be sold within  a year, the
results of  operations  related  to  Dermablend are  excluded from the Company's
consolidated statement of operations.

         The  following  unaudited pro forma  information  presents a summary of
consolidated results of operations of the Company and the results of the Johnson
Products acquisition  as if the  acquisition  had  occurred as of the  beginning
of each period presented.  The results of operations  related to  Flori Roberts,
Inc., and Dermablend  have  been  excluded  from  the  pro  forma  statements of
operations.

(Dollars in thousands except per share amounts)
                                                            Nine Months Ended  
                                                              September 30,
                                                          ----------------------
                                                             1998        1997
                                                          ----------  ----------
        Net sales                                          $132,293    $115,180
        Income before extraordinary item                     15,213       4,657
        Net income                                           14,280       4,657
        Basic and diluted income per share before              1.01        0.31
        extraordinary item
        Basic and diluted net income per share                $0.95       $0.31

These  unaudited pro forma results have been prepared for  comparative  purposes
only and include certain adjustments,  such as additional goodwill amortization,
additional  depreciation and additional  interest  expense on acquisition  debt,
among others.  These unaudited pro forma results are not necessarily  indicative
of what the actual results of operations might have been if the Johnson Products
acquisition had been in effect as of the beginning of each period presented,  or
of future  results  of operations  of  the consolidated Company.  For additional
information on the assumptions used in preparing the pro forma results, refer to
to the Company's Form 8-K/A filed on September 28,1998.

3.  Special and Non-recurring Charges

         During the quarter ended June 30, 1998, the Company recorded charges of
$15.1 million ($8.7 million net of tax) related  primarily to the  restructuring
of product lines and management at the Company's Savannah operation.

         During the quarter  ended  September  30 ,1998,  the  Company  recorded
additional  pretax  charges of $0.9 million ($0.5 million net of tax) related to
the  restructuring and a pretax charge of $3.8 million ($2.2 million net of tax)
for the write-off of an investment in the preferred stock of related party.

          During the nine months ended September 30, 1998, the Company  recorded
pre-tax charges  of $19.8 million(11.4 million  net of tax).  Such  special  and
non-recurring charges by category of expenditure were as follows:



                                                        Included In
<TABLE>
<S>                            <C>                <C>                <C>                <C>                 <C>    

                                 Cost of Goods        General and      Restructuring    Loss on Write-off
                                     Sold           Administrative        Charges         of Investment          Total      
                               ------------------ ------------------ ------------------ ------------------ ------------------
Inventories                           $6.6                                                                        $6.6
Management restructuring                                $1.5 *             $2.6 *                                  4.1
Fixed assets                                             0.2 *              2.9                                    3.1
Other                                                    2.0                0.2 *              $3.8                6.0
                               ------------------ ------------------ ------------------ ------------------ ------------------
                                      $6.6              $3.7               $5.7                $3.8              $19.8
                               ================== ================== ================== ================== ==================
</TABLE>
                                                       7
<PAGE>

         The inventory charge related primarily to write-down of inventory which
was determined to be  non-strategic  and to reserves for obsolete  inventory and
inventory  in  excess  of usage  plans.  The  management  restructuring  charges
included  employee  severance  costs and  expenses  related to the hiring of the
Company's  new  chief  executive  officer.  The  fixed  assets  charges  related
primarily  to fixed  assets  which will be  disposed of in  connection  with the
restructuring  of product  lines.  The other  charges  included  $2.0 million of
additional reserves against accounts receivable for customer deductions and $3.8
million for the  write-off of  a preferred stock  investment in  AM Cosmetics (a
related company which provides contract manufacturing  services to the  Company)
which management has determined to be unrealizable.

         Of the $19.8 million  of special  charges  recorded in the nine  months
ended September 30,1998, a total of $5.4 million (those denoted by "*" above)
were  recorded as accrued  liabilities.  Cash payments for these  expenses
totaled  approximately  $2.9  million  resulting in a liability balance at 
September 30, 1998 of $2.5 million.


4.   Sale of Subsidiary Stock

         During the three  months ended June 30,  1998,  the Company  recorded a
one-time  pretax gain of $49.1 million ($28.1 million net of tax) related to its
sale of 29.1 million  shares of its South African  subsidiary,  Carson  Holdings
Limited  ("Carson  South  Africa"),  the  shares  of  which  are  traded  on the
Johannesburg Stock Exchange.  This sale generated cash proceeds of $55.2 million
and  resulted  in an  increase  in  minority  interest  of  $6.0  million  which
represents the Company's cost basis in the shares sold.

         Concurrent with the sale of the Company's  shares,  Carson South Africa
issued an additional 10.25 million shares for which it received cash proceeds of
$19.2  million.  This  transaction  resulted  in a gain to the  Company of $11.7
million which was recorded as paid in capital.  The  transaction  also increased
minority interest by $7.6 million.

         As a result of these combined sales and  certain other transactions, as
of November 1, 1998 the Company owned approximately 52.8% of the stock of Carson
South Africa.


5.    Inventories

Inventories are summarized as follows (in thousands):


                                 September 30, 1998        December 31, 1997
                              -----------------------  -------------------------
Raw materials                          $11,459                   $10,873
Work-in-process                          1,805                     1,651
Finished goods                          18,440                    12,337
                              ------------------------  ------------------------
                                       $31,704                   $24,861        
                              ========================  ========================




                                                         8

<PAGE>




6.  New Accounting Pronouncements

         Statement  of  Financial  Accounting  Standards   No.  130,  "Reporting
Comprehensive Income" ("SFAS No. 130") is effective and has been adopted for the
Company's  fiscal  year  ending  December  31, 1998.  SFAS  No. 130  establishes
standards  for reporting  and displaying comprehensive income and its components
(revenues,  expenses,  gains  and  losses)  in  a  full  set  of general-purpose
financial statements.

The components of comprehensive income (loss) were as follows (in thousands):


<TABLE>
<S>                                      <C>              <C>             <C>            <C>    
                                           Three Months    Three Months     Nine Months     Nine Months
                                                  Ended           Ended           Ended           Ended
                                          September 30,   September 30,   September 30,   September 30,
                                                   1998            1997            1998            1997
                                         --------------- --------------- --------------- ---------------
Net income (loss)                               $(3,597)         $1,493         $13,618          $4,441
Other comprehensive (loss)
income:
  Change in equity due to foreign
  currency translation adjustments                  144            (788)         (4,131)           (164)
                                         --------------- --------------- --------------- ---------------
Comprehensive income (loss)                     $(3,453)           $705          $9,487          $4,277
                                         =============== =============== =============== ===============
</TABLE>


The loss in equity due to foreign currency  translation  adjustments  during the
nine months ended September 30, 1998, was due to the significant  devaluation of
the South  African  Rand during the second  quarter of 1998.  The Rand  devalued
approximately  20.0%,  from  4.9970  Rand per dollar at March 31, 1998 to 5.9950
Rand per dollar at June 30, 1998.  At September  30, 1998,  the  conversion  was
5.9800 Rand per dollar.  During the prior year, no such significant  fluctuation
of the Rand occurred.

         Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an  Enterprise  and Related  Information"  ("SFAS No.  131") is also
effective for the Company's  fiscal year ending  December 31, 1998. SFAS No. 131
establishes  standards  for the way  that  public  business  enterprises  report
information about operating segments in annual financial statements and requires
that those enterprises  report selected  information about operating segments in
interim  financial  reports  issued to  shareholders.  This  statement  does not
significantly alter the segment disclosures the Company provides.

7.   Consolidating Financial Information of Carson, Inc.

         The  following  condensed   consolidating   financial   information  is
presented for regulatory purposes in connection with the registration of Carson,
Inc.'s 10 3/8% Senior  Subordinated Notes due 2007 (the "Notes").  The Notes are
guaranteed on a senior subordinated basis by Carson Products Company and Johnson
Products  Company (the  "subsidiary  guarantors").  Carson Products Company is a
direct  wholly-owned  subsdidiary of Carson, Inc. Johnson Products Company is an
indirect wholly-owned  subsidiary of Carson, Inc., which was purchased by Carson
Products Company in 1998. The following tables present  condensed  consolidating
financial  information  for  Carson,  Inc.,  the  subsidiary   guarantors,   the
non-guarantor   subsidiaries  of  Carson,   Inc.  (other  than   inconsequential
non-guarantor  subsidiaries)  and the  eliminations  necessary  to arrive at the
consolidated financial statements of Carson, Inc. and its subsidiaries. Separate
financial  statements  for the  subsidiary  guarantors  are not included and the
subsidiary  guarantors  are not filing  separate  reports  under the  Securities
Exchange Act of 1934, as amended,  because the subsidiary  guarantors have fully
and unconditionally  guaranteed the Notes, and separate financial statements and
other disclosures  concerning the subsidiary  guarantors are not deemed material
to investors.

             Non-guarantor subsidiaries in 1998  include Carson Holdings Limited
("Carson  South Africa") and Carson UK,  Limited  ("Carson  UK").  Carson UK was
incorporated in 1998 and is an indirect wholly-owned  subsidiary of Carson, Inc.
Carson South Africa, an indirect 52.8%-owned non-guarantor subsidiary of Carson,
Inc., has three wholly-owned subsidiaries which are also non-guarantors:  Carson
Products (Proprietary)  Limited,  Carson Products West Africa Limited and Carson
Products  East  Africa  (EPZ)  Limited.  Carson,  Inc.,  also  has two  inactive
subsidiaries  (Fine Products  Company and Carson Botswana (PTY Limited)),  which
are  inconsequential  to the Company on an  individual  and  combined  basis and
separate  financial  information for those subsidiaries has not been included in
these tables.

                                                         9

<PAGE>
Carson, Inc.
Consolidating Balance Sheet as of September 30, 1998      
<TABLE>
<S>                                                 <C>             <C>             <C>             <C>             <C>            

                                                    Carson, Inc.    Subsidiary      Non-guarantor                   Consolidated
                                                      (parent)      guarantors      subsidiaries    Eliminations    Carson, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Assets                                                                                                             
Current assets:
    Cash and cauivalents                            $       --      $     6,970     $    14,529     $        10     $    21,509     
    Accounts receivable, net                                --           26,328           9,579              --          35,907
    Inventories, net                                        --           21,843           9,861              --          31,704
    Other current assets                                    --              524           3,524              --           4,048
Property, plant and equipment, net                          --           25,793           8,525             (36)         34,282
Intangible assets, net, and other assets                                165,636           7,776              --         173,412
Investment in subsidiary                                 83,053          41,206              --        (124,259)             --
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                        $    83,053     $   288,300     $    53,794     $  (124,285)   $    300,862

Liabilities and stockholders' equity
Current liabilities:
    Accounts payable                                $        --     $     9,666     $     2,502     $        --    $     12,168
    Other current liabilities                                --          77,989           6,068               5          84,062
Long-term debt                                               --         100,000             377              --         100,377
Other liabilities                                            --          21,092             110              --          21,202
Intercompany (receivables)/payables                          --          (3,500)          3,531             (31)             --
Common stock and paid in capital                         80,800          28,437          39,259         (67,696)         80,800
Other equity accounts                                    (7,354)        (14,509)         (8,831)         23,340          (7,354)
Retained earnings                                         9,607          69,125          10,778         (79,903)          9,607
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity          $    83,053     $   288,300     $    53,794    $   (124,285)   $    300,862

</TABLE>





Carson, Inc.
Consolidating Balance Sheet as of December 31, 1997                             
<TABLE>
<S>                                                 <C>             <C>             <C>              <C>              <C>          
                                                                    Carson  
                                                                    Products
                                                                    Company
                                                    Carson, Inc.    (subsidiary     Non-guarantor                     Consolidated
                                                      (parent)      guarantor)      subsidiaries     Eliminations     Carson, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Assets                                                                                                                
Current assets:
    Cash and cash equivalents                       $        --     $     2,614     $    11,420      $         9      $    14,043
    Accounts receivable, net                                 --          20,160           7,988               --           28,148   
    Inventories, net                                         --          20,438           4,423               --           24,861
    Other current assets                                     --             730             102               --              832
Property, plant and equipment, net                           --          16,216           6,021              (35)          22,202
Intangible assets, net, and other assets                                101,576           9,762               --          111,338   
Investment in subsidiary                                 61,531          24,518              --          (86,049)              --
------------------------------------------------------------------------------------------------------------------------------------
Total assets                                        $    61,531     $   186,252     $    39,716      $   (86,075)    $    201,424

Liabilities and stockholders' equity
Current liabilities:
    Accounts payable                                $        --     $     7,625     $       942      $        --     $      8,567   
    Other current liabilities                                --           6,047           8,321                5           14,373   
Long-term debt                                               --         103,000             623               --          103,623   
Other liabilities                                            --           9,087           4,243               --           13,330   
Intercompany (receivables)/payables                          --          (1,038)          1,069              (31)              --
Common stock and paid in capital                         69,172          16,760          20,131          (36,891)          69,172   
Other equity accounts                                    (3,630)         (3,678)         (1,526)           5,204           (3,630)  
Retained earnings (accumulated deficit)                  (4,011)         48,449           5,913          (54,362)          (4,011)  
------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity          $    61,531     $   186,252     $    39,716      $   (86,075)    $    201,424
</TABLE>







                                                         10

<PAGE>

<TABLE>
<S>                                                 <C>             <C>             <C>              <C>             <C>            
Carson, Inc.
Consolidating Statement of Operations for the Nine Months Ended September 30, 1998

                                                    Carson, Inc.    Subsidiary      Non-guarantor                    Consolidated
                                                      (parent)      guarantors      subsidiaries     Eliminations    Carson, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Net sales                                           $        --     $    75,172     $    30,362      $        --     $     105,534
Cost of goods sold                                           --          43,214          16,065             (843)           58,436
------------------------------------------------------------------------------------------------------------------------------------
    Gross profit                                             --          31,958          14,297              843            47,098
Marketing and selling expenses                               --          24,727           5,498               --            30,225
General and administrative expenses                          --          18,767           3,637               --            22,404
Restructuring expenses                                       --           5,751              --               --             5,751
------------------------------------------------------------------------------------------------------------------------------------
    Operating income (loss)                                  --         (17,287)          5,162              843           (11,282)
Other income (expense)                                       --          37,718           1,625             (843)           38,500
Equity in subsidiary earnings (net of taxes)             13,618              --              --          (13,618)               --
------------------------------------------------------------------------------------------------------------------------------------
    Income before income taxes, minority                                                                                            
        interest and extraordinary item                  13,618          20,431           6,787          (13,618)           27,218
Provision for income taxes                                   --          (9,398)         (1,617)              --           (11,015)
------------------------------------------------------------------------------------------------------------------------------------
Income before minority interest and
       extraordinary item                                13,618          11,033           5,170          (13,618)           16,203
Minority interest                                            --              --          (1,652)               --           (1,652)
------------------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item                         13,618          11,033           3,518          (13,618)           14,551
Extraordinary item, net of tax                               --            (933)             --                --             (933)
------------------------------------------------------------------------------------------------------------------------------------
Net income                                          $    13,618     $    10,100     $     3,518      $   (13,618)    $      13,618
</TABLE>




<TABLE>
<S>                                                 <C>             <C>             <C>              <C>             <C>            
Carson, Inc.
Consolidating Statement of Operations for the Nine Months Ended September 30, 1997

                                                                    Carson
                                                                    Products
                                                                    Company
                                                    Carson, Inc.    (subsidiary     Non-guarantor                    Consolidated
                                                      (parent)      guarantor)      subsidiaries     Eliminations    Carson, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Net sales                                           $        --     $    66,162     $    12,947      $    (1,318)    $      77,791
Cost of goods sold                                           --          30,437           6,312           (1,318)           35,431
------------------------------------------------------------------------------------------------------------------------------------
    Gross profit                                             --          35,725           6,635               --            42,360
Marketing and selling expenses                               --          16,861           2,741               --            19,602
General and administrative expenses                          --          10,340           1,351               --            11,691
------------------------------------------------------------------------------------------------------------------------------------
    Operating income                                         --           8,524           2,543               --            11,067
Other income (expense)                                       --          (3,172)            364               --            (2,808)
Equity in subsidiary earnings (net of taxes)              4,441              --              --           (4,441)               --
------------------------------------------------------------------------------------------------------------------------------------
    Income before minority interest and income taxes      4,441           5,352           2,907           (4,441)            8,259
Provision for income taxes                                   --          (2,569)           (741)              --            (3,310)
------------------------------------------------------------------------------------------------------------------------------------
Income before minority interest                           4,441           2,783           2,166           (4,441)            4,949
Minority interest                                            --              --            (508)              --              (508)
------------------------------------------------------------------------------------------------------------------------------------
Net income                                          $     4,441     $     2,783     $     1,658      $    (4,441)    $       4,441
</TABLE>







                                                        11

<PAGE>



<TABLE>
<S>                                                 <C>             <C>             <C>              <C>             <C>   
Carson, Inc.
Consolidating Statement of Operations for the Three Months Ended September 30, 1998

                                                    Carson, Inc.    Subsidiary      Non-guarantor                    Consolidated
                                                      (parent)      guarantors      subsidiaries     Eliminations    Carson, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Net sales                                           $        --     $    34,464     $    10,099      $        --     $      44,563
Cost of goods sold                                           --          16,934           5,309             (260)           21,983
------------------------------------------------------------------------------------------------------------------------------------
    Gross profit                                             --          17,530           4,790              260            22,580
Marketing and selling expenses                               --          10,871           1,837               --            12,708
General and administrative expenses                          --           5,249           1,179               --             6,428
Restructuring expenses                                       --             914              --               --               914
------------------------------------------------------------------------------------------------------------------------------------
    Operating income                                         --             496           1,774              260             2,530
Other income (expense)                                       --          (6,903)            666             (260)           (6,497)
Equity in subsidiary earnings (net of taxes)             (3,597)             --              --            3,597                --
------------------------------------------------------------------------------------------------------------------------------------
    Income (loss) before income taxes, minority                                                                                     
        interest and extraordinary item                  (3,597)         (6,407)          2,440            3,597            (3,967)
Provision for income taxes                                   --           2,531            (520)              --             2,011
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest and
       extraordinary item                                (3,597)         (3,876)          1,920            3,597            (1,956)
Minority interest                                            --              --            (708)              --              (708)
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item                  (3,597)         (3,876)          1,212            3,597            (2,664)
Extraordinary item, net of tax                               --            (933)             --               --              (933)
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss)                                   $    (3,597)    $    (4,809)    $     1,212      $     3,597     $      (3,597)
</TABLE>




<TABLE>
<S>                                                 <C>             <C>             <C>              <C>             <C>            
Carson, Inc.
Consolidating Statement of Operations for the Three Months Ended September 30, 1997

                                                                    Carson
                                                                    Products
                                                                    Company
                                                    Carson, Inc.    (subsidiary     Non-guarantor                    Consolidated
                                                      (parent)      guarantor)      subsidiaries     Eliminations    Carson, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Net sales                                           $        --     $    24,423     $     5,554      $      (352)    $      29,625
Cost of goods sold                                           --          11,200           2,707             (352)           13,555
------------------------------------------------------------------------------------------------------------------------------------
    Gross profit                                             --          13,223           2,847               --            16,070
Marketing and selling expenses                               --           6,020           1,305               --            7,325
General and administrative expenses                          --           3,968             576               --             4,544
------------------------------------------------------------------------------------------------------------------------------------
    Operating income (loss)                                  --           3,235             966               --             4,201
Other income (expense)                                       --          (1,579)            170               --            (1,409)
Equity in subsidiary earnings (net of taxes)              1,493              --              --           (1,493)               --
------------------------------------------------------------------------------------------------------------------------------------
    Income before minority interest and income taxes      1,493           1,656           1,136           (1,493)            2,792
Provision for income taxes                                   --            (849)           (264)              --            (1,113)
------------------------------------------------------------------------------------------------------------------------------------
Income before minority interest                           1,493             807             872           (1,493)            1,679
Minority interest                                                                          (186)                              (186)
------------------------------------------------------------------------------------------------------------------------------------
Net income                                          $     1,493     $       807     $       686      $    (1,493)    $       1,493
</TABLE>






                                                        12

<PAGE>


<TABLE>
<S>                                                 <C>             <C>             <C>              <C>             <C>            
Carson, Inc.
Consolidating Statement of Cash Flows for the Nine Months Ended September 30, 1998

                                                    Carson, Inc.    Subsidiary      Non-guarantor                    Consolidated
                                                      (parent)      guarantors      subsidiaries     Eliminations    Carson, Inc.   
------------------------------------------------------------------------------------------------------------------------------------
Operating Activities:                                                                                         
    Net income                                      $   13,618      $    10,100     $     3,518      $   (13,618)    $      13,618
    Adjustment to reconcile net income  to net                                                                                      
      cash used in operating activities:                                                                                            
          Gain on sale of subsidiary stock                  --          (49,140)             --               --           (49,140)
          Non-cash special charges                          --           14,695              --               --            14,695
          Depreciation and amortization                     --            3,962             814               --             4,776
          Extraordinary item, net of tax benefi             --              933              --               --               933
          Write-off of AM stock                             --            3,768              --               --             3,768
          Other, net                                   (13,618)           2,876               9           13,618             2,885
          Changes in operating assets and                                                                                           
            liabilities                                     --            4,130          (6,976)              --            (2,846)
------------------------------------------------------------------------------------------------------------------------------------
              Total adjustments                        (13,618)         (18,776)         (6,153)          13,618           (24,929)
------------------------------------------------------------------------------------------------------------------------------------
          Net cash used in operating activities             --           (8,676)         (2,635)              --           (11,311)
------------------------------------------------------------------------------------------------------------------------------------

Investing Activities:
    Additions to property, plant and equipment              --           (4,092)         (4,150)              --            (8,242)
    Acquisitions of business assets, net of cash                                                                                    
      acquired                                              --          (35,000)             --               --           (35,000)
------------------------------------------------------------------------------------------------------------------------------------
          Net cash used in investing activities             --          (39,092)         (4,150)              --           (43,242)
------------------------------------------------------------------------------------------------------------------------------------

Financing Activities:
    Proceeds from long-term borrowings                      --            9,500              --               --             9,500
    Principal payments on long-term debt                    --          (12,500)           (133)              --           (12,633)
    Payment on A&J Cosmetics payable                        --               --          (5,416)              --            (5,416)
    Proceeds from sale of subsidiary stock                  --           55,250          19,200                             74,450
    Other                                                   --             (125)            (72)              --              (197)
------------------------------------------------------------------------------------------------------------------------------------
          Net cash provided by financing activities         --           52,125          13,579               --            65,704
------------------------------------------------------------------------------------------------------------------------------------

Effect of Exchange Rate Changes                             --               --          (3,685)              --            (3,685)
------------------------------------------------------------------------------------------------------------------------------------

Net increase in Cash and Cash Equivalents                   --            4,357           3,109               --             7,466
Cash and Cash Equivalents at Beginning of Period            --            2,614          11,420               --            14,043
------------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period          $       --      $     6,971     $    14,529      $        --     $      21,509
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>






                                                        13

<PAGE>

<TABLE>
<S>                                                 <C>             <C>             <C>              <C>             <C>            
Carson, Inc.
Consolidating Statement of Cash Flows for the Nine Months Ending September 30, 1997

                                                                    Carson
                                                                    Products
                                                                    Company
                                                    Carson, Inc.    (subsidiary     Non-guarantor                    Consolidated
                                                      (parent)      guarantor)      subsidiaries     Eliminations    Carson, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Operating Activities:                                                                                         
    Net income                                      $    4,441      $     2,783     $     1,658      $    (4,441)    $       4,441
    Adjustment to reconcile net income to                                                                                           
      net cash used in operating activities:                                                                                   
    Depreciation and amortization                           --            2,418             268               --             2,686
    Other, net                                          (4,441)             221            (886)           4,441              (665)
    Changes in operating assets and                                                                                                 
      liabilities                                           --          (14,657)         (3,283)           4,518           (13,422)
------------------------------------------------------------------------------------------------------------------------------------
        Total adjustments                               (4,441)         (12,018)         (3,901)           8,959           (11,401)
------------------------------------------------------------------------------------------------------------------------------------
    Net cash used in operating activities                   --           (9,235)         (2,243)           4,518            (6,960)
------------------------------------------------------------------------------------------------------------------------------------

Investing Activities:
    Additions to property, plant and equipment              --           (2,271)         (2,837)              --            (5,108)
    Acquisitions of business assets, net of cash                                                                                    
      acquired                                              --          (49,513)            107               --           (49,406)
------------------------------------------------------------------------------------------------------------------------------------
    Net cash used in investing activities                   --          (51,784)         (2,730)              --           (54,514)
------------------------------------------------------------------------------------------------------------------------------------

Financing Activities:
    Proceeds from long-term borrowings                      --           62,979              --               --            62,979
    Principal payments on long-term debt                    --           (1,856)           (306)              --            (2,162)
    Proceeds from sale of subsidiary stock                  --               --           6,043           (4,518)            1,525
    Other                                                   --              (93)             21               --               (72)
------------------------------------------------------------------------------------------------------------------------------------
    Net cash provided by financing activities               --           61,030           5,758           (4,518)           62,270
------------------------------------------------------------------------------------------------------------------------------------

Net increase in Cash and Cash Equivalents                   --               11             785               --               796
Cash and Cash Equivalents at Beginning of Period            --            1,572           2,609               10             4,191
------------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period          $       --      $     1,583     $     3,394      $        10     $       4,987
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>





                                                        14

<PAGE>




                                      Management's Discussion and Analysis of
                                   Results of Operations and Financial Condition

OVERVIEW

Forward-looking Statements

         This  report  on Form  10-Q as well as other  public  documents  of the
Company   contain   forward-looking   statements   which   involve   risks   and
uncertainties,  including (I) the Company's  plans to introduce new products and
product enhancements,  (ii) the Company's plans to make selective  acquisitions,
(iii) the Company's marketing,  distribution and manufacturing  expansion plans,
(iv) future financial performance,  (v) cash flows from operations, (vi) capital
expenditures,  (vii) the availability of funds from credit facilities and (viii)
the cost  and  timely  implementation  of the  Company's  Year  2000  compliance
modifications.  The Company's  actual results may differ  materially  from those
discussed  in such  forward-looking  statements.  When  used  herein  and in the
Company's future filings, the terms "expects", "plans", "intends",  "estimates",
"projects",  "anticipates"  or similar  expressions  are  intended  to  identify
forward-looking  statements (within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")).  Such statements reflect
the current  views of the Company with respect to future  events and are subject
to certain risks,  uncertainties  and  assumptions.  In addition to risk factors
that may be described in the Company's  filings with the Securities and Exchange
Commission  (the  "Commission")   (including  this  filing,  the  Company's  IPO
prospectus dated October 14, 1996, the Company's exchange offer prospectus dated
December 19, 1997 and the  Company's  1997 Annual  Report on Form 10-K),  actual
results  could differ  materially  from those  expressed in any  forward-looking
statements made by the Company.  Such risks,  uncertainties and factors include,
but  are  not  limited  to,  foreign  business  risks,   industry   cyclicality,
fluctuations  in customer  demand and order pattern,  the seasonal nature of the
business,  changes  in  pricing,  the  identification  of  suitable  acquisition
candidates,  changes in the  implementation of the Company's  acquisition plans,
the availability of financing, and general economic conditions, as well as other
risks  detailed  in the  Company's  filings  with the  Securities  and  Exchange
Commission.  Additional  risk  factors  include,  but are not  limited  to,  the
following:  (a) the  Company's  success in  implementing  its  growth  strategy,
including its success in obtaining financing where required, (b) difficulties or
delays in developing and introducing new products or the failure of consumers to
accept new product  offerings,  (c) changes in consumer  preferences,  including
reduced consumer demand for the Company's current  products,  (d) the nature and
extent of future competition in the Company's principal marketing areas, and (e)
political,  economic and demographic  developments in the United States, Africa,
Brazil, the Caribbean,  Europe and other countries where the Company now does or
in the future may do business.


General

         The Company is a leading manufacturer and marketer in the United States
of  selected  personal  care  products  for both the ethnic  market and the mass
market. The Company believes that it is one of the leading global  manufacturers
and marketers of ethnic hair care products for persons of African  descent.  The
Company's  flagship brand,  Dark & Lovely,  is the most widely recognized ethnic
brand name in the United  States  retail  ethnic hair care  market.  The Company
sells  products  specially   formulated  to  address  the  unique  physiological
characteristics  of  persons  of  African  descent,  until  recently  under  six
principal brand names, including  Dark & Lovely, Excelle,  Beautiful Beginnings,
Dark & Natural, Magic, and Let's Jam. With the  acquisition of Johnson  Products
Company  in July  1998, the  Company added  the  brand  names  Gentle Treatment,
Ultrasheen,  Precise, Bantu and AfroSheen  to its  portfolio of ethnic hair care
products as well as Posner  cosmetics.  The majority of the Company's  net sales
have  historically  been  derived  from hair  relaxers  and texturizers,   which
are used to chemically treat and  straighten  hair  (constituting  approximately
50% of the  Company's  sales in 1997),  hair color,  men's  depilatory  products
and hair care  maintenance  products,  primarily for persons of African descent.
The Company is expanding its product  offerings to other  segments of the ethnic
personal care market,  including cosmetics and skin care products.  In addition,
the  Company is a leading  marketer of nail care products  to the United  States
mass  market  under the Cutex  brand  name.  The Company is currently seeking to
divest  the Cutex  business in order  to focus on the  worldwide ethnic personal
care business.








                                                        15

<PAGE>




         In the nine months ended September 30, 1998, approximately 32.8% of the
net sales of the Company were to customers outside the United States as compared
to 28.2 % in the first nine months of the prior fiscal year. The following table
presents the Company's net sales by geographic region for these periods (dollars
are in thousands):



Net sales to:                 1998            %           1997            %     
                          ------------  ------------  ------------  ------------
United States                  $70,853         67.2%       $55,895         71.8%
Africa                          25,900         24.5         13,360         17.2
Other                            8,781          8.3          8,536         11.0
  Total                       $105,534        100.0%        77,791        100.0%
                          ============ =============  ============= ============


          With  the  exception  of sales in  South  Africa,  Botswana,  Lesotho,
Namibia and Swaziland,  which are  denominated in South African Rand, all of the
Company's  sales are  recorded in U.S.  Dollars.  The Company  does not view the
exposure to Rand exchange rate fluctuations as significant  because Carson South
Africa incurs  substantially all of its costs in Rand. Assets and liabilities of
Carson South Africa are translated for consolidation purposes from South African
Rand into U.S. Dollars at the rate of currency exchange at the end of the fiscal
period.  Revenues and  expenses are  translated  at average  monthly  prevailing
exchange rates. Resulting translation  differences are recognized as a component
of stockholders' equity.

Acquisition

         On July 14, 1998 the Company acquired all of the outstanding  shares of
Johnson Products Co., Inc., a Florida  corporation.  Johnson Products is a major
manufacturer of personal care products for the ethnic market. Hair care products
manufactured by Johnson Products include  brand names such as Gentle  Treatment,
UltraSheen,  Precise, Bantu and AfroSheen. Johnson Products also sells cosmetics
under the Posner brand name. Also included in the acquisition was the Dermablend
corrective  cosmetics  line, which the Company intends to divest within one year
from the date of acquisition. The  acquisition was  accounted for as a purchase.
The  purchase  price, including the  Dermablend  line, was  approximately  $85.0
million  with  $35.0 million  paid in cash. The  Company  entered into  a Credit
Agreement with IVAX  Corporation,  d/b/a IVX Boscience,  Inc., for the remaining
$50.0  million  purchase  price.  The  senior  secured  loan  provided  by  IVAX
Corporation and subsequently assingned to other  lenders(the "IVAX loan")matures
on  December 15,  1998  and bears  interest  at 9.0% per annum, payable monthly.
Any  overdue  principal and  interest bear  interest at  12.0% per annum and are
payable upon demand.

         In conjunction with the IVAX Credit  Agreement, the Company  terminated
its senior secured  credit facility with  Credit Agricole  Indosuez.  During the
third  quarter of 1998, the  Company  recognized an  extraordinary  loss of $0.9
million(net of tax, or $0.06 per  share)  for the  write-off of $1.6  million of
debt financing costs related to this credit facility.


Special Items

         During the quarter  ended  September  30 ,1998,  the  Company  recorded
pretax  charges  of  $0.9  million ($0.5 million  net  of  tax) related  to  the
management restructuring in  the  previous quarter  and a  pretax charge of $3.8
million  ($2.2  million net of tax) for the  write-off of an  investment  in the
preferred  stock of AM  Cosmetics,Inc., (AM Cosmetics"), a related company which
provides contract manufacturing services to the company.

         For the nine months  ended  September  30, 1998,  the Company  recorded
one-time  pretax  charges of $19.8  million  ($11.4  million net of tax) related
primarily to the  restructuring of management and product lines at the Company's
Savannah operation.  The Company revised its key management team,  including the
termination of several senior managers and the addition of Gregory J. Andrews as
Chief  Executive  Officer,  and  announced  a new  strategic  focus  on its core
business,  the worldwide  ethnic hair care market.  In connection  with this new
focus and the Johnson  acquisition,  all of the  combined  products,  brands and
facilities were reviewed for optimum use. Items  identified as  non-strategic or
redundant were written down.

                                                        16

<PAGE>




         Of the pretax charges,  $6.6 million was recorded as cost of goods sold
for obsolete or excess  inventory and the  elimination of over 100 stock keeping
units (SKUs),  $3.7 million was recorded as general and administrative  expenses
and $5.7  million  was  recorded  as  restructuring  charges.  The  general  and
administrative   expenses  included  $1.5  million  related  to  the  management
restructuring,  $0.2 million for the write-down of fixed assets and $2.0 million
for additional  reserves  against accounts  receivable for customer  deductions.
Restructuring   charges   included  $2.6  million  related  to  the   management
restructuring,  $2.9 million for the write-down of fixed assets and $0.2 million
of other charges.  See Note 3 to the condensed consolidated financial statements
included herein.

         The one-time  pretax gain  recorded in the  nine months ended September
30, 1998 of $49.1 million ($28.1 million net of tax) related to the sale of 29.1
million  shares  of Carson  South Africa, the shares of  which are traded on the
Johannesburg  Stock  Exchange.  This sale  generated net cash  proceeds of $55.2
million  and  resulted  in  an  increase  in minority  interest of $6.0 million.
Concurrent with the sale of the Company's shares, Carson South  Africa issued an
additional 10.25 million shares for which it received net cash proceeds of $19.2
million. This transaction resulted in a gain to  the  Company  of $11.7  million
which  was  recorded  in  paid  in  capital.  The  transaction   also  increased
minority  interest  by $7.6  million.  As a result of these  combined  sales, as
of November 1, 1998, the Company currently owns approximately 52.8% of the stock
of Carson South Africa.

         The $3.8 million loss on write-off of  investment  recorded  during the
quarter ended September 30, 1998 was a result of management's determination that
the  Company's preferred stock investment in AM Cosmetics was not realizable due
to the financial condition of AM Cosmetics.


Results of Operations

Quarter  Ended September 30, 1998 Compared to Quarter Ended September 30, 1997

Net Sales.  Consolidated  net sales for the quarter ended  September 30, 1998 of
$44.6  million  increased  $14.9  million,  or  50.4%,  from the  quarter  ended
September  30, 1997.  This  increase is  summarized  as follows  (dollars are in
thousands):


                                      Quarter Ended  Quarter Ended
                                      September 30,  September 30,   % Change
                                               1998           1997
                                     -------------- -------------- -------------
Domestic core                              $17,161        $12,847          33.6
Johnson Products                            10,633             --           N/A
Cutex                                        4,754          7,329         (35.1)
Salon Professional and Cosmetics               584            822         (29.1)
   Total Domestic                           33,132         20,998          57.8
                                     -------------- -------------- -------------
South Africa                                 8,752          5,554          57.6
Other International, including U.S.
export                                       2,679          3,073         (12.9)
   Total International                      11,431          8,627          32.5
                                     -------------- -------------- -------------
   Consolidated                            $44,563        $29,625          50.4
                                     -------------- -------------- -------------



                                                       17



<PAGE>

     Sales of the Company's  domestic core business,  ethnic hair care products,
amounted to $17.2 million in the quarter  ended September  30, 1998, an increase
of $4.3 million, or 33.6%, compared to the quarter  ended   September  30, 1997.
The  Company   revised   certain  sales, distribution  and  marketing  practices
to better meet  customer  and  distributor  needs  and   stimulate   interest at
the consumer level.  Management believes that the Company is  beginning  to reap
the benefits of these changes in higher sales.  Net sales of relaxers  and  hair
colors were up 31.3% and 35.3%, respectively, over the  quarter ended  September
30, 1997.

       The addition of Johnson  Products  increased net sales $10.6 million over
the quarter ended  September 30, 1997.  This amount included $0.7 million of net
sales for items  produced for and sold to another ethnic hair care company under
a contract which management expects to be terminated at the end of 1998.

     Net  sales of Cutex  decreased  significantly  from the  prior  year  third
quarter.  Cutex product  shipments for the quarter ended September 30, 1998 were
actually  higher than the  reported net sales  indicate  due to  unusually  high
levels of  returned  product  which  continued  from the quarter second into the
third quarter of 1998.  Introduction  of the new Ultra line of nail  polishes in
April 1998 resulted in high returns  of old product which it replaced.  Most  of
the third quarter returns of Cutex came early in the quarter.

     Total  international  sales   continued  to  grow  from  the   prior  year.
International  net  sales were $11.4 million  in the quarter ended September 30,
1998, an  increase  of $2.8 million,  or 32.5 %, compared  to the  quarter ended
September  30,  1997.  All of the  growth was in Africa,  which  increased  $3.2
million compared to the corresponding quarter of 1997.

Gross Profit. Gross profit was $22.6 million for the quarter ended September 30,
1998 compared to $16.1 million for the quarter ended  September 30, 1997.  Gross
margin  decreased to 50.7% for the quarter  ended  September 30, 1998 from 54.2%
for  the  quarter  ended  September 30, 1997. A significant  factor in the gross
margin  decrease  was the  addition of Johnson  Products, which  produced  gross
profit  of  $4.8  million  and  a gross  margin of 45.5%.  Gross  margin of  the
domestic  core  business increased  during the third  quarter to 56.9%  for  the
quarter ended September 30, 1998 from 54.2 % for the quarter ended September 30,
1997.

     Gross margin was also lowered as Carson South  Africa's net sales grew as a
percentage of consolidated net sales.  Sales in Africa typically provide a lower
gross margin than domestic  sales and was 47.4% for the quarter ended  September
30,  1998.  However,  marketing  and  selling  expenses  are also lower on these
international sales, and the operating margin on these sales is typically higher
than on domestic sales.

     Gross margin was further negatively impacted during the quarter by the high
returns of Cutex product discussed above.

Marketing  and Selling  Expenses.  Marketing and selling  expenses  increased to
$12.7 million in the quarter  ended  September 30, 1998 from $7.3 million in the
quarter ended September 30, 1997, an increase of 73.5%. This increase was due to
greater promotional  activity  to increase  sales  of the Company's core  ethnic
products, higher  promotional  expenses for  Cutex and the  addition  of Johnson
Products. As a  percentage of  net  sales,  these  expenses  increased  to 28.5%
during this period from 24.7% during the comparable period in 1997.

General  and  Administrative   Expense.   General  and  administrative  expenses
increased $1.9 million to $6.4 million for the quarter ended  September 30, 1998
from $4.5 million for the quarter  ended  September 30, 1997. As a percentage of
net sales,  general and  administrative  expenses decreased to 14.4% during this
period from 15.3% during the comparable  period in 1997. The addition of Johnson
Products was responsible  for $1.1 million of additional  expense in the quarter
ended  September  30, 1998.  The  remainder of the increase was primarily due to
higher spending at Carson South Africa to support the subsidiary's growth.

Restructuring.     As  discussed  above, restructuring  charges,  included  $0.9
million related to the management restructuring.

Operating Income.  As a result of the above changes,  operating income decreased
to $2.5 million in the quarter ended September 30, 1998 from $4.2 million in the
quarter ended September 30, 1997. Excluding the $0.9 million of special charges,
operating  income  decreased to $3.4 million in the quarter ended  September 30,
1998 from income of $4.2 million in the quarter ended September 30, 1997.

Interest Expense.  Interest expense  increased  significantly to $3.8 million in
the quarter  ended  September  30, 1998 from $1.8  million in the quarter  ended
September  30,  1997.  Approximately  $0.9  million of this  increase was due to
interest on the debt incurred to purchase Johnson Products. The remainder of the
increase  was  the  result  of  additional  debt  incurred in  1997  to  finance

                                                        18

<PAGE>



acquisitions, which was subsequently refinanced with the proceeds  from the sale
of  $100  million aggregate  principal  amount of the Company's 10-year  10 3/8%
Senior Subordinated Notes.

Minority  Interest in Earnings of Subsidiary.  Minority  interest in earnings of
subsidiary  increased to expense of $0.7 million in the quarter ended  September
30, 1998 from expense of $0.2 million in the quarter  ended  September 30, 1997.
This  increase is due to higher  earnings of Carson  South Africa in the current
year  quarter  over the  prior  year  quarter  and also to the  higher  minority
ownership percentage resulting from the sales of subsidiary stock.

Other  Income.  Other income  increased  to $1.1  million for the quarter  ended
September 30, 1998 from $0.4 million for the same quarter of 1997  primarily due
to interest  income on cash balances in the United States and South Africa which
were generated by the sale of subsidiary stock.

Loss on Write-off of Investment. This loss is  related  to the write-off of  the
Company's preferred stock investment in AM Cosmetics.

Provision  for Taxes.  The  provision  for taxes  decreased to a benefit of $2.0
million, based on an effective rate of 43.0%, in the quarter ended September 30,
1998 from a provision of $1.1 million,  based on an effective rate of 42.6%,  in
the quarter  ended  September 30, 1997.  Excluding  the special  charges of $4.7
million,  the income before tax was $3,000 and the provision for taxes decreased
to zero for the quarter ended September 30, 1998.

Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30,
1997

Net Sales.  Consolidated  net sales for the nine months ended September 30, 1998
of $105.5 million increased $27.7 million,  or 35.7%, over the nine months ended
September  30, 1997.  This  increase is  summarized  as follows  (dollars are in
thousands):



                                 Nine Months Ended  Nine Months Ended
                                     September 30,      September 30,
                                              1998               1997  % Change
                                 -----------------  -----------------  ---------
Domestic core                              $42,055            $42,950      (2.1)
Johnson Products                            10,632                 --       N/A
Cutex                                       16,514             12,091      36.6
Salon Professional and Cosmetics             1,652                855      93.2
   Total Domestic                           70,853             55,895      26.8
                                 -----------------  -----------------  ---------
South Africa                                25,900             13,360      93.9
Other International                          8,781              8,536       3.0
   Total International                      34,681             21,896      58.4
                                 -----------------  -----------------  ---------
   Consolidated                           $105,534            $77,791      35.7
                                ------------------  -----------------  ---------


     Net  sales  of  the  Company's domestic  core  business, ethnic  hair  care
products, amounted  to $42.1  million in the nine  months  ended  September  30,
1998, a decrease  of $0.9 million,  or 2.1%, compared to  the nine  months ended
September 30, 1997. Until  the current quarter, domestic core net sales  in 1998
had  been below  the prior year  levels.  To address the  downward  trend in the
Company's domestic  core sales, management  was restructured and  certain sales,
distribution and marketing  practices  were revised to better meet  customer and
distributor needs and  stimulate interest at the consumer level.  Sales began to
improve in the quarter ended September 30, 1998, and the gap between current and
prior year domestic core sales was narrowed.

     The acquisition of Johnson  Products added  $10.6 million  of net sales for
the nine months ended September 30, 1998.  This amount included  $0.7 million of
net sales for items produced for and sold  to another ethnic hair  care  company
                                                        19

<PAGE>



under a contract which management expects to be  terminated at  the end of 1998.
Net sales of Cutex  increased  significantly  from  the prior  year nine months.
The  brand was  purchased  in April of 1997  and  was  included in the Company's
results of operations for only five of the nine months ended September 30, 1997.

    International net sales continued to grow significantly from the prior year.
International  net sales were $34.7  million in the nine months ended  September
30, 1998, an increase of $12.8  million,  or 58.4 %, compared to the nine months
ended  September  30,  1997.  Most  of the  growth  was in  Africa  with a 93.9%
increase,  but significant  gains were also made in Europe,  which increased net
sales by 14.5%.

Gross Profit. Gross profit was $47.1 million for the nine months ended September
30, 1998 compared to $42.4 million for the nine months ended September 30, 1997.
Excluding the $6.6 million of special charges  included in cost of goods sold,
gross profit  increased to $53.7  million in the nine months ended September 30,
1998 from $42.4 million in the nine months ended September 30, 1997, and   gross
margin decreased to 50.9% for the nine months ended  September  30, 1998 from 
54.5% for the same nine months in 1997. A significant factor in the gross margin
decrease was the  addition of Johnson  Products,  which  produced gross  profit
of $4.8 million and a gross margin of 45.5%.

     The decrease in gross margin was also due to decreased  production  volumes
earlier  in the year and to  geographic  and  product  shifts in the sales  mix.
Production  volume  was  curtailed  in the  second  quarter  of 1998  to  reduce
inventories  which had risen to levels in excess of current  needs.  Inventories
were  built  up at  the  end of  the  prior  fiscal  year  due to  manufacturing
inefficiencies  which  necessitated  carrying  higher  inventory  levels to meet
customer  needs.  Inventories  were further built up in the first part of fiscal
1998 to meet sales  forecasts  which proved to be too high.  To lower  inventory
levels, the plant was shut down for two weeks and run only four days for several
more weeks during the second quarter of 1998. This action resulted in unabsorbed
overhead in production which adversely impacted gross margin.

     Gross  margin was  lowered  as Carson  South  Africa's  net sales grew as a
percentage of consolidated net sales.  Sales in Africa typically provide a lower
gross margin (47.4%) than domestic sales.However, marketing and selling expenses
are also lower on these  international  sales, and the operating margin on these
sales is typically higher than on domestic sales.

Marketing  and Selling  Expenses.  Marketing and selling  expenses  increased to
$30.2 million in the nine months ended  September 30, 1998 from $19.6 million in
the nine months ended  September 30, 1997,  an increase of 54.2%.  This increase
was primarily  due to the additions of Johnson  Products in the current year and
Cutex and Let's Jam in the second quarter of the prior year.  Marketing and 
selling expenses were also higher due to greater  promotional  activity  to 
increase  sales of the Company's core ethnic products and due to expanded
marketing to support the growth of South Africa. As a percentage of net sales, 
these expenses increased to 28.6% during this period from 25.2% during the  
comparable period in 1997.

General and Administrative  Expense.  General and  administrative  expenses were
$22.4  million for the nine months ended  September  30, 1998  compared to $11.7
million for the nine months ended September 30, 1997. Excluding the $3.7 million
of special  charges  included  in general  and  administrative  expenses,  these
expenses  increased to $18.7 million in the nine months ended September 30, 1998
from $11.7  million in the nine months ended  September 30, 1997, an increase of
59.9%.  As a  percentage  of net  sales,  general  and  administrative  expenses
increased to 17.7% during this period from 15.0% during the comparable period in
1997.  These  expenses  increased  $1.1  million due to the  addition of Johnson
Products.  The remainder of the increase was due in part to increased personnel,
professional  and   miscellaneous   expenses   associated  with  enhancement  of
infrastructure needed to support the Company's anticipated growth, combined with
higher  amortization of intangibles related to acquisitions and higher warehouse
costs related to high inventory levels earlier in the year.

Restructuring.  As discussed above,  restructuring charges included $2.6 million
related to the  management  restructuring,  $2.9 million for the  write-down  of
fixed assets and $0.2 million of other miscellaneous charges.

Operating Income.  As a result of the above changes,  operating income decreased
to a loss of $11.3  million in the nine  months  ended  September  30, 1998 from
income of $11.1 million in the nine months ended  September 30, 1997.  Excluding
the special charges of $16.0 million,  operating  income  decreased to income of
$4.7  million in the nine months ended  September  30, 1998 from income of $11.1
million in the nine months ended September 30, 1997.

Interest Expense.     Interest expense increased significantly  to $9.6  million
in the nine months ended September 30, 1998 from $3.9 million in the nine months
ended September 30, 1997.  The increased interest  expense was the result of the

                                                        20

<PAGE>



Johnson  Products acquisition  debt as well as additional debt incurred  in 1997
to finance acquisitions, which  was  subsequently refinanced  with  the proceeds
from  the  sale of $100 million aggregate  principal amount  of the Company's 
10-year 10 3/8% Senior Subordinated Notes.

Gain on Sale of Subsidiary Stock.  As discussed  above, this gain  resulted from
the sale of 29.1 million shares of Carson South Africa.

Minority  Interest in Earnings of Subsidiary.  Minority  interest in earnings of
subsidiary  increased  to  expense  of $1.7  million  in the nine  months  ended
September  30,  1998 from  expense  of $0.5  million  in the nine  months  ended
September  30, 1997.  This  increase was due to higher  earnings of Carson South
Africa in the current  year nine months over the prior year nine months and also
to the  higher  minority  ownership  percentage  resulting  from  the  sales  of
subsidiary stock.


Other Income.  Other income  increased to $2.8 million for the nine months ended
September 30, 1998 from $1.1 million for the same nine months of 1997  primarily
due to interest  income on cash  balances in the United  States and South Africa
which were generated by the sale of subsidiary stock.

Loss on Write-off of Investment. As discussed above, this loss resulted from the
write-off of the Company's investment in preferred stock of AM Cosmetics.

Provision for Taxes.  The provision for taxes increased to $11.0 million,  based
on an effective rate of 43.1%,  in the nine months ended September 30, 1998 from
$3.3  million,  based on an  effective  rate of 42.7%,  in the nine months ended
September 30, 1997.  Excluding the special  charges and gain,  the provision for
taxes  decreased to a benefit of $1.5  million,  based on an  effective  rate of
40.1%,  in the nine months ended September 30, 1998. This effective tax rate has
decreased  from 1997 due to the larger  impact of the  earnings of Carson  South
Africa, which are taxed at lower rates than the earnings in the United States.

Liquidity and Capital Resources

     In the nine months ended  September  30, 1998,  net cash used in operations
was $11.3 million.    Excluding the effects of the Johnson Products acquisition,
cash was used to  increase accounts  receivable,  inventories and other  current
assets and to reduce  accounts  payable.  The  increases in accounts  receivable
and inventories occurred  primarily in South Africa.  The increase in other 
current assets  represents an advance  payment by Carson South Africa for  
packaging  supplies  to be used in the fourth  quarter of 1998.  The decrease in
accounts payable resulted from payment of liabilities assumed in the Johnson 
Products  purchase and a decrease in accounts  payable not related to Johnson 
Products. These were offset by increased accounts payable at Carson South 
Africa.

     Net cash used in investing  activities for the nine months ended  September
30, 1998 consisted of capital expenditures of $8.2 million and primarily for the
acquisition of Johnson Products for $35.0 million.

     Net  cash  provided  by  financing  activities  for the nine  months  ended
September 30, 1998 totaled $65.7  million.  Cash inflows  included $55.2 million
received  domestically from the sale of Carson South Africa stock by the Company
and $19.2 million  received in South Africa for the issuance of new shares of 
Carson South Africa stock.  Significant  financing  cash  outflows  included the
scheduled payment of $5.4 million for the purchase of A&J Cosmetics and a net 
$3.0 million reduction in the Company's outstanding revolver balance.

     The cash balance was also adversely impacted by the significant devaluation
of the South African Rand during the nine months ended  September 30, 1998.  The
Rand devalued approximately 19.7%, from 4.9970 Rand per dollar at March 31, 1998
to 5.9800 Rand per dollar at September 30, 1998.  Due to this  devaluation,  the
cash  balances  held in South Africa fell $3.7  million  when  converted to U.S.
dollars.  During the prior year,  no such  significant  devaluation  of the Rand
occurred.

     The Company  believes that cash flow from  operating  activities,  existing
cash  balances and  anticipated  proceeds from the planned  divestitures  of the
Cutex  and  Dermablend  brands  will  be  sufficient  to  fund  working  capital
requirements,   capital  expenditures  and  debt  service  requirements  in  the
immediate  future. However, if the Cutex and Dermablend brands are not  divested
prior to the  maturity  date  of  the  IVAX loan, or if  net proceeds from  such
divestitures are  insufficient to satisfy cash requirements, the Company expects
to employ alternative  means to satisfy cash requirements and, for this purpose,
has  hired  the  investment  banking  firm  of Donaldson, Lufkin and Jenrette to
assist the Company in seeking alternative financing solutions. If the  IVAX loan
is not repaid by December 15, 1998,  principal  and interest  will be payable on
demand and will  bear interest at 12% per annum, and  other  indebtness  of  the
Company could be subject to acceleration.  

                                                        21

<PAGE>

Year 2000 Computer Issue

The Company currently utilizes two computer  information systems. The JD Edwards
financial  package is used to support  several  financial  applications.  In its
distribution and manufacturing  operations,  the Company uses a software package
known as PRISM developed by MARCAM.  The JD Edwards and PRISM packages run on an
IBM AS/400 computer and are currently not year 2000 compliant.

To replace the current systems and provide year 2000 compliance,  management has
selected a single vendor,  integrated  business  software  package.  The cost of
conversion to the new system is estimated to be approximately $1.0 million.  The
implementation  process  has  begun,  and  the  new  system  is  expected  to be
functional by the end of the second quarter of 1999.

In the  unlikely  event that  implementation  of the selected  software  package
fails, the Company would  immediately begin working with another software vendor
to achieve year 2000 compliance as quickly as possible. The risk associated with
not having systems that are compliant by the year 2000 is that the Company would
have  to  implement  manual  procedures  which  would  lead  to a  reduction  in
efficiency.  The Company  could  continue to operate,  but at a reduced level of
productivity.



                                                        22

<PAGE>




                                                   CARSON, INC.

                                            PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

     The Company is party to lawsuits  incidental  to its  business.  Management
believes that the ultimate  resolution of these matters will not have a material
adverse  impact on the business or financial  condition  and  operations  of the
Company.

Item 2.  Changes in Securities

     None

Item 3.  Defaults upon Senior Securities

     None

Item 4.  Submission of Matters to a Vote of Security Holders

      None

Item 5.  Other Information

     None


Item 6.  Exhibits and Reports on Form 8-K

(a)    Exhibits --

     27                  Financial data schedule.


(b)    Reports on Form 8-K --

On  September  28,  1998,  the  Company  filed a Form  8-K/A that  included  the
Financial  Statements of Johnson Products Co., Inc., and Subsidiaries  (Personal
Care Products Subsidiary of IVAX Corporation),  Pro Forma Financial Information,
and related exhibits.

                                                        23

<PAGE>



                                                    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.

CARSON, INC.





/s/  Robert W. Pierce                                    Date: November 16, 1998
Robert W. Pierce
Executive Vice President, Chief Financial Officer and Secretary
(Principal Financial Officer)





                                                        24

<PAGE>