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, 2009       
|                                                       
|[]                                                      | 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  [  ]      No  [  ]
|                                                                                                                                                                                                                                                                                                                                                                                                                    
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                    
|Large accelerated filer                                                                                                                                                                                                                                                                                                                                                                                             
|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
January 27, 2010
|-------------------------------------- |  | -------------------------------
|                                       |  |                                
|Common Stock, $.01 par value per share |  | 28,981,210                     





---

ELIZABETH ARDEN, INC.



INDEX TO FORM 10-Q



|PART I        |  | FINANCIAL INFORMATION                                                                                   |  |         
|------------- |  | ------------------------------------------------------------------------------------------------------- |  | --------
|              |  |                                                                                                         |  |         
|Item 1.       |  | Financial Statements                                                                                    |  | Page No.
|              |  |                                                                                                         |  |         
|              |  | Consolidated Balance Sheets -- December 31, 2009 and June 30, 2009                                      |  | 3       
|              |  |                                                                                                         |  |         
|              |  | Consolidated Statements of Income -- Three and six months ended December 31, 2009 and December 31, 2008 |  | 4       
|              |  |                                                                                                         |  |         
|              |  | Consolidated Statement of Shareholders' Equity -- Six months ended December 31, 2009                    |  | 5       
|              |  |                                                                                                         |  |         
|              |  | Consolidated Statements of Cash Flow -- Six months ended December 31, 2009 and December 31, 2008        |  | 6       
|              |  |                                                                                                         |  |         
|              |  | Notes to Unaudited Consolidated Financial Statements                                                    |  | 7       
|              |  |                                                                                                         |  |         
|Item 2.       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                   |  | 23      
|              |  |                                                                                                         |  |         
|Item 3.       |  | Quantitative and Qualitative Disclosures About Market Risk                                              |  | 36      
|              |  |                                                                                                         |  |         
|Item 4.       |  | Controls and Procedures                                                                                 |  | 36      
|              |  |                                                                                                         |  |         
|PART II       |  | OTHER INFORMATION                                                                                       |  |         
|              |  |                                                                                                         |  |         
|Item 1A.      |  | Risk Factors                                                                                            |  | 38      
|              |  |                                                                                                         |  |         
|Item 2.       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                             |  | 38      
|              |  |                                                                                                         |  |         
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                                     |  | 39      
|              |  |                                                                                                         |  |         
|Item 6.       |  | Exhibits                                                                                                |  | 40      
|              |  |                                                                                                         |  |         
|Signatures    |  | 43                                                                                                     
|              |  |                                                                                                         |  |         
|Exhibit Index |  | 44                                                                                                     

- 2 -



---



PART I      FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS



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



|                                                          |                                                                                                                     | As of             |                                           
|--------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ----------------- | ------------------------------------------
|                                                          |                                                                                                                     |                   |                                           
|                                                          |                                                                                                                     | December 31,
2009 |                                           
|                                                          |                                                                                                                     |                   |                                           
|ASSETS                                                    |                                                                                                                     | (Unaudited)       |                                           
|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                               |                                                                                                                     |                   | 68,478                                    
|Exclusive brand licenses, trademarks and intangibles, net |                                                                                                                     |                   | 183,925                                   
|Goodwill                                                  |                                                                                                                     |                   | 21,054                                    
|Debt financing costs, net                                 |                                                                                                                     |                   | 4,132                                     
|Deferred income taxes                                     |                                                                                                                     |                   | 10,268                                    
|Other assets                                              |                                                                                                                     |                   | 1,161                                     
|                                                          |                                                                                                                     |                   |                                           
|                                                          |                                                                                                                     |                   | 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 per share, 50,000,000 shares authorized; 31,743,692and 31,444,935 issued, respectively |                   |                                           
|                                                          | Additional paid-in capital                                                                                          |                   |                                           
|                                                          | Retained earnings                                                                                                   |                   |                                           
|                                                          | Treasury stock (2,760,482  and 2,728,329 shares at cost, respectively)                                              |                   |                                           
|                                                          | Accumulated other comprehensive income (loss)                                                                       |                   |                                           
|                                                          |                                                                                                                     |                   |                                           
|                                                          |                                                                                                                     |                   | Total shareholders' equity                
|                                                          |                                                                                                                     |                   |                                           
|                                                          |                                                                                                                     |                   | Total liabilities and shareholders' equity
|                                                          |                                                                                                                     |                   |                                           
|                                                          |                                                                                                                     |                   |                                           
|                                                          |                                                                                                                     |                   |                                           



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



- 3 -



---





|ELIZABETH ARDEN, INC. AND SUBSIDIARIES       
|---------------------------------------------
|CONSOLIDATED STATEMENTS OF INCOME            
|(Unaudited)                                  
|(Amounts in thousands, except per share data)



|                                           |                                     |   |                   
|------------------------------------------ | ----------------------------------- | - | ------------------
|                                           | Three Months Ended                  |   | Six Months Ended  
|                                           |                                     |   |                   
|                                           | December 31, 
2009                  |   | December 31, 
2008
|                                           |                                     |   |                   
|Net sales                                  |                                     | $ | 393,345           
|Cost of goods sold:                        |                                     |   |                   
|Cost of sales                              |                                     |   | 217,827           
|Depreciation related to cost of goods sold |                                     |   | 1,194             
|                                           |                                     |   |                   
|Total cost of goods sold                   |                                     |   | 219,021           
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|Gross profit                               |                                     |   | 174,324           
|                                           |                                     |   |                   
|Operating expenses:                        |                                     |   |                   
|                                           | Selling, general and administrative |   |                   
|                                           | Depreciation and amortization       |   |                   
|                                           |                                     |   |                   
|                                           | Total operating expenses            |   |                   
|                                           |                                     |   |                   
|Income from operations                     |                                     |   | 36,483            
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|Interest expense, net                      |                                     |   | 5,804             
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|Income before income taxes                 |                                     |   | 30,679            
|Provision for income taxes                 |                                     |   | 9,623             
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|Net income                                 |                                     | $ | 21,056            
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|Net income per common share:               |                                     |   |                   
|                                           | Basic                               |   | $                 
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|                                           | Diluted                             |   | $                 
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|Weighted average number of common shares:  |                                     |   |                   
|                                           | Basic                               |   |                   
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|                                           | Diluted                             |   |                   
|                                           |                                     |   |                   
|                                           |                                     |   |                   
|                                           |                                     |   |                   



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



- 4 -



---





|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 July 1, 2009                                       |                                                                        |                                                                                 | 31,445 |  |                    | $ | 316 |          |  | $ | 285,847        |  |  | $                               | 99,413  |        |                     | 
|                                                              |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|Issuance of restricted stock, net of forfeitures              |                                                                        |                                                                                 | 150    |  |                    |   | 1   |          |  |   |                |  |  |                                 |         |        |                     | 
|Issuance of common stock for employee stock 
   purchase plan |                                                                        |                                                                                 | 88     |  |                    |   |     |          |  |   | 551            |  |  |                                 |         |        |                     | 
|Issuance of common stock upon exercise of stock 
   options   |                                                                        |                                                                                 | 61     |  |                    |   |     |          |  |   | 512            |  |  |                                 |         |        |                     | 
|                                                              |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|Amortization of share-based awards                            |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   | 2,411          |  |  |                                 |         |        |                     | 
|Repurchase of common stock                                    |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|                                                              |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|Comprehensive income:                                         |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|                                                              | Net income                                                             |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         | 21,096 |                     | 
|                                                              |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|                                                              | Foreign currency translation adjustments                               |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|                                                              |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|                                                              | Disclosure of reclassification amount, net of
   taxes (28% 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                                             |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         | 21,096 |                     | 
|                                                              |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|Balance at December 31, 2009                                  |                                                                        |                                                                                 | 31,744 |  |                    | $ | 317 |          |  | $ | 289,321        |  |  | $                               | 120,509 |        |                     | 
|                                                              |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|                                                              |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 
|                                                              |                                                                        |                                                                                 |        |  |                    |   |     |          |  |   |                |  |  |                                 |         |        |                     | 

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,
2009                                   |       
|                                                             |                                                                                          |                                                     |       
|Operating Activities:                                        |                                                                                          |                                                     |       
|                                                             | Net income                                                                               |                                                     | $     
|                                                             | Adjustments to reconcile net income to net cash used in operating 
   activities:        |                                                     |       
|                                                             | Depreciation and amortization                                                            |                                                     |       
|                                                             | Amortization of senior note offering and credit facility costs                           |                                                     |       
|                                                             | Amortization of share-based awards                                                       |                                                     |       
|                                                             | Deferred income taxes                                                                    |                                                     |       
|Changes in assets and liabilities, net of acquisitions:      |                                                                                          |                                                     |       
|                                                             | Increase in accounts receivable                                                          |                                                     |       
|                                                             | Decrease in inventories                                                                  |                                                     |       
|                                                             | Decrease (increase) in prepaid expenses and other assets                                 |                                                     |       
|                                                             | Decrease in accounts payable                                                             |                                                     |       
|                                                             | Increase in other payables, accrued expenses and other liabilities                       |                                                     |       
|                                                             | Other                                                                                    |                                                     |       
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          | Net cash provided by (used in) operating activities |       
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          |                                                     |       
|Investing Activities:                                        |                                                                                          |                                                     |       
|                                                             | Additions to property and equipment                                                      |                                                     |       
|                                                             | Acquisition of other assets                                                              |                                                     |       
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          | Net cash used in investing activities               |       
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          |                                                     |       
|Financing Activities:                                        |                                                                                          |                                                     |       
|                                                             | (Payments on) proceeds from short-term debt                                              |                                                     |       
|                                                             | Payments on long-term debt                                                               |                                                     |       
|                                                             | Payments under capital lease obligations                                                 |                                                     |       
|                                                             | Proceeds from the exercise of stock options                                              |                                                     |       
|                                                             | Proceeds from the issuance of new common stock under the employee stock
   purchase plan |                                                     |       
|                                                             | Repurchase of common stock                                                               |                                                     |       
|                                                             | Financing fees paid                                                                      |                                                     |       
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          | Net cash (used in) provided by financing activities |       
|                                                             |                                                                                          |                                                     |       
|Effect of exchange rate changes on cash and cash equivalents |                                                                                          |                                                     | 669   
|                                                             |                                                                                          |                                                     |       
|Net increase in cash and cash equivalents                    |                                                                                          |                                                     | 9,603 
|Cash and cash equivalents at beginning of period             |                                                                                          |                                                     | 23,102
|                                                             |                                                                                          |                                                     |       
|Cash and cash equivalents at end of period                   |                                                                                          | $                                                   | 32,705
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          |                                                     |       
|Supplemental Disclosure of Non-Cash Information:             |                                                                                          |                                                     |       
|                                                             | Additions to property and equipment (not included above)                                 |                                                     | $     
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          |                                                     |       
|                                                             |                                                                                          |                                                     |       

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" or "our") is a global prestige beauty products company that sells fragrances, skin care and cosmetic products to retailers in the United States and approximately 100 countries internationally.



The unaudited consolidated financial statements include the accounts of the Company's wholly-owned domestic and international subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.  The accompanying unaudited consolidated financial statements 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 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 fiscal year ended June 30, 2009 (the "2009 Annual Report"), filed with the Commission.



The consolidated balance sheet of the Company as of June 30, 2009 is derived from the financial statements included in the 2009 Annual Report but does not include all disclosures required by accounting principles generally accepted in the United States.  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.



To conform to the presentation of the three and six months ended December 31, 2009, certain reclassifications were made to the prior year's unaudited consolidated financial statements and the accompanying footnotes. Management has evaluated subsequent events through January 29, 2010, which is the date the financial statements were issued.



During the three months ended December 31, 2009, the Company recorded out-of-period adjustments, which relate to the fiscal years ended 2001 to 2009, and the first quarter of fiscal 2010.  Net sales and gross profit for the three months ended December 31, 2009 decreased by $2.7 million and $0.9 million, respectively.  The Company did not adjust the prior periods as it concluded that such adjustments were not material to the current or prior periods' consolidated financial statements.



NOTE 2.    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)/COMPREHENSIVE INCOME (LOSS)

The Company's accumulated other comprehensive income (loss) shown on the accompanying consolidated balance sheets consists of foreign currency translation adjustments, which are not adjusted for income taxes since they relate to indefinite investments in non-U.S. subsidiaries, and the unrealized losses, net of taxes, related to the Company's foreign currency contracts.

The components of accumulated other comprehensive income (loss) were as follows:



|(Amounts in thousands)                              | December 31, 
2009 |       | June 30, 
2009 | 
|--------------------------------------------------- | ------------------ | ----- | -------------- | 
|                                                    |                    |       |                | 
|Cumulative foreign currency translation adjustments | $                  | 1,129 |                | 
|Unrealized hedging loss, net of taxes               |                    | (559  | )              | 
|                                                    |                    |       |                | 
|Accumulated other comprehensive income (loss)       | $                  | 570   |                | 
|                                                    |                    |       |                | 
|                                                    |                    |       |                | 
|                                                    |                    |       |                | 

The Company's  comprehensive income consists of net income, foreign currency translation adjustments, which are not adjusted for income taxes since they relate to indefinite investments in non-U.S. subsidiaries, and the unrealized gains (losses), net of taxes, related to the Company's foreign currency contracts.

The components of other comprehensive income were as follows:



|(Amounts in thousands)                       | Three Months Ended |        | Six Months Ended
|-------------------------------------------- | ------------------ | ------ | ----------------
|                                             |                    |        |                 
|                                             | December 31,
2009  |        |                 
|                                             |                    |        |                 
|Net income                                   | $                  | 21,056 |                 
|Foreign currency translation adjustments     |                    | 634    |                 
|Unrealized hedging gain (loss), net of taxes |                    | (630   | )               
|                                             |                    |        |                 
|Total comprehensive income                   | $                  | 21,060 |                 
|                                             |                    |        |                 
|                                             |                    |        |                 
|                                             |                    |        |                 

- 7 -



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

NOTE 3.   INCOME PER SHARE



Basic income per share is computed by dividing the net income by the weighted average number of shares of the Company's 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,
2009            |   |        | December 31,
2008 | 
|                                               |                                                                  |                              |   |        |                   | 
|Basic                                          |                                                                  |                              |   |        |                   | 
|                                               | Net income                                                       |                              | $ | 21,056 |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               | Weighted average shares outstanding                              |                              |   | 28,071 |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               | Net income per basic share                                       |                              | $ | 0.75   |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|Diluted                                        |                                                                  |                              |   |        |                   | 
|                                               | Net income                                                       |                              | $ | 21,056 |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               | Weighted average shares outstanding                              |                              |   | 28,071 |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               | Potential common shares - treasury 
   method                    |                              |   | 636    |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               | Weighted average shares and potential 
   dilutive common shares |                              |   | 28,707 |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  | Net income per diluted share |   | $      | 0.73              | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 
|                                               |                                                                  |                              |   |        |                   | 

The following table shows the number of shares subject to option awards that were outstanding for the three and six months ended December 31, 2009 and 2008 that were not included in the diluted net income per share calculation because to do so would have been anti-dilutive:





|                 |  | Three Months Ended |           |  | Six Months Ended  | 
|---------------- |  | ------------------ | --------- |  | ----------------- | 
|                 |  |                    |           |  |                   | 
|                 |  | December 31,
2009  |           |  | December 31,
2008 | 
|                 |  |                    |           |  |                   | 
|Number of shares |  |                    | 1,866,594 |  |                   | 
|                 |  |                    |           |  |                   | 
|                 |  |                    |           |  |                   | 
|                 |  |                    |           |  |                   | 



NOTE 4.    RESTRUCTURING CHARGES

In fiscal 2007, the Company commenced a comprehensive review of its global business processes to re-engineer its extended supply chain, distribution, logistics and transaction processing systems. In May 2008, the Company announced a decision to accelerate the re-engineering of its extended supply chain, distribution and logistics functions, as well as the realignment of other parts of its organization to better support its new business processes.  This initiative also includes a migration to a shared services model to simplify transaction processing by consolidating the Company's primary global transaction processing functions and the implementation of a new financial accounting and order processing system.  The Company refers to this initiative as the Global Efficiency Re-engineering initiative, or sometimes simply as the Initiative.



As a result of the acceleration of the Initiative, the implementation of the Oracle financial accounting and order processing system and the migration to a shared services transaction processing model, the Company has implemented a restructuring plan that will result in restructuring and one-time expenses, including severance, relocation, recruiting and temporary staffing expenditures.  The Company currently estimates that these expenses will total $12.0 million to $14.0 million, before taxes, and expects that substantially all of these

- 8 -



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



expenses will have been incurred by the end of fiscal 2010. Through December 31, 2009, we have incurred a total of $11.2 million of expenses related to the Initiative, before taxes, which includes $6.2 million for Initiative-related restructuring and $5.0 million of other one time Initiative-related expenses.  The following table summarizes the restructuring costs related to the Initiative.



|(Amounts in thousands)                      |  | Six Months 
Ended
December 31,
2009 |       |  | Year
Ended
June 30,
2009 |   |       | Year
Ended
June 30,
2008 | 
|------------------------------------------- |  | ----------------------------------- | ----- |  | ------------------------ | - | ----- | ------------------------ | 
|                                            |  |                                     |       |  |                          |   |       |                          | 
|Restructuring expenses under the Initiative |  | $                                   | 1,965 |  |                          | $ | 3,544 |                          | 
|                                            |  |                                     |       |  |                          |   |       |                          | 
|                                            |  |                                     |       |  |                          |   |       |                          | 
|                                            |  |                                     |       |  |                          |   |       |                          | 

Unrelated to the Initiative, for the six months ended December 31, 2009, the Company incurred approximately $0.4 million of other restructuring expenses, which was recorded in the fiscal quarter ended September 30, 2009.	 For the three and six months ended December 31, 2008, the Company incurred $0.9 million of other restructuring expenses unrelated to the Initiative.



Aggregate amounts paid during the six months ended December 31, 2009 for restructuring were $3.1 million.  All of the restructuring expenses discussed above are included in selling, general and administrative expenses in the Company's consolidated statements of operations and, as described in Note 14, have not been attributed to any of the Company's reportable segments and are included in unallocated corporate expenses.  At December 31, 2009 and June 30, 2009, the Company had a restructuring liability of $0.3 million and $1.0 million, respectively.

NOTE 5.    NEW ACCOUNTING STANDARDS

Interim Disclosures About Fair Value of Financial Instruments

In April 2009, the FASB issued an update to Codification Topic 825, Financial Instruments, amending the disclosure requirements under Topic 825 to require disclosures about the fair value of financial instruments for interim reporting periods in addition to the previously required annual disclosures.  The interim reporting requirements under Codification Topic 825 were effective for the Company beginning July 1, 2009 and did not have a material impact on the Company's consolidated financial statements.

Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities

In June 2008, the FASB issued an update to Codification Topic 260, Earnings Per Share, that addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The update to Codification Topic 260 requires unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) to be treated as participating securities and to be included in the computation of earnings per share pursuant to the two-class method.  The revisions to Codification Topic 260 were effective for the Company beginning July 1, 2009 and did not have a material impact on the Company's consolidated financial statements.



Business Combinations



In December 2007, the FASB issued an update to Codification Topic 805, Business Combinations,which significantly changes the accounting for business combinations in a number of areas, including the treatment of contingent consideration, pre-acquisition contingencies, transaction costs, restructuring costs and income taxes.  The revisions to Codification Topic 805 were effective for acquisitions that occur after July 1, 2009 and did not have a material impact on the Company's consolidated financial statements.



Useful Life of Intangible Assets



In April 2008, the FASB issued an update to Codification Topic 350, Intangible- Goodwill and Other,whichamends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This amendment is effective on a prospective basis to all intangible assets acquired and for disclosures on all intangible assets recognized on or after the beginning of the first annual period subsequent to December 15, 2008.  Early adoption is prohibited.  The amendment to Codification Topic 350 was effective for the Company beginning July 1, 2009 and did not have a material impact on the Company's consolidated financial statements.

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



Fair Value Measurements



Codification Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The requirements for financial assets and liabilities under Codification Topic 820 became effective for the Company on July 1, 2008 and did not have a material impact on the Company's consolidated financial statements.  For non-financial assets and liabilities, Codification Topic 820 was effective for the Company beginning July 1, 2009 and did not have a material impact on the Company's consolidated financial statements.



In August 2009, the FASB issued an update to Codification Topic 820 that provides additional guidance on the fair value measurement of liabilities. Specifically, this update provides clarification in circumstances in which a quoted price in an active market is not available. The update to Codification Topic 820 was effective for the Company beginning July 1, 2009 and did not have a material impact on the Company's consolidated financial statements.



NOTE 6.    INVENTORIES



The components of inventory were as follows:





|(Amounts in thousands) | December 31,
2009 |         | June 30,
2009
|---------------------- | ----------------- | ------- | -------------
|                       |                   |         |              
|Raw materials          | $                 | 56,207  |              
|Work in progress       | 24,960            |         | 30,777       
|Finished goods         | 183,545           |         | 223,611      
|                       |                   |         |              
|Total                  | $                 | 264,712 |              
|                       |                   |         |              
|                       |                   |         |              
|                       |                   |         |              

NOTE 7.    EXCLUSIVE BRAND LICENSES, TRADEMARKS AND INTANGIBLES, NET AND GOODWILL



The following summarizes the cost basis amortization and weighted average estimated life associated with the Company's intangible assets:





|(Amounts in thousands)                                      | December 31, 
2009                                                                       |         | June 30, 
2009 |  | June 30, 2009 
Weighted Average 
Estimated Life
|----------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------- | -------------- |  | -----------------------------------------------
|                                                            |                                                                                          |         |                |  |                                                
|Elizabeth Arden brand trademarks                            | $                                                                                        | 122,415 |                |  | $                                              
|Exclusive brand licenses and related trademarks             |                                                                                          | 84,714  |                |  |                                                
|Exclusive brand trademarks                                  |                                                                                          | 43,377  |                |  |                                                
|Other intangibles(1)                                        |                                                                                          | 20,330  |                |  |                                                
|                                                            |                                                                                          |         |                |  |                                                
|Exclusive brand licenses, trademarks and intangibles, gross |                                                                                          | 270,836 |                |  |                                                
|                                                            |                                                                                          |         |                |  |                                                
|Accumulated amortization:                                   |                                                                                          |         |                |  |                                                
|Exclusive brand licenses and related trademarks             |                                                                                          | (42,828 | )              |  |                                                
|Exclusive brand trademarks                                  |                                                                                          | (37,679 | )              |  |                                                
|Other intangibles                                           |                                                                                          | (6,404  | )              |  |                                                
|                                                            |                                                                                          |         |                |  |                                                
|Exclusive brand licenses, trademarks and intangibles, net   | $                                                                                        | 183,925 |                |  | $                                              
|                                                            |                                                                                          |         |                |  |                                                
|                                                            |                                                                                          |         |                |  |                                                
|                                                            |                                                                                          |         |                |  |                                                
|                                                           
|(1)                                                         | Primarily consists of customer relationships, customer lists and non-compete agreements.



Amortization expense was $2.4 million and $4.9 million for the three months and six months ended December 31, 2009, respectively as compared to $2.5 million and $4.8 million for three months and six months ended December 31, 2008, respectively. At December 31, 2009, the Company estimated annual amortization expense for its intangible assets for each of the next five fiscal years to be as shown in the following table. Future acquisitions, renewals or impairment events could cause these amounts to change.

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





|                         |  | (Amounts in millions)
|------------------------ |  | ---------------------
|                         |  |                      
|Remainder of fiscal 2010 |  | $4.4                 
|2011                     |  | $7.0                 
|2012                     |  | $5.7                 
|2013                     |  | $5.0                 
|2014                     |  | $4.1                 



At December 31, 2009 and June 30, 2009, the Company had goodwill of $21.1 million recorded on its consolidated balance sheets. The entire amount of the goodwill in all periods presented relates to the North America Fragrance segment.



NOTE 8.    SHORT-TERM DEBT



The Company has a $325 million revolving bank credit facility (the "Credit Facility") with a syndicate of banks, for which JPMorgan Chase Bank is the administrative agent, which generally provides for borrowings on a revolving basis, with a $25 million sub-limit for letters of credit.  Under the terms of the Credit Facility, the Company may, at any time, increase the size of the Credit Facility up to $375 million without entering into a formal amendment requiring the consent of all of the banks, subject to the Company's satisfaction of certain conditions.  The Credit Facility expires in December 2012.



The Credit Facility is guaranteed by all of the Company's U.S. subsidiaries and is collateralized by a first priority lien on all of the Company's U.S., Canada and Puerto Rico accounts receivable and U.S. inventory. Borrowings under the Credit Facility are limited to 85% of eligible accounts receivable and 85% of the appraised net liquidation value of the Company's inventory, as determined pursuant to the terms of the Credit Facility; provided, however, that from August 15 to October 31 of each year the borrowing base may be temporarily increased by up to $25 million.  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 base capacity declines to less than $25 million ($35 million from December 1 through May 31). The Company's average borrowing base capacity during the quarter ended December 31, 2009, did not fall below the applicable thresholds noted above. Accordingly, the debt service coverage ratio did not apply for the quarter ended December 31, 2009. The Company was in compliance with all applicable covenants under the Credit Facility for the quarter ended December 31, 2009.



Under the terms of the Credit Facility, the Company may pay dividends or repurchase Common Stock if the Company maintains borrowing base capacity of at least $25 million from June 1 to November 30, and at least $35 million from December 1 to May 31, after making the applicable payment.  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 1.00% to 1.75% and is 0% for prime rate loans, except that the Applicable Margin on the first $25.0 million of borrowings from August 15 to October 15 of each year, while the temporary increase in the Company's borrowing base is in effect, is 1.00% higher.  At December 31, 2009, the Applicable Margin was 1.75% for LIBOR loans and 0% for prime rate loans.  The commitment fee on the unused portion of the Credit Facility is 0.25%. For the six months ended December 31, 2009 and 2008, the weighted average annual interest rate on borrowings under the Credit Facility was 2.4% and 4.0%, respectively.



At December 31, 2009, the Company had $66.0 million in outstanding borrowings and approximately $4.9 million in letters of credit outstanding under the Credit Facility, compared with $115.0 million in outstanding borrowings under the Credit Facility at June 30, 2009.  As of December 31, 2009, the Company had approximately $266.1 million of eligible accounts receivable and inventories available as collateral under the Credit Facility and remaining borrowing availability of $200.1 million.  The Company classifies the Credit Facility as short-term debt on its balance sheet because it expects to reduce outstanding borrowings over the next twelve months.



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

NOTE 9.    LONG-TERM DEBT



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





|(Amounts in thousands)                            |  | December 31,
2009 |         | June 30,
2009 |  
|------------------------------------------------- |  | ----------------- | ------- | ------------- | -
|                                                  |  |                   |         |               |  
|7 3/4% Senior Subordinated Notes due January 2014 |  | $                 | 225,000 |               | $
|Termination costs on interest rate swap, net      |  |                   | (1,483) |               |  
|Riviera Term Note                                 |  |                   | --      |               |  
|                                                  |  |                   |         |               |  
|Total debt                                        |  |                   | 223,517 |               |  
|Less: Current portion of long-term debt           |  |                   | --      |               |  
|                                                  |  |                   |         |               |  
|Total long-term debt                              |  | $                 | 223,517 |               | $
|                                                  |  |                   |         |               |  
|                                                  |  |                   |         |               |  
|                                                  |  |                   |         |               |  



In connection with the June 2006 acquisition of certain assets of Riviera Concepts Inc., the Company assumed a promissory note held by Riviera Concepts in the principal amount of approximately $3.4 million (the "Riviera Term Note").  The final installment was paid on July 15, 2009.



At December 31, 2009 and June 30, 2009, the estimated fair value of the Company's 7 3/4% Senior Subordinated Notes and, at June 30, 2009, the estimated value of the Riviera Term Note, using available market information and interest rates was as follows:





|(Amounts in thousands)                            |  | December 31,
2009 |         | June 30,
2009 |  
|------------------------------------------------- |  | ----------------- | ------- | ------------- | -
|                                                  |  |                   |         |               |  
|7 3/4% Senior Subordinated Notes due January 2014 |  | $                 | 220,500 |               | $
|Riviera Term Note                                 |  | $                 | --      |               | $



The Company determined the estimated fair value amounts by using available market information and commonly accepted valuation methodologies.  However, considerable judgment is required in interpreting market data to develop estimates of fair value, primarily due to the illiquid nature of the capital markets in which the 7 3/4% Senior Subordinated Notes are traded.  Accordingly, the fair value estimates presented herein are not necessarily indicative of the amount that the Company or the debt holders could realize in a current market exchange.  The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value.



NOTE 10.    COMMITMENTS AND CONTINGENCIES



In connection with the August 2006 acquisition of certain assets comprising the fragrance business of Sovereign Sales LLC ("Sovereign"), $12 million of the purchase price was in the form of contingent consideration, the majority of which was to be paid in two installments over two years from the date of closing if certain financial targets and other conditions are satisfied.  The conditions for the first, second and final installments were satisfied, and the Company recognized a liability of $6.3 million, $5.3 million and $0.3 million in the consolidated balance sheets at June 30, 2007, June 30, 2008 and June 30, 2009, respectively.  The first installment was paid in September 2007, and the second installment was paid in July 2008.  The final installment of contingent consideration of $0.3 million was paid in September 2009.



The Company is a party to a number of 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, prospects, results of operations, financial condition or cash flows.







Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date.  The

- 12 -



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



accounting standards also have established a fair value hierarchy, which prioritizes the inputs to valuation techniques used in measuring fair value into three broad levels as follows:





|Level 1 - | Quoted prices in active markets for identical assets or liabilities                                      
|--------- | ---------------------------------------------------------------------------------------------------------
|          |                                                                                                          
|Level 2 - | Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly
|          |                                                                                                          
|Level 3 - | Unobservable inputs based on the Company's own assumptions                                               

The Company's derivative assets and liabilities are currently comprised of foreign currency contracts.  Fair values are based on market prices or determined using valuation models that use as their basis readily observable market data that is actively quoted and can be validated through external sources, including independent pricing services, brokers and market transactions.



The following table presents the fair value hierarchy for those of the Company's financial assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2009:



|(Amounts in thousands)     |  | Level 1 |    | Level 2 |   | Level 3 |  | Total
|-------------------------- |  | ------- | -- | ------- | - | ------- |  | -----
|                           |  |         |    |         |   |         |  |      
|Assets                     |  |         |    |         |   |         |  |      
|Foreign currency contracts |  | $       | -- |         | $ | 33      |  | $    
|Liabilities                |  |         |    |         |   |         |  |      
|Foreign currency contracts |  | $       | -- |         | $ | 900     |  | $    

As of June 30, 2009, the Company's foreign currency contracts were measured at fair value under Level 2 as an asset of $0.5 million and as a liability of $0.4 million.  See Note 12 for a discussion of the Company's foreign currency contracts.



Effective July 1, 2009, we adopted the accounting standards for fair value for  non-financial assets and non-financial liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis. Non-financial assets and liabilities are recognized at fair value subsequent to initial recognition when they are deemed to be other-than-temporarily impaired. There were no non-financial assets and liabilities measured at fair value on a nonrecurring basis for the six months ended December 31, 2009.





The Company operates in several foreign countries, which exposes it to market risk associated with foreign currency exchange rate fluctuations.  The Company's risk management policy is to hedge a significant portion of its forecasted net sales to reduce the exposure of the Company's foreign subsidiaries' revenues to fluctuations in currency rates using foreign currency forward contracts.  The Company also hedges a significant portion of its forecasted inventory purchases to reduce the exposure of its Canadian and Australian subsidiary's cost of sales to such fluctuations.  Additionally, when appropriate, the Company enters into and settles foreign currency contracts to reduce the exposure of the Company's foreign subsidiaries' net balance sheets to fluctuations in currency rates.  The principal currencies hedged are British pounds, Euros, Canadian dollars and Australian dollars.  The Company does not enter into derivative financial contracts for speculative or trading purposes.  The Company's derivative financial instruments are recorded in the consolidated balance sheets at fair value determined using pricing models based on market prices or determined using valuation models that use as their basis readily observable market data that is actively quoted and can be validated through external sources, including independent pricing services, brokers and market transactions.  Cash flows from derivative financial instruments are classified as cash flows from operating activities in the consolidated statements of cash flows.



Foreign currency contracts used to hedge forecasted revenues are designated as cash flow hedges.  These contracts are used to hedge forecasted subsidiary revenues generally over approximately 12 to 18 months.  Changes to fair value of the foreign currency contracts are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity, to the extent such contracts are effective, and are recognized in net sales in the period in which the forecasted transaction affects earnings.  Changes to fair value of any contracts deemed to be ineffective would be recognized in earnings immediately. There were no amounts recorded in fiscal 2010 and 2009 relating to foreign currency contracts used to hedge forecasted revenues resulting from hedge ineffectiveness.  As of December 31, 2009, the Company had notional amounts of 12.8 million British pounds under foreign currency contracts used to hedge forecasted revenues that expire between January 31, 2010 and May 30, 2011.



- 13 -



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

Foreign currency contracts used to hedge forecasted cost of sales are designated as cash flow hedges.  These contracts are used to hedge forecasted Canadian and Australian subsidiary cost of sales generally over approximately 12 to 18 months.  Changes to fair value of the foreign currency contracts are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity, to the extent such contracts are effective, and are recognized in cost of sales in the period in which the forecasted transaction affects earnings. Changes to fair value of any contracts deemed to be ineffective would be recognized in earnings immediately.  There were no amounts recorded in fiscal 2010 and 2009 relating to foreign currency contracts used to hedge forecasted cost of sales resulting from hedge ineffectiveness.  As of December 31, 2009, the Company had notional amounts of 10.4 million Canadian dollars and 12.8 million Australian dollars under foreign currency contracts used to hedge forecasted cost of sales that expire between January 31, 2010 and May 30, 2011.



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.    These contracts are used to hedge balance sheet exposure generally over one month and are settled before the end of the month in which they are entered into.  Changes to fair value of the forward contracts are recognized in selling, general and administrative expense in the period in which the contracts expire.  For the three and six months ended December 31, 2009, the Company recorded a charge of $53,000 and $212,000, respectively in selling, general and administrative expenses related to these contracts.  For the three and six months ended December 31, 2008, the Company recorded  a benefit of $2.1 million and $2.9 million, respectively in selling, general and administrative expenses related to these contracts.  As of December 31, 2009, there were no such foreign currency contracts outstanding.  There were no amounts recorded in fiscal 2010 and 2009 relating to foreign currency contracts to hedge subsidiary balance sheets resulting from hedge ineffectiveness.



|                                           | Fair Value of Derivative Instruments     | 
|------------------------------------------ | ---------------------------------------- | 
|                                           |                                          | 
|(Amounts in thousands)                     | Asset DerivativesAs of December 31,
2009 | 
|                                           |                                          | 
|                                           | Balance 
Sheet 
Location                 | 
|                                           |                                          | 
|Derivatives designated as effective hedges |                                          | 
|Foreign Exchange Contracts                 | Other assets                             | 
|                                           |                                          | 
|Total                                      |                                          | 
|                                           |                                          | 
|                                           |                                          | 
|                                           |                                          | 

As of June 30, 2009, the Company's foreign currency contracts were measured at fair value as an asset of $0.5 million and as a liability of $0.4 million.

The following tables illustrate the fair value of outstanding foreign currency contracts and the gains (losses) associated with the settlement of these contracts:



Gain (Loss) Recognized in OCI on Derivatives, Net of Tax (Effective Portion):



|(Amounts in thousands)             | Three Months Ended |      | Six Months Ended
|---------------------------------- | ------------------ | ---- | ----------------
|                                   |                    |      |                 
|                                   | December 31,
2009  |      |                 
|                                   |                    |      |                 
|Currency Contracts-Sales           | $                  | (414 | )               
|Currency Contracts - Cost of Sales |                    | (216 | )               
|                                   |                    |      |                 
|Total                              | $                  | (630 | )               
|                                   |                    |      |                 
|                                   |                    |      |                 
|                                   |                    |      |                 



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

Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion):





|(Amounts in thousands)                                                    | Three Months Ended |      | Six Months Ended
|------------------------------------------------------------------------- | ------------------ | ---- | ----------------
|                                                                          |                    |      |                 
|                                                                          | December 31,
2009  |      |                 
|                                                                          |                    |      |                 
|Currency Contracts-Sales (1)                                              | $                  | 21   |                 
|Currency Contracts- Cost of Sales (2)                                     |                    | (164 | )               
|                                                                          |                    |      |                 
|Total                                                                     | $                  | (143 | )               
|                                                                          |                    |      |                 
|                                                                          |                    |      |                 
|                                                                          |                    |      |                 
|                                                                          |                    |      |                 
|(1)   Recorded in net sales on the consolidated statements of income.    
|(2)   Recorded in cost of sales on the consolidated statements of income.

NOTE 13.    CONDENSED CONSOLIDATING FINANCIAL INFORMATION



The following condensed financial statements as of December 31, 2009 and June 30, 2009, and for the three and six months ended December 31, 2009 and 2008, 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]



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



|Balance Sheet                         | As of December 31, 2009                                      
|------------------------------------- | -------------------------------------------------------------
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|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
|                                      | Goodwill                                                     
|                                      | Debt financing costs, net                                    
|                                      | Other                                                        
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|LIABILITIES AND 
SHAREHOLDERS' EQUITY |                                                              
|Current Liabilities:                  |                                                              
|                                      | Short-term debt                                              
|                                      | Accounts payable - trade                                     
|                                      | Intercompany payable                                         
|                                      | Other payables and accrued expenses                          
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      | 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 -



---



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



|Balance Sheet                         | As of June 30, 2009                                          
|------------------------------------- | -------------------------------------------------------------
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|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
|                                      | Goodwill                                                     
|                                      | 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 loss                         
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              
|                                      |                                                              



- 17 -



---



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



|Statement of Income                        | Three Months Ended December 31, 2009
|------------------------------------------ | ------------------------------------
|                                           |                                     
|                                           |                                     
|                                           |                                     
|Net sales                                  |                                     
|Cost of goods sold:                        |                                     
|Cost of sales                              |                                     
|Depreciation related to cost of goods sold |                                     
|                                           |                                     
|Total cost of goods sold                   |                                     
|                                           |                                     
|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 Income                        | Six Months Ended December 31, 2009
|------------------------------------------ | ----------------------------------
|                                           |                                   
|                                           |                                   
|                                           |                                   
|Net sales                                  |                                   
|Cost of goods sold:                        |                                   
|Cost of sales                              |                                   
|Depreciation related to cost of goods sold |                                   
|                                           |                                   
|Total cost of goods sold                   |                                   
|                                           |                                   
|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 -



---



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





|Statement of Income                        | Three Months Ended December 31, 2008
|------------------------------------------ | ------------------------------------
|                                           |                                     
|                                           |                                     
|                                           |                                     
|Net sales                                  |                                     
|Cost of goods sold:                        |                                     
|Cost of sales                              |                                     
|Depreciation related to cost of goods sold |                                     
|                                           |                                     
|Total cost of goods sold                   |                                     
|                                           |                                     
|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 Income                        | Six Months Ended December 31, 2008
|------------------------------------------ | ----------------------------------
|                                           |                                   
|                                           |                                   
|                                           |                                   
|Net sales                                  |                                   
|Cost of goods sold:                        |                                   
|Cost of sales                              |                                   
|Depreciation related to cost of goods sold |                                   
|                                           |                                   
|Total cost of goods sold                   |                                   
|                                           |                                   
|Gross profit                               |                                   
|Selling, general and administrative costs  |                                   
|Depreciation and amortization              |                                   
|                                           |                                   
|(Loss) income from operations              |                                   
|Other expense (income):                    |                                   
|                                           | Interest expense (income)         
|                                           | Other                             
|                                           |                                   
|(Loss) income before income taxes          |                                   
|(Benefit from) provision for income taxes  |                                   
|                                           |                                   
|Net income                                 |                                   
|                                           |                                   
|                                           |                                   
|                                           |                                   



- 19 -



---



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

|Condensed Statement of Cash Flows                            |                                                                                       | Six Months Ended December 31, 2009 |        
|------------------------------------------------------------ | ------------------------------------------------------------------------------------- | ---------------------------------- | -------
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       | Company                            |        
|                                                             |                                                                                       |                                    |        
|Operating activities:                                        |                                                                                       |                                    |        
|Net cash provided by operating activities                    |                                                                                       | $                                  | 46,890 
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       |                                    |        
|Investing activities:                                        |                                                                                       |                                    |        
|                                                             | Additions to property and equipment                                                   |                                    |        
|                                                             | Acquisition of other assets                                                           |                                    |        
|                                                             |                                                                                       |                                    |        
|Net cash used in investing activities                        |                                                                                       |                                    | (13,946
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       |                                    |        
|Financing activities:                                        |                                                                                       |                                    |        
|                                                             | Payments on short-term debt                                                           |                                    |        
|                                                             | Payments on long-term debt                                                            |                                    |        
|                                                             | Payments under capital lease obligations                                              |                                    |        
|                                                             | Proceeds from the exercise of stock options                                           |                                    |        
|                                                             | Proceeds from the issuance of common stock under the
   employee stock purchase plan  |                                    |        
|                                                             | Repurchase of common stock                                                            |                                    |        
|                                                             | Net change in intercompany obligations                                                |                                    |        
|                                                             |                                                                                       |                                    |        
|Net cash used in financing activities                        |                                                                                       |                                    | (27,550
|                                                             |                                                                                       |                                    |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                       |                                    | 669    
|Net increase (decrease) in cash and cash equivalents         |                                                                                       |                                    | 6,063  
|Cash and cash equivalents at beginning of period             |                                                                                       |                                    | 1,936  
|                                                             |                                                                                       |                                    |        
|Cash and cash equivalents at end of period                   |                                                                                       | $                                  | 7,999  
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       |                                    |        
|Condensed Statement of Cash Flows                            |                                                                                       | Six Months Ended December 31, 2008 |        
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       | Company                            |        
|                                                             |                                                                                       |                                    |        
|Operating activities:                                        |                                                                                       |                                    |        
|Net cash provided by (used in) operating activities          |                                                                                       | $                                  | 10,388 
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       |                                    |        
|Investing activities:                                        |                                                                                       |                                    |        
|                                                             | Additions to property and equipment                                                   |                                    |        
|                                                             | Acquisition of other assets                                                           |                                    |        
|                                                             |                                                                                       |                                    |        
|Net cash used in investing activities                        |                                                                                       |                                    | (11,661
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       |                                    |        
|Financing activities:                                        |                                                                                       |                                    |        
|                                                             | Proceeds from short-term debt                                                         |                                    |        
|                                                             | Payments on long-term debt                                                            |                                    |        
|                                                             | Payments under capital lease obligations                                              |                                    |        
|                                                             | Proceeds from the exercise of stock options                                           |                                    |        
|                                                             | Financing fees paid                                                                   |                                    |        
|                                                             | Proceeds from the issuance of common stock under the 
   employee stock purchase plan |                                    |        
|                                                             | Repurchase of common stock                                                            |                                    |        
|                                                             | Net change in intercompany obligations                                                |                                    |        
|                                                             |                                                                                       |                                    |        
|Net cash provided by (used in) financing activities          |                                                                                       |                                    | 4,676  
|                                                             |                                                                                       |                                    |        
|Effect of exchange rate changes on cash and cash equivalents |                                                                                       |                                    | (1,937 
|Net increase (decrease) in cash and cash equivalents         |                                                                                       |                                    | 1,466  
|Cash and cash equivalents at beginning of period             |                                                                                       |                                    | 3,487  
|                                                             |                                                                                       |                                    |        
|Cash and cash equivalents at end of period                   |                                                                                       | $                                  | 4,953  
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       |                                    |        
|                                                             |                                                                                       |                                    |        



- 20 -



---



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

NOTE 14.    Segment Data and Related Information



Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the "Chief Executive") in deciding how to allocate resources and in assessing performance.  As a result of the similarities in the procurement, marketing and distribution processes for all of the Company's products, much of the information provided in the consolidated financial statements is similar to, or the same as, that reviewed on a regular basis by the Chief Executive.



The Company's operations are organized into the following reportable segments:





| | North America Fragrance-The North America Fragrance segment sells the Company's portfolio of owned, licensed and distributed fragrances to department stores, mass retailers and distributors in the United States, Canada and Puerto Rico.  This segment also sells the Company's Elizabeth Arden products in prestige department stores in Canada and Puerto Rico and to other selected retailers. This segment also includes the Company's e-commerce business.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | International -The International segment sells the Company's portfolio of owned and licensed brands, including the Elizabeth Arden products, in approximately 100 countries outside of North America through perfumeries, boutiques, department stores and travel retail outlets worldwide.                                                                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Other-The Other reportable segment sells the Company's Elizabeth Arden products in prestige department stores in the United States and through the Red Door beauty salons, which are owned and operated by an unrelated third party that licenses the Elizabeth Arden and Red Door trademarks from the Company for use in its salons.                                                                                                                             



The Chief Executive evaluates segment profit based upon income from operations, which represents earnings before income taxes, interest expense and depreciation and amortization charges.  The accounting policies for each of the reportable segments are the same as those described in the Company's 2009 Annual Report under Note 1 -- "General Information and Summary of Significant Accounting Policies."  The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information regarding assets and liabilities of the Company's reportable segments is produced for the Chief Executive or included herein.



Segment profit (loss) excludes depreciation and amortization, interest expense, debt extinguishment charges and unallocated corporate expenses, which are shown in the table reconciling segment profit (loss) to consolidated income (loss) before income taxes. Included in unallocated corporate expenses are (i) adjustments to eliminate intercompany mark-up, (ii) employee incentive costs, (iii) restructuring charges, (iv) costs related to the Initiative and, (v) costs related to the Liz Claiborne license agreement.  These expenses are recorded in unallocated corporate expenses as these items are centrally directed and controlled and are not included in internal measures of segment operating performance.  The Company does not have any intersegment sales.



- 21 -



---



ELIZABETH ARDEN, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The following table is a comparative summary of the Company's net sales and segment profit (loss) by reportable segment for the three and six months ended December 31, 2009 and 2008:



|(Amounts in thousands)            | Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |         | Six Months Ended
|--------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ----------------
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                  | December 31, 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|Segment Net Sales:                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|North America Fragrance           | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 262,515 |                 
|International                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 118,149 |                 
|Other                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 12,681  |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|Total                             | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 393,345 |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|Segment Profit (Loss):            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|North America Fragrance           | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 52,578  |                 
|International                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 8,759   |                 
|Other                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | (2,969  | )               
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|Total                             | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 58,368  |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|Reconciliation:                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|Segment Profit                    | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 58,368  |                 
|Less:                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|Depreciation and Amortization     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | (6,997  | )               
|Interest Expense, net             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | (5,804  | )               
|Unallocated Corporate Expenses(1) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | (14,888 | )               
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|Income Before Income Taxes        | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 30,679  |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |         |                 
|                                 
|(1)                               | Unallocated corporate expenses include (i) adjustments to eliminate intercompany mark-up, (ii) employee incentive costs, (iii) restructuring charges, (iv) costs related to the Initiative, and (v) costs related to the Liz Claiborne license agreement.  Excluding items addressed below in footnotes (2) and (3), unallocated corporate expenses for the three months ended December 31, 2009 increased as compared to the prior year period primarily due to higher incentive compensation costs. Excluding items addressed below in footnotes (4) and (5), unallocated corporate expenses for the six months ended December 31, 2009 increased as compared to the prior year period primarily due to higher intercompany mark-up eliminations.                               
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(2)                               | Amounts for the three months ended December 31, 2009, include $1.1 million of restructuring charges related to the Initiative and $0.9 million of expenses related to the implementation of an Oracle accounting and order processing system.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(3)                               | In May 2008, the Company entered into an exclusive long-term global licensing agreement for the Liz Claiborne fragrance brands, which became effective on June 9, 2008. Amounts for the three months ended December 31, 2008, include (i) $4.2 million ($3.5 million of which did not require the use of cash) related to the Company's Liz Claiborne license agreement due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement, (ii) $0.3 million of restructuring expenses related to the Initiative, (iii) $0.9 million of restructuring expenses not related to the Initiative, and (iv) $0.6 million of expenses related to the implementation of an Oracle accounting and order processing system.
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(4)                               | Amounts for the six months ended December 31, 2009, include (i) $2.0 million of restructuring expenses related to the Initiative, (ii) $0.4 million of restructuring expenses not related to the Initiative, and (iii) $1.6 million of expenses related to the implementation of an Oracle accounting and order processing system.                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(5)                               | Amounts for the six months ended December 31, 2008, include (i) $23.3 million of expenses ($18.9 million of which did not require the use of cash) related to the Company's Liz Claiborne license agreement due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement, (ii) $1.2 million of restructuring expenses related to the Initiative, (iii) $0.9 million of restructuring expenses not related to the Initiative, and (iv) $0.8 million of expenses related to the implementation of an Oracle accounting and order processing system.                                                                                                                                                            
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



- 22 -



---



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



This discussion should be read in conjunction with the Unaudited Consolidated Financial Statements and related notes contained in this quarterly report 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, 2009.  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.



Overview



We are a global prestige beauty products company with an extensive portfolio of prestige fragrance, skin care and cosmetics brands. Our branded products include the Elizabeth Arden fragrances: Red Door, Elizabeth Arden 5th Avenue, Elizabeth Arden Provocative Woman, Elizabeth Arden green tea, Pretty Elizabeth Arden, and Elizabeth Arden Mediterranean; the Elizabeth Arden skin care brands: Ceramide, Eight Hour Cream, Intervene, and PREVAGE®; and the Elizabeth Arden branded lipstick, foundation and other color cosmetics products.  Our prestige fragrance portfolio also includes the following celebrity, lifestyle and designer fragrance brands:





|Celebrity Fragrances | The fragrance brands of Elizabeth Taylor, Britney Spears, Hilary Duff, Danielle Steel, Mariah Carey and Usher                         
|-------------------- | --------------------------------------------------------------------------------------------------------------------------------------
|                     |                                                                                                                                       
|Lifestyle Fragrances | Curve, Giorgio Beverly Hills, Lucky, PS Fine CologneandWhite Shoulders                                                                
|                     |                                                                                                                                       
|Designer Fragrances  | Juicy Couture, Badgley Mischka, Rocawear, Alberta Ferretti, Alfred Sung, Nannette Lepore, Geoffrey Beene, Halston, Bob Mackie,and GANT

In addition to our owned and licensed fragrance brands, we distribute approximately 300 additional prestige fragrance brands, primarily in the United States, through distribution agreements and other purchasing arrangements.



Our business strategy is to increase net sales, operating margins and earnings by (a) increasing the sales of the Elizabeth Arden brand through new product innovation, targeting fast-growing geographical markets and leveraging our strength in skin care, (b) increasing the sales of our prestige fragrance portfolio internationally and through licensing opportunities and acquisitions, (c) expanding the prestige fragrance category at mass retail customers in North America, and (d) implementing initiatives to improve our gross margin, cost structure, working capital efficiency, and return on invested capital, as well as improving the effectiveness of our marketing and selling expenditures.

We manage our business by evaluating net sales, EBITDA (as defined later in this discussion), EBITDA margin, segment profit and working capital utilization (including monitoring our levels of inventory, accounts receivable, operating cash flow and return on invested capital). We encounter a variety of challenges that may affect our business and should be considered as described in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended June 30, 2009 and in the section of this quarterly report captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Forward-Looking Information and Factors That May Affect Future Results."

In fiscal 2007, we commenced a comprehensive review of our global business processes to re-engineer our extended supply chain, distribution, logistics and transaction processing systems.  We refer to this initiative as the Global Efficiency Re-engineering initiative, or sometimes simply as the Initiative.  In May 2008, we announced an acceleration of the re-engineering of our extended supply chain, distribution and logistics functions, as well as the realignment of other parts of our organization to better support our new business processes.  As a result of the Initiative, we expect gross margins to improve by 200 to 250 basis points by the end of fiscal 2010 as compared to the prior fiscal year.  We expect to use a portion of this anticipated margin improvement to support our key brands and drive brand innovation and improved profitability.

In connection with the Initiative, in July 2009 we completed the first phase of the implementation of an Oracle financial accounting system (general ledger and accounts payable) in accordance with our projected timeline. We plan to complete the remaining portion of the financial accounting system as well as the order processing system in the second half of fiscal 2010. The system is intended to improve key transaction processes and accommodate the anticipated growth of our business.  We expect this infrastructure investment to simplify our transaction processing by utilizing a common platform to centralize our primary global transaction processing functions.



As a result of the acceleration of the Initiative, the implementation of the Oracle financial accounting and order processing system, and the migration to a shared services transaction processing model, we have implemented a restructuring plan that will result in restructuring and one-time expenses, including severance, relocation, recruiting and temporary staffing expenditures.  We currently

- 23 -



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estimate that these expenses will total approximately $12.0 million to $14.0 million, before taxes, and expect that substantially all of these expenses will have been incurred by the end of fiscal 2010. Through December 31, 2009, we have incurred a total of $11.2 million of expenses related to the Initiative, before taxes, which includes $6.2 million for Initiative-related restructuring and $5.0 million of other one time Initiative-related expenses.  See Note 4 to Notes to Unaudited Consolidated Financial Statements.



Seasonality



Our operations have historically been seasonal, with higher sales generally occurring in the first half of our fiscal year as a result of increased demand by retailers in anticipation of and during the holiday season.  For the year ended June 30, 2009, approximately 61% of our net sales were made during the first half of our fiscal year.  Due to product innovations and new product launches, the size and timing of certain orders from our customers, and additions or losses of brand distribution rights, sales, results of operations, working capital requirements and cash flows can vary significantly between quarters of the same and different years.  As a result, we expect to experience variability in net sales, operating margin, net income, working capital requirements and cash flows on a quarterly basis.  Increased sales of skin care and cosmetic products relative to fragrances may reduce the seasonality of our business.

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

Critical Accounting Policies and Estimates



As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2009, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles.  The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements.  We base our estimates on historical experience and other factors that we believe are most likely to occur.  Changes in facts and circumstances may result in revised estimates, which are recorded in the period in which they become known.  Our most critical accounting policies relate to revenue recognition, provisions for inventory obsolescence, allowances for sales returns, markdowns and doubtful accounts, intangible and long-lived assets, income taxes, hedging contracts and share-based compensation. Since June 30, 2009, there have been no significant changes to the assumptions and estimates related to those critical accounting policies.

Foreign Currency Contracts

We operate in several foreign countries, which exposes us to market risk associated with foreign currency exchange rate fluctuations. Our risk management policy is to hedge a significant portion of our forecasted net sales to reduce the exposure of our foreign subsidiaries' revenues to fluctuations in currency rates using foreign currency forward contracts.  We also hedge a significant portion of our forecasted inventory purchases to reduce the exposure of our Canadian and Australian subsidiaries' cost of sales to such fluctuations. Additionally, when appropriate, we enter into and settle foreign currency contracts to reduce the exposure of our foreign subsidiaries' net balance sheets to fluctuations in currency rates.  The principal currencies hedged are British pounds, Euros, Canadian dollars and Australian dollars.  We do not enter into derivative financial contracts for speculative or trading purposes.



Changes to fair value of the foreign currency contracts are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity, to the extent such contracts are effective, and are recognized in net sales or cost of sales in the period in which the forecasted transaction affects earnings. Changes to fair value of any contracts deemed to be ineffective would be recognized in earnings immediately. There were no amounts recorded in fiscal years 2010 or 2009 relating to foreign currency contracts used to hedge forecasted revenues or forecasted cost of sales resulting from hedge ineffectiveness.



When appropriate, we also enter into and settle foreign currency contracts for Euros, British pounds and Canadian dollars to reduce exposure of our foreign subsidiaries' net balance sheets to fluctuations in foreign currency rates. These contracts are used to hedge balance sheet exposure generally over one month and are settled before the end of the month in which they are entered into. Changes to fair value of the forward contracts are recognized in selling, general and administrative expense in the period in which the contracts expire.



- 24 -



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The table below summarizes the effect of the pre-tax gain (loss) from our settled foreign currency contracts on the specified line items in our consolidated statements of income for the three and six months ended December 31, 2009 and December 31, 2008.



|(Amounts in thousands)              | Three Months Ended |      |   | Six Months Ended  |  
|----------------------------------- | ------------------ | ---- | - | ----------------- | -
|                                    |                    |      |   |                   |  
|                                    | December 31,
2009  |      |   | December 31,
2008 |  
|                                    |                    |      |   |                   |  
|Net Sales                           | $                  | 21   |   |                   | $
|Cost of Sales                       |                    | (164 | ) |                   |  
|Selling, general and administrative |                    | (53  | ) |                   |  
|                                    |                    |      |   |                   |  
|Total pre-tax (loss) gain           | $                  | (196 | ) |                   | $
|                                    |                    |      |   |                   |  
|                                    |                    |      |   |                   |  
|                                    |                    |      |   |                   |  



Results of Operations

The following discussion compares the historical results of operations for the three and six months ended December 31, 2009 and December 31, 2008.  Results of operations as a percentage of net sales were as follows (dollar amounts in thousands; percentages may not add due to rounding):





|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                        | Three Months Ended |         | Six Months Ended  
|------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ------- | ------------------
|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    |         |                   
|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                        | December 31, 
2009 |         | December 31, 
2008
|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    |         |                   
|Net sales                                        |                                                                                                                                                                                                                                                                                                                                                                                                                        | $                  | 393,345 |                   
|Cost of sales                                    |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    | 217,827 |                   
|Depreciation in cost of sales                    |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    | 1,194   |                   
|                                                 | Gross profit                                                                                                                                                                                                                                                                                                                                                                                                           |                    |         | 174,324           
|Selling, general and administrative 
   expenses |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    | 132,038 |                   
|Depreciation and amortization                    |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    | 5,803   |                   
|                                                 | Income from operations                                                                                                                                                                                                                                                                                                                                                                                                 |                    |         | 36,483            
|Interest expense, net                            |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    | 5,804   |                   
|                                                 | Income before income taxes                                                                                                                                                                                                                                                                                                                                                                                             |                    |         | 30,679            
|Provision for income taxes                       |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    | 9,623   |                   
|                                                 | Net income                                                                                                                                                                                                                                                                                                                                                                                                             |                    |         | 21,056            
|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    |         |                   
|Other data                                       |                                                                                                                                                                                                                                                                                                                                                                                                                        |                    |         |                   
|EBITDA and EBITDA margin(1)                      |                                                                                                                                                                                                                                                                                                                                                                                                                        | $                  | 43,480  |                   
|                                                
|(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, 2009 Compared to Three Months Ended December 31, 2008 and Six Months Ended December 31, 2009 compared to Six Months Ended December 31, 2008. EBITDA margin represents EBITDA divided by net sales.                                                               
|                                                 |                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2)                                              | The three and six months ended December 31, 2008 include $4.2 million and $23.3 million of expenses, respectively (of which, $3.5 million and $18.9 million, respectively, did not require the use of cash) related to the Liz Claiborne license agreement due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement, and transition expenses.



Our operations are organized into the following reportable segments:





| | North America Fragrance - Our North America Fragrance segment sells our portfolio of owned, licensed and distributed fragrances to department stores, mass retailers and distributors in the United States, Canada and Puerto Rico.  This segment also sells our Elizabeth Arden products in prestige department stores in Canada and Puerto Rico, and to other selected retailers. This segment also includes our e-commerce business.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | International - Our International segment sells our portfolio of owned and licensed brands, including our Elizabeth Arden products, in approximately 100 countries outside of North America through perfumeries, boutiques, department stores and travel retail outlets worldwide.                                                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Other-Our Other reportable segment sells our Elizabeth Arden products in prestige department stores in the United States and through the Red Door beauty salons, which are owned and operated by an unrelated third party that licenses the Elizabeth Arden and Red Door trademarks from us for use in its salons.                                                                                                                     



- 25 -



---



Segment profit (loss) excludes depreciation and amortization, interest expense and unallocated corporate expenses, which are shown in the table below reconciling segment profit (loss) to consolidated net income before income taxes.  Included in unallocated corporate expenses are (i) adjustments to eliminate intercompany mark-up, (ii) employee incentive costs, (iii) restructuring charges, (iv) costs related to the Initiative, and (v) costs related to the Liz Claiborne license agreement.  These expenses are recorded in unallocated corporate expenses as these items are centrally directed and controlled and are not included in internal measures of segment operating performance.  We do not have any intersegment sales.

The following table is a comparative summary of our net sales and segment profit by reportable segment for the three and six months ended December 31, 2009 and 2008 and reflects the basis of presentation described in Note 14 -- "Segment Data and Related Information" to the Notes to Unaudited Consolidated Financial Statements for all periods presented.





|(Amounts in thousands)            | Three Months Ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |         |   | Six Months Ended  |  
|--------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | - | ----------------- | -
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|                                  | December 31, 2009                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |         |   | December 31, 2008 |  
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|Segment Net Sales:                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|North America Fragrance           | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 262,515 |   |                   | $
|International                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 118,149 |   |                   |  
|Other                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 12,681  |   |                   |  
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|Total                             | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 393,345 |   |                   | $
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|Segment Profit (Loss):            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|North America Fragrance           | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 52,578  |   |                   | $
|International                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 8,759   |   |                   |  
|Other                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | (2,969  | ) |                   |  
|Less:                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|Depreciation and Amortization     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | (6,997  | ) |                   |  
|Interest Expense, net             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | (5,804  | ) |                   |  
|Unallocated Corporate Expenses(1) |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | (14,888 | ) | (2)               |  
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|Income Before Income Taxes        | $                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 30,679  |   |                   | $
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |   |                   |  
|                                 
|(1)                               | Unallocated corporate expenses include (i) adjustments to eliminate intercompany mark-up, (ii) employee incentive costs, (iii) restructuring charges, (iv) costs related to the Initiative, and (v) costs related to the Liz Claiborne license agreement.  Excluding items addressed below in footnotes (2) and (3), unallocated corporate expenses for the three months ended December 31, 2009, increased as compared to the prior year period primarily due to higher incentive compensation costs. Excluding items addressed below in footnotes (4) and (5), unallocated corporate expenses for the six months ended December 31, 2009 increased as compared to the prior year period primarily due to higher intercompany mark-up eliminations.            
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2)                               | Amounts for the three months ended December 31, 2009, include $1.1 million of restructuring charges primarily related to the Initiative and $0.9 million of expenses related to the implementation of an Oracle accounting and order processing system.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3)                               | In May 2008, we entered into an exclusive long-term global licensing agreement for the Liz Claiborne fragrance brands, which became effective on June 9, 2008.  Amounts for the three months ended December 31, 2008, include (i) $4.2 million ($3.5 million of which did not require the use of cash) related to the Liz Claiborne license agreement due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement, (ii) $0.3 million of restructuring expenses related to the Initiative, (iii) $0.9 million of restructuring expenses not related to the Initiative, and (iv) $0.6 million of expenses related to the implementation of an Oracle accounting and order processing system.
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4)                               | Amounts for the six months ended December 31, 2009, include (i) $2.0 million of restructuring expenses related to the Initiative, (ii) $0.4 million of restructuring expenses not related to the Initiative, and (iii) $1.6 million of expenses related to the implementation of an Oracle accounting and order processing system.                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(5)                               | Amounts for the six months ended December 31, 2008, include (i) $23.3 million of expenses ($18.9 million of which did not require the use of cash) related to the Liz Claiborne license agreement due to Liz Claiborne inventory that was purchased at a higher cost prior to the June 2008 effective date of the license agreement, (ii) $1.2 million of restructuring expenses related to the Initiative, (iii) $0.9 million of restructuring expenses not related to the Initiative, and (iv) $0.8 million of expenses related to the implementation of an Oracle accounting and order processing system.                                                                                                                                                    
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



- 26 -



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Three Months Ended December 31, 2009 Compared to Three Months Ended December 31, 2008

Net Sales.    Net sales increased by 6.3% or $23.3 million for the three months ended December 31, 2009, compared to the three months ended December 31, 2008. Excluding the favorable impact of foreign currency translation, net sales increased by 3.3% or $12.1 million. Net sales of the Juicy Couture fragrances increased by $17.7 million due to the current year launch of the new Juicy Couture fragrance, Couture Couture.Sales of Britney Spears fragrances also increased by $10.5 million.





|North America Fragrance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Net sales increased by 5.8% or $14.3 million. Excluding the favorable impact of foreign currency translation, net sales increased by 5.3 % or $13.1 million.  The increase in net sales was primarily due to higher sales of the Juicy Couture fragrance brands resulting from the current year launch of Couture Couture. Also contributing to the increase were higher sales of Britney Spears and Mariah Carey fragrance brands, partially offset by a decline in sales of Elizabeth Arden fragrance and skin care products.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|International                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Net sales increased by 6.0% or $6.6 million. Excluding the favorable impact of foreign currency translation, net sales decreased by 3.1% or $3.4 million.                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Net sales increased by 22.9% or $2.4 million due to higher sales of Elizabeth Arden fragrance and color cosmetic  products.                                                                                                                                                                                                                                                                                                                                                                                                    

Gross Margin.    For the three months ended December 31, 2009 and 2008, gross margins were 44.3% and 40.7%, respectively.  Gross margin for the three months ended December 31, 2008 included $3.5 million of charges (which did not require the use of cash) related to the higher cost Liz Claiborne inventory purchased prior to the June 2008 effective date of the Liz Claiborne license agreement.In addition, gross margin in the current year period benefited from a higher proportion of sales of owned and licensed brands, which reflect higher gross margins as compared to distributed brands, and favorable currency impacts, as well as improved operating efficiencies due to the Initiative.



SG&A.Selling, general and administrative expenses increased 9.7%, or $11.7 million, for the three months ended December 31, 2009, compared to the three months ended December 31, 2008.  The increase was principally due to (i) higher total advertising and sales promotion expenses of $4.7 million primarily due to new product launch activity in the current year period, (ii) higher royalty expenses of $2.5 million due to higher sales of licensed brands, and (iii) higher general and administrative expenses of $4.0 million for the three months ended December 31, 2009. The increase in general and administrative expenses was principally due to higher payroll costs of $6.8 million, including incentive compensation costs, as the prior year period included a reversal of $2.0 million of previously recognized costs relating to the performance based restricted stock grants made in August 2006 and August 2007. Partially offsetting this increase were transition expenses of $0.7 million in the prior year period related to the Liz Claiborne license agreement and a favorable impact of $1.0 million related to foreign currency translation of our international affiliates' balance sheets as compared to the prior year. For the three months ended December 31, 2009, total share-based compensation cost charged against income for all stock plans was $1.2 million compared to a credit against income of $0.5 million for the three months ended December 31, 2008. For the three months ended December 31, 2009, restructuring and one-time costs under the Initiative totaled $2.0 million as compared to $0.9 million for the three months ended December 31, 2008.





|Segment Profit                                                                                                                                                                                                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                      
|North America Fragrance                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                      
|Segment profit increased 42.0% or $15.5 million. The increase in segment profit was due to higher sales and improved gross margins resulting from a higher proportion of sales of owned and licensed brands, which reflect higher gross margins as compared to distributed brands, and lower distribution and freight costs.                                          
|                                                                                                                                                                                                                                                                                                                                                                      
|International                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                      
|Segment profit increased 5.4% or $0.5 million.  The improvement in segment profit was primarily due to the impact of favorable foreign currency translation and improved gross margins due to a higher proportion of basic product sales, which have higher gross margins as compared to promotional products.  Selling, general and administrative expenses were $7.8

- 27 -



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|million higher compared to the three months ended December 31, 2008, primarily due to higher total advertising and sales promotion expenses to support new product launch activity partially offset by the favorable impact of the foreign currency translation of our international affiliates' balance sheets as compared to the prior year period.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                     
|Other                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                     
|Segment loss decreased by $1.2 million from the prior year period primarily due to higher sales and improved gross margins.                                                                                                                                                                                                                          



Interest Expense.    Interest expense, net of interest income, decreased 17.4%, or $1.2 million, for the three months ended December 31, 2009, compared to the three months ended December 31, 2008.  The decrease was due to lower average interest rates under our revolving bank credit facility and lower average borrowings under such credit facility during the current year period.



Provision for Income Taxes.Our effective tax rate, which is calculated as a percentage of the income or loss before income taxes, for the three months ended December 31, 2009, was 31.4 % compared to 23.1% for the three months ended December 31, 2008. The pre-tax income for our domestic and international operations was $18.7 million and $12.0 million, respectively for the three months ended December 31, 2009. The pre-tax income for our domestic and international operations was $6.1 million and $11.7 million, respectively, for the three months ended December 31, 2008.The increase in the effective tax rate was mainly due to higher income from operations in the U.S. in the current year period, which has a higher effective tax rate than our international operations.



Net Income.    Net income for the three months ended December 31, 2009, was $21.1 million, compared to $13.7 million for the three months ended December 31, 2008.  The increase in net income was primarily the result of higher sales and improved gross margins, and lower interest expense of $1.2 million in the current year period, partially offset by higher selling, general and administrative expenses of $11.7 million and a higher effective tax rate.



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) increased by approximately $12.2 million to $43.5 million for the three months ended December 31, 2009, compared to $31.3 million for the three months ended December 31, 2008.  The increase in EBITDA was primarily the result of higher net sales and improved gross margins, partially offset by higher selling, general and administrative expenses in the current year period.



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 or 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.

- 28 -



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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) | Three Months Ended            |       
|---------------------- | ----------------------------- | ------
|                       |                               |       
|                       | December 31,
2009             |       
|                       |                               |       
|Net income             | $                             | 21,056
|Plus:                  |                               |       
|                       | Provision for income taxes    |       
|                       | Interest expense, net         |       
|                       | Depreciation in cost of sales |       
|                       | Depreciation and amortization |       
|                       |                               |       
|                       |                               | EBITDA
|                       |                               |       
|                       |                               |       
|                       |                               |       

Six Months Ended December 31, 2009 Compared to Six Months Ended December 31, 2008

Net Sales.    Net sales increased by 0.7% or $4.3 million for the six months ended December 31, 2009, compared to the six months ended December 31, 2008.  Excluding the favorable impact of foreign currency translation, net sales decreased by 0.3% or $2.1 million. Net sales of the Juicy Couture fragrances increased by $27.6 million due to the current year launch of the new Juicy Couture fragrance, Couture Couture, and the continued roll out of the prior year launch of Viva La Juicy.  Aggregate sales of Britney Spears and Mariah Carey fragrances also increased by $16.7 million.  Our International segment also benefited from incremental sales due to the launch of the Alberta Ferrettifragrance. These increases were partially offset by $15.3 million in reduced sales of distributed brands and $8.2 million of lower sales of Elizabeth Arden branded products, substantially all of which is due to retailer de-stocking that occurred in the first quarter of our current fiscal year.





|North America Fragrance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Net sales increased by 1.2% or $4.9 million. Excluding the favorable impact of foreign currency translation, net sales increased by 1.0% or $4.1 million. The increase in net sales was primarily due to higher sales of the Juicy Couture fragrance brands, in particular due to the current year launch of Couture Coutureand the continued roll out of the prior year launch of Viva La Juicy. Also contributing to the increase were higher sales of Britney Spears and Mariah Carey fragrance brands, partially offset by a decline in sales of distributed brands and Elizabeth Arden skin care and fragrance products.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|International                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Net sales decreased by 1.2% or $2.5 million. Excluding the favorable impact of foreign currency translation, net sales decreased by 4.0 % or $8.2 million. A decrease in sales of Elizabeth Arden fragrance and skin care products was offset by higher sales of the Juicy Couture fragrance brands, in particular due to the current year launch of Couture Couture. The current year period also benefited from incremental sales due to the launch of the Alberta Ferretti fragrance and higher sales of Britney Spears fragrance brands.                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Net sales increased by 8.7% or $2.0 million due to higher sales of Elizabeth Arden fragrance and color cosmetic products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Gross Margin.    For the six months ended December 31, 2009 and 2008, gross margins were 44.0% and 39.1%, respectively.  Gross margin for the six months ended December 31, 2008 included $19.9 million of charges ($18.9 million of which did not require the use of cash) related to the higher cost Liz Claiborne inventory purchased prior to the June 2008 effective date of the Liz Claiborne license agreement. In addition, gross margin in the current year period benefited from a higher proportion of sales of owned and licensed brands, which reflect higher gross margins as compared to distributed brands and favorable currency impacts, as well as improved operating efficiencies due to the Initiative.

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SG&A.Selling, general and administrative expenses increased 2.7%, or $6.3 million, for the six months ended December 31, 2009, compared to the six months ended December 31, 2008.  The increase was principally due to higher total advertising and sales promotion expenses of $8.1 million primarily due to new product launch activity in the current year period and higher royalty expenses of $2.8 million due to higher sales of licensed brands. Partially offsetting this increase were lower general and administrative expenses of $4.3 million. The decrease in general and administrative expenses was principally due to a (i) $0.6 million favorable impact of foreign currency translation of our affiliates' balance sheets as compared to a loss in the prior year period of $3.7 million and (ii)  transition expenses of $3.4 million in the prior year period related to the Liz Claiborne license agreement, partially offset by higher payroll costs of $5.2 million, including incentive compensation costs, as the prior year amount included a reversal of $2.0 million of previously recognized costs relating to the performance based restricted stock grants made in August 2006 and August 2007.  For the six months ended December 31, 2009, restructuring and one-time costs under the Initiative totaled $3.6 million as compared to $2.0 million for the six months ended December 31, 2008.





|Segment Profit                                                                                                                                                                                                                                                                                                                                        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                      
|North America Fragrance                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                      
|Segment profit increased 16.4% or $11.3 million. The increase in segment profit was mostly due to higher sales and improved gross margins due to a higher proportion of sales of owned and licensed brands, which reflect higher gross margins as compared to distributed brands.                                                                     
|                                                                                                                                                                                                                                                                                                                                                      
|International                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                      
|Segment profit increased by $7.7 million.  The improvement in segment results was primarily due to improved gross margins due to a higher proportion of basic product sales, which have higher gross margins as compared to promotional sales and favorable currency impacts, partially offset by higher selling, general and administrative expenses.
|                                                                                                                                                                                                                                                                                                                                                      
|Other                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                      
|Segment loss decreased by $1.4 million from the prior year period primarily due to higher sales and improved gross margins.                                                                                                                                                                                                                           



Interest Expense.    Interest expense, net of interest income, decreased 16.1%, or $2.2 million, for the six months ended December 31, 2009, compared to the six months ended December 31, 2008.  The decrease was due to lower average interest rates under our revolving bank credit facility and lower average borrowings under such credit facility during the current year period.



Provision for Income Taxes.    The effective tax rate, which is calculated as a percentage of the income or loss before income taxes for the six months ended December 31, 2009, was 31.4 % compared to 39.0% for the six months ended December 31, 2008.  The pre-tax income for our domestic and international operations was $15.0 million and $15.7 million, respectively, for the six months ended December 31, 2009.  The pre-tax loss for our domestic operations was $10 million and the pre-tax income for our international operations was $11.9 million for the six months ended December 31, 2008.The decrease in the effective tax rate was mainly due to the domestic pre-tax loss in the prior year and changes in earnings contributions from our worldwide affiliates as our worldwide affiliates generally have lower tax rates than our domestic operations.



Net Income.    Net income for the six months ended December 31, 2009, was $21.1 million compared to $1.2 million for the six months ended December 31, 2008.  The increase in net income was primarily the result of higher sales and improved gross margins, and lower interest expense of $2.2 million in the current year period, partially offset by higher selling, general and administrative expenses.



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) increased by approximately $28.1 million to $56.4 million for the six months ended December 31, 2009, compared to $28.3 million for the six months ended December 31, 2008.  The increase in EBITDA was primarily the result of higher sales and improved margins, partially offset by higher selling, general and administrative expenses of $6.3 million in the current year period.

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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,
2009             |       
|                       |                               |       
|Net income             | $                             | 21,096
|Plus:                  |                               |       
|                       | Provision for income taxes    |       
|                       | Interest expense, net         |       
|                       | Depreciation in cost of sales |       
|                       | Depreciation and amortization |       
|                       |                               |       
|                       |                               | EBITDA
|                       |                               |       
|                       |                               |       
|                       |                               |       



Liquidity and Capital Resources



|(Amounts in thousands)                              | Six Months Ended  |        
|--------------------------------------------------- | ----------------- | -------
|                                                    |                   |        
|                                                    | December 31,
2009 |        
|                                                    |                   |        
|Net cash provided by (used in) operating activities | $                 | 77,094 
|Net cash used in investing activities               |                   | (18,165
|Net cash (used in) provided by financing activities |                   | (49,995
|Net increase in cash and cash equivalents           |                   | 9,603  

Cash Flows. For the six months ended December 31, 2009, net cash provided by operating activities was $77.1 million, as compared to net cash used in operating activities of $2.1 million for the six months ended December 31, 2008.  This improvement in cash used in operating activities was principally due to lower inventory levels resulting from the Initiative, higher net income, and the timing of payments to vendors, partially offset by higher receivables.



For the six months ended December 31, 2009, net cash used in investing activities of $18.2 million was composed of $17.8 million of capital expenditures and the $0.3 million payment of the remaining installment of contingent consideration associated with our acquisition of the fragrance business of Sovereign Sales, LLC.  For the six months ended December 31, 2008, net cash used in investing activities of $18.2 million was composed of $12.8 million of capital expenditures and the $5.3 million payment of the second installment of contingent consideration associated with our acquisition of the fragrance business of Sovereign Sales.  The increase in capital expenditures for the six months ended December 31, 2009 is primarily due to the implementation of our new accounting and order processing system.

For the six months ended December 31, 2009, net cash used in financing activities was $50.0 million, as compared to net cash provided by financing activities of $24.9 million for the six months ended December 31, 2008.  During the six months ended December 31, 2009, borrowings under our credit facility decreased by $49.0 million to $66.0 million at December 31, 2009.  During the six months ended December 31, 2008, borrowings under our credit facility increased by $26.7 million to $145.7 million at December 31, 2008.

Interest paid during the six months ended December 31, 2009, included $8.7 million of interest payments on the 7 3/4% senior subordinated notes due 2014 and $2.1 million of interest paid on the borrowings under our credit facility.  Interest paid during the six months ended December 31, 2008, included $8.7 million of interest payments on the 7 3/4% senior subordinated notes and $5.2 million of interest paid on the borrowings under our credit facility.



At December 31, 2009, we had approximately $32.7 million of cash, of which $24.7 million was held outside of the United States.  Of the cash held outside of the U.S., $9.7 million was considered cash in excess of local operating requirements and could have been repatriated to the U.S. without restriction or tax effect.  The balance of such cash held outside the U.S., approximately $15.0 million, was needed to meet local working capital requirements and therefore considered permanently reinvested in the applicable local subsidiary.



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 licensing and distribution arrangements, capital expenditures and debt service.  In addition, we may use funds to repurchase our common stock and senior subordinated notes.  We have historically financed our working capital 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.

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We have a revolving $325 million credit facility with a syndicate of banks, for which JPMorgan Chase Bank is the administrative agent, which generally provides for borrowings on a revolving basis, with a $25 million sub-limit for letters of credit.  Under the terms of the credit facility we may, at any time, increase the size of the credit facility up to $375 million without entering into a formal amendment requiring the consent of all of the banks, subject to our satisfaction of certain conditions.  The credit facility expires in December 2012.



The credit facility is guaranteed by all of our U.S. subsidiaries and is collateralized by a first priority lien on all of our U.S., Canada and Puerto Rico accounts receivable and U.S. inventory. Borrowings under the credit facility are limited to 85.0% of eligible accounts receivable and 85.0% of the appraised net liquidation value of our inventory, as determined pursuant to the terms of the credit facility; provided, however, that from August 15 to October 31 of each year our borrowing base may be temporarily increased by up to $25 million. 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 base capacity declines to less than $25 million ($35 million from December 1 through May 31).  Our average borrowing base capacity during the quarter ended December 31, 2009, did not fall below the applicable thresholds noted above. Accordingly, the debt service coverage ratio did not apply for the quarter ended December 31, 2009. We were in compliance with all applicable covenants under the credit facility for the quarter ended December 31, 2009.



Under the terms of the credit facility, we may pay dividends or repurchase Common Stock if we maintain borrowing base capacity of at least $25 million from June 1 to November 30, and at least $35 million from December 1 to May 31, after making the applicable payment.  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, except that the Applicable Margin on the first $25 million of borrowings from August 15 to October 31 of each year, while the temporary increase in our borrowing base is in effect, is 1.00% higher. At December 31, 2009, the Applicable Margin was 1.75% for LIBOR loans and 0% for prime rate loans.  The commitment fee on the unused portion of the credit facility is 0.25%.  For the six months ended December 31, 2009 and 2008, the weighted average annual interest rate on borrowings under the credit facility was 2.4% and 4.0%, respectively. The interest rates payable by us on our 7 3/4% senior subordinated notes and on borrowings under our revolving credit facility are not impacted by credit rating agency actions.



At December 31, 2009, we had (i) $66.0 million in borrowings and $4.9 million in letters of credit outstanding under the credit facility, (ii) $266.1 million of eligible accounts receivable and inventories available as collateral under the credit facility, and (iii) remaining borrowing availability of $200.1 million.  The borrowing availability under the credit facility typically declines in the second half of our fiscal year as our higher accounts receivable balances resulting from holiday season sales are likely to decline due to cash collections.

At December 31, 2009, we had outstanding $225.0 million aggregate principal amount of 7 3/4% senior subordinated notes.  The 7 3/4% senior subordinated notes are guaranteed by our U.S. subsidiaries.    The indenture pursuant to which the 7 3/4% senior subordinated notes were issued provides that such notes will be our senior subordinated obligations.  The 7 3/4% senior subordinated notes rank junior to all of our existing and future senior indebtedness, including indebtedness under the credit facility, and pari passu in right of payment to all of our senior subordinated indebtedness.  Interest on the 7 3/4% senior subordinated notes is payable semi-annually on February 15 and August 15 of each year.  The indenture generally permits us (subject to the satisfaction of a fixed charge coverage ratio and, in certain cases, also a net income test) to incur additional indebtedness, pay dividends, purchase or redeem our common stock or redeem subordinated indebtedness.  The indenture generally limits our ability to create liens, merge or transfer or sell assets.  The indenture also provides that the holders of the 7 3/4% senior subordinated notes have the option to require us to repurchase their notes in the event of a change of control involving us (as defined in the indenture).



Based upon our internal projections, 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 licensing or distribution arrangements.  A further deterioration in the economic and retail environment, however, could cause us to fail to satisfy the financial maintenance covenant under our credit facility that applies only in the event we do not have the requisite average borrowing base capacity as set forth under the credit facility.  In such an event, we would not be allowed to borrow under

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the credit facility and may not have access to the capital necessary for our business.  In addition, a default under our credit facility that causes acceleration of the debt under this facility could trigger a default under our outstanding 7 3/4% senior subordinated notes.  In the event we are not able to borrow under our credit facility, we would be required to develop an alternative source of liquidity.  There is no assurance that we could obtain replacement financing or what the terms of such financing, if available, would be.



We have discussions from time to time with manufacturers and owners of prestige fragrance brands regarding our possible acquisition of additional exclusive licensing and/or distribution rights.  We currently have no material agreements or commitments with respect to any such acquisition, although we periodically execute routine agreements to maintain the confidentiality of information obtained during the course of discussions with such manufacturers and brand owners.



Repurchases of Common Stock.    On November 5, 2008, our board of directors authorized us to extend our existing $80 million common stock repurchase program through November 30, 2010.  As of December 31, 2009, we had repurchased 2,558,391 shares of common stock on the open market under the stock repurchase program, at an average price of $16.91 per share, at a cost of $43.3 million, including sales commissions, leaving $36.7 million available for additional common stock repurchases under the program.  During the three and six months ended December 31, 2009, we purchased 32,153 shares of common stock on the open market under the stock repurchase program at an average price of $11.61 per share and at a cost of $0.4 million, including sales commissions. The acquisition of these shares by us was accounted for under the treasury method.



New Accounting Standards

Interim Disclosures About Fair Value of Financial Instruments



In April 2009, the FASB issued an update to Codification Topic 825, Financial Instruments, amending the disclosure requirements under Topic 825 to require disclosures about the fair value of financial instruments for interim reporting periods in addition to the previously required annual disclosures.  The interim reporting requirements under Codification Topic 825 were effective for us beginning July 1, 2009 and did not have a material impact on our consolidated financial statements.



Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities



In June 2008, the FASB issued an update to Codification Topic 260, Earnings Per Share, that addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The update to Codification Topic 260 requires unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) to be treated as participating securities and to be included in the computation of earnings per share pursuant to the two-class method.  The revisions to Codification Topic 260 were effective for us beginning July 1, 2009 and did not have a material impact on our consolidated financial statements.



Business Combinations



December 2007, the FASB issued an update to Codification Topic 805, Business Combinations, which significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, pre-acquisition contingencies, transaction costs, restructuring costs and income taxes.  The revisions to Codification Topic 805 were effective for acquisitions that occur after July 1, 2009 and did not have a material impact on our consolidated financial statements.



Useful Life of Intangible Assets



In April 2008, the FASB issued an update to Codification Topic 350, Intangible- Goodwill and Other, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This amendment is effective on a prospective basis to all intangible assets acquired and for disclosures on all intangible assets recognized on or after the beginning of the first annual period subsequent to December 15, 2008.  Early adoption is prohibited.  The amendment to Codification Topic 350 was effective for us beginning July 1, 2009 and did not have a material impact on our consolidated financial statements.

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Fair Value Measurements

Codification Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. The requirements for financial assets and liabilities under Codification Topic 820 became effective for us on July 1, 2008 and did not have a material impact on our consolidated financial statements. For non-financial assets and liabilities, Codification Topic 820 was effective for us beginning July 1, 2009 and did not have a material impact on our consolidated financial statements.

In August 2009, the FASB issued an update to Codification Topic 820 that provides additional guidance on the fair value measurement of liabilities. Specifically, this update provides clarification in circumstances in which a quoted price in an active market is not available. The update to Codification Topic 820 was effective for us beginning July 1, 2009 and did not have a material impact on our consolidated financial statements.

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Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results



The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions.  This Quarterly Report on Form 10-Q and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management's plans and assumptions regarding future events or performance.  We have tried, wherever possible, to identify such statements by using words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "will" and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products, future performance or results of current and anticipated products, sales efforts, expenses and/or cost savings, interest rates, foreign exchange rates, the outcome of contingencies, such as legal proceedings, and financial results. A list of factors that could cause our actual results of operations and financial condition to differ materially is set forth below, and these factors are discussed in greater detail under Item 1A -- "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended June 30, 2009:





|* | factors affecting our relationships with our customers or our customers' businesses, including the absence of contracts with customers, our customers' financial condition, and changes in the retail, fragrance and cosmetic industries, such as the consolidation of retailers and the associated closing of retail doors, as well as retailer inventory control practices, including, but not limited to, levels of inventory carried at point of sale and practices used to control inventory shrinkage;
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | risks of international operations, including foreign currency fluctuations, hedging activities, economic and political consequences of terrorist attacks, unfavorable changes in U.S. or international tax laws or regulations, diseases and pandemics, and political instability in certain regions of the world;                                                                                                                                                                                          
|* | our reliance on third-party manufacturers for substantially all of our owned and licensed products and our absence of contracts with suppliers of distributed brands and components for manufacturing of owned and licensed brands;                                                                                                                                                                                                                                                                         
|* | delays in shipments, inventory shortages and higher costs of production due to the loss of or disruption in our distribution facilities or at key third party manufacturing or fulfillment facilities that manufacture or provide logistic services for our products;                                                                                                                                                                                                                                       
|* | our ability to respond in a timely manner to changing consumer preferences and purchasing patterns and other international and domestic conditions and events that impact retailer and/or consumer confidence and demand, such as the current global recession;                                                                                                                                                                                                                                             
|* | our ability to protect our intellectual property rights;                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|* | the success, or changes in the timing or scope, of our new product launches, advertising and merchandising programs;                                                                                                                                                                                                                                                                                                                                                                                        
|* | the quality, safety and efficacy of our products;                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|* | the impact of competitive products and pricing;                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|* | our ability to (i) implement our growth strategy and acquire or license additional brands or secure additional distribution arrangements, (ii) successfully and cost-effectively integrate acquired businesses or new brands, and (iii) finance our growth strategy and our working capital requirements;                                                                                                                                                                                                   
|* | our level of indebtedness, our ability to realize sufficient cash flows from operations to meet our debt service obligations and working capital requirements, and restrictive covenants in our revolving credit facility and the indenture for our 7 3/4% senior subordinated notes;                                                                                                                                                                                                                       
|* | changes in product mix to less profitable products;                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|* | the retention and availability of key personnel;                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|* | 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 or critical accounting estimates;                                                                                                                                                                                                                                                                                           
|* | the success of, and costs associated with, our Global Efficiency Re-engineering initiative, including our transition to a turnkey manufacturing process and our implementation of a new Oracle financial accounting and order processing system, and related restructuring plan;                                                                                                                                                                                                                            
|* | the potential for significant impairment charges relating to our trademarks, goodwill or other intangible assets that could result from a number of factors, including downward pressure on our stock price; and                                                                                                                                                                                                                                                                                            
|* | other unanticipated risks and uncertainties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                



We caution that the factors described herein and other factors could cause our actual results of operations and financial condition 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.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of December 31, 2009, we had approximately $66.0 million in borrowings outstanding under our revolving credit facility.  Borrowings under our revolving credit facility are seasonal, with peak borrowings typically 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 revolving credit facility during the six months ended December 31, 2009, and assuming there had been a two percentage point (200 basis point) change in the average interest rate for these borrowings, it is estimated that our interest expense for the six months ended December 31, 2009 would have increased or decreased by approximately $1.6 million.  See Note 8 to the Notes to Unaudited Consolidated Financial Statements.



Foreign Currency Risk



We sell our products in approximately 100 countries around the world.  During the three and six months ended December 31, 2009, we derived approximately 34% and 35%, 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 third-party manufacturing facilities located in the U.S.  Our operations may be subject to volatility because of currency changes, inflation 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 adversely affect our ability to meet our obligations and could adversely affect our business, prospects, results of operations, financial condition or cash flows.  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.



As of December 31, 2009, we had notional amounts of 12.8 million British pounds under open foreign currency contracts that expire between January 31, 2010 and May 30, 2011 to reduce the exposure of our foreign subsidiary revenues to fluctuations in currency rates.  As of December 31, 2009, we had notional amounts of 10.4 million Canadian dollars and 12.8 million Australian dollars under open foreign currency contracts that expire between January 31, 2010 and May 30, 2011 to reduce the exposure of our foreign subsidiary cost of sales 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 forecasted transaction affects earnings. The realized loss, net of taxes, recognized during the three and six months ended December 31, 2009 from settled contracts was approximately $102,000 and $116,000, respectively.  At December 31, 2009, the unrealized loss, net of taxes, associated with these open contracts of approximately $559,000 is included in accumulated other comprehensive income (loss) in our consolidated balance sheet.  See Note 12 to the Notes to Unaudited Consolidated Financial Statements.



When appropriate, we also enter into and settle foreign currency contracts for Euros, British pounds and Canadian dollars to reduce the exposure of our foreign subsidiaries' net balance sheets to fluctuations in foreign currency rates.  As of December 31, 2009, there were no such foreign currency contracts outstanding.  The realized loss, net of taxes, recognized during the three and six months ended December 31, 2009 from the settlement of the contracts, was approximately $15,000 and $135,000, 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

Our Chairman, President and Chief Executive Officer and the Company's 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 our 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, our disclosure controls and procedures are functioning effectively.

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During July 2009, we completed the first phase of the implementation of an Oracle financial accounting system (general ledger and accounts payable) in accordance with our projected timeline. We plan to complete the implementation of the remaining portion of the financial accounting system, as well as an order processing system, in the second half of fiscal 2010. As part of this implementation, we also migrated to a shared services model for our primary global transaction processing functions.  As a result of these activities, internal controls related to user security, account structure and hierarchy, system reporting and approval procedures have been, or will be, modified and redesigned to conform with and support the new financial accounting and order processing system and the new shared services model.  Management is currently reviewing and evaluating the design of key controls in the new Oracle financial accounting system and the accuracy of the data conversion that is taking place during the implementation and thus far has not uncovered a control deficiency or combination of control deficiencies that management believes meet the definition of a material weakness in internal control over financial reporting.



Management believes that it has taken the necessary steps to monitor and maintain appropriate internal controls during this period of change and that internal controls are being enhanced by the new financial accounting system, however, it has not completed its testing of the operating effectiveness of all key controls in the new financial accounting system. As such, there is a risk that control deficiencies may exist that have not yet been identified and that could constitute, individually or in combination, a material weakness. In addition, the implementation is ongoing and difficulties may still arise as we complete the implementation of the remaining portion of the financial accounting system as well as the order processing system in the second half of fiscal 2010.



There have been no other changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are likely to materially affect, our internal control over financial reporting.

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PART II.   OTHER INFORMATION

ITEM 1A.    RISK FACTORS



Risk factors describing the major risks to our business can be found under Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the fiscal year ended June 30, 2009.  There has been no material change in our risk factors from those previously discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2009.



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







|Issuer Purchases of Equity Securities                                                                                                                                                                                                                                                                                                                                                                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|Period                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|October 1, 2009 through October 31, 2009                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|November 1, 2009 through November 30, 2009                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|December 1, 2009 through December 31, 2009                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|Totals                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|(1)   On November 5, 2008, our board of directors authorized us to extend our existing $80 million stock repurchase program through November 30, 2010.  The stock repurchase program was set to expire on November 30, 2008.  The extension of the stock repurchase program was announced on November 6, 2008.  All shares purchased during the quarter ended December 31, 2009 were purchased on the open market.
|                                                                                                                                                                                                                                                                                                                                                                                                                  
|(2)   Amounts reflect the remaining dollar value of shares that may be purchased under the stock repurchase program described above.                                                                                                                                                                                                                                                                              



- 38 -



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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 12, 2009, 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     |  | 26,781,302
| |  |  | Fred Berens          |  | 16,706,445
| |  |  | Maura J. Clark       |  | 26,812,005
| |  |  | Richard C. W. Mauran |  | 26,818,138
| |  |  | William M. Tatham    |  | 18,718,932
| |  |  | J. W. Nevil Thomas   |  | 18,718,384
| |  |  | Paul West            |  | 26,818,342



| | 2. | The vote on the ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2010, was as follows:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Votes Cast
|----------
|          
|          
|For       
|          
|26,725,531



- 39 -



---



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 3.1 filed as part of the Company's Form 8-K dated October 27, 2009 (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)).                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.1           |  | 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)).                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.2           |  | First Amendment to Second Amended and Restated Credit Agreement dated as of February 25, 2004, 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 4.5 filed as part of the Company's Form 10-K for the year ended January 31, 2004 (Commission File No. 1-6370)).                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.3           |  | Second Amendment to Second Amended and Restated Credit Agreement dated as of June 2, 2004, 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 4.6 to the Company's Form 10-Q for the quarter ended May 1, 2004 (Commission File No. 1-6370)).                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.4           |  | Third Amendment to Second Amended and Restated Credit Agreement dated as of September 30, 2004, 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 October 1, 2004 (Commission File No. 1-6370)).                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.5           |  | Fourth Amendment to Second Amended and Restated Credit Agreement dated as of November 2, 2005, among the Company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to 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 September 30, 2005 (Commission File No. 1-6370)).  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.6           |  | Fifth Amendment to Second Amended and Restated Credit Agreement dated as of August 11, 2006, among the Company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto (incorporated herein 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)).             
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.7           |  | Sixth Amendment to Second Amended and Restated Credit Agreement dated as of August 15, 2007, among the Company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 10.7 filed as part of the Company's Form 10-K for the year ended June 30, 2007 (Commission File No. 1-6370)).           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.8           |  | Seventh Amendment to Second Amended and Restated Credit Agreement dated as of November 13, 2007, among the Company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 10.8 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



- 40 -



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|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.9           |  | Eighth Amendment to Second Amended and Restated Credit Agreement dated as of July 21, 2008, among the company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto (incorporated herein by reference to Exhibit 10.1 filed as part of the Company's Form 8-K dated July 21, 2008 (Commission File No. 1-6370)).                               
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.10 *        |  | Exhibits to the Second Amended and Restated Credit Agreement dated as of December 24, 2002, among the company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto, as amended through the Eighth Amendment thereto dated as of July 21, 2008.  (Portions of this exhibit have been omitted pursuant to a request for confidential treatment).
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.11          |  | 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 January 23, 2001 (Commission File No. 1-6370)).                                                                                                                                                                     
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.12          |  | 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)).                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.13 +        |  | 2004 Stock Incentive Plan, as amended and restated (incorporated herein by reference to Exhibit 10.12 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.14 +        |  | 2004 Non-Employee Director Stock Option Plan, as amended (incorporated herein 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)).                                                                                                                                                                                                                                                                           
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.15 +        |  | 2000 Stock Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.14 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).                                                                                                                                                                                                                                                                                              
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.16 +        |  | 1995 Stock Option Plan, as amended (incorporated herein 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)).                                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.17 *        |  | Amended 2002 Employee Stock Purchase Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.18 +        |  | Non-Employee Director Stock Option Plan, as amended (incorporated herein 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)).                                                                                                                                                                                                                                                                                
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.19 +        |  | Form of Nonqualified Stock Option Agreement for stock option awards under the Company's 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)).                                                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.20 +        |  | Form of Incentive Stock Option Agreement for stock option awards under the Company's 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)).                                                                                                                                                                                                                          
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.21 +        |  | Form of Nonqualified Stock Option Agreement for stock option awards under the Company's 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)).                                                                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.22 +        |  | 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)).                                                                                                                                                                                                                                
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.23 +        |  | Form of Restricted Stock Agreement for service-based restricted stock awards (one-year vesting) under the Company's 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)).                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



- 41 -



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|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                       
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                                                                                                                                                                                                                   
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.24 +        |  | Form of Restricted Stock Agreement for the performance-based restricted stock awards under the Company's 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)).              
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.25 +        |  | 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)).                         
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.26 +        |  | 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)).                   
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.27 +        |  | 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)).                                                
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.28 +        |  | Form of Restricted Stock Agreement for the 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)).                                    
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.29 +        |  | 2005 Management Bonus Plan, as amended (incorporated herein by reference to Exhibit 10.28 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).                                                                                                         
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.30 +        |  | 2005 Performance Bonus Plan, as amended (incorporated herein by reference to Exhibit 10.29 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2007 (Commission File No. 1-6370)).                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.31 +        |  | Elizabeth Arden, Inc. Severance Policy (incorporated herein by reference to Exhibit 10.31 filed as part of the Company's Form 10-K for the year ended June 30, 2007 (Commission File No. 1-6370)).                                                                                                                
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.32 +        |  | Form of Restricted Stock Agreement for service-based restricted stock awards (three-year vesting period) under the Company's 2000 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.32 filed as part of the Company's Form 10-K for the year ended June 30, 2007 (Commission File No. 1-6370)).
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.33 +        |  | Termination Agreement between Elizabeth Arden International S.à.r.l. and Jacobus A. J. Steffens dated November 5, 2008 (incorporated herein by reference to Exhibit 10.32 filed as part of the Company's Form 10-Q for the quarter ended December 31, 2008 (Commission File No. 1-6370)).                         
|               |  |                                                                                                                                                                                                                                                                                                                   
|10.34 +        |  | Form of Indemnification Agreement for Directors and Officers of Elizabeth Arden, Inc. (incorporated by reference to Exhibit 10.1 filed as part of the Company's Form 8-K dated August 11, 2009 (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.                                                                                                                                                                                                                        
|               |  |                                                                                                                                                                                                                                                                                                                   



+



- 42 -



---



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: January 29, 2010  |  | /s/ E. Scott Beattie                                
|                        |  |                                                     
|                        |  | E. Scott Beattie                                    
|                        |  | Chairman, President and Chief Executive Officer     
|                        |  | (Principal Executive Officer)                       
|                        |  |                                                     
|Date:  January 29, 2010 |  | /s/ Stephen J. Smith                                
|                        |  |                                                     
|                        |  | Stephen J. Smith                                    
|                        |  | Executive Vice President and Chief Financial Officer
|                        |  | (Principal Financial and Accounting Officer)        
|                        |  |                                                     



- 43 -



---



EXHIBIT INDEX



|Exhibit 
Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.10           |  | Exhibits to the Second Amended and Restated Credit Agreement dated as of December 24, 2002, among the company, JPMorgan Chase Bank, as administrative agent, Bank of America, N. A. (successor in interest by merger to Fleet National Bank), as the collateral agent, and the banks listed on the signature pages thereto, as amended through the Eighth Amendment thereto dated as of July 21, 2008.  (Portions of this exhibit have been omitted pursuant to a request for confidential treatment).
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.17           |  | Amended 2002 Employee Stock Purchase Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|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.                                                                                                                                                                                                                                                                                                                                                                                                            



- 44 -



---