UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, DC
20549





FORM 10-Q





x           QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the quarterly period ended March
31, 2008





OR





o           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:
001-33142





Physicians Formula Holdings,
Inc.





(Exact
name of registrant as specified in its charter)





DELAWARE
            
            20-0340099(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)1055 West 8th
      Street
            
            91702Azusa,
      California
            
            (Zip
      Code)(Address
      of principal executive offices)





(626) 334-3395





(Registrant’s
telephone number, including area code)





N/A





(Former
name, former address and former fiscal year, if changed since last
report)





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 o





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. (Check
one):




Large
      accelerated filer o
            
            Accelerated
      filer xNon-accelerated
      filer  o
            
            Smaller
      reporting company o





Indicate by
check mark whether the Registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes o  No x





The
number of shares outstanding of the registrant’s common stock, par value $.01
per share, as of May 2, 2008, was 14,096,227.















TABLE OF CONTENTS





PART I. FINANCIAL INFORMATION
            
            1Item 1.
            
            Financial
      Statements
            
            1Item 2.
            
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            
            10Item 3.
            
            Quantitative and Qualitative Disclosures About Market
      Risk
            
            15Item 4.
            
            Controls and Procedures
            
            15PART II. OTHER INFORMATION
            
            16Item 1.
            
            Legal
      Proceedings
            
            16Item 1A.
            
            Risk
      Factors
            
            16Item 6.
            
            Exhibits
            
            16














PART
I.





FINANCIAL
INFORMATION





ITEM
1.  FINANCIAL STATEMENTS





PHYSICIANS FORMULA HOLDINGS,
INC.


CONDENSED CONSOLIDATED BALANCE
SHEETS


(unaudited)


(dollars in thousands, except share
data)




March
      31,
                
                
                December
      31,2008
                
                
                2007ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                3
                
                
                $
                -Accounts
      receivable, net of allowance for bad debts of $454 and
$436
                
                
                36,311
                
                
                
                33,421Inventories
                
                
                27,856
                
                
                
                31,648Prepaid
      expenses and other current assets
                
                
                1,834
                
                
                
                1,781Deferred
      income taxes
                
                
                6,206
                
                
                
                7,364Total
      current assets
                
                
                72,210
                
                
                
                74,214PROPERTY
      AND EQUIPMENT—Net
                
                
                4,032
                
                
                
                4,070OTHER
      ASSETS—Net
                
                
                1,136
                
                
                
                1,174INTANGIBLE
      ASSETS—Net
                
                
                54,105
                
                
                
                54,546GOODWILL
                
                
                17,463
                
                
                
                17,463TOTAL
                
                $
                148,946
                
                
                $
                151,467LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable
                
                $
                9,176
                
                
                $
                13,043Accrued
      expenses
                
                
                1,585
                
                
                
                2,134Trade
      allowances
                
                
                7,041
                
                
                
                5,001Sales
      returns reserve
                
                
                9,363
                
                
                
                10,396Income
      taxes payable
                
                
                2,669
                
                
                
                3,125Line
      of credit borrowings
                
                
                7,512
                
                
                
                10,168Current
      portion of long-term debt
                
                
                2,625
                
                
                
                3,000Total
      current liabilities
                
                
                39,971
                
                
                
                46,867DEFERRED
      COMPENSATION
                
                
                804
                
                
                
                829DEFERRED
      INCOME TAXES
                
                
                20,333
                
                
                
                20,821LONG-TERM
      DEBT
                
                
                9,750
                
                
                
                10,500COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITY:Series A
      preferred stock, $.01 par value—10,000,000 shares
      authorized, no shares issued and outstanding at March 31, 2008
      and December 31, 2007
                
                
                -
                
                
                
                -Common
      stock, $.01 par value—50,000,000 shares authorized, 14,096,227 and
      14,095,727 shares issued and outstanding at March 31, 2008 and
      December 31, 2007, respectively
                
                
                141
                
                
                
                141Additional
      paid-in capital
                
                
                59,792
                
                
                
                59,173Retained
      earnings
                
                
                18,155
                
                
                
                13,136Total
      stockholders' equity
                
                
                78,088
                
                
                
                72,450TOTAL
                
                $
                148,946
                
                
                $
                151,467




See notes
to condensed consolidated financial statements.





-1-





PHYSICIANS FORMULA HOLDINGS,
INC.


CONDENSED CONSOLIDATED STATEMENTS OF
INCOME


(unaudited)


(dollars in thousands, except per
share data)





Three
      Months Ended March 31,2008
                
                
                2007NET
      SALES
                
                $
                42,661
                
                
                $
                35,723COST
      OF SALES
                
                
                18,946
                
                
                
                15,102GROSS
      PROFIT
                
                
                23,715
                
                
                
                20,621SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
                
                
                14,876
                
                
                
                13,110INCOME
      FROM OPERATIONS
                
                
                8,839
                
                
                
                7,511INTEREST
      EXPENSE-NET
                
                
                358
                
                
                
                404OTHER EXPENSE
      (INCOME)
                
                
                87
                
                
                
                (5
                )INCOME
      BEFORE INCOME TAXES
                
                
                8,394
                
                
                
                7,112PROVISION
      FOR INCOME TAXES
                
                
                3,375
                
                
                
                2,810NET
      INCOME
                
                $
                5,019
                
                
                $
                4,302NET
      INCOME PER COMMON SHARE:Basic
                
                $
                0.36
                
                
                $
                0.31Diluted
                
                $
                0.34
                
                
                $
                0.30WEIGHTED-AVERAGE
      COMMON SHARES OUTSTANDING:Basic
                
                
                14,095,834
                
                
                
                13,866,389Diluted
                
                
                14,579,437
                
                
                
                14,537,147





See notes
to condensed consolidated financial statements.





-2-





PHYSICIANS FORMULA HOLDINGS,
INC.


CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS


(unaudited)


(dollars in
thousands)





Three
      Months Ended March 31,2008
                        
                        
                        2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                        
                        $
                        5,019
                        
                        
                        $
                        4,302Adjustments to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                        
                        
                        712
                        
                        
                        
                        669Exchange
      rate loss
                        
                        
                        317
                        
                        
                        
                        -Deferred
      income taxes
                        
                        
                        670
                        
                        
                        
                        (1,313
                        )Provision
      for bad debts
                        
                        
                        18
                        
                        
                        
                        15Amortization
      of debt issuance costs
                        
                        
                        9
                        
                        
                        
                        8Recognition
      of stock-based compensation
                        
                        
                        591
                        
                        
                        
                        452Tax
      benefit on exercise of stock options
                        
                        
                        (2
                        )
                        
                        
                        -Changes
      in operating assets and liabilities:Accounts
      receivable
                        
                        
                        (3,226
                        )
                        
                        
                        (2,370
                        )Inventories
                        
                        
                        3,819
                        
                        
                        
                        2,275Prepaid
      expenses and other current assets
                        
                        
                        (53
                        )
                        
                        
                        174Other
      assets
                        
                        
                        5
                        
                        
                        
                        (88
                        )Accounts
      payable
                        
                        
                        (3,792
                        )
                        
                        
                        (2,449
                        )Accrued
      expenses, trade allowances and sales returns reserve
                        
                        
                        459
                        
                        
                        
                        932Income
      taxes payable
                        
                        
                        (456
                        )
                        
                        
                        3,278Net
      cash provided by operating activities
                        
                        
                        4,090
                        
                        
                        
                        5,885CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of property and equipment
                        
                        
                        (308
                        )
                        
                        
                        (250
                        )CASH
      FLOWS FROM FINANCING ACTIVITIES:Paydowns
      of term loans
                        
                        
                        (1,125
                        )
                        
                        
                        (375
                        )Net
      paydowns under line of credit
                        
                        
                        (2,656
                        )
                        
                        
                        (5,260
                        )Debt
      issuance costs
                        
                        
                        -
                        
                        
                        
                        (13
                        )Tax
      benefit on exercise of stock options
                        
                        
                        2
                        
                        
                        
                        8Net
      cash used in financing activities
                        
                        
                        (3,779
                        )
                        
                        
                        (5,640
                        )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                        
                        
                        3
                        
                        
                        
                        (5
                        )CASH
      AND CASH EQUIVALENTS—Beginning of period
                        
                        
                        -
                        
                        
                        
                        26CASH
      AND CASH EQUIVALENTS—End of period
                        
                        $
                        3
                        
                        
                        $
                        21SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION—Cash paid during the period
      for:Interest,
      net of amounts capitalized
                        
                        $
                        436
                        
                        
                        $
                        402Income
      taxes
                        
                        $
                        3,161
                        
                        
                        $
                        846SUPPLEMENTAL
      DISCLOSURE OF NON-CASH INVESTING ACTIVITIES - The Company had accounts
      payable of $62 and $247 outstanding relating to purchases of property and
      equipment as of March 31, 2008 and 2007, respectively.





See notes
to condensed consolidated financial statements.





-3-





PHYSICIANS FORMULA HOLDINGS,
INC.


NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS


(Unaudited)





1.  ORGANIZATION AND BASIS
OF PRESENTATION





The
accompanying unaudited condensed consolidated financial statements include the
accounts of Physicians Formula Holdings, Inc., a Delaware corporation (the
‘‘Company’’, ‘‘we’’ or ‘‘our’’), and its wholly owned subsidiary, Physicians
Formula, Inc. (‘‘Physicians’’), a New York corporation, and its wholly
owned subsidiaries, Physicians Formula Cosmetics, Inc., a Delaware
corporation, and Physicians Formula DRTV, LLC, a Delaware limited liability
company.





The
Company develops, markets, manufactures and distributes innovative,
premium-priced products for the mass market channel. The Company’s products
include face powders, bronzers, concealers, blushes, foundations, eye shadows,
eyeliners, brow makeup and mascaras. The Company sells its products to mass
market retailers such as Wal-Mart, Target, CVS, Walgreens and
Kroger.





The
accompanying condensed consolidated balance sheet as of March 31, 2008, the
condensed consolidated statements of income for the three months
ended March 31, 2008 and 2007 and the condensed consolidated statements of
cash flows for the three months ended March 31, 2008 and 2007 are
unaudited. These unaudited condensed consolidated interim financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America
(‘‘GAAP’’) for interim financial information and Article 10 of Regulation
S-X. In the opinion of the Company’s management, the unaudited condensed
consolidated interim financial statements include all adjustments of a normal
recurring nature necessary for the fair presentation of the Company’s financial
position as of March 31, 2008, its results of operations for the three months
ended March 31, 2008 and 2007, and its cash flows for the three months
ended March 31, 2008 and 2007. The results for the interim periods are not
necessarily indicative of the results to be expected for any future period or
for the fiscal year ending December 31, 2008. The condensed consolidated balance
sheet as of December 31, 2007 has been derived from the audited consolidated
balance sheet as of that date.





These
condensed consolidated interim financial statements should be read in
conjunction with the Company’s audited financial statements and notes thereto
included in the Company’s Annual Report on Form 10-K for the year ended December
31, 2007.





Use of Estimates—The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the amounts reported in the
condensed consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.




2.  NEW
ACCOUNTING STANDARDS
 
 In
September 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements(“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a
framework for measuring fair value and requires enhanced disclosures about fair
value measurements. SFAS No. 157 requires companies to disclose the fair value
of financial instruments according to a fair value hierarchy as defined in the
standard. SFAS No. 157 became effective for the Company on January
1, 2008 and will be applied on a prospective basis. In February 2008, the
FASB issued FASB Staff Position No. 157-2, which defers the effective date of
SFAS No. 157 by a year for nonfinancial assets and liabilities, except for items
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The Company adopted SFAS No. 157 on
January 1, 2008, except as they relate to non-financial assets and liabilities,
which would be adopted on January 1, 2009, as allowed under SFAS No.
157. The adoption did not have an impact on the condensed consolidated
financial statements. The Company has not yet determined the impact, if any, on
our condensed consolidated financial statements for non-financial assets and
liabilities.
 
 In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115 (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure
eligible items at fair value at specified election dates and report unrealized
gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date. SFAS No. 159 became effective
for the Company on January 1, 2008. The Company adopted SFAS No. 159 and there
was no impact on the condensed consolidated financial
statements.




-4-





3.  NET INCOME PER
SHARE





Basic net
income per common share is computed as net income divided by the
weighted-average number of common shares outstanding during the period. Diluted
net income per share reflects the potential dilution that could occur from the
exercise of outstanding stock options and is computed by dividing net income by
the weighted-average number of common shares outstanding for the period, plus
the dilutive effect of outstanding stock options, calculated using the treasury
stock method. The following table summarizes the potential dilutive effect of
outstanding stock options, calculated using the treasury stock
method:





Three
      Months Ended March 31,2008
              
              
              2007Weighted-average
      number of common shares—basic
              
              
              14,095,834
              
              
              
              13,866,389Effect
      of dilutive employee stock options
              
              
              483,603
              
              
              
              670,758Weighted-average
      number of common shares—diluted
              
              
              14,579,437
              
              
              
              14,537,147





Stock options
for the purchase of 662,000 and 300,000 shares of common stock were
excluded from the above calculation during the three months ended March 31, 2008
and 2007, respectively, as the effect of those options was
anti-dilutive.





4.  INVENTORIES





Inventories
consist of the following (dollars in thousands):





March
      31,
              
              
              December
      31,2008
              
              
              2007Raw
      materials and components
              
              $
              14,642
              
              
              $
              17,307Finished
      goods
              
              
              13,214
              
              
              
              14,341Total
              
              $
              27,856
              
              
              $
              31,648





5.  PROPERTY AND
EQUIPMENT





Property
and equipment consist of the following (dollars in thousands):





March
      31,
                      
                      
                      December
      31,Useful
      Lives
                      
                      2008
                      
                      
                      2007Tooling
                      3
      to 5 years
                      
                      $
                      509
                      
                      
                      $
                      479Leasehold
      improvements
                      Lesser
      of term of lease to 5 years
                      
                      
                      1,062
                      
                      
                      
                      1,054Machinery
      and equipment
                      3
      to 8 years
                      
                      
                      2,528
                      
                      
                      
                      2,493Furniture
      and fixtures
                      5
      to 8 years
                      
                      
                      334
                      
                      
                      
                      330Computer
      equipment
                      3
      years
                      
                      
                      1,927
                      
                      
                      
                      1,840Construction
      in progress
                      
                      
                      
                      1,141
                      
                      
                      
                      1,073Total
      property and equipment
                      
                      
                      
                      7,501
                      
                      
                      
                      7,269Accumulated
      depreciation
                      
                      
                      
                      (3,469
                      )
                      
                      
                      (3,199
                      )Total
                      
                      
                      $
                      4,032
                      
                      
                      $
                      4,070





Depreciation
expense was $271,000 and $229,000 for the three months ended March 31, 2008
and 2007, respectively.





Capitalized
interest is recorded on construction-in-progress using the average interest
rate over the construction period during the three months ended
March 31, 2008.  Interest of $17,000 was capitalized for the three
months ended March 31, 2008.  Capitalized interest for the three months
ended March 31, 2007 was not significant.




-5-





6.  INTANGIBLE
ASSETS





Intangible
assets consist of the following as of March 31, 2008 (dollars in
thousands):





Gross
      Carrying Amount
              
              
              Accumulated
      Amortization
              
              
              TotalTrade
      names
              
              $
              29,500
              
              
              $
              -
              
              
              $
              29,500Patents
              
              
              8,699
              
              
              
              2,561
              
              
              
              6,138Distributor
      relationships
              
              
              23,701
              
              
              
              5,234
              
              
              
              18,467Total
              
              $
              61,900
              
              
              $
              7,795
              
              
              $
              54,105




Intangible
assets consist of the following as of December 31, 2007 (dollars in
thousands):





Gross
      Carrying Amount
              
              
              Accumulated
      Amortization
              
              
              TotalTrade
      names
              
              $
              29,500
              
              
              $
              -
              
              
              $
              29,500Patents
              
              
              8,699
              
              
              
              2,417
              
              
              
              6,282Distributor
      relationships
              
              
              23,701
              
              
              
              4,937
              
              
              
              18,764Total
              
              $
              61,900
              
              
              $
              7,354
              
              
              $
              54,546





Amortization
expense was $441,000 in each of the three month periods ended March 31, 2008 and
2007. Amortization of intangible assets for the remainder of 2008 will be
approximately $1,324,000 and will be approximately $1,765,000 in each of the
next five years.




-6-






7.  EQUITY AND STOCK OPTION
PLANS





2006 Equity Incentive
Plan





In
connection with the Company’s initial public offering in November 2006, the
Company adopted the Physicians Formula Holdings, Inc. 2006 Equity Incentive Plan
(the “2006 Plan”). The 2006 Plan provides for grants of stock options, stock
appreciation rights, restricted stock, restricted stock units, deferred stock
units and other performance awards to directors, officers and employees of the
Company, as well as others performing services for the Company. The options
generally have a 10-year life and vest in equal monthly installments over a
four-year period. As of March 31, 2008, a total of 796,775 shares of the
Company’s common stock were available for issuance under the 2006 Plan. This
amount will automatically increase on the first day of each fiscal year ending
in 2016 by the lesser of: (i) 2% of the shares of common stock outstanding on
the last day of the immediately preceding fiscal year or (ii) such lesser number
of shares as determined by the compensation committee of the Board of Directors.
On January 30, 2008, the Company granted 317,000 stock options to certain
employees under the 2006 Plan.





2003 Stock Option
Plan





In
November 2003, the Board of Directors adopted the 2003 Stock Option Plan (the
“2003 Plan”) and reserved a total of 2,500,000 shares for grants under the 2003
Plan. The 2003 Plan provides for the issuance of stock options for common stock
to executives and other key employees. The options generally have a 10-year life
and vest over a period of time ranging from 24 months to 48 months. Options
granted under the 2003 Plan were originally granted as time-vesting options and
performance-vesting options. The original time-vesting options vest in equal
annual installments over a four-year period. In connection with the initial
public offering, the 713,334 performance-vesting options were amended to
accelerate the vesting of 550,781 of such options, and 296,140 of these options
were exercised. The remaining 162,553 performance-vesting options were converted
to time-vesting options that vest in equal monthly installments over a two-year
period. Options are granted with exercise prices not less than the fair value at
the date of grant, as determined by the Board of Directors, which subsequent
to the Company's initial public offering is the closing price on
the grant date.





The
equity incentive and stock option plan activity is summarized
below:





Time-Vesting
      Options
              
              
              Performance-Vesting
      OptionsWeighted-Average
      Exercise Price
              
              
              Aggregate
      Intrinsic Value
              
              
              
              
              
              Weighted-Average
      Exercise Price
              
              
              Aggregate
      Intrinsic ValueOptions
      outstanding—January 1, 2008
              
              
              862,342
              
              
              $
              7.80
              
              
              
              
              
              
              136,681
              
              
              $
              0.10Options
      granted
              
              
              317,000
              
              
              
              9.54
              
              
              
              
              
              
              -
              
              
              
              -Options
      exercised
              
              
              (500
              )
              
              
              0.25
              
              
              $
              4,000
              
              
              
              -
              
              
              
              -Options
      outstanding—March 31, 2008
              
              
              1,178,842
              
              
              $
              8.27
              
              
              $
              766,000
              
              
              
              136,681
              
              
              $
              0.10
              
              
              $
              1,206,000Vested
      and expected to vest-March 31, 2008
              
              
              1,178,842
              
              
              $
              8.27
              
              
              $
              766,000
              
              
              
              136,681
              
              
              $
              0.10
              
              
              $
              1,206,000





The fair
value of options granted during the three months ended March 31, 2008
and 2007 totaled $1.6 million and $3.2 million, respectively. The Company
utilized the Black-Scholes option valuation model to calculate the fair value of
these options using the following assumptions:




Three
      Months Ended March 31,2008
                
                
                2007Risk-free
      interest rate
                
                
                3.3
                %
                
                
                4.9
                %Volatility
                
                
                50.7
                %
                
                
                52.2
                %Dividend
      rate
                
                None
                
                
                NoneLife
      in years
                
                
                6.5
                
                
                
                5.0





The
risk-free interest rate is based-upon the U.S. Treasury yield curve in effect at
the time of grant for periods corresponding with the expected life of the
options. The expected volatility rate is based on companies of similar growth
and maturity and our peer group in the industry in which the Company does
business. The dividend rate assumption is excluded from the calculation, as the
Company intends to retain all earnings. The expected life of the
Company's stock options represents management’s best estimate based upon
historical and expected trends in the Company's stock option
activity.




-7-


The
vesting activity for the equity incentive and stock option plans is summarized
below:
 
 Time-Vesting
      Options
                
                Performance-Vesting
      OptionsWeighted-Average
                
                
                
                
                
                
                Weighted-AverageVested
      and Exercisable
                
                Aggregate
      Exercise Price
                
                Exercise
      Price
                
                Remaining
      Contractual Life
                
                Aggregate
      Intrinsic Value
                
                Vested
      and Exercisable
                
                Aggregate
      Exercise Price
                
                Exercise
      Price
                
                Remaining
      Contractual Life
                
                Aggregate
      Intrinsic ValueJanuary
      1, 2008
                475,572
                
                $
      1,393,000
                
                
                
                
                
                
                
                136,681
                
                $   14,000Vesting
      during period
                89,061
                
                616,000
                
                
                
                
                
                
                
                -
                
                -Options
      exercised
                (500)
                
                -
                
                
                
                
                
                
                
                -
                
                -March
      31, 2008
                564,133
                
                $
      2,009,000
                
                $   3.56
                
                7.8
      years
                
                $3,024,000
                
                136,681
                
                $   14,000
                
                $   0.10
                
                5.6
      years
                
                $
      1,206,000


As
of March 31, 2008, the options outstanding under the 2003 Plan and 2006
Plan had exercise prices between $0.10 and $20.75 and the weighted-average
remaining contractual life for all options was 7.6 years.





A summary
of the weighted-average grant date fair value of the non-vested stock option
awards is presented in the table below:





Weighted-Average
      Grant Date Fair ValueJanuary
      1, 2008
                  
                  
                  386,770
                  
                  
                  $
                  10.24Vested
                  
                  
                  (89,061
                  )
                  
                  
                  7.35Granted
                  
                  
                  317,000
                  
                  
                  
                  5.13March
      31, 2008
                  
                  
                  614,709
                  
                  
                  $
                  8.02





The total
fair value of options that vested during the three months ended March 31,
2008 and 2007 was $655,000 and $413,000, respectively.





As of
March 31, 2008, total unrecognized estimated compensation cost related to
non-vested stock options was approximately $4.9 million, which is expected to be
recognized over a weighted-average period of approximately 2.8 years. The
Company recorded cash received from the exercise of stock options of $125 during
the three months ended March 31, 2008. Upon option exercise, the Company
issues new shares of stock.





The
Company incurred $614,000 and $768,000 of pre-tax non-cash share-based
compensation expense for the three months ended March 31, 2008 and 2007,
respectively.  Non-cash share-based compensation cost of $23,000 was a
component of cost of sales and $591,000 was a component of selling, general
and administrative expenses in the accompanying condensed consolidated statement
of income for the three months ended March 31, 2008. Non-cash share-based
compensation cost of $333,000 was a component of cost of sales and $435,000 was
a component of selling, general and administrative expenses in the
accompanying condensed consolidated statement of income for the three
months ended March 31, 2007. The tax benefit recognized of $270,000 and $338,000
was recorded for the three months ended March 31, 2008 and 2007,
respectively.  The Company capitalized non-cash share-based
compensation expense of $28,000 and $18,000 in inventory for the three
months ended March 31, 2008 and 2007, respectively.





Excess
tax benefits exist when the tax deduction resulting from the exercise of options
exceeds the compensation cost recorded and the cash flows resulting from such
excess tax benefits are classified as financing cash flows.







-8-


8.  COMMITMENTS AND
CONTINGENCIES
 
 Litigation—The Company
is involved in various lawsuits in the ordinary course of business. In
management’s opinion, the ultimate resolution of these matters will not result
in a material impact to the Company’s condensed consolidated financial
statements.
 
 Environmental—The
shallow soils and groundwater below the Company's City of Industry
facilities were contaminated by the former operator of the property. The former
operator performed onsite cleanup and the Company anticipates
that it will receive written confirmation from the State of California that
no further onsite cleanup is necessary. Such confirmation would not rule out
potential liability for regional groundwater contamination or alleged potable
water supply contamination discussed below. If further onsite cleanup is
required, the Company believes the cost, which the Company is not able to
estimate, would be indemnified, without contest or material limitation, by
companies that have fulfilled similar indemnity obligations to the Company in
the past, and that the Company believes remain financially able to do
so.





The
facility is located within an area of regional groundwater contamination known
as the Puente Valley “operable unit” (“PVOU”) of the San Gabriel Valley
Superfund Site. The Company, along with many others, was named a potentially
responsible party (“PRP”) for the regional contamination by the United States
Environmental Protection Agency (“EPA”). The Company entered into a settlement
with another PRP at the site, pursuant to which, in return for a payment the
Company has already made and that was fully indemnified and paid by a second
company, the other PRP indemnified the Company against most claims for PVOU
contamination. The Company expects to enter into a consent decree with EPA and
the other PRP that will resolve its liability for the cleanup of regional
groundwater contamination without any payment by the Company to EPA.
Depending on the scope and duration of the cleanup, the Company may be required
to make further payments to the other PRP for regional groundwater remediation
costs. The Company estimates the amount of any such additional payments would
not exceed approximately $130,000. The estimate is based on component estimates
for two distinct contaminants that may require remediation. Those estimates in
turn are based on a number of assumptions concerning the likelihood that
remediation will be required, the cost of remediation if required and other
matters. Uncertainty in predicting these matters limits the reliability and
precision of the estimates. The Company expects any such additional payments by
the Company to be covered by indemnities given to the Company by other
companies. Those companies may contest their indemnity obligation for these
payments. The Company believes the companies are financially able to pay the
liability. Because the Company believes it is not probable that it will be held
liable for any of these expenses, the Company has not recorded a liability for
such potential claims.





The
Company is also one of approximately 25 parties considered potentially liable by
a regional water authority for alleged contamination of two of that water
authority’s wells. The Company is fully indemnified for this liability under a
past settlement with a private company. The indemnity is not materially limited
and the Company does not believe it would be contested. The Company believes
that the indemnifying private company is financially able to pay the liability.
Because the Company believes it is not probable that it will be held liable for
any of these expenses, the Company has not recorded a liability for such
potential claims for alleged contamination of the area’s potable water
supply.





The
Company’s liability for these contamination matters and related claims is
substantially covered by third-party indemnities and resolved by prior
settlements, and borne by prior operators of the facility, their successors and
their insurers. The Company is attempting to recoup approximately $0.7 million
in defense costs from one of these indemnitors. These costs have been expensed
as paid by the Company and are not recorded in its condensed consolidated
balance sheets.





9.  GEOGRAPHIC
INFORMATION





Geographic
revenue information is based on the location of the customer. All of the
Company’s assets are located in the United States. Net sales to external
customers by geographic region are as follows (dollars in
thousands):





Three
      Months Ended March 31,Customer
              
              2008
              
              
              2007United
      States
              
              $
              35,437
              
              
              $
              31,131Canada
              
              
              7,072
              
              
              
              4,467Other
              
              
              152
              
              
              
              125$
              42,661
              
              
              $
              35,723





-9-





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





General





This
discussion should be read in conjunction with the Notes to Condensed
Consolidated Financial Statements included herein and the Notes to Consolidated
Financial Statements and Management’s Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual Report on Form 10-K
for the year ended December 31, 2007.





Overview of the
Business





We are
one of the fastest growing cosmetics companies of the ten largest in the U.S.
mass market channel by retail sales. We specialize in developing and marketing
innovative, premium-priced products for the mass market channel. Our products
focus on addressing skin imperfections through a problem-solution approach,
rather than focusing on changing fashion trends. Our products address specific,
everyday cosmetics needs and include face powders, bronzers, concealers,
blushes, foundations, eye shadows, eyeliners, brow makeup and
mascaras.





We sell
our products to mass market retailers such as Wal-Mart, Target, CVS, Walgreens
and Kroger. Our products provide above-average profitability for retailers due
to their higher price points and sales per linear foot. Our products are
currently sold in approximately 27,000 of the 49,000 stores in which we estimate
our masstige
competitors’ products are sold. We seek to be first-to-market with new products
within this channel, and are able to take new products from concept development
to shipment in less than 12 months. New products, which are primarily
introduced during the first and fourth quarters, are a very important
part of our business and have contributed, on average, approximately 45.2% of
our net sales for the last three years.





Overview of U.S. Market Share
Data





Based on
retail sales data provided by ACNielsen, our approximate share of the masstige market, as we define
it, was 8.0% for the 52 weeks ended March 22, 2008, or a gain of 10% when
compared to 7.3% for the same period in the prior year. We define the masstige market as products
sold in the mass market channel under the following premium-priced brands:
Physicians Formula, Almay, L’Oreal, Max Factor, Neutrogena, Revlon and Vital
Radiance. AC Nielsen is an independent research entity and its data does not
include Wal-Mart and Canada.




Seasonality





Our business,
similar to others in the cosmetic industry, is subject to seasonal variation due
to the annual “sell-in” period when retailers decide how much retail space will
be allotted to each supplier and the number of new and existing products to be
offered in their stores. For us, this period has historically been from
December through April. Sales during these months are typically greater due
to the shipments required to fill the inventory at retail stores and retailers’
warehouses. Retailers typically reset their retail selling space during these
months to accommodate changes in space allocation to each supplier and to
incorporate the addition of new products and the deletion of slow-selling items.
For example, our net sales for the three months ended March 31, 2008 and
the three months ended December 31, 2007 were higher than our net sales for the
second and third quarters of 2007, as a result
of this seasonality. Our quarterly results of operations may also fluctuate as a
result of a variety of other reasons including the timing of new product
introductions, general economic conditions or consumer buyer behavior. In
addition, results for any one quarter may not be indicative of results for the
same quarter in subsequent years.




Critical Accounting
Policies




Our
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America,
which require management to make estimates and assumptions that affect the
amounts reported in the condensed consolidated financial statements and
accompanying notes. Actual results could differ from those estimates. Critical
accounting policies represent the areas where more significant judgments and
estimates are used in the preparation of our condensed consolidated financial
statements. A discussion of such critical accounting policies, which include
revenue recognition, inventory valuation, goodwill and other intangible assets,
share-based compensation and income taxes can be found in our Annual Report on
Form 10-K for the year ended December 31, 2007. There have been
no material changes to these policies as of this Quarterly Report on
Form 10-Q for the three months ended March 31, 2008.





-10-




Results of
Operations





The
following table sets forth our condensed consolidated statements of income for
the three months ended March 31, 2008 and 2007:





Three
      Months Ended March 31,2008
                
                
                2007(dollars
      in thousands, except per share data)Statement
      of Income Data:Net
      sales
                
                $
                42,661
                
                
                $
                35,723Cost
      of sales
                
                
                18,946
                
                
                
                15,102Gross
      profit
                
                
                23,715
                
                
                
                20,621Selling,
      general and administrative expenses
                
                
                14,876
                
                
                
                13,110Income
      from operations
                
                
                8,839
                
                
                
                7,511Interest
      expense-net
                
                
                358
                
                
                
                404Other expense
      (income)
                
                
                87
                
                
                
                (5
                )Income
      before income taxes
                
                
                8,394
                
                
                
                7,112Provision
      for income taxes
                
                
                3,375
                
                
                
                2,810Net
      income
                
                $
                5,019
                
                
                $
                4,302Net
      income per common share:Basic
                
                $
                0.36
                
                
                $
                0.31Diluted
                
                $
                0.34
                
                
                $
                0.30Weighted-average
      common shares outstanding:Basic
                
                
                14,095,834
                
                
                
                13,866,389Diluted
                
                
                14,579,437
                
                
                
                14,537,147





The
following is a discussion of our results of operations for the three months
ended March 31, 2008 and 2007.




-11-


Three Months Ended March 31, 2008
Compared to Three Months Ended March 31, 2007





Net Sales.Net
sales increased $7.0 million, or 19.6%, to $42.7 million for the three months
ended March 31, 2008, from $35.7 million for the three months ended March 31,
2007.  The increase was primarily attributable to growth in sales of
our face makeup products, as we continued to broaden our total distribution.
Total distribution represents the number of stores in which we sell products
multiplied by our number of stock keeping units per store. Unit sales for our
face makeup increased by 0.7 million units, or 12.3%, to 6.4
million units for the three months ended March 31, 2008 from 5.7 million
units for the same period a year ago. New products, which are
primarily introduced during the first and fourth quarters, represented 48%
of our net sales for the three months ended March 31, 2008, 3% higher than
the same period a year ago, when new products contributed 45% of net sales.
Partially offsetting our net sales growth for the three months ended March 31,
2008 was a decrease in sales of our eye makeup products and an increase in trade
spending with retailers.  Unit sales for our eye makeup decreased
by 0.8 million units, or 33.3%, to 1.6 million units for the three
months ended March 31, 2008 from 2.4 million units for the same period a
year ago. Trade spending with retailers increased by $1.0 million, which
includes an increase in cooperative advertising expense of $2.0 million offset
by a decrease in our provision for returns of $0.5 million and a decrease in our
provision for coupon expense of $0.5 million.  The variance is
primarily due to management's strategic decision to increase trade spending with
retailers for in-store advertising and promotions to increase consumer retail
sales. During the three months ended March 31, 2008, our results included
net sales of $7.2 million from our international customers, compared to $4.6
million for the three months ended March 31, 2007.





Cost of
Sales.Cost of sales increased $3.9 million, or 25.8%, to
$19.0 million for the three months ended March 31, 2008, from $15.1 million
for the three months ended March 31, 2007. The increase in cost of sales
resulted primarily from an increase in product cost of $4.0 million due to an
increase in face makeup units sold for the three months ended March 31, 2008.
Cost of sales as a percentage of net sales was 44.4% of net sales for the three
months ended March 31, 2008, compared to 42.3% for the three months ended March
31, 2007. The increase in cost of sales, as a percentage of net sales, was
primarily due to an increase in product costs and trade spending with retailers
of $1.0 million for the three months ended March 31, 2008.





Selling, General and Administrative
Expenses.Selling, general and administrative expenses
increased $1.8 million, or 13.7%, to $14.9 million for the three months ended
March 31, 2008, from $13.1 million for the three months ended March 31, 2007.
The increase was primarily due to a $0.7 million increase in marketing
spending, a $0.4 million increase in distribution costs related to our growth, a
$0.3 million increase in realized and unrealized foreign currency exchange loss,
a $0.2 million increase in expense for stock option awards and a $0.1
million increase in freight and warehouse costs.





Interest
Expense-Net.Interest expense remained relatively consistent
at $0.4 million for the three months ended March 31, 2008 and 2007.
The slight decrease in interest expense was due to the decrease in average
borrowings outstanding under our credit facility and the associated interest
rate.





Other Expense
(Income).Other expense for the three months
ended March 31, 2008 was $87,000 compared to other income
of $5,000 for the three months ended March 31, 2007. Other expense for
the three months ended March 31, 2008 and other income for the three months
ended March 31, 2007 were attributable to realized and unrealized gains and
losses related to investments held as part of our non-qualified deferred
compensation plan.





Provision for Income
Taxes.The provision for income taxes represents Federal,
state and local income taxes.  For the three months ended March 31, 2008,
income tax expense was $3.4 million, representing an effective income
tax rate of 40.2%, compared to income tax expense of $2.8
million for the
three months ended March 31, 2007, representing an effective tax rate of 39.5%.
The effective rates differed from the statutory rates due to the effect of
varying state and local taxes and certain permanent items such as research
and development credits.




-12-




Liquidity and Capital
Resources





Cash Flows





As of
March 31, 2008, we had $3,000 in cash and cash equivalents compared to no cash
and cash equivalents as of December 31, 2007. The low level of cash reflects the
use of cash to pay increased income taxes related to growth in pre-tax income
and to pay down the revolving credit facility on a regular basis. As of March
31, 2008, we had $12.5 million of availability under our revolving credit
facility. The significant components of our working capital are accounts
receivable and inventories, reduced by accounts payable and accrued
expenses.





Operating
activities.Cash provided by operating activities decreased by
$1.8 million, or 30.5%, to $4.1 million for the three months ended March 31,
2008, from $5.9 million for the three months ended March 31, 2007. The net
decrease in cash provided by operating activities resulted primarily from
unfavorable changes in accounts receivable, accounts payable and income
taxes payable. The net decrease in cash provided by operating activities was
offset by favorable changes in inventory, accrued expenses and deferred income
taxes.  Inventory decreased by $3.8 million when compared to prior
year end due to increased sales. Our inventory turnover rate decreased to an
annualized 1.8 times per year for the three months ended March 31,
2008, from an annualized 2.0 times per year for the three months ended
March 31, 2007. Days sales outstanding increased by 2.7 days, to 51.2
days for the three months ended March 31, 2008 from 48.5 days for
the three months ended March 31, 2007.





Investing
activities.Cash used in investing activities for
the three months ended March 31, 2008 was $0.3 million, which was
related to capital expenditures for the replacement of machinery and equipment,
the automation of an assembly line to accommodate future growth and improvements
to our warehouse distribution systems. Cash used in investing activities for
the three months ended March 31, 2007 of $0.3 million was related to
capital expenditures for the replacement and upgrade of machinery and
equipment.





Financing
activities.Cash used in financing activities was $3.8 million
for the three months ended March 31, 2008 compared to cash used in
financing activities of $5.6 million for the three months ended March 31,
2007. The decrease in cash used in financing activities between periods
primarily resulted from lower debt service related to our revolving credit
facility.





Future Liquidity and Capital
Needs.The significant components of our working capital are
accounts receivable and inventories, reduced by accounts payable, accrued
expenses, line of credit borrowings and the current portion of
our long-term debt. Net working capital requirements increased by $8.8
million, or approximately 37.6%, to $32.2 million for the three months ended
March 31, 2008, from $23.4 million for the three months ended
March 31, 2007. We
anticipate that working capital will decrease during the second and third
quarters and increase during the fourth quarter of 2008, when we typically
experience higher inventory levels as we produce new products for shipment in
the first quarter of the following year. We have
budgeted capital expenditures of $1.7 million for 2008 for several key projects,
including investment in our information technology infrastructure and
improvements to our manufacturing and distribution equipment. Capital
requirements related to manufacturing include a major project undertaken in 2007
to automate a product assembly line that is used to assemble products that
represented approximately 36.9% of our total sales in 2007. We expect the
aggregate capital requirements of this project to total $1.3 million, of which
$1.1 million was incurred as of March 31, 2008. In addition to an estimated
$0.2 million required to complete the assembly line project, we expect to need
to make improvements to other manufacturing and distribution equipment at a cost
of approximately $1.1 million, improvements to our leasehold facilities of
approximately $0.2 million and improvements to our information technology
infrastructure at a cost of approximately $0.2 million in 2008. We
incurred $0.3 million of capital expenditures for the three months ended March
31, 2008. We believe that our cash flows from operations and funds from our
revolving credit facility will provide adequate funds for our working capital
needs and planned capital expenditures for at least the next twelve months. No
assurance can be given, however, that this will be the case.





-13-




Credit
Facilities





On
November 14, 2006, we entered into a senior credit agreement with a bank
that will terminate in 2011 and consists of a $15.0 million term loan facility
and a revolving credit facility providing for borrowings of up to $20.0 million.
At March 31, 2008, there was $7.5 million outstanding under the revolving credit
facility at an interest rate of 5.75% and we had $12.5 million of availability
under the revolving credit facility.  The availability under the revolving
credit facility is reduced by outstanding letters of credit.





Borrowings
under the senior credit agreement are guaranteed by Physicians
Formula Holdings, Inc. and the domestic subsidiary of Physicians Formula,
Inc., are secured by liens on substantially all of the assets of
Physicians Formula, Inc., including the assets of its subsidiaries. Amounts
outstanding under the term loan facility totaled $12.4 million at March 31,
2008. There were no outstanding letters of credit as of March 31, 2008. The
interest rate on the term loan was 5.75% at March 31, 2008. Payments under the
term loan facility are due quarterly, increasing from initial quarterly payments
of $375,000 to $562,500 as of December 31, 2007, $750,000 as of December 31,
2008, $937,500 as of December 31, 2009 and $1,125,000 as of December 31, 2010.
Quarterly payments of $375,000 were made on January 1, 2007, April 2, 2007, July
16, 2007 and October 2, 2007 and quarterly payments of $562,500 were made on
January 2, 2008 and March 31, 2008.





Amounts
outstanding under the term loan facility and the revolving credit facility bear
interest at a LIBOR Adjusted Rate (as defined in our senior credit agreement)
plus 2.0% or at a Base Rate (as defined in our senior credit agreement) plus
0.5%. The revolving credit facility is also subject to a commitment fee of 0.25%
on any unused commitments.





The senior
credit agreement contains the following financial covenants: a maximum total
leverage ratio; a minimum fixed charge coverage ratio; a minimum net worth
requirement; and a limitation on capital expenditures (which may be no more than
$3,000,000 per fiscal year). As of March 31, 2008, we were in compliance with
these covenants.





The senior
credit agreement contains certain additional negative covenants, including
limitations on the ability of Physicians Formula, Inc., our operating
subsidiary, to: incur other indebtedness and liens; fundamentally change
in its business through a merger, consolidation, amalgamation or
liquidation; sell assets; pay cash dividends or pay for expenses of Physicians
Formula Holdings, Inc., unless certain conditions are satisfied; make certain
acquisitions, investments, loans and advances; engage in transactions with our
affiliates; enter into certain agreements; engage in sale-leaseback
transactions; incur certain unfunded liabilities; and change our line of
business.





The senior
credit agreement requires us to make mandatory prepayments with the proceeds of
certain asset dispositions and upon the receipt of insurance or condemnation
proceeds to the extent we do not use the proceeds for the purchase of
satisfactory replacement assets.





Off-Balance Sheet
Transactions





We do not
have any relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose
entities, which would have been established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or limited
purposes. In addition, we do not engage in trading activities involving
non-exchange traded contracts that rely on estimation techniques to calculate
fair value. As such, we are not exposed to any financing, liquidity, market or
credit risk that could arise if we had engaged in such
relationships.





-14-


Forward-Looking
Statements





This
section and other parts of this Quarterly Report on Form 10-Q contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934,
as amended. In some cases, forward-looking statements can be identified by words
such as “anticipates,” “expects,” “believes,” “plans,” “predicts,” and similar
terms. Such forward-looking statements are based on current expectations,
estimates and projections about our industry, management’s beliefs and
assumptions made by management. Forward-looking statements are not guarantees of
future performance and our actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to those discussed in Part I, Item
1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December
31, 2007. Unless otherwise required by law, we expressly disclaim any obligation
to update publicly any forward-looking statements, whether as result of new
information, future events or otherwise.




ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





(a)  Foreign Currency
Risk.





The
Company sells to Canadian customers in Canadian dollars and pays overseas
suppliers and third-party manufacturers in U.S. dollars. An increase in the
Canadian dollar relative to the U.S. dollar could result in lower net sales and
higher selling, general and administrative expenses. Further, a decrease in the
value of the Euro and the Chinese Yuan relative to the U.S. dollar could cause
our suppliers to raise prices that would result in higher cost of sales. The
volatility of the applicable rates and prices are dependent on many factors that
cannot be forecasted with reliable accuracy. Our current sales to Canadian
customers and reliance on foreign suppliers for many of the raw materials and
components used to produce products make it possible that our operating results
may be affected by fluctuations in the exchange rate of the currencies
of our customers and suppliers. We do not have any foreign currency
hedges.





(b)  Interest Rate
Risk.





We are
exposed to interest rate risks primarily through borrowings under our revolving
loan and term loan facilities. Interest on these borrowings is based upon
variable interest rates. Our weighted-average borrowings outstanding
under our revolving loan and term loan facilities during
the three months ended March 31, 2008, was $19.9 million and the
weighted-average interest rate in effect at March 31, 2008, was 5.75%. A
hypothetical 1% increase or decrease in interest rates would have resulted in a
$50,000 change to interest expense for the three months ended March 31,
2008.





ITEM
4.  CONTROLS AND PROCEDURES





The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in its reports pursuant to the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in Rule 13a-15 under the Exchange Act, and that such
information is accumulated and communicated to the Company’s management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. Management
is responsible for establishing and maintaining adequate internal control over
financial reporting.





As
required by Rule 13a-15(b) under the Exchange Act, the Company carried out an
evaluation, under the supervision and with the participation of its management,
including the Chief Executive Officer and the
Chief Financial Officer, of the effectiveness of the design and operation of the
Company’s disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer determined that
disclosure controls and procedures were effective at a reasonable assurance
level as of the end of the period covered by this report. 
 There has
been no change in internal controls over financial reporting during the most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, internal controls over financial
reporting.





-15-




PART
II.


OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





The
Company is involved in various lawsuits in the ordinary course of business. In
management’s opinion, the ultimate resolution of these matters will not result
in a material impact to the Company’s condensed consolidated financial
statements.





ITEM
1A.  RISK FACTORS





There
have been no material changes to our risk factors as disclosed in Item 1A. “Risk
Factors” in our Annual Report on Form 10-K for the year ended December 31,
2007.





ITEM
6.  EXHIBITS





Exhibit
              Number
            
            
            
            Description31.1
            
            Certification
      by Ingrid Jackel, Chief Executive Officer.31.2
            
            Certification
      by Joseph J. Jaeger, Chief Financial Officer.32.1
            
            Certification
      Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.32.2
            
            Certification
      Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of
  2002.




-16-


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.





Physicians
      Formula Holdings, Inc./s/
      Ingrid JackelDate:
      May 5, 2008
            
            By:
      Ingrid JackelIts:   Chief Executive
      Officer
              (principal executive officer)/s/
      Joseph J. JaegerDate:
      May 5, 2008
            
            By:
      Joseph J. JaegerIts:   Chief Financial
      Officer
              (principal financial officer)








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