UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q





|(Mark One)                                              |                                                                                          
|------------------------------------------------------- | -----------------------------------------------------------------------------------------
|[x]                                                     | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                       
|For the quarterly period ended December 31, 2006       
|                                                       
|[]                                                      | 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 1-6370                          





|ELIZABETH ARDEN, INC.                                 
|------------------------------------------------------
|                                                      
|(Exact name of registrant as specified in its charter)



|Florida                                                        |  | 59-0914138                          
|-------------------------------------------------------------- |  | ------------------------------------
|                                                               |  |                                     
|(State or other jurisdiction of incorporation
or organization) |  | (I.R.S. Employer
Identification No.)
|                                                               |  |                                     
|2400 S.W. 145 Avenue, Miramar, Florida                         |  | 33027                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip Code)                          
|                                                               |  |                                     



|(954) 364-6900                                      
|----------------------------------------------------
|                                                    
|(Registrant's telephone number, including area code)



|Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  [X]      No  [  ]
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                   
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.    Large accelerated filer  [  ]      Accelerated filer  [X]      Non-accelerated filer  [  ]                                                  
|                                                                                                                                                                                                                                                                                                                                                                                   
|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  [  ]      No  [X]                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                   
|Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:                                                                                                                                                                                                                                                      



|Class                        |  | Outstanding at
February 5, 2007
|---------------------------- |  | -------------------------------
|                             |  |                                
|Common Stock, $.01 par value |  | 28,349,418                     





---



ELIZABETH ARDEN, INC.



INDEX TO FORM 10-Q





|PART I        |  | FINANCIAL INFORMATION                                                                                                 |  |         
|------------- |  | --------------------------------------------------------------------------------------------------------------------- |  | --------
|              |  |                                                                                                                       |  |         
|Item 1.       |  | Financial Statements                                                                                                  |  | Page No.
|              |  |                                                                                                                       |  |         
|              |  | Unaudited Consolidated Balance Sheets -- December 31, 2006 and June 30, 2006                                          |  | 3       
|              |  |                                                                                                                       |  |         
|              |  | Unaudited Consolidated Statements of Operations -- Three and six months ended December 31, 2006 and December 31, 2005 |  | 4       
|              |  |                                                                                                                       |  |         
|              |  | Unaudited Consolidated Statement of Shareholders' Equity -- Six months ended December 31, 2006                        |  | 5       
|              |  |                                                                                                                       |  |         
|              |  | Unaudited Consolidated Statements of Cash Flow -- Six months ended December 31, 2006 and December 31, 2005            |  | 6       
|              |  |                                                                                                                       |  |         
|              |  | Notes to Unaudited Consolidated Financial Statements                                                                  |  | 7       
|              |  |                                                                                                                       |  |         
|Item 2.       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                 |  | 20      
|              |  |                                                                                                                       |  |         
|Item 3.       |  | Quantitative and Qualitative Disclosures About Market Risk                                                            |  | 29      
|              |  |                                                                                                                       |  |         
|Item 4.       |  | Controls and Procedures                                                                                               |  | 30      
|              |  |                                                                                                                       |  |         
|PART II       |  | OTHER INFORMATION                                                                                                     |  |         
|              |  |                                                                                                                       |  |         
|Item 1A.      |  | Risk Factors                                                                                                          |  | 31      
|              |  |                                                                                                                       |  |         
|Item 2.       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                           |  | 31      
|              |  |                                                                                                                       |  |         
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                                                   |  | 32      
|              |  |                                                                                                                       |  |         
|Item 6.       |  | Exhibits                                                                                                              |  | 33      
|              |  |                                                                                                                       |  |         
|Signatures    |  | 36                                                                                                                   
|              |  |                                                                                                                       |  |         
|Exhibit Index |  | 37                                                                                                                   



- 2 -



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PART I      FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS



|ELIZABETH ARDEN, INC. AND SUBSIDIARIES                 
|-------------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                            
|(Unaudited)                                            
|(Amounts in thousands, except share and per share data)





|                                     |                                                                                                                                                                                | As of             |                                           
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------- | ------------------------------------------
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                | December 31,
2006 |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|ASSETS                               |                                                                                                                                                                                |                   |                                           
|Current Assets                       |                                                                                                                                                                                |                   |                                           
|                                     | Cash and cash equivalents                                                                                                                                                      |                   | $                                         
|                                     | Accounts receivable, net                                                                                                                                                       |                   |                                           
|                                     | Inventories                                                                                                                                                                    |                   |                                           
|                                     | Deferred income taxes                                                                                                                                                          |                   |                                           
|                                     | Prepaid expenses and other assets                                                                                                                                              |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   | Total current assets                      
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|Property and equipment, net          |                                                                                                                                                                                |                   | 38,398                                    
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|Other Assets                         |                                                                                                                                                                                |                   |                                           
|                                     | Exclusive brand licenses, trademarks and intangibles, net                                                                                                                      |                   |                                           
|                                     | Debt financing costs, net                                                                                                                                                      |                   |                                           
|                                     | Other assets                                                                                                                                                                   |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   | Total other assets                        
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   | Total assets                              
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|LIABILITIES AND SHAREHOLDERS' EQUITY |                                                                                                                                                                                |                   |                                           
|Current Liabilities                  |                                                                                                                                                                                |                   |                                           
|                                     | Short-term debt                                                                                                                                                                |                   | $                                         
|                                     | Accounts payable -- trade                                                                                                                                                      |                   |                                           
|                                     | Other payables and accrued expenses                                                                                                                                            |                   |                                           
|                                     | Current portion of long-term debt                                                                                                                                              |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   | Total current liabilities                 
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|Long-term Liabilities                |                                                                                                                                                                                |                   |                                           
|                                     | Long-term debt, net                                                                                                                                                            |                   |                                           
|                                     | Deferred income taxes and other liabilities                                                                                                                                    |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   | Total long-term liabilities               
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   | Total liabilities                         
|                                     |                                                                                                                                                                                |                   |                                           
|Commitments and Contingencies        |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|Shareholders' Equity                 |                                                                                                                                                                                |                   |                                           
|                                     | Common stock, $.01 par value, 50,000,000 shares authorized; 
  30,222,206 issued and 28,360,037 outstanding, and 29,869,458 
  issued and 28,531,331 outstanding, respectively |                   |                                           
|                                     | Additional paid-in capital                                                                                                                                                     |                   |                                           
|                                     | Retained earnings                                                                                                                                                              |                   |                                           
|                                     | Treasury stock (1,862,169 and 1,338,127 shares at cost, respectively)                                                                                                          |                   |                                           
|                                     | Accumulated other comprehensive income                                                                                                                                         |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   | Total shareholders' equity                
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   | Total liabilities and shareholders' equity
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           
|                                     |                                                                                                                                                                                |                   |                                           



The accompanying notes are an integral part of the unaudited consolidated financial statements.



- 3 -



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|ELIZABETH ARDEN, INC. AND SUBSIDIARIES                                                                      
|------------------------------------------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS                                                                       
|(Unaudited)                                                                                                 
|(Amounts in thousands, except per share data)                                                               
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Net sales                                                                                                   
|Cost of sales (excludes depreciation of $1,227, 
  $503, $1,710 and $1,181, respectively, included 
  below)
|                                                                                                            
|Gross profit                                                                                                
|                                                                                                            
|Operating expenses                                                                                          
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Income from operations                                                                                      
|                                                                                                            
|                                                                                                            
|Interest expense, net                                                                                       
|                                                                                                            
|                                                                                                            
|Income before income taxes                                                                                  
|Provision for income taxes                                                                                  
|                                                                                                            
|                                                                                                            
|Net income                                                                                                  
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Net income per common share:                                                                                
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|Weighted average number of common shares:                                                                   
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            
|                                                                                                            





The accompanying notes are an integral part of the unaudited consolidated financial statements.



- 4 -



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|ELIZABETH ARDEN, INC. AND SUBSIDIARIES        
|----------------------------------------------
|CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
|(Unaudited)                                   
|(Amounts in thousands)                        



|                                                                   |                                                                      | Common Stock                                                                   |        |  | Additional
Paid-in |   |     | Retained |  |   | Treasury Stock |   |  | Accumulated
Other
Comprehensive |        |        | Total
Shareholders' | 
|------------------------------------------------------------------ | -------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------ |  | ------------------ | - | --- | -------- |  | - | -------------- | - |  | ------------------------------- | ------ | ------ | ------------------- | 
|                                                                   |                                                                      | Shares                                                                         |        |  | Amount             |   |     | Capital  |  |   | Earnings       |   |  | Shares                          |        |        | Amount              | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|Balance at June 30, 2006                                           |                                                                      |                                                                                | 29,869 |  |                    | $ | 299 |          |  | $ | 252,565        |   |  | $                               | 48,341 |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|Issuance of common stock upon exercise of 
  stock options         |                                                                      |                                                                                | 32     |  |                    |   | --  |          |  |   | 393            |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|Issuance of common stock under the employee stock 
  purchase plan |                                                                      |                                                                                | 45     |  |                    |   | --  |          |  |   | 696            |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|Issuance of restricted stock, net of forfeitures                   |                                                                      |                                                                                | 276    |  |                    |   | 3   |          |  |   | (3             | ) |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|Amortization of share-based awards                                 |                                                                      |                                                                                |        |  |                    |   |     |          |  |   | 4,359          |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|Repurchase of common stock                                         |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|Comprehensive income:                                              |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   | Net income                                                           |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        | 24,542 |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   | Foreign currency translation adjustments                             |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   | Disclosure of reclassification amount, net of
  taxes (8% tax rate): |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      | Unrealized hedging loss arising during the 
  period                           |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      | Less: reclassification adjustment for 
  hedging losses included in net income |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      | Net unrealized cash flow hedging loss                                          |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   | Total comprehensive income                                           |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        | 24,542 |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|Balance at December 31, 2006                                       |                                                                      |                                                                                | 30,222 |  |                    | $ | 302 |          |  | $ | 258,010        |   |  | $                               | 72,883 |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 
|                                                                   |                                                                      |                                                                                |        |  |                    |   |     |          |  |   |                |   |  |                                 |        |        |                     | 

The accompanying notes are an integral part of the unaudited consolidated financial statements.



- 5 -





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|ELIZABETH ARDEN, INC. AND SUBSIDIARIES
|--------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOW  
|(Unaudited)                           
|(Dollars in thousands)                

|                                                             |                                                                                   | Six Months Ended                                    |       
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | --------------------------------------------------- | ------
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   | December 31,
2006                                   |       
|                                                             |                                                                                   |                                                     |       
|Operating Activities:                                        |                                                                                   |                                                     |       
|                                                             | Net income                                                                        |                                                     | $     
|                                                             | Adjustments to reconcile net income to net cash provided by operating activities: |                                                     |       
|                                                             | Depreciation and amortization                                                     |                                                     |       
|                                                             | Amortization of senior note offering costs                                        |                                                     |       
|                                                             | Amortization of share-based awards                                                |                                                     |       
|                                                             | Cumulative effect of a change in accounting for share-based payments              |                                                     |       
|                                                             | Deferred income taxes                                                             |                                                     |       
|                                                             | Changes in assets and liabilities, net of acquisitions:                           |                                                     |       
|                                                             | Increase in accounts receivable                                                   |                                                     |       
|                                                             | Decrease in inventories                                                           |                                                     |       
|                                                             | Increase in prepaid expenses and other assets                                     |                                                     |       
|                                                             | Increase (decrease) in accounts payable                                           |                                                     |       
|                                                             | Increase in other payables, accrued expenses and other liabilities                |                                                     |       
|                                                             | Other                                                                             |                                                     |       
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   | Net cash provided by operating activities           |       
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   |                                                     |       
|Investing Activities:                                        |                                                                                   |                                                     |       
|                                                             | Additions to property and equipment                                               |                                                     |       
|                                                             | Proceeds from disposals of property and equipment                                 |                                                     |       
|                                                             | Acquisitions                                                                      |                                                     |       
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   | Net cash used in investing activities               |       
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   |                                                     |       
|Financing Activities:                                        |                                                                                   |                                                     |       
|                                                             | Proceeds from short-term debt                                                     |                                                     |       
|                                                             | Proceeds from the exercise of stock options                                       |                                                     |       
|                                                             | Proceeds from issuance of common stock under the employee stock purchase plan     |                                                     |       
|                                                             | Repurchase of common stock                                                        |                                                     |       
|                                                             | Other                                                                             |                                                     |       
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   | Net cash provided by (used in) financing activities |       
|                                                             |                                                                                   |                                                     |       
|Effect of exchange rate changes on cash and cash equivalents |                                                                                   |                                                     | 300   
|                                                             |                                                                                   |                                                     |       
|Net increase (decrease) in cash and cash equivalents         |                                                                                   |                                                     | 14,909
|Cash and cash equivalents at beginning of period             |                                                                                   |                                                     | 28,466
|                                                             |                                                                                   |                                                     |       
|Cash and cash equivalents at end of period                   |                                                                                   | $                                                   | 43,375
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   |                                                     |       
|Supplemental Disclosure of Cash Flow Information:            |                                                                                   |                                                     |       
|                                                             | Interest paid during the period                                                   |                                                     | $     
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   |                                                     |       
|                                                             | Income taxes paid during the period                                               |                                                     | $     
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   |                                                     |       
|                                                             |                                                                                   |                                                     |       

The accompanying notes are an integral part of the unaudited consolidated financial statements.

- 6 -





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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.    BUSINESS AND BASIS OF PRESENTATION

Elizabeth Arden, Inc. (the "Company") is a manufacturer and marketer of prestige designer fragrances, skin care and cosmetic products to retailers in the United States and approximately 90 countries internationally.

The unaudited consolidated financial statements include the accounts of the Company's wholly-owned subsidiaries, and all significant intercompany accounts and transactions have been eliminated in consolidation.



The accompanying unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "Commission") for interim financial information.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation and should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company's Annual Report on Form 10-K for the year ended June 30, 2006 (the "Annual Report"), filed with the Commission.



The consolidated balance sheet of the Company as of June 30, 2006 is derived from the financial statements included in the Annual Report.  The other consolidated financial statements presented in this quarterly report are unaudited but include all adjustments that are of a normal recurring nature that management considers necessary for the fair statement of the results for the interim periods.  Results for interim periods are not necessarily indicative of results for the full fiscal year.

NOTE 2.   INCOME PER SHARE



Basic income per share is computed by dividing the net income by the weighted average shares of outstanding common stock, $.01 par value per share ("Common Stock").  The calculation of diluted income per share is similar to basic income per share except that the denominator includes potentially dilutive Common Stock such as stock options and non-vested restricted stock.

The following table represents the computation of net income per share:



|(Amounts in thousands, except per 
 share data) |                                                          | Three Months Ended           |   |        | Six Months Ended | 
|----------------------------------------------- | -------------------------------------------------------- | ---------------------------- | - | ------ | ---------------- | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          | December 31,                 |   |        | December 31,     | 
|                                                |                                                          | 2006                         |   |        | 2005             | 
|                                                |                                                          |                              |   |        |                  | 
|Basic                                           |                                                          |                              |   |        |                  | 
|                                                | Net income                                               |                              | $ | 25,856 |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                | Weighted average shares outstanding                      |                              |   | 27,380 |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                | Net income per basic share                               |                              | $ | 0.94   |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|Diluted                                         |                                                          |                              |   |        |                  | 
|                                                | Net income                                               |                              | $ | 25,856 |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                | Weighted average shares outstanding                      |                              |   | 27,380 |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                | Potential common shares - treasury 
  method             |                              |   | 1,030  |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                | Weighted average shares and potential 
  dilutive shares |                              |   | 28,410 |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          | Net income per diluted share |   | $      | 0.91             | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 
|                                                |                                                          |                              |   |        |                  | 

- 7 -



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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



The following table shows the options to purchase shares of Common Stock that were outstanding during the three and six months ended December 31, 2006 and 2005 where the option exercise price was greater than the average market price of the Common Stock over the applicable period:





|                        | Three Months Ended |   | Six Months Ended  
|----------------------- | ------------------ | - | ------------------
|                        |                    |   |                   
|                        | December 31, 
2006 |   | December 31, 
2005
|                        |                    |   |                   
|Number of shares        |                    |   | 863,059           
|                        |                    |   |                   
|                        |                    |   |                   
|                        |                    |   |                   
|Range of exercise price |                    | $ | 18.45-23.40       
|                        |                    |   |                   
|                        |                    |   |                   
|                        |                    |   |                   
|                        |                    |   |                   



NOTE 3.    SHARE-BASED COMPENSATION

At December 31, 2006, the Company had outstanding several share-based compensation plans.  For the three and six months ended December 31, 2006, the compensation cost charged against income was $2.4 million and $4.4 million, respectively. For the three and six months ended December 31, 2005, the compensation cost charged against income was $2.6 million and $5.1 million, respectively.  The tax benefit related to the compensation cost charged against income for the three and six months ended December 31, 2006 was approximately $0.6 million and $1.1 million, respectively. The tax benefit related to the compensation cost charged against income for the three and six months ended December 31, 2005 was approximately $0.8 million and $1.6 million, respectively.



As of December 31, 2006, there were approximately $11.9 million of unrecognized compensation costs related to non-vested share-based arrangements granted under the Company's share-based compensation plans.  Those costs are expected to be recognized over a weighted-average period of approximately 2.0 years.



Stock Options



On November 15, 2006, the date of the Company's most recent annual meeting, the Company granted stock options for an aggregate of 30,000 shares of Common Stock to five non-employee directors under the 2004 Non-Employee Director Plan.  Pursuant to the 2004 Non-Employee Director Plan, stock options are granted on the Company's annual meeting date to directors who are re-elected to the Board of Directors at the annual meeting.  The stock options are exercisable three years from the date of grant if such persons continue to serve as a director until that date. The exercise price of those stock options is $18.45 per share, which was the closing price of the Common Stock on the date of grant. The weighted-average grant-date fair value of options granted was $7.18 per share based on the Black-Scholes option-pricing model. The options expire ten years from the date of grant.



On August 21, 2006, the Company's Board of Directors (the "Board") granted stock options to 26 managerial employees for 316,000 shares of Common Stock under the 2004 Stock Incentive Plan ("2004 Incentive Plan").  The stock options are due to vest in equal thirds over a three-year period on the dates that are two business days after the Company's financial results for each of the fiscal years ending June 30, 2007, 2008 and 2009 are publicly announced, but only if the person receiving the grant is still employed by the Company at the time of vesting.  The exercise price of those stock options is $15.00 per share, which was the closing price of the Common Stock on the effective date of grant.  The weighted-average grant date fair value of options granted was $5.85 per share based on the Black-Scholes option-pricing model.  The options expire ten years from the date of grant.



The weighted-average grant date fair value of options granted during the six months ended December 31, 2006 was estimated on the grant date using the Black-Scholes option-pricing model with the assumptions noted in the following table.  Expected volatilities are based on historical volatility of the Common Stock and other factors.  The expected term of options represents the period of time that options granted are expected to be outstanding and is derived from historical terms and other factors.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.



- 8 -



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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





|                                  |  | Six Months Ended 
|--------------------------------- |  | -----------------
|                                  |  | December 31, 2006
|                                  |  |                  
|Expected dividend yield           |  |                  
|Expected price volatility         |  |                  
|Risk-free interest rate           |  |                  
|Expected life of options in years |  |                  



A summary of stock option activity under the Company's share-based compensation plans for the six months ended December 31, 2006 is presented below:



|Options                          |  | Common 
Stock 
Shares |   |  | Weighted
Average
Exercise
Price |       |  | Weighted
Average
Remaining
Contractual
Term |     | Aggregate
Intrinsic
Value (1)
|-------------------------------- |  | --------------------- | - |  | ------------------------------- | ----- |  | ------------------------------------------- | --- | -----------------------------
|                                 |  |                       |   |  |                                 |       |  |                                             |     |                              
|Outstanding at July 1, 2006      |  | 3,366,469             |   |  | $                               | 15.10 |  |                                             | 5.6 |                              
|New grants                       |  | 346,000               |   |  | $                               | 15.30 |  |                                             |     |                              
|Exercised                        |  | (32,632               | ) |  | $                               | 12.05 |  |                                             |     |                              
|Forfeited or expired             |  | (15,026               | ) |  | $                               | 18.42 |  |                                             |     |                              
|                                 |  |                       |   |  |                                 |       |  |                                             |     |                              
|Outstanding at December 31, 2006 |  | 3,664,811             |   |  | $                               | 15.13 |  |                                             | 5.6 |                              
|                                 |  |                       |   |  |                                 |       |  |                                             |     |                              
|                                 |  |                       |   |  |                                 |       |  |                                             |     |                              
|                                 |  |                       |   |  |                                 |       |  |                                             |     |                              
|Exercisable at December 31, 2006 |  | 2,867,977             |   |  | $                               | 13.96 |  |                                             | 5.6 |                              
|                                 |  |                       |   |  |                                 |       |  |                                             |     |                              
|                                 |  |                       |   |  |                                 |       |  |                                             |     |                              
|                                 |  |                       |   |  |                                 |       |  |                                             |     |                              



|(1)  The intrinsic value of a stock option is the amount by which the current market value of the underlying Common Stock exceeds the exercise price of the option.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------

The total intrinsic value of stock options exercised during the six months ended December 31, 2006 and 2005, based upon the average market price during the period, was approximately $0.2 million and $0.6 million, respectively.

Restricted Common Stock

On August 21, 2006, the Board granted 138,675 shares of performance-based restricted stock to 70 managerial employees and 142,125 shares of service-based restricted stock to 80 managerial employees.  The performance-based restricted stock will vest in full on the date that is two business days after the Company's financial results for fiscal 2009 are released to the public, but only if (i) the person receiving the grant is still employed by the Company and (ii) the Company achieves a cumulative earnings per diluted share target.  The service-based restricted stock will vest in equal thirds over a three-year period on the dates that are two business days after the Company's financial results for each of the fiscal years ending June 30, 2007, 2008 and 2009 are publicly announced, but only if the person is still employed by the Company at the time of vesting.  The fair value of the restricted stock granted was based on the closing price of the Common Stock on the date of grant.  The restricted stock is recorded as additional paid-in capital in shareholders' equity as amortization occurs over the three-year vesting period.



A summary of the Company's restricted stock activity for the six months ended December 31, 2006, is presented below:















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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



|Restricted Stock                |  | Shares  |   |  | Weighted 
Average
Grant-Date
Fair Value
|------------------------------- |  | ------- | - |  | ---------------------------------------
|                                |  |         |   |  |                                        
|Non-vested at July 1, 2006      |  | 774,175 |   |  | $                                      
|Granted                         |  | 280,800 |   |  | $                                      
|Vested                          |  | (61,445 | ) |  | $                                      
|Forfeited                       |  | (5,962  | ) |  | $                                      
|                                |  |         |   |  |                                        
|Non-vested at December 31, 2006 |  | 987,568 |   |  | $                                      
|                                |  |         |   |  |                                        
|                                |  |         |   |  |                                        
|                                |  |         |   |  |                                        



Employee Stock Purchase Plan



The Company currently has an Employee Stock Purchase Plan ("ESPP") under which employees in certain countries are permitted to deposit after tax funds from their wages for purposes of purchasing Common Stock at a 15% discount from the lower of the closing price of the Common Stock at either the start of the contribution period or the end of the contribution period.  The Company expenses the discount taken and the fair value of the "look-back" feature realized by employees upon purchases of Common Stock under the ESPP.  For the three and six months ended December 31, 2006, the Company recorded costs associated with the ESPP of approximately $0.1 million and $0.2 million, respectively.  For the three and six months ended December 31, 2005, the Company recorded costs associated with the ESPP of approximately $0.1 million and $0.3 million, respectively. The next purchase under the ESPP will be consummated on June 1, 2007.

NOTE 4.    NEW ACCOUNTING STANDARDS



Accounting for Uncertainty in Income Taxes



In June 2006, the Financial Accounting Standards Board ("FASB") issued Financial Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109," which requires a company to recognize, measure and disclose in its financial statements uncertain tax positions it has taken or expects to take in a tax return.  FIN 48 will be effective for the Company on July 1, 2007. In anticipation of the adoption of FIN 48, the Company is in the process of assessing the impact of FIN 48 on its consolidated financial statements.

Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS 157"), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements.  SFAS 157 will be effective for the Company on July 1, 2008.  The Company is currently evaluating the impact of SFAS 157 on its consolidated financial statements.

Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial 
Statements



In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" ("SAB 108"), which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB 108 is effective for the Company during the fiscal year ending June 30, 2007 and permits a one-time transitional cumulative effect adjustment to beginning retained earnings as of July 1, 2006, for errors that were not previously deemed material, but are material under the guidance in SAB 108.  The Company does not believe the adoption of SAB 108 will have a material impact on its consolidated financial statements.



- 10 -



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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5.    INVENTORIES

The components of inventory were as follows:



|(Amounts in thousands)       | December 31,
2006 |         | June 30,
2006
|---------------------------- | ----------------- | ------- | -------------
|                             |                   |         |              
|Raw materials and components | $                 | 50,921  |              
|Work in progress             | 24,120            |         | 35,775       
|Finished goods               | 233,770           |         | 179,566      
|                             |                   |         |              
|Total                        | $                 | 308,811 |              
|                             |                   |         |              
|                             |                   |         |              
|                             |                   |         |              
|                             |                   |         |              

NOTE 6.    SHORT-TERM DEBT



The Company has a revolving credit facility with a syndicate of banks, for which JPMorgan Chase Bank is the administrative agent, which provides for borrowings on a revolving basis of up to $250 million with a $25 million sublimit for letters of credit (the "Credit Facility").  The Credit Facility expires in December 2010.  Under the terms of the Credit Facility, the Company may increase the size of the Credit Facility up to $300 million without entering into a formal amendment requiring the consent of all of the banks, subject to the Company's satisfaction of certain conditions.

On August 11, 2006, the Company amended the Credit Facility in connection with the acquisition of certain assets of Sovereign Sales, LLC ("Sovereign") to (i) increase the credit facility from $200 million to $300 million until December 31, 2006, following which the limit was set at $250 million, (ii) amend the definition of the borrowing base through December 31, 2006 to increase the borrowings on eligible inventory and provide for a temporary increase in borrowing availability of $25 million, and (iii) include the indebtedness issued and assumed pursuant to the June 2006 acquisition of certain assets of Riviera Concepts, Inc. ("Riviera") and the indebtedness issued pursuant to the August 2006 acquisition of certain assets of Sovereign under "permitted indebtedness" as defined in the Credit Facility.



The Credit Facility is guaranteed by all of the Company's U.S. subsidiaries. Borrowings under the Credit Facility are limited to 85% of eligible accounts receivable and 75% (65% December 1 through May 31) of eligible finished goods inventory and are collateralized by a first priority lien on all of the Company's U.S. accounts receivable and inventory. Under the August 2006 amendment, the borrowing limit on eligible finished goods inventory prior to December 31, 2006 ranged from 80% to 90%. The Company's obligations under the Credit Facility rank senior to the Company's 7 3/4% Senior Subordinated Notes due 2014 (the "7 3/4% Senior Subordinated Notes").



The Credit Facility has only one financial maintenance covenant, which is a debt service coverage ratio that must be maintained at not less than 1.1 to 1 if average borrowing availability declines to less than $25 million ($35 million from December 1 through May 31).  No financial maintenance covenant was applicable for the six months ended December 31, 2006.  Under the terms of the Credit Facility, the Company may pay dividends or repurchase Common Stock if the Company maintains borrowing availability after the applicable payment of at least $25 million from June 1 to November 30, and at least $35 million from December 1 to May 31.  The Credit Facility restricts the Company from incurring additional non-trade indebtedness (other than refinancings and certain small amounts of indebtedness).

Borrowings under the credit portion of the Credit Facility bear interest at a floating rate based on the "Applicable Margin," which is determined by reference to a specific financial ratio.  At the Company's option, the Applicable Margin may be applied to either the London InterBank Offered Rate ("LIBOR") or the prime rate.  The reference ratio for determining the Applicable Margin is a debt service coverage ratio.  The Applicable Margin charged on LIBOR loans ranges from 1% to 1.75% and is 0% for prime rate loans.  As of December 31, 2006, the Applicable Margin was 1.25% for LIBOR loans and 0% for prime rate loans.  The commitment fee on the unused portion of the Credit Facility is 0.25%. As a result of the August 2006 amendment, the interest rate charged on the first $25 million of borrowings was set at LIBOR plus 2.5% through November 30, 2006.



- 11 -





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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2006, the Company had $115 million in outstanding borrowings and approximately $4 million in letters of credit outstanding under the Credit Facility, compared with approximately $40 million in outstanding borrowings under the Credit Facility at June 30, 2006.  As of December 31, 2006, the Company had approximately $225 million of eligible receivables and inventories available as collateral under the Credit Facility and remaining borrowing availability of approximately $105 million.  The Company classifies the Credit Facility as short-term debt on its balance sheet since it expects to reduce outstanding borrowings over the next twelve months.

NOTE 7.    LONG-TERM DEBT

The Company's long-term debt consisted of the following:



|(Amounts in thousands)                                                                            |  | December 31,
2006 |         | June 30,
2006 |  
|------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ------------- | -
|                                                                                                  |  |                   |         |               |  
|7 3/4% Senior Subordinated Notes due January 2014                                                 |  | $                 | 225,000 |               | $
|Termination costs on interest rate swap relating to the 
   7 3/4% Senior Subordinated Notes, net |  |                   | (2,306  | )             |  
|Riviera Term Note                                                                                 |  |                   | 3,376   |               |  
|                                                                                                  |  |                   |         |               |  
|Total debt                                                                                        |  |                   | 226,070 |               |  
|Less: Current portion of long-term debt                                                           |  |                   | 1,125   |               |  
|                                                                                                  |  |                   |         |               |  
|Total long-term debt                                                                              |  | $                 | 224,945 |               | $
|                                                                                                  |  |                   |         |               |  
|                                                                                                  |  |                   |         |               |  
|                                                                                                  |  |                   |         |               |  



NOTE 8.    COMMITMENTS AND CONTINGENCIES



At December 31, 2006, the Company had contractual obligations to incur promotional and advertising expenses, which are either fixed commitments or based on net sales for licensed brands, and minimum royalty guarantees in an aggregate amount of $77.4 million through 2011, compared with$75.2 million through 2011 at June 30, 2006.



In October 2005, the Company received a demand from a licensee of certain of the Company's patents alleging the Company had breached the license agreement, indicating that it would not pay any further royalties and requesting that the Company return approximately $3 million in royalty payments already made.  The Company believes that it has not breached the license agreement and that the licensee is obligated to continue to make royalty payments.  The Company has filed a lawsuit against the licensee seeking recovery of its damages for breach of contract.  The Company is not able to determine the ultimate outcome of this action or estimate the possible loss or range of loss relating to the licensee's claim.



In August 2006, the Company was served with a complaint from a dermatologist alleging that the Company's use of her quote in product advertisements was unauthorized and constituted a false endorsement, false advertising, invasion of privacy, trademark dilution and disparagement, a violation of the right to publicity, fraud and unjust enrichment.  In October 2006, the plaintiff filed an amended complaint adding the licensor of the product name to the lawsuit.  The plaintiff seeks to enjoin the Company's use of her name and advertising and damages of no less than $2 million, including payments of profits associated with the relevant product, and exemplary and treble damages.  The Company believes that the claims lack merit and is vigorously contesting the matter.  The Company is not able to determine the ultimate outcome of this dispute or estimate the possible loss or range of loss relating to the plaintiff's claim.



The Company is a party to a number of other legal actions, proceedings and claims.  While any action, proceeding or claim contains an element of uncertainty and it is possible that the Company's cash flows and results of operations in a particular quarter or year could be materially affected by the impact of such actions, proceedings and claims, management of the Company believes that the outcome of such actions, proceedings or claims will not have a material adverse effect on the Company's business, financial position or results of operations.







- 12 -



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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



As of December 31, 2006, the Company had notional amounts of 40.3 million Euros and 17.6 million Britishpounds under foreign currency contracts that expire between January 31, 2007 and June 30, 2008 to reduce the exposure of its foreign subsidiary revenues to fluctuations in currency rates.  The Company has designated each qualifying foreign currency contract as a cash flow hedge.  The gains and losses of these contracts will only be recognized in earnings in the period in which the contracts expire.  At December 31, 2006, the unrealized loss, net of taxes, associated with these contracts of approximately $1.5 million, is included in accumulated other comprehensive income.  The unrealized loss, net of taxes, generated during the three and six months ended December 31, 2006, was approximately $1.8 million and $1.2 million, respectively.



When appropriate, the Company also enters into and settles foreign currency contracts for Euros, British pounds and Canadian dollars to reduce exposure of the Company's foreign subsidiaries' net balance sheets to fluctuations in foreign currency rates.  As of December 31, 2006, there were no such foreign currency contracts outstanding.  The realized loss, net of taxes, recognized from contracts in place during the three and six months ended December 31, 2006 was approximately $0.6 million and $0.5 million, respectively.



Acquisitions

In June 2006, the Company acquired certain assets of Riviera, including inventory, accounts receivable and certain brand licenses.  The net purchase price was approximately $14.2 million and has been preliminarily allocated as follows: $8.2 million for inventory, $1.8 million for accounts receivable, $0.8 million for prepaid, deferred and fixed assets, and $19.2 million for intangible assets, offset by liabilities of $15.8 million (including the assumption of a term note in the principal amount of approximately $3.4 million, a contingent performance liability of $8.6 million and other assumed liabilities).  The contingent performance liability is payable subject to the satisfaction of certain sales targets over the three year period after the closing date and was recorded as a result of the negative goodwill resulting from this acquisition.  The Company has not finalized its allocation of the purchase price among the assets acquired.  In addition to the debt issued and liabilities assumed, the Company paid $11.5 million in cash at closing of the acquisition and held $2.7 million in escrow pending satisfaction of certain obligations, of which $1.6 million remained in escrow at December 31, 2006.

In August 2006, the Company acquired the fragrance business of Sovereign, a distributor of prestige fragrances to mass retail customers in North America. The assets acquired included inventory and certain intangible assets.  The purchase price consisted of (i) approximately $90.2 million in cash, comprised of $87.7 million paid in cash at closing and approximately $2.5 million in cash paid in five installments after the closing and (ii) $11.0 million in the form of contingent consideration that may be paid over two years from the date of closing if certain financial targets and other conditions are satisfied.  The cash portion of the purchase price has been preliminarily allocated as follows:  $67.2 million for inventory, $22.2 million for certain intangible assets, and $0.8 million of other assets.  If the contingent consideration is paid, the Company will allocate that amount to intangible assets.  The Company used the Credit Facility to fund the cash portion of the purchase price.  The Company has not finalized its allocation of the purchase price among the net assets acquired.



Disposals of Property and Equipment



On August 1, 2005, the Company sold its formercorporate headquarters and former distribution facility located on a 13-acre tract of land in Miami Lakes, Florida (the "Miami Lakes Facility").  The Company received approximately $9.9 million in net proceeds relating to the sale of the Miami Lakes Facility and associated equipment.



NOTE 9.     REPURCHASE OF COMMON STOCK



On November 2, 2005, the Board authorized the Company to implement a stock repurchase program to repurchase up to $40.0 million of Common Stock through March 31, 2007.  On November 2, 2006, the Board authorized the repurchase of an additional $40.0 million of Common Stock under the terms of the Company's existing stock repurchase program and extended the term of the stock repurchase program from March 31, 2007 to November 30, 2008.







- 13 -



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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



As of December 31, 2006, the Company had repurchased 1,862,169 shares of Common Stock on the open market at a cost of $33.9 million, including sales commissions. For the six months ended December 31, 2006, the Company repurchased 524,042 shares of Common Stock at an average price of $16.30 per share on the open market at a cost of $8.5 million, including sales commissions. These repurchases are accounted for under the treasury method.



NOTE 10.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION



The following condensed financial statements as of December 31, 2006 and as of June 30, 2006, and for the three and six month periods ended December 31, 2006 and 2005, show the consolidated financial statements of the Company, and, in separate financial statements, the financial statements of those subsidiaries that are guarantors of the 7 3/4% Senior Subordinated Notes, plus, in each case, the financial statements of non-guarantor entities, elimination adjustments and the consolidated total.  The Company's subsidiaries, DF Enterprises, Inc., FD Management, Inc., Elizabeth Arden International Holding, Inc., Elizabeth Arden (Financing), Inc., RDEN Management, Inc. and Elizabeth Arden Travel Retail, Inc., are guarantors of the 7 3/4% Senior Subordinated Notes.  Equity income of the guarantor subsidiaries is included in other expense (income), net.  All subsidiaries listed in this note are wholly-owned subsidiaries of the Company and their guarantees are joint and several, full and unconditional.  All information presented is in thousands.







[Remainder of Page Intentionally Left Blank]







- 14 -



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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



|Balance Sheet                           | As of December 31, 2006                                     
|--------------------------------------- | ------------------------------------------------------------
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|ASSETS                                  |                                                             
|Current Assets                          |                                                             
|                                        | Cash and cash equivalents                                   
|                                        | Accounts receivable, net                                    
|                                        | Inventories                                                 
|                                        | Intercompany receivable                                     
|                                        | Deferred income taxes                                       
|                                        | Prepaid expenses and other assets                           
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|Property and equipment, net             |                                                             
|                                        |                                                             
|Other Assets:                           |                                                             
|                                        | Investment in subsidiaries                                  
|                                        | Exclusive brand licenses, trademarks and 
  intangibles, net
|                                        | Debt financing costs, net                                   
|                                        | Other assets                                                
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|LIABILITIES AND SHAREHOLDERS' 
  EQUITY |                                                             
|Current Liabilities:                    |                                                             
|                                        | Short-term debt                                             
|                                        | Accounts payable -- trade                                   
|                                        | Intercompany payable                                        
|                                        | Other payables and accrued expenses                         
|                                        | Current portion of long-term debt                           
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        | Long-term debt, net                                         
|                                        | Deferred income taxes and other liabilities                 
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|Shareholders' Equity                    |                                                             
|                                        | Common stock                                                
|                                        | Additional paid-in capital                                  
|                                        | Retained earnings (accumulated deficit)                     
|                                        | Treasury Stock                                              
|                                        | Accumulated other comprehensive income                      
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             
|                                        |                                                             





- 15-





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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



|Balance Sheet                            | As of June 30, 2006                                          
|---------------------------------------- | -------------------------------------------------------------
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|ASSETS                                   |                                                              
|Current Assets:                          |                                                              
|                                         | Cash and cash equivalents                                    
|                                         | Accounts receivable, net                                     
|                                         | Inventories                                                  
|                                         | Intercompany receivable                                      
|                                         | Deferred income taxes                                        
|                                         | Prepaid expenses and other assets                            
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|Property and equipment, net              |                                                              
|                                         |                                                              
|Other Assets:                            |                                                              
|                                         | Investment in subsidiaries                                   
|                                         | Exclusive brand licenses, trademarks and 
   intangibles, net
|                                         | Debt financing costs, net                                    
|                                         | Other                                                        
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|LIABILITIES AND SHAREHOLDERS' 
   EQUITY |                                                              
|Current Liabilities:                     |                                                              
|                                         | Short-term debt                                              
|                                         | Accounts payable -- trade                                    
|                                         | Intercompany payable                                         
|                                         | Other payables and accrued expenses                          
|                                         | Current portion of long-term debt                            
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         | Long-term debt                                               
|                                         | Deferred income taxes and other liabilities                  
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|Shareholders' Equity                     |                                                              
|                                         | Common stock                                                 
|                                         | Additional paid-in capital                                   
|                                         | Retained earnings (accumulated deficit)                      
|                                         | Treasury stock                                               
|                                         | Accumulated other comprehensive income                       
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              
|                                         |                                                              

- 16 -



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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



|Statement of Operations                   | Three Months Ended December 31, 2006
|----------------------------------------- | ------------------------------------
|                                          |                                     
|                                          |                                     
|                                          |                                     
|Net sales                                 |                                     
|Cost of sales                             |                                     
|                                          |                                     
|Gross profit                              |                                     
|                                          |                                     
|Selling, general and administrative costs |                                     
|Depreciation and amortization             |                                     
|                                          |                                     
|Income from operations                    |                                     
|Other expense (income):                   |                                     
|                                          | Interest expense (income)           
|                                          | Other                               
|                                          |                                     
|Income before income taxes                |                                     
|Provision for income taxes                |                                     
|                                          |                                     
|Net income                                |                                     
|                                          |                                     
|                                          |                                     
|                                          |                                     





|Statement of Operations                   | Six Months Ended December 31, 2006
|----------------------------------------- | ----------------------------------
|                                          |                                   
|                                          |                                   
|                                          |                                   
|Net sales                                 |                                   
|Cost of sales                             |                                   
|                                          |                                   
|Gross profit                              |                                   
|                                          |                                   
|Selling, general and administrative costs |                                   
|Depreciation and amortization             |                                   
|                                          |                                   
|Income from operations                    |                                   
|Other expense (income):                   |                                   
|                                          | Interest expense (income)         
|                                          | Other                             
|                                          |                                   
|Income before income taxes                |                                   
|Provision for income taxes                |                                   
|                                          |                                   
|Net income                                |                                   
|                                          |                                   
|                                          |                                   
|                                          |                                   





- 17 -



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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



|Statement of Operations                   | Three Months Ended December 31, 2005
|----------------------------------------- | ------------------------------------
|                                          |                                     
|                                          |                                     
|                                          |                                     
|Net sales                                 |                                     
|Cost of sales                             |                                     
|                                          |                                     
|Gross profit                              |                                     
|                                          |                                     
|Selling, general and administrative costs |                                     
|Depreciation and amortization             |                                     
|                                          |                                     
|Income from operations                    |                                     
|Other expense (income):                   |                                     
|                                          | Interest expense (income)           
|                                          | Other                               
|                                          |                                     
|Income before income taxes                |                                     
|Provision for income taxes                |                                     
|                                          |                                     
|Net income                                |                                     
|                                          |                                     
|                                          |                                     
|                                          |                                     





|Statement of Operations                   | Six Months Ended December 31, 2005
|----------------------------------------- | ----------------------------------
|                                          |                                   
|                                          |                                   
|                                          |                                   
|Net sales                                 |                                   
|Cost of sales                             |                                   
|                                          |                                   
|Gross profit                              |                                   
|                                          |                                   
|Selling, general and administrative costs |                                   
|Depreciation and amortization             |                                   
|                                          |                                   
|Income from operations                    |                                   
|Other expense (income):                   |                                   
|                                          | Interest expense (income)         
|                                          | Other                             
|                                          |                                   
|Income before income taxes                |                                   
|Provision for income taxes                |                                   
|                                          |                                   
|Net income                                |                                   
|                                          |                                   
|                                          |                                   
|                                          |                                   





- 18 -



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ELIZABETH ARDEN, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



|Statement of Cash Flows                                         |                                                                                  | Six Months Ended December 31, 2006 |        
|--------------------------------------------------------------- | -------------------------------------------------------------------------------- | ---------------------------------- | -------
|                                                                |                                                                                  |                                    |        
|                                                                |                                                                                  | Company                            |        
|                                                                |                                                                                  |                                    |        
|Operating activities:                                           |                                                                                  |                                    |        
|Net cash provided by operating activities                       |                                                                                  | $                                  | 35,633 
|                                                                |                                                                                  |                                    |        
|                                                                |                                                                                  |                                    |        
|Investing activities:                                           |                                                                                  |                                    |        
|                                                                | Additions to property and equipment                                              |                                    |        
|                                                                | Acquisitions                                                                     |                                    |        
|                                                                |                                                                                  |                                    |        
|Net cash used in investing activities                           |                                                                                  |                                    | (97,006
|                                                                |                                                                                  |                                    |        
|                                                                |                                                                                  |                                    |        
|Financing activities:                                           |                                                                                  |                                    |        
|                                                                | Proceeds from short-term debt                                                    |                                    |        
|                                                                | Proceeds from the exercise of stock options                                      |                                    |        
|                                                                | Proceeds from issuance of common stock under 
  the employee stock purchase plan |                                    |        
|                                                                | Repurchase of common stock                                                       |                                    |        
|                                                                | Other                                                                            |                                    |        
|                                                                | Net change in intercompany obligations                                           |                                    |        
|                                                                |                                                                                  |                                    |        
|Net cash provided by (used in) financing activities             |                                                                                  |                                    | 70,226 
|                                                                |                                                                                  |                                    |        
|Effect of exchange rate changes on cash and cash 
  equivalents |                                                                                  |                                    | 300    
|Net increase in cash and cash equivalents                       |                                                                                  |                                    | 9,153  
|Cash and cash equivalents at beginning of period                |                                                                                  |                                    | 4,931  
|                                                                |                                                                                  |                                    |        
|Cash and cash equivalents at end of period                      |                                                                                  | $                                  | 14,084 
|                                                                |                                                                                  |                                    |        
|                                                                |                                                                                  |                                    |        
|                                                                |                                                                                  |                                    |        





|Statement of Cash Flows                                         | Six Months Ended December 31, 2005                                              
|--------------------------------------------------------------- | --------------------------------------------------------------------------------
|                                                                |                                                                                 
|                                                                |                                                                                 
|                                                                |                                                                                 
|Operating activities:                                           |                                                                                 
|Net cash provided by (used in) operating activities             |                                                                                 
|                                                                |                                                                                 
|                                                                |                                                                                 
|Investing activities:                                           |                                                                                 
|                                                                | Additions to property and equipment                                             
|                                                                | Proceeds from disposals of property and
  equipment                             
|                                                                | Acquisition                                                                     
|                                                                |                                                                                 
|Net cash provided by (used in) investing activities             |                                                                                 
|                                                                |                                                                                 
|                                                                |                                                                                 
|Financing activities:                                           |                                                                                 
|                                                                | Payments on short-term debt                                                     
|                                                                | Proceeds from the exercise of stock options                                     
|                                                                | Proceeds from issuance of common stock under 
  the employee stock purchase plan
|                                                                | Repurchase of common stock                                                      
|                                                                | Net change in intercompany obligations                                          
|                                                                |                                                                                 
|Net cash (used in) provided by financing activities             |                                                                                 
|                                                                |                                                                                 
|Effect of exchange rate changes on cash and cash 
  equivalents |                                                                                 
|Net (decrease) increase in cash and cash equivalents            |                                                                                 
|Cash and cash equivalents at beginning of period                |                                                                                 
|                                                                |                                                                                 
|Cash and cash equivalents at end of period                      |                                                                                 
|                                                                |                                                                                 
|                                                                |                                                                                 
|                                                                |                                                                                 

- 19 -



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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
                  OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Elizabeth Arden, Inc., is hereby providing cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in forward-looking statements (as defined in such Act) made in this quarterly report on Form 10-Q.  Any statements that are not historical facts and that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "intends," "plans," "believes," and "projects") may be forward-looking and may involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements.  Accordingly, any such statements are qualified in their entirety by reference to, and are accompanied by, the following key factors that have a direct bearing on our results of operations:



|* | our absence of contracts with customers or suppliers and our ability to maintain and develop relationships with customers and suppliers;                                                                                                              
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | international and domestic economic and business changes that could impact consumer confidence or our customers' operations;                                                                                                                          
|* | the impact of competitive products andpricing;                                                                                                                                                                                                        
|* | risks of international operations, including foreign currency fluctuations, economic and political consequences of terrorist attacks, and political instability in certain regions of the world;                                                      
|* | unexpected factors affecting customer or consumer preferences and/or purchasing patterns;                                                                                                                                                             
|* | the quality, safety and efficacy of our products;                                                                                                                                                                                                     
|* | our ability to successfully launch new products and implement our growth strategy;                                                                                                                                                                    
|* | the success or changes in the timing or scope of advertising and merchandising programs;                                                                                                                                                              
|* | our ability to successfully and cost-effectively integrate acquired businesses or new brands;                                                                                                                                                         
|* | our substantial indebtedness, debt service obligations and restrictive covenants in our revolving credit facility and the indenture for our 7 3/4% senior subordinated notes;                                                                         
|* | our customers' financial condition;                                                                                                                                                                                                                   
|* | our ability to access capital for acquisitions;                                                                                                                                                                                                       
|* | changes in product mix to less profitable products;                                                                                                                                                                                                   
|* | the retention and availability of key personnel;                                                                                                                                                                                                      
|* | the assumptions underlying our critical accounting estimates;                                                                                                                                                                                         
|* | delays in shipments, inventory shortages and higher costs of production due to interruption of operations at key third party manufacturing or fulfillment facilities that manufacture or provide logistic services for our supply of certain products;
|* | the loss of or disruption in our distribution facilities;                                                                                                                                                                                             
|* | changes in the retail, fragrance and cosmetic industries, including the consolidation of retailers and the associated closing of retail doors as well as retailer inventory control practices;                                                        
|* | our ability to protect our intellectual property rights;                                                                                                                                                                                              
|* | changes in the legal, regulatory and political environment that impact, or will impact, our business, including changes to customs or trade regulations or accounting standards; and                                                                  
|* | other unanticipated risks and uncertainties.                                                                                                                                                                                                          

We caution that the factors described herein could cause actual results to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements.  Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.  New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.





- 20 -



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General



This discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and related notes contained herein and the Consolidated Financial Statements and related notes and the Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the year ended June 30, 2006. The results of operations for an interim period may not give a true indication of results for the year.  In the following discussion, all comparisons are with the corresponding items in the prior year period.



Our operations have historically been seasonal, with higher sales generally occurring during the first half of the fiscal year (July through December) as a result of increased demand by retailers in anticipation of, and during, the holiday season.  During the fiscal year ended June 30, 2006, approximately 60% of our net sales were made during those months. Due to the size and timing of certain orders from our customers, sales, results of operations, working capital requirements and cash flows can vary between quarters of the same and different years.  As a result, we expect to experience variability in net sales, net income, working capital requirements and cash flows on a quarterly basis.



We experience seasonality in our working capital, with peak inventory levels from July to October and peak receivable balances from September to December.  Our working capital borrowings are also seasonal and are normally highest in the months of September, October and November.  Cash is normally generated during the months of December, January and February of each year, as customer payments on holiday season orders are received.

In June 2006, we acquired certain assets of Riviera Concepts, Inc., including licenses for the fragrance brands Badgley Mischka, Alfred Sung, HUMMERTM, Nanette Lepore, Lulu Guinness and Bob Mackie.  In August 2006, we acquired the fragrance business of Sovereign Sales, LLC, a distributor of fragrance brands to mass market retailers in North America.

Overview



For the three and six months ended December 31, 2006, net sales increased 18.8% and 16.1%, respectively.  Excluding the impact of foreign currency translation, net sales increased 17.3%and 15.0%, respectively.  The increase for the three and six months ended December 31, 2006 was driven mainly by higher sales of fragrances due to the Sovereign acquisition and sales from new brands, including the with Love...Hilary Duff fragrance and the brands acquired from Riviera. Also contributing to the increase were higher sales of Elizabeth Arden branded skin care and color products, primarily in international markets.  The increase in fragrance sales was partially offset by the loss of distributed brands previously manufactured by Unilever Cosmetics and lower sales of the Britney Spears fragrances in U.S. department stores due to the absence of a major product launch for the holiday season.  For the three and six months ended December 31, 2006, selling, general and administrative expenses increased 25.8% and 20.4%, respectively, compared to the prior year period principally due to higher promotional and product development costs related to new fragrance launches, higher compensation costs that were primarily incentive related, transition costs related to the recent acquisitions, and the unfavorable effect of foreign exchange rates.  Selling, general and administrative expenses were also affected by restructuring costs, primarily in our European operations.



Critical Accounting Policies and Estimates



We believe the accounting policies below represent our critical accounting policies.  See our Annual Report on Form 10-K for the year ended June 30, 2006 for a detailed discussion on the application of these and other accounting policies.



Accounting for Acquisitions and Intangible Assets.    We have accounted for our acquisitions under the purchase method of accounting for business combinations. Under the purchase method of accounting, the cost, including transaction costs, are allocated to the underlying net assets, based on their respective estimated fair values.  The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.



The judgments made in determining the estimated fair value and expected useful lives assigned to each class of assets and liabilities acquired can significantly affect net income.  For example, different classes of assets will have useful





- 21 -



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lives that differ and the useful life of property, plant, and equipment acquired will differ substantially from the useful life of brand licenses and trademarks.  Consequently, to the extent a longer-lived asset is ascribed greater value under the purchase method than a shorter-lived asset, net income in a given period may be higher.



Determining the fair value of certain assets and liabilities acquired is judgmental in nature and often involves the use of significant estimates and assumptions.  One of the areas that require more judgment is determining the fair value and useful lives of intangible assets.  To assist in this process, we often obtain appraisals from independent valuation firms for certain intangible assets.



Our intangible assets primarily consist of exclusive brand licenses and trademarks.   The value of our intangible assets, including brand licenses, trademarks and other intangibles, is exposed to future adverse changes if we experience declines in operating results or experience significant negative industry or economic trends. We periodically review intangible assets, at least annually or more often as circumstances dictate, for impairment and the useful life assigned using the guidance of applicable accounting literature.



We have determined that the Elizabeth Arden trademarks have indefinite useful lives, as cash flows from the use of the trademarks are expected to be generated indefinitely.  In the quarter ended March 31, 2006, we performed our annual impairment testing of these assets with the assistance of a third party valuation firm.  The analyses and assessments of these assets indicated that no impairment adjustment was required.



We have not finalized the allocation of the purchase price among the net assets acquired as part of the recent acquisitions involving Sovereign and Riviera.



Depreciation and Amortization.    Depreciation and amortization is provided over the estimated useful lives of the assets using the straight-line method.  Periodically, we review the lives assigned to our long-lived assets, and adjust the lives, as circumstances dictate.

Long-Lived Assets.    We review for the impairment of long-lived assets to be held and used whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable.  Measurement of an impairment loss is based on the fair value of the asset compared to its carrying value. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.



Revenue Recognition.    Sales are recognized when title and risk of loss transfers to the customer, the sales price is fixed or determinable and collectibility of the resulting receivable is probable.  Sales are recorded net of estimated returns and other allowances.  The provision for sales returns represents management's estimate of future returns based on historical experience and considering current external factors and market conditions.



Allowances for Sales Returns and Markdowns.    As is customary in the prestige beauty business, we grant certain of our customers, subject to our authorization and approval, the right to either return product or to receive a markdown allowance for certain promotional product.  Upon sale, we record a provision for product returns and markdowns estimated based on our historical and projected experience, economic trends and changes in customer demand.  There is considerable judgment used in evaluating the factors influencing the allowance for returns and markdowns, and additional allowances in any particular period may be needed.

Allowances for Doubtful Accounts Receivable.    We maintain allowances for doubtful accounts to cover uncollectible accounts receivable, and we evaluate our accounts receivable to determine if they will ultimately be collected.  This evaluation includes significant judgments and estimates, including an analysis of receivables aging and a customer-by-customer review for large accounts. If, for example, the financial condition of our customers deteriorates resulting in an impairment of their ability to pay, additional allowances may be required.



Provisions for Inventory Obsolescence.We record a provision for estimated obsolescence and shrinkage of inventory.  Our estimates consider the cost of inventory, forecasted demand, the estimated market value, the shelf life of the inventory and our historical experience.  If there are changes to these estimates, additional provisions for inventory obsolescence may be necessary.







- 22 -



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Hedge Contracts.    We have designated each qualifying foreign currency contract we have entered into as a cash flow hedge.  Unrealized gains or losses, net of taxes, associated with these contracts are included in accumulated other comprehensive income on the balance sheet.  Gains and losses will only be recognized in earnings in the period in which the contracts expire.



Share-Based Compensation

We rely on our historical experience and post-vested termination activity to provide data for estimating our expected term for use in determining the fair value of our stock options.  We currently estimate our stock volatility by considering our historical stock volatility experience and other key factors.  The risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the input to the Black-Scholes model.  We estimate forfeitures using our historical experience.  Our estimates of forfeitures will be adjusted over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from their estimates.



Income Taxes and Valuation Reserves.    A valuation allowance may be required to reduce deferred tax assets to the amount that is more likely than not to be realized.  We consider projected future taxable income and ongoing tax planning strategies in assessing a potential valuation allowance. In the event we determine that we may not be



Results of Operations

The following discussion compares the historical results of operations for the three and six months ended December 31, 2006 and December 31, 2005.  Results of operations as a percentage of net sales were as follows (dollar amounts in thousands, percentages may not add due to rounding):

















[Remainder of Page Intentionally Left Blank]



















- 23 -





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|                                                |                            | Three Months Ended |         | Six Months Ended  
|----------------------------------------------- | -------------------------- | ------------------ | ------- | ------------------
|                                                |                            |                    |         |                   
|                                                |                            | December 31, 
2006 |         | December 31, 
2005
|                                                |                            |                    |         |                   
|Net sales                                       |                            | $                  | 410,771 |                   
|Cost of sales                                   |                            |                    | 252,817 |                   
|                                                | Gross profit               |                    |         | 157,954           
|Selling, general and administrative 
  expenses |                            |                    | 108,322 |                   
|Depreciation and amortization                   |                            |                    | 6,350   |                   
|                                                | Income from operations     |                    |         | 43,282            
|Interest expense, net                           |                            |                    | 8,529   |                   
|                                                | Income before income taxes |                    |         | 34,753            
|Provision for income taxes                      |                            |                    | 8,897   |                   
|                                                | Net income                 |                    |         | 25,856            
|                                                |                            |                    |         |                   
|Other data                                      |                            |                    |         |                   
|EBITDA and EBITDA margin (1)                    |                            | $                  | 49,632  |                   





|(1)  For a definition of EBITDA and a reconciliation of net income to EBITDA, see "EBITDA" under Results of Operations - Three Months Ended December 31, 2006 Compared to Three Months Ended December 31, 2005.  EBITDA margin represents EBITDA divided by net sales.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Three Months Ended December 31, 2006 Compared to Three Months Ended December 31, 2005



Net Sales.    Net sales increased 18.8% for the three months ended December 31, 2006 compared to the three months ended December 31, 2005.  Excluding the impact of foreign currency translation, net sales increased 17.3%.  The increase is due to approximately $51 million of higher sales of distributed fragrances, primarily due to the Sovereign acquisition, net of the loss of distributed brands previously manufactured by Unilever Cosmetics. Also contributing to the increase was an increase of approximately $17 million in net sales from new brands, including the with Love...Hilary Dufffragrance and the brands acquired as part of the Riviera acquisition, and an increase of approximately $12 million from higher sales of Elizabeth Arden branded skin care and color products, primarily in international markets.  Partially offsetting these increases is approximately $6 million of lower sales of the Britney Spears fragrances in U.S. department stores due to the absence of a major product launch for the holiday season.  Pricing changes had an immaterial effect on net sales.



Gross Profit.    Gross profit increased by 8.4% for the three months ended December 31, 2006 compared to the three months ended December 31, 2005.  The increase in gross profit was primarily due to the higher sales volumes.  Gross margin decreased to 38.5% for the three months ended December 31, 2006, from 42.1% for the three months ended December 31, 2005 due to (i) a higher proportion of our net sales coming from distributed fragrances, which traditionally operate at lower gross margins than our owned and licensed fragrance brands, as a result of the Sovereign acquisition, and (ii) transition costs associated with the Riviera and Sovereign acquisitions.



SG&A.    Selling, general and administrative expenses increased 25.8% for the three months ended December 31, 2006 over the three months ended December 31, 2005.  The increase was principally due to higher promotional and product development costs of $10.0 million mainly related to new fragrance launches, employee compensation costs that were primarily incentive related of $8.3 million, and the unfavorable effect of foreign exchange rates of $0.9 million.  Also contributing to the increase were transition costs associated with the Riviera and Sovereign acquisitions.



Depreciation and Amortization.    Depreciation and amortization increased by 18.1% for the three months ended December 31, 2006 compared to the three months ended December 31, 2005.  The increase is primarily a result of the amortization of intangible assets associated with the Riviera and Sovereign acquisitions and higher depreciation costs due to the higher level of capital additions during the fiscal year ended June 30, 2006 as compared to the previous year.



Interest Expense.    Interest expense, net of interest income, increased by 28.0% for the three months ended December 31, 2006 compared to the three months ended December 31, 2005.  The increase is a result of higher average borrowings under our credit facility primarily due to the approximately $88.0 million of cash paid at closing for the Sovereign acquisition in August 2006.

- 24 -



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Provision for Income Taxes.    A provision for income taxes of approximately $8.9 million was recorded for the three months ended December 31, 2006, compared to approximately $14.5 million for the three months ended December 31, 2005 due to lower income from operations, higher interest expense and a lower effective tax rate.  The effective tax rate for the three months ended December 31, 2006 and 2005 was 25.6% and 30.5%, respectively, reflecting anticipated increased earnings contributions from our international affiliates in the current year as compared to what we were expecting at December 31, 2005.  Our international affiliates generally have lower tax rates than our U.S. operations.



Net Income.    Net income for the three months ended December 31, 2006 was $25.9 million as compared to $33.1 million for the three months ended December 31, 2005. The decrease was primarily a result of lower income from operations due to the higher selling, general and administrative expenses, partially offset by higher net sales, gross profit and a decrease in the provision for income taxes.



EBITDA.    EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) decreased by $10.0 million to $49.6 million for the three months ended December 31, 2006, compared to $59.6 million for the three months ended December 31, 2005.  The decrease in EBITDA was primarily the result of higher selling, general and administrative expenses, partially offset by higher net sales and gross profit.



EBITDA should not be considered as an alternative to operating income (loss) or net income (loss) (as determined in accordance with generally accepted accounting principles) as a measure of our operating performance or to net cash provided by operating, investing and financing activities (as determined in accordance with generally accepted accounting principles) or as a measure of our ability to meet cash needs. We believe that EBITDA is a measure commonly reported and widely used by investors and other interested parties as a measure of a company's operating performance and debt servicing ability because it assists in comparing performance on a consistent basis without regard to capital structure (particularly when acquisitions are involved), depreciation and amortization, or non-operating factors such as historical cost.  Accordingly, as a result of our capital structure, we believe EBITDA is a relevant measure.  This information has been disclosed here to permit a more complete comparative analysis of our operating performance relative to other companies and of our debt servicing ability. EBITDA may not, however, be comparable in all instances to other similar types of measures.

In addition, EBITDA has limitations as an analytical tool, including the fact that:





|* | it does not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;                                                                                                                
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                    
|* | it does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments on our debt;                                                                                     
|  |                                                                                                                                                                                                                                    
|* | it does not reflect any cash income taxes that we may be required to pay; and                                                                                                                                                      
|  |                                                                                                                                                                                                                                    
|* | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and these measures do not reflect any cash requirements for such replacements.



The following is a reconciliation of net income, as determined in accordance with generally accepted accounting principles, to EBITDA:





|(Amounts in thousands) | Three Months Ended            |       
|---------------------- | ----------------------------- | ------
|                       |                               |       
|                       | December 31, 
2006            |       
|                       |                               |       
|Net income             | $                             | 25,856
|Plus:                  |                               |       
|                       | Provision for income taxes    |       
|                       | Interest expense, net         |       
|                       | Depreciation and amortization |       
|                       |                               |       
|                       |                               | EBITDA
|                       |                               |       
|                       |                               |       
|                       |                               |       

- 25 -



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Six Months Ended December 31, 2006 Compared to Six Months Ended December 31, 2005



Net Sales.    Net sales increased 16.1% for the six months ended December 31, 2006 compared to the six months ended December 31, 2005.  Excluding the impact of foreign currency translation, net sales increased 15.0%.  The increase is due to approximately $68 million of higher sales of distributed fragrances, primarily due to the Sovereign acquisition, net of the loss of distributed brands previously manufactured by Unilever Cosmetics.  Also contributing to the increase was an increase of approximately $39 million in net sales from new brands, including the with Love...Hilary Dufffragrance and the brands acquired as part of the Riviera acquisition, and an increase of approximately $24 million in higher sales of Elizabeth Arden branded skin care and color products, primarily in international markets.  Partially offsetting these increases is approximately $13 million of lower sales of the Britney Spears fragrances in U.S. department stores due to the absence of a major product launch for the holiday season.  Pricing changes had an immaterial effect on net sales.



Gross Profit.    Gross profit increased by 9.5% for the six months ended December 31, 2006 compared to the six months ended December 31, 2005.  The increase in gross profit was primarily due to the higher sales volumes.  Gross margin decreased to 38.6% for the six months ended December 31, 2006, from 41.0% for the six months ended December 31, 2005 due to (i) a higher proportion of our net sales coming from distributed fragrances, which traditionally operate at lower gross margins than our owned and licensed fragrance brands, as a result of the Sovereign acquisition, and (ii) transition costs associated with the Riviera and Sovereign acquisitions.



SG&A.    Selling, general and administrative expenses increased 20.4% for the six months ended December 31, 2006 over the six months ended December 31, 2005.  The increase was principally due to higher promotional and product development costs of $12.0 million mainly related to new fragrance launches, employee compensation costs that were primarily incentive related of $10.9 million, and the unfavorable effect of foreign exchange rates of $2.2 million.  Also contributing to the increase were costs of $1.7 million in connection with our restructuring plans announced in May 2006, primarily in our European operations, and transition costs associated with the Riviera and Sovereign acquisitions.



Depreciation and Amortization.    Depreciation and amortization increased by 19.2% for the six months ended December 31, 2006 compared to the six months ended December 31, 2005.  The increase is primarily a result of the amortization of intangible assets associated with the Riviera and Sovereign acquisitions and higher depreciation costs due to the higher level of capital additions during the fiscal year ended June 30, 2006 as compared to the previous years.



Interest Expense.  Interest expense, net of interest income, increased by 24.4% for the six months ended December 31, 2006 compared to the six months ended December 31, 2005.  The increase is a result of higher average borrowings under our credit facility primarily due to the approximately $88.0 million of cash paid at closing for the Sovereign acquisition in August 2006.



Provision for Income Taxes.    A provision for income taxes of approximately $8.4 million was recorded for the six months ended December 31, 2006, compared to approximately $14.9 million for the six months ended December 31, 2005 due to lower income from operations, higher interest expense and a lower effective tax rate.  The effective tax rate for the six months ended December 31, 2006 and 2005 was 25.6% and 30.5%, respectively, reflecting anticipated increased earnings contributions from our international affiliates in the current year as compared to what we were expecting at December 31, 2005.  Our international affiliates generally have lower tax rates than our U.S. operations.



Net Income.    Net income for the six months ended December 31, 2006 was $24.5 million as compared to $34.0 million for the six months ended December 31, 2005. The decrease was primarily a result of lower income from operations due to the higher selling, general and administrative expenses and depreciation and amortization expenses and higher interest costs, partially offset by higher net sales, gross profit and a decrease in the provision for income taxes.



EBITDA.    EBITDA (net income plus the provision for income taxes (or net loss less the benefit from income taxes), plus interest expense, plus depreciation and amortization expense) decreased by $10.7 million to $61.6 million for the six months ended December 31, 2006, compared to $72.3 million for the six months ended December 31, 2005.  The decrease in EBITDA was primarily the result of higher selling, general and administrative expenses, partially offset by higher net sales and gross profit.





- 26 -



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The following is a reconciliation of net income, as determined in accordance with generally accepted accounting principles, to EBITDA:





|(Amounts in thousands) | Six Months Ended              |       
|---------------------- | ----------------------------- | ------
|                       |                               |       
|                       | December 31, 
2006            |       
|                       |                               |       
|Net income             | $                             | 24,542
|Plus:                  |                               |       
|                       | Provision for income taxes    |       
|                       | Interest expense, net         |       
|                       | Depreciation and amortization |       
|                       |                               |       
|                       |                               | EBITDA
|                       |                               |       
|                       |                               |       
|                       |                               |       



Financial Condition



|(Amounts in thousands)                                   | Six Months Ended   |         
|-------------------------------------------------------- | ------------------ | --------
|                                                         |                    |         
|                                                         | December 31, 
2006 |         
|                                                         |                    |         
|Net cash provided by operating activities                | $                  | 47,936  
|Net cash used in investing activities                    |                    | (101,711
|Net cash provided by (used in) financing activities      |                    | 68,384  
|Net increase (decrease) in cash and cash 
   equivalents |                    | 14,909  

Cash Flows.    Net cash provided by operating activities increased by approximately $16.8 million or 54.0% for the six months ended December 31, 2006 as compared to the six months ended December 31, 2005.  The increase for the six months ended December 31, 2006 is primarily due to increases totaling approximately $57.4 million in accounts payable and other payables and accrued expenses as a result of the timing of payments to vendors and increased accounts payable and accruals reflecting increased sales volume resulting from the Sovereign and Riviera acquisitions, and higher incentive compensation accruals.  This increase was partially offset by additional working capital to support the increased sales volume, including approximately $19.2 million of increased inventory and approximately $10.5 million of increased accounts receivable, and approximately $9.4 million of lower net income.



For the six months ended December 31, 2006, net cash used in investing activities was approximately $101.7 million, as compared to approximately $2.5 million for the six months ended December 31, 2005.  The increase in net cash used in investing activities is primarily a result of approximately $87.7 million in cash paid at closing and $2.4 million in cash paid in installments in connection with the Sovereign acquisition.  Additionally, we realized approximately $9.9 million of cash proceeds from the sale of our Miami Lakes facility in the prior year period.



For the six months ended December 31, 2006, net cash provided by financing activities was approximately $68.4 million, as compared to approximately $32.9 million of net cash used in financing activities for the six months ended December 31, 2005.  The increase in borrowings under our credit facility is primarily due to borrowings used to fund a portion of the purchase price for the Sovereign acquisition in August 2006 and the Riviera acquisition in June 2006. See Note 8 to Notes to Unaudited Consolidated Financial Statements.



Interest paid during the six months ended December 31, 2006 included $8.7 million of interest payments on the 7 3/4% senior subordinated notes due 2014, which is paid semi-annually on February 15 and August 15 of each year, and $6.2 million of interest paid on the borrowings under our credit facility.  Interest paid during the six months ended December 31, 2005 included $8.6million of interest payments on the 7 3/4% senior subordinated notes and  $3.2 million paid on the borrowings under our credit facility.















- 27 -



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Future Liquidity and Capital Needs.   Our principal future uses of funds are for working capital requirements, including brand development and marketing expenses, new product launches, additional brand acquisitions or product distribution arrangements, capital expenditures and debt service.  In addition, we may use funds to repurchase our common stock and notes.  We have historically financed, and we expect to continue to finance, our needs primarily through internally generated funds, our credit facility and external financing.  We collect cash from our customers based on our sales to them and their respective payment terms.



We have a revolving credit facility with a syndicate of banks, for which JPMorgan Chase Bank is the administrative agent, which provides for borrowings on a revolving basis of up to $250 million with a $25 million sublimit for letters of credit.  The credit facility expires in December 2010.  Under the terms of the credit facility, we may increase the size of the credit facility up to $300 million without entering into a formal amendment requiring the consent of all of the banks, subject to our satisfaction of certain conditions.



On August 11, 2006, we amended the credit facility in connection with the acquisition of certain assets of Sovereign to (i) increase the credit facility from $200 million to $300 million until December 31, 2006, following which the limit was set at $250 million, (ii) amend the definition of the borrowing base through December 31, 2006 to increase the borrowings on eligible inventory and provide for a temporary increase in borrowing availability of $25 million, and (iii) include the indebtedness issued and assumed pursuant to the June 2006 acquisition of certain assets of Riviera and the indebtedness issued pursuant to the August 2006 acquisition of certain assets of Sovereign under "permitted indebtedness" as defined in the credit facility.



The credit facility is guaranteed by all of our U.S. subsidiaries. Borrowings under the credit facility are limited to 85% of eligible accounts receivable and 75% (65% December 1 through May 31) of eligible finished goods inventory and are collateralized by a first priority lien on all of the our U.S. accounts receivable and inventory. Under the August 2006 amendment, the borrowing limit on eligible finished goods inventory prior to December 31, 2006 ranged from 80% to 90%. Our obligations under the credit facility rank senior to our 7 3/4% senior subordinated notes due 2014.



The credit facility has only one financial maintenance covenant, which is a debt service coverage ratio that must be maintained at not less than 1.1 to 1 if average borrowing availability declines to less than $25 million ($35 million from December 1 through May 31).  No financial maintenance covenant was applicable for the six months ended December 31, 2006.  Under the terms of the credit facility, we may pay dividends or repurchase common stock if we maintain borrowing availability after the applicable payment of at least $25 million from June 1 to November 30, and at least $35 million from December 1 to May 31. The credit facility restricts us from incurring additional non-trade indebtedness (other than refinancings and certain small amounts of indebtedness).



Borrowings under the credit portion of the credit facility bear interest at a floating rate based on the "Applicable Margin," which is determined by reference to a specific financial ratio.  At our option, the Applicable Margin may be applied to either the London InterBank Offered Rate (LIBOR) or the prime rate.  The reference ratio for determining the Applicable Margin is a debt service coverage ratio. The Applicable Margin charged on LIBOR loans ranges from 1.00% to 1.75% and is 0% for prime rate loans.  As of December 31, 2006, the Applicable Margin was 1.25% for LIBOR loans and 0% for prime rate loans.  The commitment fee on the unused portion of the credit facility is 0.25%.  As a result of the August 2006 amendment, the interest rate charged on the first $25 million of borrowings was LIBOR plus 2.5% through November 30, 2006.



As of December 31, 2006, we had $115 million in outstanding borrowings and approximately $4 million in letters of credit outstanding under the credit facility, approximately $225 million of eligible receivables and inventories available as collateral under the credit facility, and remaining borrowing availability of approximately $105 million. We used approximately $88 million of borrowings under our credit facility to pay a majority of the purchase price for the acquisition of certain assets of Sovereign in August 2006.



We believe that existing cash and cash equivalents, internally generated funds and borrowings under our credit facility will be sufficient to cover debt service, working capital requirements and capital expenditures for the next twelve months, other than additional working capital requirements that may result from further expansion of our operations through acquisitions of additional brands or new product launches or distribution arrangements.







- 28 -



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Repurchases of Common Stock.    On November 2, 2005, our board of directors authorized us to implement a stock repurchase program to repurchase up to $40.0 million of our common stock through March 31, 2007. On November 2, 2006, our board of directors authorized the repurchase of an additional $40.0 million of our common stock under the terms of our existing stock repurchase program and extended the term of the stock repurchase program from March 31, 2007 to November 30, 2008.  As of December 31, 2006, we have repurchased 1,862,169 shares of common stock on the open market at a cost of approximately $33.9 million, including sales commissions.  For the six months ended December 31, 2006, we repurchased 524,042 shares of common stock at an average price of $16.30 per share on the open market at a cost of approximately $8.5 million, including sales commissions.  These repurchases are accounted for under the treasury method.



Contractual Obligations.    At December 31, 2006, we had contractual obligations to incur promotional and advertising expenses, which are either fixed commitments or based on net sales for licensed brands, and minimum royalty guarantees in an aggregate amount of $77.4 million through 2011, compared with $75.2 million through 2011 at June 30, 2006.



New Accounting Standards

Accounting for Uncertainty in Income Taxes



In June 2006, the Financial Accounting Standards Board issued Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109," which requires a company to recognize, measure, and disclose in its financial statements uncertain tax positions it has taken or expects to take in a tax return.  This interpretation will be effective for us beginning on July 1, 2007. In anticipation of the adoption of this interpretation, we are in the process of assessing the impact of this interpretation on our consolidated financial statements.



Fair Value Measurements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements.  SFAS 157 will be effective for us on July 1, 2008. We are currently evaluating the impact of SFAS 157 on our consolidated financial statements.



Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements



In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment.  SAB 108 is effective for us during the fiscal year ending June 30, 2007 and permits a one-time transitional cumulative effect adjustment to beginning retained earnings as of July 1, 2006, for errors that were not previously deemed material, but are material under the guidance in SAB 108.  We do not believe the adoption of SAB 108 will have a material impact on our consolidated financial statements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of December 31, 2006, we had $115.0 million in borrowings outstanding under our credit facility.  Borrowings under our credit facility are seasonal, with peak borrowings in the months of September, October and November.  Borrowings under the credit facility are subject to variable rates and, accordingly, our earnings and cash flow will be affected by changes in interest rates.  Based upon our average borrowings under our credit facility during the quarter ended December 31, 2006, and assuming there had been a two percentage point change in the average interest rate for these borrowings, it is estimated that our interest expense for the three and six months ended December 31, 2006, would have increased or decreased by approximately $1.1 and $1.9 million, respectively. See Note 6 to the Notes to Unaudited Consolidated Financial Statements.

- 29 -



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Foreign Currency Risk



We sell our products in approximately 90 countries around the world.  During the three and six months ended December 31, 2006, we derived approximately 32.0%and 33.0%, respectively,of our net sales from our international operations.   We conduct our international operations in a variety of different countries and derive our sales in various currencies including the Euro, British pound, Swiss franc, Canadian dollar and Australian dollar, as well as the U.S. dollar.  Most of our skin care and cosmetic products are produced in a U.S. third-party manufacturing facility located in Roanoke, Virginia. Our operations may be subject to volatility because of currency changes, inflation changes and changes in political and economic conditions in the countries in which we operate.  With respect to international operations, our sales, cost of goods sold and expenses are typically denominated in a combination of local currency and the U.S. dollar.  Our results of operations are reported in U.S. dollars. Fluctuations in currency rates can affect our reported sales, margins, operating costs and the anticipated settlement of our foreign denominated receivables and payables.  A weakening of the foreign currencies in which we generate sales relative to the currencies in which our costs are denominated, which is primarily the U.S. dollar, may decrease our reported cash flow and operating profits.  Our competitors may or may not be subject to the same fluctuations in currency rates, and our competitive position could be affected by these changes.  The cumulative effect of translating balance sheet accounts from the functional currency into the U.S. dollar at current exchange rates is included in "Accumulated other comprehensive income" in our consolidated balance sheets.



As of December 31, 2006, we had notional amounts of 40.3 million Euros and 17.6 million British pounds under foreign currency contracts that expire between January 31, 2007 and June 30, 2008 to reduce the exposure of our foreign subsidiary revenues to fluctuations in currency rates.  We have designated each qualifying foreign currency contract as a cash flow hedge.  The gains and losses of these contracts will only be recognized in earnings in the period in which the contracts expire.  At December 31, 2006, the unrealized loss, net of taxes associated with these contracts of approximately $1.5 million, is included in accumulated other comprehensive income. The unrealized loss, net of taxes, generated during the three and six months ended December 31, 2006, was approximately $1.8 million and $1.2 million, respectively.







We do not utilize foreign exchange contracts for trading or speculative purposes.  There can be no assurance that our hedging operations or other exchange rate practices, if any, will eliminate or substantially reduce risks associated with fluctuating exchange rates.



ITEM 4.    CONTROLS AND PROCEDURES

The Company's Chairman, President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, who are the principal executive officer and principal financial officer, respectively, have evaluated the effectiveness and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report (the "Evaluation Date").  Based upon such evaluation, they have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective.



There have been no changes in the Company's internal control over financial reporting during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.















- 30 -



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PART II.   OTHER INFORMATION

ITEM 1A.    RISK FACTORS







ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





Issuer Purchases of Equity Securities



|                                            |  | (a)                              |  |                               | (b)   |                                                                                  | (c)       |                                                                                    |   | (d)        |    
|------------------------------------------- |  | -------------------------------- |  | ----------------------------- | ----- | -------------------------------------------------------------------------------- | --------- | ---------------------------------------------------------------------------------- | - | ---------- | ---
|                                            |  |                                  |  |                               |       |                                                                                  |           |                                                                                    |   |            |    
|Period                                      |  | Total Number of Shares Purchased |  | Average Price Paid Per Shares |       | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |           | Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs (2) |  
|                                            |  |                                  |  |                               |       |                                                                                  |           |                                                                                    |   |            |    
|October 1, 2006 through 
October 31, 2006   |  | 135,670                          |  | $                             | 17.13 |                                                                                  | 2,323,757 |                                                                                    | $ | 6,321,381  |    
|                                            |  |                                  |  |                               |       |                                                                                  |           |                                                                                    |   |            |    
|November 1, 2006 through 
November 30, 2006 |  | 11,066                           |  | $                             | 18.15 |                                                                                  | 200,810   |                                                                                    | $ | 46,120,572 | (3)
|                                            |  |                                  |  |                               |       |                                                                                  |           |                                                                                    |   |            |    
|December 1, 2006 through 
December 31, 2006 |  | --                               |  | $                             | --    |                                                                                  | --        |                                                                                    | $ | 46,120,572 |    
|                                            |  |                                  |  |                               |       |                                                                                  |           |                                                                                    |   |            |    
|Totals                                      |  | 146,736                          |  | $                             | 17.20 |                                                                                  | 2,524,567 |                                                                                    | $ | 46,120,572 |    
|                                            |  |                                  |  |                               |       |                                                                                  |           |                                                                                    |   |            |    
|                                            |  |                                  |  |                               |       |                                                                                  |           |                                                                                    |   |            |    
|                                            |  |                                  |  |                               |       |                                                                                  |           |                                                                                    |   |            |    





|(1)   On November 2, 2005, our board of directors authorized us to implement a stock repurchase program to repurchase up to $40 million of our common stock through March 31, 2007.  The stock repurchase program was announced on November 3, 2005.  All shares repurchased during the quarter ended December 31, 2006 were purchased on the open market.            
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                      
|(2)   Amounts reflect the remaining dollar value of shares that may be purchased under the stock repurchase program.                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                      
|(3)   On November 2, 2006, our board of directors authorized the repurchase of an additional $40 million of our common stock under the terms of our existing stock repurchase program and extended the term of the stock repurchase program from March 31, 2007 to November 30, 2008. The extension of the stock repurchase program was announced on November 3, 2006.



























- 31 -



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ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



|(a) |  | The Annual Meeting of Shareholders (the "Annual Meeting") of the Company was held on November 15, 2006, in Miramar, Florida.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                             
|(b) |  | The following directors were elected at the Annual Meeting:                                                                 
|    |  |                                                                                                                             
|    |  |                                                                                                                             
|    |  |                                                                                                                             
|    |  |                                                                                                                             
|    |  |                                                                                                                             
|    |  |                                                                                                                             
|    |  |                                                                                                                             
|    |  |                                                                                                                             
|    |  |                                                                                                                             
|(c) |  | The shareholders voted at the Annual Meeting on the following matters:                                                      



| | 1. | The vote on the election of directors to serve until the next annual meeting of shareholders or until their successors are duly elected and qualified was as follows:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |                     |  | Votes Cast
| |  |  | ------------------- |  | ----------
| |  |  |                     |  |           
| |  |  |                     |  | For       
| |  |  |                     |  |           
| |  |  | E. Scott Beattie    |  | 23,745,622
| |  |  | Fred Berens         |  | 23,750,575
| |  |  | Maura J. Clark      |  | 26,015,658
| |  |  | Richard C.W. Mauran |  | 22,916,984
| |  |  | William M. Tatham   |  | 26,014,003
| |  |  | J. W. Nevil Thomas  |  | 23,748,575
| |  |  | Paul West           |  | 23,750,850

| | 2. | The vote on the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the fiscal year ending June 30, 2007, was as follows:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Votes Cast
|----------
|          
|          
|For       
|          
|25,910,002



































- 32 -





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ITEM 6.    EXHIBITS

|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3.1            |  | Amended and Restated Articles of Incorporation of the Company dated November 17, 2005 (incorporated herein by reference to Exhibit 3.1 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2005 (Commission File No. 1-6370)).                                                                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3.2            |  | Amended and Restated By-laws of the Company (incorporated herein by reference to Exhibit 3.2 filed as part of the Company's Form 10-Q for the transition period from February 1, 2004 to June 30, 2004 (Commission File No. 1-6370)).                                                                                                                                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.1            |  | Indenture dated as of January 13, 2004, among the Company and FD Management, Inc., DF Enterprises, Inc., Elizabeth Arden International Holding, Inc., RDEN Management, Inc., Elizabeth Arden (Financing), Inc., Elizabeth Arden Travel Retail, Inc., as guarantors, and HSBC Bank USA, as trustee (incorporated herein by reference to Exhibit 4.3 to the Company's Form 10-K for the year ended January 31, 2004 (Commission File No. 1-6370)).                    
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.2            |  | Second Amended and Restated Credit Agreement dated as of December 24, 2002 among the Company, JPMorgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.1 filed as part of the Company's Form 8-K dated December 30, 2002 (Commission File No. 1-6370)).                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.3            |  | First Amendment to Second Amended and Restated Credit Agreement dated as of February 25, 2004, among the Company, JP Morgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated by reference to Exhibit 4.6 filed as part of the Company's Form 10-Q for the quarter ended May 1, 2004 (Commission File No. 1-6370)).                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.4            |  | Second Amendment to Second Amended and Restated Credit Agreement dated as of June 2, 2004, among the Company, JP Morgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.6 to the Company's Form 10-Q for the quarter ended May 1, 2004 (Commission File No. 1-6370)).                                                             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.5            |  | Third Amendment to Second Amended and Restated Credit Agreement dated as of December 31, 2004, among the Company, JP Morgan Chase Bank, as administrative agent, Fleet National Bank, as collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.1 filed as part of the Company's Form 8-K dated October 1, 2004 (Commission File No. 1-6370)).                                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.6            |  | Fourth Amendment to Second Amended and Restated Credit Agreement dated as of November 2, 2005, among the Company, JP Morgan Chase Bank, as administrative agent, Bank of America, N.A. (formerly Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 4.8 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2005 (Commission File No. 1-6370)).
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.7            |  | Fifth Amendment to Second Amended and Restated Credit Agreement dated as of August 11, 2006, among the Company, JP Morgan Chase Bank, as administrative agent, Bank of America, N.A. (formerly Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto (incorporated by reference to Exhibit 4.7 filed as part of the Company's Form 10-K for the year ended June 30, 2006 (Commission File No. 1-6370)).                
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|4.8            |  | Amended and Restated Security Agreement dated as of January 29, 2001, made by the Company and certain of its subsidiaries in favor of Fleet National Bank, as administrative agent (incorporated herein by reference to Exhibit 4.5 filed as part of the Company's Form 8-K dated February 7, 2001 (Commission File No. 1-6370)).                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     





- 33 -



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|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                 
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                             
|10.1           |  | Amended 2004 Stock Incentive Plan. (incorporated by reference to Exhibit 10.1 filed as part of the Company's Form 10-Q for the quarter ended September 30, 2006 (Commission file No. 1-6370)).                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                             
|10.2           |  | Amended 2004 Non-Employee Director Stock Option Plan. (incorporated by reference to Exhibit 10.2 filed as part of the Company's Form 10-Q for the quarter ended September 30, 2006 (Commission file No. 1-6370)).                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                             
|10.3           |  | Amended 2000 Stock Incentive Plan. (incorporated by reference to Exhibit 10.3 filed as part of the Company's Form 10-Q for the quarter ended September 30, 2006 (Commission file No. 1-6370)).                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                             
|10.4           |  | Amended 1995 Stock Option Plan. (incorporated by reference to Exhibit 10.4 filed as part of the Company's Form 10-Q for the quarter ended September 30, 2006 (Commission file No. 1-6370)).                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                             
|10.5           |  | Amended 2002 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 filed as part of the Company's Form 10-K for the year ended June 30, 2006 (Commission File No. 1-6370)).                                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                             
|10.6           |  | Amended Non-Employee Director Stock Option Plan. (incorporated by reference to Exhibit 10.6  filed as part of the Company's Form 10-Q for the quarter ended September 30, 2006 (Commission file No. 1-6370)).                                                                                               
|               |  |                                                                                                                                                                                                                                                                                                             
|10.7           |  | Amended and Restated Deed of Lease dated as of January 17, 2003, between the Company and Liberty Property Limited Partnership (incorporated herein by referenced to Exhibit 10.5 filed as a part of the Company's Form 10-Q for the quarter ended April 26, 2003 (Commission File No. 1-6370)).             
|               |  |                                                                                                                                                                                                                                                                                                             
|10.8           |  | Form of Nonqualified Stock Option Agreement for stock option awards under the Company's Amended Non-Employee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.8 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).    
|               |  |                                                                                                                                                                                                                                                                                                             
|10.9           |  | Form of Incentive Stock Option Agreement for stock option awards under the Company's Amended 1995 Stock Option Plan (incorporated herein by reference to Exhibit 10.9 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).                        
|               |  |                                                                                                                                                                                                                                                                                                             
|10.10          |  | Form of Nonqualified Stock Option Agreement for stock option awards under the Company's Amended 1995 Stock Option Plan (incorporated herein by reference to Exhibit 10.10 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).                    
|               |  |                                                                                                                                                                                                                                                                                                             
|10.11          |  | Form of Stock Option Agreement for stock option awards under the Company's 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.11 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).                                      
|               |  |                                                                                                                                                                                                                                                                                                             
|10.12          |  | Form of Restricted Stock Agreement for service-based restricted stock awards under the Company's Amended 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.12 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).        
|               |  |                                                                                                                                                                                                                                                                                                             
|10.13          |  | Form of Restricted Stock Agreement for the performance-based restricted stock awards under the Company's Amended 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.13 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
|               |  |                                                                                                                                                                                                                                                                                                             
|10.14          |  | Form of Stock Option Agreement for stock option awards under the Company's 2004 Non-Employee Director Stock Option Plan (incorporated herein by reference to Exhibit 10.14 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).                   
|               |  |                                                                                                                                                                                                                                                                                                             



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|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                    
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                
|10.15          |  | Form of Restricted Stock Agreement for the market-based restricted stock awards under the Company's 2004 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.15 filed as a part of the Company's Form 10-Q for the quarter ended March 31, 2005 (Commission File No. 1-6370)).
|               |  |                                                                                                                                                                                                                                                                                                
|10.16          |  | Form of Stock Option Agreement for stock option awards under the Company's 2004 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.19 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).                             
|               |  |                                                                                                                                                                                                                                                                                                
|10.17          |  | Form of Restricted Stock Agreement for restricted stock awards under the Company's 2004 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.20 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).                     
|               |  |                                                                                                                                                                                                                                                                                                
|10.18          |  | Compensation Arrangements for Named Executive Officers (incorporated by reference to Exhibit 10.16 filed as part of the Company's Form 10-K for the year ended June 30, 2006 (Commission File No. 1-6370)).                                                                                    
|               |  |                                                                                                                                                                                                                                                                                                
|10.19          |  | Board of Directors Compensation Arrangements (incorporated by reference to Exhibit 10.17 filed as part of the Company's Form 10-K for the year ended June 30, 2006 (Commission File No. 1-6370)).                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                
|10.20          |  | 2005 Management Bonus Plan (incorporated herein by reference to Exhibit 10.21 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                
|10.21          |  | 2005 Performance Bonus Plan (incorporated herein by reference to Exhibit 10.22 filed as a part of the Company's Form 10-K for the year ended June 30, 2005 (Commission File No. 1-6370)).                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                
|10.22          |  | Asset Purchase Agreement dated August 11, 2006 between the Company and Sovereign Sales, LLC (incorporated by reference to Exhibit 10.22 filed as part of the Company's Form 10-K for the year ended June 30, 2006 (Commission File No. 1-6370)).                                               
|               |  |                                                                                                                                                                                                                                                                                                
|31.1           |  | Section 302 Certification of Chief Executive Officer.                                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                
|31.2           |  | Section 302 Certification of Chief Financial Officer.                                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                
|32             |  | Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer.                                                                                                                                                                                                     



The foregoing list omits instruments defining the rights of holders of our long-term debt where the total amount of securities authorized thereunder does not exceed 10% of our total assets.  We hereby agree to furnish a copy of each such instrument or agreement to the Commission upon request.

































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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|                        |  | ELIZABETH ARDEN, INC.                               
|----------------------- |  | ----------------------------------------------------
|                        |  |                                                     
|Date:  February 5, 2007 |  | /s/ E. Scott Beattie                                
|                        |  |                                                     
|                        |  | E. Scott Beattie                                    
|                        |  | Chairman, President and Chief Executive Officer     
|                        |  | (Principal Executive Officer)                       
|                        |  |                                                     
|Date:  February 5, 2007 |  | /s/ Stephen J. Smith                                
|                        |  |                                                     
|                        |  | Stephen J. Smith                                    
|                        |  | Executive Vice President and Chief Financial Officer
|                        |  | (Principal Financial and Accounting Officer)        
|                        |  |                                                     





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EXHIBIT INDEX

|Exhibit 
Number |  | Description                                                                               
|--------------- |  | ------------------------------------------------------------------------------------------
|                |  |                                                                                           
|                |  |                                                                                           
|31.1            |  | Section 302 Certification of Chief Executive Officer.                                     
|                |  |                                                                                           
|31.2            |  | Section 302 Certification of Chief Financial Officer.                                     
|                |  |                                                                                           
|32              |  | Section 906 Certifications of the Chief Executive Officer and the Chief Financial Officer.







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