Selected Consolidated Historical Financial Data
Carson, Inc.
<TABLE>


<S>                                <C>         <C>               <C>           <C>            <C>      <C>      <C>       <C>
                                               Combined (1)
                                   Company (3) (Unaudited)       Full Fiscal Year
                                                                                                              Predecessor
                                    Nine        Nine
                                   Months      Months          Predecessor     Company (2)
                                   Ended       Ended          April 1, 1995     August 23, 1995          Year Ended March 31,
Amounts in 000s except per
   share data                     December 31,  December 31,   to August 22,    to March 31,
                                      1996         1995           1995              1996        1995    1994       1993    1992
Statement of Operations Data :
Net sales                           $59,938    $50,527        $26,854            $41,465      $58,126  $50,108    $49,335  $49,947
Income (loss)
   from continuing operations (4)    (3,256)     4,272          3,934              1,206        5,688    3,083      4,939    5,605
(Loss) earnings per share from
   continuing operations (4)       $  (0.25)                                    $   0.10
Weighted average common shares
   outstanding                        12,715                                       11,871

</TABLE>

<TABLE>
<S>                                                    <C>             <C>            <C>           <C>          <C>     <C>

                                                            Company     Company (2)                     Predecessor
                                                       December 31,       March 31,                      March 31,
Balance Sheet Data:                                           1996          1996           1995         1994        1993    1992
  Total assets                                              $97,631       $88,082      $  43,863      $39,209    $37,572  $37,848
  Long-term debt (excluding current portion)                 24,501       63,778                                     288      552
  Stockholders' equity                                       54,317       9,877           34,358       29,699     30,473   29,141
  Working capital                                           $15,954       $13,957      $  15,140      $11,653    $14,256  $14,184


</TABLE>

(1) The combined  unaudited nine months ended December 31, 1995 includes results
of the Predecessor for the period from April 1, 1995 to August 22, 1995 combined
with the Company  results of  operations  for the period from August 23, 1995 to
December 31, 1995. (2) The  acquisition of Aminco,  Inc. (the  Predecessor)  was
completed on August 23, 1995.  The Company's  financial  statements  include the
operating  results from the acquisition  date. (3) Effective  December 31, 1996,
the Company changed its fiscal year-end from March 31 to December 31. (4) Before
extraordinary item and cumulative effect of accounting change.


EX-13, PAGE 1

<PAGE>

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

Overview
     Carson,  Inc.  (formerly DNL Savannah  Holding  Corp.  and also referred to
herein as the "Company" or "Carson") is a leading  manufacturer  and marketer in
the U.S.  retail  ethnic  hair care  market for  African-Americans.  The Company
currently  sells over 70 different  products in the United States and in over 60
other countries under five principal brand names.  The majority of the Company's
net sales are derived from four  categories of the ethnic health and beauty aids
market:  hair relaxers and texturizers (which  constituted  approximately 50% of
the Company's  net sales in 1996),  hair color,  shaving  products and hair care
maintenance products.
        Carson was  established in May 1995 and until August 1995 its operations
were de minimus. On August 23, 1995, the Company acquired all of the outstanding
stock  of  Aminco,  Inc.  (also  referred  to as  the  "Predecessor").  Aminco's
operations were  principally  conducted by its wholly owned  subsidiary,  Carson
Products  Company.  Subsequent to the  acquisition  of Aminco,  Carson  Products
Company was merged into Aminco; the surviving entity was renamed Carson Products
Company. The accompanying financial statements include the operating  results of
Carson Products Company ("Carson Products") from the acquisition date.
        The Company's  acquisition  of the  Predecessor  for  approximately  $95
million  in cash  (including  $6  million  for fees  and  other  costs  directly
associated  with  the  acquisition)   was  initially   financed  with  long-term
borrowings aggregating approximately $68.0 million and has been accounted for as
a  purchase  (the  "acquisition").  Accordingly,  the  purchase  price  has been
allocated to the Predecessor's  identifiable assets and liabilities based on the
fair  values  at  the   acquisition   date.   Liabilities   assumed   aggregated
approximately  $11.4  million.  The excess of the  purchase  price over the fair
value of the  Predecessor's  identifiable  net  assets  has been  classified  as
goodwill.  In  connection  with the  acquisition,  the senior  management of the
Predecessor  was  replaced.  The  Predecessor  had a March 31  fiscal  year-end.
Effective  December 31, 1996, the Company changed its fiscal year-end from March
31 to December 31. The decision to change the fiscal  year-end was made in order
to conform the Company's  financial  reporting year to the natural business year
of the industry.
        On  July  3,  1996,  the  Company's  South  African  subsidiary,  Carson
Holdings,  Ltd.  ("Carson  South Africa") sold 25.0% of its shares in an initial
public offering on the Johannesburg  Stock Exchange.  This offering  resulted in
net  proceeds of  approximately  $4.2  million.  At the same time,  Carson South
Africa issued 1.875% of its shares to certain employees,  officers and directors
involved in the Company's South African operations.  As a result of the issuance
of these  shares,  the Company has  reflected in its  consolidated  statement of
operations for periods  subsequent to the share issuance a minority  interest in
subsidiary earnings. The amount of the charge reflected in this line item equals
Carson South  Africa's net income for the  applicable  period  multiplied by the
percentage of the Carson South Africa shares which are not  indirectly  owned by
the Company. In conjunction with the South African initial public offering,  the
Company's  U.S.  subsidiary,  Carson  Products  entered into an amendment to its
license agreement with Carson Products  Proprietary  Limited ("Carson  Products,
S.A."), a South African  registered company wholly owned by Carson South Africa,
which provides that  commencing on April 1, 1998,  Carson Products S.A. will pay
to  Carson  Products  a  royalty  in the  amount of 3.0% of the net sales of all
licensed products.  The amount of the royalty increases to 3.5% on April 1, 1999
and 4.0% on April 1, 2000 until the  termination of the  agreement.  The initial
term of the agreement expires on April 1, 1999; however, the agreement continues
indefinitely  thereafter until terminated by either party upon 12 months written
notice.

EX-13, PAGE 2

<PAGE>
        With the  exception of sales by Carson  Products  S.A. to South  Africa,
Botswana, Lesotho, Namibia and Swaziland, which are denominated in South African
Rand, all of the Company's sales are recorded in U.S. Dollars.  The Company does
not view the exposure to Rand exchange rate fluctuations as significant  because
the  South  African  subsidiary  incurs  all of its  costs in Rand.  Assets  and
liabilities  of the  Company's  South  African  operations  are  translated  for
consolidation  purposes from South African Rand into U.S. Dollars at the rate of
currency  exchange at the end of the fiscal  period.  Revenues  and expenses are
translated at average monthly prevailing exchange rates.  Resulting  translation
differences are recognized as a component of stockholders' equity.
        On  June  26,  1996,  Carson  made an  investment  of  $3.0  million  in
Morningside  AM  Acquisition  Corp.,  the  parent  of AM  Cosmetics,  Inc.  ("AM
Cosmetics") a leading  low-cost  manufacturer  of cosmetics.  The investment was
made  through the purchase of $3.0  million of 12%  cumulative,  payment-in-kind
preferred stock. The Company's consolidated statements of operations for periods
subsequent  to June 26, 1996 include the dividend  income from this  investment,
although dividends are anticipated to be paid through the issuance of additional
preferred  stock.  Therefore,  it is anticipated  that no cash will be generated
from this  investment  in the near future.  In connection  with the  investment,
Carson entered into a management  agreement and will enter into certain  related
sales agreements and manufacturing agreements with AM Cosmetics.
        The Company  completed the offering (the "Offering") of 4,818,500 shares
of Class A common stock on the New York Stock  Exchange on October 18, 1996 at a
price of $14 per share. Of these shares  3,113,000 were sold by the Company with
the balance sold by selling stockholders,  none of which included any members of
management or the original buyout group.

Effect of the Acquisition on Results of Operations
The  consummation  of the Company's  acquisition of the stock of the Predecessor
(the "acquisition")  affected the Company's results of operations  following the
acquisition in certain significant respects. The acquisition was reflected using
purchase  accounting  with the purchase  price being  allocated to the Company's
identifiable  assets  and  liabilities  based on fair  values at the date of the
acquisition,  which was August 23, 1995.  The excess of the purchase  price over
the fair value of the Company's  identifiable  net assets has been classified as
goodwill.  Therefore,  the  Company's  amortization  expenses are  significantly
higher  than  the  corresponding  amounts  for  the  Predecessor.  Additionally,
interest   expense   increased  due  to  debt  initially  used  to  finance  the
acquisition.

Results of Operations
The acquisition was completed on August 23, 1995.  Because of the application of
purchase  accounting and the resulting  revaluation of the Predecessor's  assets
and liabilities and the impact on certain expenses,  the financial statements of
the  Predecessor  for the  periods  prior to August  23,  1995 are not  strictly
comparable to those of subsequent periods. However, the following table combines
historical  fiscal  1996 data for the  Predecessor  and the  Company in order to
facilitate discussion of financial results.

EX-13, PAGE 3

<PAGE>
Statement of Operations Data
<TABLE>
<S>                   <C>                    <C>              <C>              <C>

                             Company         Combined (a)
                             Nine-Month       Nine-Month      Combined (b)      Predecessor
                           Period Ended      Period Ended         Year Ended      Year Ended
                      December 31, 1996      December 31, 1995    March 31, 1996  March 31, 1995
                                               (Unaudited)
Net sales                      $    59,938  $  50,527        $  68,319            $ 58,126
Cost of sales                       26,940     22,336           30,142              25,692
    Gross profit                    32,998     28,191           38,177              32,434
Selling expenses                    15,692     13,596           17,048              17,888
General and
  administrative expenses            5,836      4,751            7,337               5,246
Incentive compensation               7,123
Depreciation and
  amortization                       1,896      1,278            1,833               1,085
    Operating income                 2,451      8,566           11,959               8,215
Interest expense                     4,545      2,696            4,543                 136
Other income, net                      565      1,172            1,319                 783
(Loss) Income before taxes          (1,529)     7,042            8,735               8,862
Provision for income taxes           1,727      2,770            3,595               3,174
(Loss) Income before
  extraordinary item                (3,256)     4,272            5,140               5,688
Extraordinary item, net of tax      (3,527)
Net (loss) income (c)              $(6,783)$    4,272   $        5,140           $   5,688

EBITDA (d)                     $     4,410    $ 9,838         $  13,977   $          9,450

Data As A Percentage Of Sales:
Net sales                           100.0%      100.0%           100.0%             100.0%
Cost of sales                        44.9        44.2             44.1               44.2
    Gross profit                     55.1        55.8             55.9               55.8
Selling expenses                     26.2        26.9             25.0               30.8
General and
  administrative expenses             9.7         9.4             10.7                9.0
Incentive compensation               11.9
Depreciation and amortization         3.2        2.5              2.7                1.9
Operating income                      4.1%      17.0%            17.5%              14.1%
</TABLE>

(a) The combined  unaudited  statement of operations for the  nine-month  period
ended  December 31, 1995  includes  results of  Predecessor  operations  for the
period from April 1, 1995 to August 22, 1995  combined  with Company  results of
operations  for the period from August 23, 1995 to December  31,  1995.  (b) The
statement of operations of the  Predecessor for the period from April 1, 1995 to
August 22, 1995 is combined  with the statement of operations of the Company for
the period  August 23, 1995 to March 31,  1996.  (c) Before  effect of change in
accounting  principle and dividends on preferred stock of the  Predecessor.  (d)
EBITDA  is  calculated  by  adding  earnings  before  interest,   income  taxes,
depreciation  and  amortization  expense.  In  addition,  the effect of the $3.5
million extraordinary item is excluded.

EX-13, PAGE 4

<PAGE>

Company Nine-Month Period Ended December 31, 1996 Compared to Combined
Nine-Month Period Ended December 31, 1995

Net Sales.  Net sales  increased from $50.5 million for the combined  nine-month
period ended December 31, 1995 to $59.9 million for the nine-month  period ended
December  31, 1996,  an increase of 18.6%.  In the United  States,  relaxers and
texturizers,  hair color and hair care  maintenance  products each generated net
sales  increases.  Carson South Africa  continued to demonstrate  strong results
with an  increase  in net sales of 69.2%  from  $5.2  million  for the  combined
nine-month  period ended  December  31, 1995 to $8.8 million for the  nine-month
period ended December 31, 1996.

Gross  Profit.  Gross  profit  increased  from $28.2  million  for the  combined
nine-month  period ended  December 31, 1995 to $33.0 million for the  nine-month
period ended  December 31, 1996, an increase of 17.0%.  This increase was almost
entirely  due to the  increase  in net sales.  As a percent of net sales,  gross
profit  decreased from 55.8% for the combined  nine-month  period ended December
31, 1995 to 55.1% for the nine-month  period ended December 31, 1996,  primarily
due to an i nventory  adjustment  related to repackaging  and  reformulation  of
several product lines.

Selling Expenses. Selling expenses increased from $13.6 million for the combined
nine-month  period ended  December 31, 1995 to $15.7 million for the  nine-month
period ended  December 31, 1996,  an increase of 15.4%.  The increase in selling
expense  was  almost  entirely  a result  of the  increase  in net  sales.  As a
percentage of net sales,  selling expenses  decreased from 26.9% to 26.2% during
this period,  primarily as a result of the timing of advertising and promotional
expenses.

General  and  Administrative  Expenses.   General  and  administrative  expenses
increased  from $4.8 million for the combined  nine-month  period ended December
31, 1995 to $5.8 million for the  nine-month  period ended December 31, 1996, an
increase of 20.8%.  As a  percentage  of net sales,  general and  administrative
expenses  increased  from 9.4% to 9.7%  during  this  period.  This  increase in
general and administrative  expenses as a percentage of net sales was a function
of several factors relating to the acquisition and the new management structure.
First,  the new  management  team  included  the  addition of several new senior
executives and the promotion of certain key executives that increased  personnel
costs which  management  believed was  necessary to support the future growth of
the  Company.  Second,  the Company  entered into a  management  agreement  with
Morningside which provides strategic  consulting advice to the Company for a fee
of $0.4 million per annum. Third, travel expenses increased significantly due to
the new  management's  focus on international  markets which required  extensive
travel.  Finally bank fees and professional fees increased due to the new credit
agreements relating to the debt incurred to finance the acquisition.

Incentive  Compensation  Expenses. The Company recognized $7.1 million of incent
ive compensation  expenses during the nine-month  period ended December 31, 1996
relating to costs under certain long-term incentive compensation  agreements and
the purchase of shares prior to the initial public  offering by several  outside
directors and certain members of senior  management and for the shares of Carson
South Africa awarded to certain members of its management. No similar costs were
previously recorded.

Depreciation and Amortization. Depreciation and
amortization  expense  increased  from $1.3 million for the combined  nine-month
period ended December 31, 1995 to $1.9 million for the  nine-month  period ended
December 31, 1996. As a percentage of net sales,  depreciation  and amortization
expense  increased  from 2.5% to 3.2%  during this  period.  This  increase  was
primarily due to goodwill  amortization  which resulted from the  application of
purchase  accounting.  The increase in  amortization  due to the acquisition was
partially offset by a change in the wa y the Company accounts for package design
costs.  Prior to the  acquisition,  the Predecessor  capitalized  package design
costs and  amortized  it over a four year  period.  Since the  acquisition,  the
Company has expensed package design costs as incurred.

Operating Income and EBITDA. As a result of the above changes,  operating income
decreased  from $8.6 million for the combined  nine-month  period ended December
31, 1995 to $2.5  million for the  nine-month  period  ended  December 31, 1996.
EBITDA decreased from $9.8 million to $4.4 million during this period.

Interest Expense. Interest expense increased substantially from $2.7 million for
the combined  nine-month  period ended December 31, 1995 to $4.5 million for the
nine-month  period ended December 31, 1996, as a result of the new debt incurred
to finance the acquisition.

EX-13, PAGE 5

<PAGE>

Other Income,  net.  Other income  decreased as a result of the  elimination  of
royalty income associated with the Caribbean.  The Company now handles Caribbean
sales  through its in-house  sales  organization.  Investment  income  decreased
because most of the  Predecessor's  investments  were  liquidated in conjunction
with  the  acquisition.  Additionally,  in June of  1996,  the  Company  made an
investment and entered into a management  contract with AM Cosmetics,  a leading
low-cost  producer  of  cosmetics.  Under  the terms of the  investment  and the
management agreement,  the Company is entitled to a 12% paid in kind dividend on
its $3.0 million  investment and an annual  management fee of the greater of $.5
million or 1% of net sales.

Provision for Taxes. The provision for taxes decreased from $2.8 million to
$1.7 million during this period. The effective tax rate is not proportionate
to the statutory rates as a result of the majority of the incentive
compensation charge not being deductible for income tax purposes.

Combined Twelve-Months Ended March 31, 1996 Compared to Predecessor
Twelve-Months Ended March 31, 1995

Net Sales.  Net sales  increased  from $58.1  million  for fiscal  1995 to $68.3
million for fiscal 1996,  an increase of 17.6%,  as a result of positive  market
acceptance of new product  formulation  and new packaging and the efforts of the
Company's in-house sales  organization,  which was established in April 1995. In
the United States,  relaxers and texturizers,  hair color,  shaving products and
hair care maintenance  products all generated net sales increases.  Carson South
Africa  continued  to show strong  growth with an increase in net sales of 80.4%
from $3.6  million  recorded  for fiscal 1995 to $6.6 million for fiscal 1996, a
function of both the rapid expansion of the African market and increasing market
share.   International  sales  excluding  sales  by  Carson  South  Africa  also
increased, primarily due to European sales where the Company increased its sales
representation.

Gross Profit. Gross profit increased from $32.4 million for fiscal 1995 to $38.2
million for fiscal 1996, an increase of 17.7%. This increase was almost entirely
due to the increase in net sales.  Gross margin increased slightly from 55.8% to
55.9% during this period.

Selling Expenses.  Selling expenses decreased from $17.9 million for fiscal 1995
to $17.0  million for fiscal 1996, a decrease of 4.7% despite an increase in net
sales of 17.6%. As a percentage of net sales,  selling  expenses  decreased from
30.8% to 25.0%  during  this  period.  This  decrease  was due to the  Company's
decision to establish an in-house sales  organization and terminate the majority
of  its  sales  broker  relationships.  In  fiscal  1995,  brokers  were  paid a
commission which averaged  slightly above 5%. The commission  expense was almost
entirely  eliminated  in fiscal  1996.  This  savings  was  offset in part by an
increase in sales  salaries  and other  payroll  costs  related to the new sales
employees.  General and  Administrative  Expenses.  General  and  administrative
expenses  increased from $5.2 million for fiscal 1995 to $7.3 million for fiscal
1996,  an  increase  of  39.9%.  As a  percentage  of  net  sales,  general  and
administrative  expenses  increased from 9.0% to 10.7% during this period.  This
increase in general and administrative expenses as a percentage of net sales was
a function of several factors relating to the acquisition and the new management
structure.  First,  the new management team included the addition of several new
senior  executives  and the promotion of certain key  executives  that increased
personnel costs which  management  believed were necessary to support the future
growth of the Company.  Second, the Company entered into a management  agreement
with Morningside which provides strategic consulting advice to the Company for a
fee of $0.4 million per annum.  Third,  travel expenses increased  significantly
due to the new  management's  focus  on  international  markets  which  required
extensive travel.  Finally, bank fees and professional fees increased due to the
new credit agreements relating to the debt incurred to finance the acquisition.

Depreciation and Amortization.  Depreciation and amortization  expense increased
from $1.1  million  for  fiscal  1995 to $1.8  million  for  fiscal  1996.  As a
percentage of net sales,  depreciation and amortization  expense  increased from
1.9% to 2.7% during this period. This increase was due to goodwill  amortization
which  resulted from the  application  of purchase  accounting.  The increase in
amortization  due to the acquisition was partially offset by a change in the way
the Company  accounts for package design costs.  Prior to the  acquisition,  the
Predecessor  capitalized  package design costs and amortized it over a four year
period. Since the acquisition,  the Company has expensed package design costs as
incurred.  The application of purchase accounting related to the acquisition did
not have a material impact on the Company's depreciation expense.

Operating Income and EBITDA. As a result of the above changes,  operating income
increased from  approximately  $8.2 million for fiscal 1995 to $12.0 million for
fiscal  1996,  an increase of 45.6%.  As a  percentage  of net sales,  operating
income  increased from 14.1% to 17.5% during this period.  EBITDA increased from
approximately  $9.5 million to $14.0  million,  an increase of 47.4% during this
period.

EX-13, PAGE 6

<PAGE>

Interest Expense. Interest expense increased substantially from $0.1 million for
fiscal 1995 to $4.5 million for fiscal 1996 as a result of the new debt incurred
to finance the acquisition.

Other Income;  Investment Income.  Other income remained  approximately the same
for fiscal 1996 as compared to fiscal 1995.  Investment  income  increased  from
$0.6 million for fiscal 1995 to $1.1 million for fiscal 1996 as the  Predecessor
realized gains on the liquidation of certain investment securities.

Provision for Taxes.  The provision for income taxes increased from $3.2 million
for fiscal 1995 to $3.6  million  for fiscal  1996,  an increase of 13.3%.  This
increase  occurred despite pre-tax income decreasing from $8.9 million in fiscal
1995 to $8.7  million for fiscal 1996 as a result of  goodwill  amortization  of
$0.7  million  for  fiscal  1996  that  was not  deductible  for  tax  purposes.
Accordingly,  the effective tax rate  increased  from 35.8% to 41.2% during this
period.

Liquidity and Capital Resources
        The Company used the net proceeds of the Offering to repay  indebtedness
incurred in the  acquisition.  In  conjunction  with the  Offering,  the Company
refinanced  the remaining  portion of its Bank Credit  Facility with  borrowings
under a New Senior  Bank  Facility  pursuant to a credit  agreement  dated as of
October 18, 1996,  which  included (i) a $15.0 million term loan A, (ii) a $10.0
million term loan B and (iii) a $15.0 million  revolving credit facility,  which
provides  more  availability  than the  previous  facility.  The term loan A and
revolving  credit facility bear interest at the applicable  prime rate plus 0.5%
or LIBOR  plus  2.0% and have a final  maturity  of six  years . The term loan B
bears  interest at the  applicable  prime rate plus 1.0% or LIB OR plus 2.5% and
has a final maturity of seven years. The New Senior Bank Faci lity contains less
restrictive  covenants compared to the previous  facility,  since the Company is
substantially less leveraged following the Offering.
        In the nine months  ended  December  31, 1996 net cash flow  provided by
operations  was $2.2  million as a result of an increase in accounts  payable of
$3.5 million and a decrease in other current assets of $1.7 million. These items
were offset in part by increases in accounts  receivable and inventories of $2.6
million and $2.1 million,  respectively.  Working  capital  increased from $14.0
million at March 31, 1996 to $16.0 million at December 31, 1996.
        Net cash used in investing activities for the nine months ended December
31,  1996  totaled  $6.8  million   which   included  $3.8  million  of  capital
expenditures  and a $3.0 million  investment in AM Cosmetics.  The three largest
capital  projects  involved  purchasing  and  equipping  the new  South  African
manufacturing  facility,  reorganizing the shaving powder production in Savannah
to better  optimize  capacity  and adding  production  equipment in the Savannah
facility to address short term capacity constraints.
        Net cash provided from  financing  activities  for the nine months ended
December  31,  1996  totaled  $7.2  million.  This  included  $32.7  million  of
borrowings  from the New Senior Bank Facility,  proceeds from the initial public
offerings of the Company and its South African subsidiary of $42.4 million, less
$69.2 million to repay acquisition indebtedness.
        The net cash flow for the nine months ended December 31, 1996 was
$2.6 million, which when combined with beginning cash of $1.6 million results
in a net cash balance of $4.2 million as of December 31, 1996.

Inflation
        The Company's manufacturing costs and operating expenses are affected by
price changes.  The Company has historically  mitigated  inflationary effects by
passing price changes along to its customers and by continually  developing more
cost-effective  manufacturing and operational procedures.  The Company's ability
to mitigate the effects of price changes will depend on market factors.

Outlook
        The Company believes that cash flow from operating activities,  existing
cash balances and available  borrowings  under its New Senior Bank Facility will
be sufficient to fund working capital  requirements,  capital  expenditures  and
debt service requirements in the foreseeable future.
        The preceding  statement and certain other  statements  contained herein
are  forward-looking  statements.  It is  important  to note that the  Company's
actual   results  could  differ   materially   from  those   projected  in  such
forward-looking  statements  based on a number  of  factors,  some of which  are
beyond the Company's control.
        Risk factors include,  but are not limited to, the Company's  ability to
successfully  implement  its  growth  strategy,  the nature and extent of future
competition in the Company's  principal  marketing  areas and increased costs of
compliance with any developments in the U.S., Brazil, the Caribbean,  Europe and
other  countries  where the  Company  now does  business or in the future may do
business.

EX-13, PAGE 7

<PAGE>


<TABLE>

Consolidated Statements of Operations                                                          Twelve Month Period
Carson, Inc.                                                                    Nine Month Period
<S>                                                          <C>             <C>            <C>       <C>             <C>
                                                                 Company

                                                           Company        Unaudited          Predecessor      Company   Predecessor
                                                          April 1, 1996  August 23, 1995  April 1, 1995  August 23, 1995  Year Ended
Amounts in 000s except per share data                   to December 31,  to  December 31,  to August 22,   to March 31,    March 31,
                                                              1996             1995          1995          1996               1995

Net sales .................................................  $59,938         $23,673       $26,854      $41,465           $58,126
Cost of sales .............................................   26,940          10,823        11,513       18,629            25,692
    Gross profit ..........................................   32,998          12,850        15,341       22,836            32,434
Selling expenses ..........................................   15,692           6,129         7,467        9,581            17,888
General and administrative expenses .......................    5,603           2,475         2,276        5,061             5,246
General and administrative - fees paid to Morningside .....      233

Incentive compensation, directors and management ..........    7,123

Depreciation and amortization .............................    1,896             776           502        1,331              1,085
    Operating income ......................................    2,451           3,470         5,096        6,863              8,215
Interest expense ..........................................    4,545           2,640            56        4,487                136
Other income, net .........................................      121              35         1,137          182                783
Other income, AM Cosmetics management fee and dividend ....      444

(Loss) income before income tax ...........................   (1,529)            865         6,177        2,558              8,862
Provision for income tax ..................................    1,727             527         2,243        1,352              3,174
(Loss) income before extraordinary item and change in
      accounting principle ................................   (3,256)            338         3,934        1,206              5,688
Extraordinary item, net of tax benefit ....................   (3,527)

Cumulative effect of change in accounting principle,
                               net of tax benefit .........                                                                   (250)
Net (loss) income .........................................   (6,783)            338         3,934        1,206              5,438
Dividends on preferred stock                                                                   554                           1,109
(Loss) income available to all shareholders ...............  $(6,783)           $338        $3,380       $1,206             $4,329
Earnings per common share:
      Before extraordinary item ...........................    $0.25)          $0.03                      $0.10
      Extraordinary item, net of tax benefit ..............    (0.28)

      Net (loss) earnings per share .......................   $(0.53)          $0.03                      $0.10
Weighted average common shares outstanding ................   12,715          11,871                     11,871

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>

EX-13, PAGE 8

<PAGE>

Consolidated Balance Sheets
Carson, Inc.

<TABLE>


<S>                                                                                 <C>                  <C>
                                                                                     December 31,        March 31,
Dollars in 000s except share and par value data                                           1996                1996

ASSETS
Current Assets
      Cash and cash equivalents .................................................... $    4,191          $     1,553
      Accounts receivable (less allowance for doubtful accounts of $614 and $531
       at December 31, 1996 and March 31, 1996, respectively) ......................      14,855              12,611
      Accounts receivable due from AM Cosmetics ....................................         262
      Inventories ..................................................................      10,749               8,663
      Other current assets .........................................................       1,346               3,094
      Total current assets .........................................................      31,403              25,921

Property, Plant and Equipment, at cost:

      Land and improvements ........................................................         545                 545
      Buildings and improvements ...................................................       6,689               5,427
      Machinery and equipment ......................................................       7,436               5,806
      Furniture and fixtures .......................................................         396                 277
      Construction-in-progress .....................................................       1,004                 282
                                                                                          16,070              12,337
      Less:accumulated depreciation ................................................         981                 351
                                                                                          15,089               11,986
Investment in AM Cosmetics .........................................................       3,187


Goodwill, net of accumulated amortization of $1,573 and $688 at
   December 31, 1996 and March 31, 1996, respectively ..............................       45,801              46,633

Other Assets .......................................................................        2,151              3,542


      Total Assets .................................................................  $    97,631        $    88,082

EX-13, PAGE 9

<PAGE>

                                                                                     December 31,             March 31,
Dollars  in 000s  except  share and par value  data                                     1996                       1996

LIABILITIES  AND
STOCKHOLDERS' EQUITY

Current Liabilities:
      Accounts payable .............................................................  $    7,065          $    3,600
      Accrued expenses .............................................................       4,451               5,354
      Accrued expenses, directors and employees ....................................       1,333
      Current maturities of long-term debt .........................................       2,600               3,010
      Total current liabilities ....................................................      15,449              11,964
Long-term Debt .....................................................................      24,501              63,778
Other Liabilities ..................................................................       1,700               1,732
Deferred Income Taxes ..............................................................                             731
Minority Interest in Subsidiary ....................................................       1,664


Commitments and Contingencies (Notes 11 and 14)


Stockholders' Equity:
  Preferred stock, $.01 par value, 10,000,000 shares authorized, none outstanding


  Common stock:
   Class A, voting, $.01 par value, 150,000,000 shares authorized, 4,996,568
     shares issued and outstanding as of December 31, 1996 .........................          50

   Class B, nonvoting, $.01 par value, 2,000,000 shares authorized, 1,859,677
      shares issued and outstanding ................................................          19                   19
   Class C, voting, $.01 par value,  13,000,000 shares authorized,  8,127,937
      and 9,510,323 shares issued and outstanding at December 31, 1996
      and March 31, 1996, respectively .............................................           81                  95
      Paid-in capital ..............................................................       62,418              8,557
      Notes receivable from employee shareholders, net of discount .................       (1,365)

      (Accumulated deficit) Retained earnings ......................................       (5,577)             1,206
      Foreign currency translation adjustment ......................................       (1,309)

      Total stockholders' equity ...................................................       54,317               9,877
      Total Liabilities and Stockholders' Equity ...................................  $    97,631        $    88,082

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

</TABLE>
EX-13, PAGE 10

<PAGE>
<TABLE>

Consolidated Statement of Shareholders' Equity
<S>                            <C>      <C>      <C>        <C>         <C>      <C>       <C>      <C>       <C>       <C>
                                                                                                                            Total
                                  Common Stock    Preferred Stock    Paid-in  Retained   Valuation  ESOP Debt Treasury Stockholders'
Amounts in 000s               Shares    Amount    Shares   Amount   Capital    Earnings  Adjustment  Guarantee   Stock     Equity
PREDECESSOR
Balance, March 31, 1994 ...... 406,699  $1,220   606,752    $6,068      $214     $28,858   $          $(288)    $(6,373)   $29,699
Net income ...................                                                     5,438                                     5,438
Cash dividends,
    preferred stock ..........                                                    (1,109)                                   (1,109)
Reduction in ESOP debt
    guarantee ................                                                                          288                    288
Issuance of treasury stock ...                                            94                                        232        326
Purchase of treasury stock ...                                                                                     (567)      (567)
Unrealized gains on
    investments
    available for sale,
    net of taxes .............                                                                283                              283
Balance, March 31, 1995 ...... 406,699  1,220    606,752    6,068        308       33,187     283                (6,708)    34,358
Net income ...................                                                      3,934                                    3,934
Cash dividends,
    preferred stock ..........                                                       (554)                                    (554)
Issuance of treasury stock ...                                                                                      296        296
Balance, August 22, 1995 .....  406,699  $1,220   606,752    $6,068      $308      $36,567    $283       $  --   $(6,412)   $38,034
</TABLE>

EX-13, PAGE 11

<PAGE>
Carson, Inc.

<TABLE>
<S>                        <C>          <C>   <C>    <C>    <C>      <C>    <C>      <C>         <C>         <C>       <C>

                                                                                         Retained               Notes    Total
                                 Class A      Class B        Class C        Paid-in   Earnings   Translation           Stockholders'
Amounts in 000s              Shares    Amount Shares  Amount Shares   Amount Capital (Accumulated             Receivable
                                                                                      Deficit)   Adjustment  From Officers   Equity
COMPANY, beginning
August 23, 1995
Sale of common stock ........           $      569    $  6   5,799     $58  $11,936       $          $         $             $12,000
Issuance of common stock
    in connection with
    acquisition .............                1,291      13   2,006      20    2,717                                            2,750
Carryover of predecessor
    basis ...................                                1,705      17   (6,096)                                         (6,079)
Net income ..................                                                             1,206                                1,206
Balance, March 31, 1996 .....                1,860      19   9,510      95    8,557       1,206                                9,877
Gain on sale of South African
    stock, net ..............                                                 2,808                                            2,808
Sale of common stock, net ... 3,113      31                                  38,162                                           38,193
Conversion of Class C shares
    to Class A shares ....... 1,884      19                 (1,884)    (19)
Gain on forgiveness of
    shareholder note ........                                                 5,530                                            5,530
Net loss ....................                                                            (6,783)                             (6,783)
Translation adjustment ......                                                                          (1,309)               (1,309)
Employee shareholder loans,
    less discount ...........                                                                                        (1,365) (1,365)
Incentive compensation
    and other ...............                                  502        5   7,361                                            7,366
Balance, December 31, 1996 .. 4,997     $50  1,860     $19   8,128      $81 $62,418     $(5,577)      $(1,309)      $(1,365) $54,317

The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Cash Flows
</TABLE>

EX-13, PAGE 12

<PAGE>
<TABLE>
Carson, Inc.
                                                                                          Twelve-Month Period

<S>                                              <C>                   <C>                 <C>             <C>           <C>
                                                                        Nine-Month Period

                                          Company           Company Unaudited     Predecessor     Company              Predecessor
                                          April 1, 1996 to  August 23, 1995 to   April 1, 1995 to August 23, 1995 to   Year ended
Dollars in 000s                          December 31, 1996  December 31, 1995   August 22, 1995   March 31, 1996     March 31, 1995
Operating Activities:

  Net (loss) income ............................ $(6,783)              $   338             $  3,934        $1,206        $  5,438
  Adjustments to reconcile  net (loss)
    income to net
    cash provided by operating
    activities:
    Depreciation and amortization ..............   1,896                   776                  502         1,331           1,085
    Extraordinary item, net of tax benefit .....   3,527
    Incentive compensation .....................   6,163
    Provision for doubtful accounts ............     112                   110
    Deferred income taxes ......................    (957)                                                     805              25
    Other, net .................................  (1,363)               (2,238)              (1,367)          701             394
    Prepayment penalty on long-term debt .......  (1,328)
    Changes in operating assets and
      liabilities, net
      of acquisitions:
    Accounts receivable ........................  (2,356)                 (446)               (588)        (2,385)         (1,275)
    Accounts receivable, related party .........    (262)
    Inventories ................................  (2,086)               (1,579)                190         (1,586)            467
    Other current assets .......................   1,748                   (89)               (546)          (970)            313
    Accounts payable ...........................   3,465                   366                (732)         1,360             755
    Accrued liabilities ........................    (903)                 (985)              1,688         (1,677)            479
    Accrued liabilities, related party .........   1,333
    Total adjustments ..........................   8,989                (4,085)               (853)        (2,421)          2,243
    Net cash provided by (used in)
     operating activities ......................   2,206                (3,747)               3,081        (1,215)          7,681

Investing Activities:
  Additions to property, plant and equipment ...  (3,805)                 (624)               (375)        (1,470)           (974)
  Long-term investments ........................  (3,000)
  Proceeds from sales and maturities of
     investments ...............................                                             21,428                        12,498
  Package design costs .........................                                               (244)                         (356)
  Acquisitions of business assets, net of
     cash acquired .............................                        (65,300)                           (65,300)
  Purchases of investments .....................                                              (6,760)                     (15,704)
  Other ........................................                                                                              299
    Net cash (used in) provided by
     investing activities ......................  (6,805)              $(65,924)         $    14,049      $(66,770)       $ (4,237)

</TABLE>

EX-13, PAGE 13
<PAGE>

<TABLE>
<S>                                 <C>                <C>                       <C>               <C>                 <C>
                                                                                   Twelve-Month Period
                                                                  Nine-Month Period
                                         Company        Company Unaudited         Predecessor      Company             Predecessor
                                     April 1, 1996 to     August 23, 1995 to     April 1, 1995 to  August 23, 1995 to  Year ended
Dollars in 000s                     December 31, 1996     December 31, 1995      August 22, 1995   March 31, 1996    March 31, 1995
Financing Activities:

  Proceeds from long-term borrowings ...........   $32,704          $     58,550     $                   $ 58,550        $
  Principal payments on long-term debt .........   (67,876)                 (500)                          (1,012)
  Dividends paid, preferred stock ..............                                             (554)                       (1,109)
  Purchases of treasury stock ..................                                             (296)                         (567)
  Checks outstanding ...........................                                                                         (1,043)
  Proceeds from sale of common stock ...........    38,193                 12,000                          12,000
  Proceeds from sale of subsidiary stock .......     4,216
    Net cash provided by (used in) financing
     activities ................................     7,237                 70,050            (850)         69,538         (2,719)

Net Increase (Decrease) in Cash and Cash
     Equivalents ...............................     2,638                   379            16,280          1,553            725

Cash and Cash Equivalents at Beginning of Period     1,553                                   1,620                           895

Cash and Cash Equivalents at End of Period .....    $4,191              $    379     $      17,900          $1,553    $    1,620

  Cash paid during the period for:
    Interest ...................................    $4,178            $    3,034     $          56           $3,991   $      136
    Income taxes ...............................    $2,421            $    1,276        $      457           $2,497   $    2,654

  Non-cash financing activities:
    Long-term debt issued in Acquisition .......$                     $    11,753      $                   $11,753    $

    Forgiveness of shareholder debt ............    $5,530                 $           $                       $      $

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>

EX-13, PAGE 14

<PAGE>

Notes to Consolidated Financial Statements
Carson, Inc.

Note 1. Organization and Business

Carson, Inc. (formerly DNL Savannah Holding Corp. and also referred to herein as
the "Company") was  established in May 1995 and until August 1995 its operations
were de minimus. On August 23, 1995, the Company acquired all of the outstanding
stock  of  Aminco,  Inc.  (also  referred  to as  the  "Predecessor").  Aminco's
operations were  principally  conducted by its wholly owned  subsidiary,  Carson
Products  Company.  Subsequent to the  acquisition  of Aminco,  Carson  Products
Company was merged into Aminco; the surviving entity was renamed Carson Products
Company.  The  accompanying  financial  statements  of the  Company  include the
operating  results  of Carson  Products  Company  ("Carson  Products")  from the
acquisition date.
        The Company is the leading  manufacturer and marketer in the U.S. retail
ethnic  hair care  market for  African-Americans.  The Company is also a leading
global  manufacturer  and  marketer of ethnic hair care  products for persons of
African  descent.  The Company's  more than 60 products are marketed  under five
principal  brand names.  Certain of the Company's  international  activities are
conducted by its South African subsidiary.
     The Company's  acquisition of the Predecessor for approximately $95 million
in cash (including $6 million for fees and other costs directly  associated with
the acquisition) was initially  financed with long-term  borrowings  aggregating
approximately  $68.0  million  and has been  accounted  for as a  purchase  (the
"Acquisition").  Accordingly,  the  purchase  price  has been  allocated  to the
Predecessor's  identifiable  assets and liabilities  based on the fair values at
the  acquisition  date.  The excess of the purchase price over the fair value of
the Predecessor's identifiable net assets has been classified as goodwill.
     Certain previous  shareholders of the Predecessor received 1,705,500 shares
of Class A Common Stock in the acquisition. Such share interest has been carried
over at such  shareholders'  proportionate  equity  in the book  value of Aminco
(predecessor basis in accordance with Emerging Issues Task Force Issue No.
88-16, "Basis in Leveraged Buyout Transactions."
     The  purchase  price  of the  Predecessor  (net of  carryover  of  negative
predecessor  basis of approximately  $6.1 million) has been allocated as follows
(in millions):

     Current assets (including $17.9 of cash acquired)      $37.9
     Property, plant and equipment                           10.8
     Goodwill                                                47.2
     Other assets                                             4.5
     Liabilities assumed                                    (11.4)
                                                             89.0

     In July 1996, the Company's South African subsidiary sold 25% of its shares
in an initial public offering on the Johannesburg Stock Exchange. The subsidiary
received  net  proceeds  of  approximately  $4.2  million  from this sale (which
resulted  in a gain to the  Company  of  approximately  $2.8  million  which was
recorded in paid in capital).  In  conjunction  with this public  offering,  the
Company  entered  into an  amendment  to its  license  agreement  with its South
African  subsidiary  which provides that  commencing on April 1, 1998, its South
African  subsidiary  will pay the Company a royalty in the amount of 3.0% of the
net sales price of all licensed products. The amount of the royalty increases to
3.5% on April 1, 1999 and 4.0% on April 1, 2000  until  the  termination  of the
agreement.  The initial term of the agreement expires on April 1, 1999; however,
the agreement continues indefinitely thereafter until terminated by either party
upon 12 months written notice.
     The Company completed an initial public offering of 4,818,500 shares of its
common stock on October 18, 1996. The Company used the proceeds of such offering
to repay  certain  indebtedness  (see Note 7).  This  repayment  resulted  in an
extraordinary  loss recorded at that time of approximately  $3.5 million (net of
tax) for prepayment penalties and the write-off of unamortized debt discount and
deferred financing costs.
        In October 1996, the Company amended its Certificate of Incorporation to
change the  authorized  capital  stock to Class A Common  Stock,  Class B Common
Stock,  Class C Common Stock and Preferred  Stock (each with a par value of $.01
per  share).  Each  share  of the  Company's  former  Class A Common  Stock  was
converted  into 11,370 shares of newly  created  Class C Common Stock,  and each
share of former Class B Common Stock was  converted  into 11,370 shares of newly
created  Class  B  Common  Stock.   These  stock  conversions  have  been  given
retroactive recognition in the accompanying financial statements.

EX-13, PAGE 15

<PAGE>

Note 2. Significant Accounting Policies

Change in Fiscal Year
Effective December 31, 1996, the Company changed
its fiscal year-end from
March 31 to December 31 in order to conform the  Company's  financial  reporting
year to the natural business year of its industry.

Principles of Consolidation
The accompanying  financial  statements  include the accounts of the Company and
its wholly owned subsidiaries and the Predecessor.  All significant intercompany
transactions and accounts have been eliminated.

Inventories
Inventories  in the United States are valued at the lower of Last-In,  First-Out
(LIFO) cost or market. Inventories of the South African subsidiary are valued at
the lower of First-In, First-Out (FIFO) cost or market.

Property, Plant and Equipment
Property,  plant and  equipment  is recorded at assigned  values or cost less an
allowance for depreciation. The Company capitalizes eligible expenditures with a
cost greater  than  $1,000.  Depreciation  is computed  using the  straight-line
method over the following estimated useful lives:

        Buildings                                        42 years
        Land improvements                                20 years
        Machinery and equipment                          12 years
        Furniture and fixtures                           10 years
        Office equipment                                 8 years
        Vehicles                                         5 years
        Information systems                              5 years

Intangible Assets
Goodwill is amortized over 40 years using the straight-line  method.  Debt issue
costs are  amortized on the interest  method over the life of the related  debt.
Patents are amortized using the straight-line  method over 17 years.  Trademarks
are  amortized  using  the  straight-line  method  over 40  years.  The  Company
periodically assesses the recoverability of intangible assets based on judgments
as to future undiscounted cash flows from operations.

Income Taxes
Deferred  income taxes are  recognized  for the tax  consequences  of "temporary
differences"  by  applying  currently  enacted  statutory  rates to  differences
between  financial  statement  carrying  amounts  and the tax basis of  existing
assets and liabilities. The effect on deferred taxes of a change in tax rates is
recognized  in the  results  of  operations  in the  period  that  includes  the
enactment date.

Revenue Recognition
Revenue  from  sales  of  manufactured  goods is  recognized  upon  shipment  to
customers.

Research and Development Costs
Research and development  costs  (principally  for new products) are expensed as
incurred and aggregated  $349,000 for the  nine-month  period ended December 31,
1996,  $250,000 for the period  August 23, 1995 to March 31, 1996,  $160,000 for
the period from April 1, 1995 to August 22, 1995 and $323,000 for the year ended
March 31, 1995. These costs are included in general and administrative  expenses
in the accompanying statements of operations.

Use of Estimates
     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Foreign Currency Translation
     Assets and  liabilities  of the  Company's  South  African  operations  are
translated  from South  African  Rand into U.S.  dollars at the rate of currency
exchange at the end of the fiscal  period.  Revenues and expenses are translated
at average  monthly  exchange  rates  prevailing  during the  period.  Resulting
translation differences are recognized as a component of stockholders' equity.

Net (Loss) Earnings Per Share
Net (loss)  earnings  per share is computed  by dividing  net income by weighted
average  common  shares  outstanding.  In  accordance  with  the  rules  of  the
Securities and Exchange  Commission,  all shares of common stock issued prior to
the Company's  initial public  offering are included in weighted  average shares
outstanding as if they were issued at the Company's formation.

EX-13, PAGE 16

<PAGE>

Supplementary Net (Loss) Earnings Per Share
     Supplementary net (loss) earnings per share is computed as if the Company's
shares  issued in its initial  public  offering of 3,113,000  were issued at the
beginning of the Company's  formation and interest related to debt that was paid
off with proceeds is added back. Supplementary net (loss) earnings per share was
$(0.33),  $0.13 and $0.26 for the periods  April 1, 1996 to December  31,  1996,
August 23,  1995 to December  31,  1995 and August 23,  1995 to March 31,  1996,
respectively.

Cash and Cash Equivalents
Cash and investments  with maturities of three months or less when purchased are
considered cash equivalents.

Fair Value of Financial Instruments
     The  carrying  values of cash and cash  equivalents,  accounts  receivable,
inventories,  investment in AM Cosmetics  preferred stock,  accounts payable and
accrued liabilities  approximate fair values due to the short-term maturities of
the instruments.  The carrying value of long-term debt  approximates fair value.

RECLASSIFICATION
Certain  prior period  balances have been  reclassified  to conform with current
year presentation.

Note 3. Inventories

Inventories  at December 31, 1996 and March 31, 1996 are  summarized  as follows
(in 000s):

                                              December 31, 1996  March 31, 1996
Raw materials                                    $      7,017            $4,562
Work-in-process                                         1,236             1,002
Finished goods                                          2,496             3,099
    Total                                        $     10,749        $    8,663

There were no material differences between inventories valued on a LIFO basis or
their valuation on a FIFO basis at December 31, 1996 and March 31, 1996.

Note 4. Other Current Assets

Other  current  assets at December  31,  1996 and March 31, 1996  consist of the
following (in 000s):

                                              December 31, 1996   March 31, 1996
Deferred income taxes                             $    128               $   785
Income tax receivable                                  872
Prepaid interest                                                           1,090
Prepaid other                                          346                 1,219
    Total                                         $  1,346             $   3,094

Note 5. Property, Plant and Equipment

Depreciation  expense for the nine months  ended  December 31, 1996 and December
31, 1995 was $672,000 and  $586,000,  respectively.  For the periods from August
23, 1995 to March 31,  1996,  April 1, 1995 to August 22, 1995 and April 1, 1994
to March 31, 1995,  depreciation  expense was  $351,000,  $322,000 and $679,000,
respectively.

Note 6. Other Assets

Other assets at December 31, 1996 and March 31, 1996 are  summarized  as follows
(in 000s):
                                             December 31, 1996    March 31, 1996
Deferred financing costs                          $    937            $3,275
Deferred tax asset                                     935
Prepaid interest                                                         433
Patents                                                184               152
Trademarks and other                                   128
                                                     2,184             3,860
Less: accumulated amortization                          33               318
    Total                                        $   2,151            $3,542

EX-13, PAGE 17
<PAGE>

Note 7. Long-Term Debt

Long-term  debt at December 31, 1996 and March 31, 1996 is summarized as follows
(in 000s):

                                            December 31, 1996    March 31, 1996
Term Loans                                       $      24,350        $29,000
Revolving line of credit                                 2,052          7,500
Senior subordinated notes,
  interest at 12.5%                                                    16,693
Subordinated notes, interest at 15%                                     2,004
Junior subordinated notes,
  interest at 10%                                                      11,544
Other                                                     699              47

                                                       27,101          66,788
Less: current portion                                   2,600           3,010
                                                 $      24,501        $63,778

Note 7. Long-Term Debt (continued)
Annual  maturities  of  outstanding  indebtedness  at  December  31, 1996 are as
follows (in 000s):


                                                              December 31, 1996
1997                                                                   $2,600
1998                                                                    2,840
1999                                                                    2,891
2000                                                                    2,745
2001                                                                    2,623
Thereafter                                                             13,402
                                                                       27,101
Less: Current maturities                                                2,600
Long-term portion                                                     $24,501

     The Company used the proceeds  from its initial  public  offering to retire
the senior subordinated notes, subordinated notes and junior subordinated notes.
As a result,  during the nine  months  ended  December  31,  1996,  the  Company
incurred  $3.5  million  (net of the  related  tax  benefit of $2.4  million) of
debt-related charges and write-offs reflected in the accompanying  Statements of
Operations  as an  extraordinary  item.  In addition,  a  shareholder  forgave a
portion  of the  junior  subordinated  notes  totaling  $5.5  million  which  is
reflected as a capital addition in the Statement of Shareholders' Equity.
     In October  1996,  the Company  replaced  its credit  agreement  with a new
facility (the "New Senior Bank Facility") that includes (i) a $15.0 million term
loan A, (ii) a $10.0  million  term loan B and (iii) a $15.0  million  revolving
credit  facility,  including up to $5.0 million of letters of credit.  Aggregate
borrowings under the revolving credit facility and outstanding letters of credit
may not exceed the Borrowing  Base,  which equals the sum of (i) 80% of Eligible
Accounts Receivable and (ii) 50% of Eligible Inventory. The amount available for
borrowing  under the revolver at December 31, 1996 was $12.9 million.  Term loan
A, term loan B and the revolving  credit facility mature in September 2002, 2003
and 2002,  respectively.  Term loan A amortizes  in  quarterly  installments  of
$625,000,  term loan B amortizes in quarterly  installments  of $25,000  through
September 2002 and in quarterly installments of $2,350,000 beginning in December
2002.
        The term loan A and  revolving  credit  facility  bear  interest  at the
applicable  prime rate plus 0.5% or LIBOR plus 2.0% and have a final maturity of
six years. The term loan B bears interest at the applicable prime rate plus 1.0%
or LIBOR plus 2.5% and has a final maturity of seven years.  The New Senior Bank
Facility contains less restrictive  covenants compared to the previous facility,
since the Company is substantially less leveraged following the Offering.
        The Credit Agreement provides for (i) a commitment fee of 0.5% per annum
on the unutilized  portion of the revolving credit facility,  (ii) a fee of 2.0%
per annum on the maximum  amount  available to be drawn under letters of credit,
and (iii) a letter of credit issuance fee.
     The  obligations of Carson  Products under the New Senior Bank Facility are
secured by substantially all of Carson Products' (and its subsidiaries)  assets,
as well as by a pledge of the capital stock of Carson  Products.  The New Senior
Bank  Facility  is  guaranteed  by the  Company  and  each  present  and  future
subsidiary  of  Carson   Products  (other  than  Carson  South  Africa  and  its
subsidiaries).  The New Senior Bank Facility contains covenants with respect to,
among other things, (i) maintenance by Carson Products of certain total interest
coverage  ratios,  fixed charge  coverage ratios and leverage  ratios,  and (ii)
restrictions  on the  incurrence of additional  liens or  indebtedness.  The New
Senior Bank Facility contains  restrictions on the payment of any cash dividends
except for dividends or distributions payable in shares of capital stock.

EX-13, PAGE 18

<PAGE>

Note 8. Accrued Liabilities

Accrued  liabilities  at December  31, 1996 and March 31, 1996  consisted of the
following (in 000s):

                                               December 31, 1996  March 31, 1996
Compensation and benefits                         $    1,587             $2,227
Advertising                                            1,070              1,340
Self-insurance                                           719                927
Interest                                                 240                384
Income tax payable                                       493                --
Other                                                    342                476
                                                       4,451              5,354

Note 9. Income Taxes

The  following is a  reconciliation  of the  statutory tax rate on (loss) income
from continuing  operations to the Company's  effective tax rate for the periods
noted:
<TABLE>
<S>                        <C>          <C>                      <C>              <C>                <C>
                             Company                        Predecessor            Company     Predecessor
                                    Unaudited
                   April 1, 1996  to  Aug. 23, 1995 to   April 1, 1995 to      Aug. 23, 1995 to    Year Ended
                   Dec. 31, 1996  Dec. 31, 1995            Aug. 22, 1995        March 31, 1996    March 31, 1995

Statutory rate             (34.0)%      34.0%                    34.0%            34.0%              34.0%
State income taxes
    (net of federal
    benefit)                (2.6)%        2.6%                   4.0%              4.0%               4.0%
Foreign taxes               33.8%        21.5%                                    21.5%
Foreign tax credit         (33.8)%      (21.5)%                                  (21.5)%
Permanent differences:
    Incentive
       Compensation         93.9%
    Goodwill                21.8%        24.3%                                    15.0%
Other taxes                 33.8%                              (1.7)%                               (2.2)%
Effective rate             112.9%        60.9%                  36.3%             53.0%              35.8%

</TABLE>
EX-13, PAGE 19
<PAGE>

Note 9. Income Taxes (continued)
Income tax expense  (benefit)  for the periods  noted  include the following (in
000s):
<TABLE>
<S>                         <C>           <C>     <C>                           <C>         <C>
                                                              Twelve-Months
                                               Nine-Months
                      Company                          Predecessor             Company          Predecessor
                  April 1, 1996 to  Aug. 23, 1995 to  April 1, 1995 to      Aug. 23, 1995 to    Year Ended
                  Dec. 31, 1996     Dec. 31, 1995      Aug. 22, 1995        March 31, 1996     March 31, 1995
                                        Unaudited
Current:

    Federal                 $1,685        $117    $        1,744                $204        $  2,760
    State                      405          19               333                  33             294
    Foreign                    594         177               104                 310              95
    Total current
      provision              2,684         313             2,181                 547           3,149

Deferred:
    Federal                  (749)          102              52                  609             23
    State                    (269)          65               10                  114              2
    Foreign                    61           47                                    82
    Total deferred
      provision              (957)         214               62                  805              25

    Total provision
       for continuing
       operations            1,727         527             2,243                1,352           3,174
    Benefit for extra-
      ordinary item         (2,351)
    Benefit for
       accounting
       change                                                                                    (147)
    Total income tax
       (benefit) expense   $  (624)      $ 527  $          2,243              $  1,352    $      3,027


</TABLE>

The effects of temporary  differences  which gave rise to the deferred tax asset
and  liability  at  December  31,  1996 and at March 31, 1996 are as follows (in
000s):

EX-13, PAGE 20

<PAGE>
<TABLE>
<S>                                       <C>          <C>          <C>             <C>
                                                    December 31, 1996      March 31, 1996
                                          Current      Long-term    Current          Long-term
Deferred domestic tax assets related to:
    Deferred compensation                    $          $ 643        $               $  638
    Accrued expenses                           813                     522              188
    Package design costs                                  533                           412
    Allowance for doubtful accounts             219                    199
    Foreign tax credit carryforward                       702
    NOLcarryforward                                       241
    Inventories                                14                      50
    Other                                                 116          14
                                               1,046    2,235         785             1,238

Deferred domestic tax liabilities related to:
    Inventories                                 (827)                                  (801)
    Property, plant and equipment                      (1,300)                       (1,168)
    Other                                        (91)
                                                (918)  (1,300)                       (1,969)
Deferred domestic tax asset (liability)        $128    $  935       $ 785         $    (731)
Deferred foreign tax liability                 $       $ (106)      $                  $(54)

</TABLE>


Deferred  income  taxes were not provided on  undistributed  earnings of certain
foreign  subsidiaries  ($5.7  million at December  31, 1996 and $1.0  million at
March  31,  1996)  because  such  undistributed  earnings  are  expected  to  be
reinvested   indefinitely   overseas.  If  these  amounts  were  not  considered
permanently  invested,  an additional  deferred tax  liability of  approximately
$712,500 and $125,000 would have been provided as of December 31, 1996 and March
31,  1996,  respectively.  The foreign tax credit and NOL  carryforward  of $0.7
million and $0.5  million  expire at December  31, 2001 and  December  31, 2011,
respectively.

EX-13, PAGE 20

<PAGE>

Note 10. Employee Benefit Plans

The Company has a profit  sharing plan which covers  substantially  all its U.S.
employees.  Contributions  to the plan are  discretionary,  as determined by the
Board of  Directors.  Contributions  are made on an annual  basis.  The  Company
contributed  $401,000  to the plan for the period from April 1, 1996 to December
31,  1996 and  $246,000 to the plan for the period from August 23, 1995 to March
31, 1996.
        The Company is obligated for  retirement  benefits to a former  employee
for the remainder of his (and his spouse's) life. The expected  present value of
this obligation ($1.6 million at December 31, 1996 and $1.7 million at March 31,
1996) is classified in other liabilities in the accompanying balance sheets.
        The Company  provides  postretirement  health care benefits to a limited
number of key executives.  The  accumulated  postretirement  benefit  obligation
("APBO") was  $517,000 at December 31, 1996 and $499,000 at March 31, 1996.  For
measurement  purposes,  the cost of  providing  medical  benefits was assumed to
increase by 10% in the fiscal year ended  December  31, 1996,  decreasing  to an
annual  rate of 8%  after  December  31,  1999.  The  medical  cost  trend  rate
assumption could have an effect on amounts reported. For example, an increase of
1% in the assumed rate of increase  would have an effect of increasing  the APBO
by $63,000 and the net  periodic  postretirement  benefit  cost by $23,000.  The
weighted average discount rate used in determining the APBO was 8%. Net periodic
postretirement
 benefit  cost for the period from August 23, 1995 to March 31, 1996 was $9,000.
Net  periodic  postretirement  benefit cost for the period from April 1, 1996 to
December 31, 1996 was $18,000.
     The Company  recognized  $0.8 million of  compensation  expense  during the
quarter  ended  June 30,  1996  relating  to  anticipated  costs  under  certain
equity-based  long-term  incentive  compensation  arrangements  (such awards and
compensation  expense are based upon the fair market value of the Company at the
time of the initial public offering).  Such arrangements were awarded originally
as stock  appreciation  rights ("SARs").  During 1996, the SARs were amended and
converted to immediately  exercisable  stock purchase  rights,  on a complete or
partial basis, as agreed to by the Company and the awardee.The SARs entitled the
holder to a specified value  (determined as a percentage of the Company's equity
value) over a fixed base value  subject to five year  vesting  requirements  (or
earlier  upon a public  offering or sale of the  Company).  Upon  amendment  and
conversion,  the SAR rights  were  cancelled  (and  replaced  with  accelerated,
immediately  exercisable  stock  purchase  rights).  These  rights  have a fixed
purchase price equal in amount to the canceled SARs fixed base value.
     During August 1996,  pursuant to the terms of the accelerated,  immediately
exercisable stock purchase rights,  several outside directors  purchased 115,373
shares  of Common  Stock at  approximately  $2.17  per  share  for an  aggregate
purchase price of $250,000 and members of senior  management  purchased  385,818
shares  of Common  Stock at  approximately  $4.21  per  share  for an  aggregate
purchase price of $1.6 million. The purchase of such shares by senior management
was  financed  with  $1.4  million  (net of  discount)  in  noninterest  bearing
long-term  full recourse  loans from the Company.  The  incentive  compensation
expense  represents  the excess of the initial  public  offering  price over the
actual purchase price of these shares plus certain cash payments.  In connection
with  the  South  African  offering,  the  Company  also  issued  shares  of the
subsidiary  to  certain  members  of  its  management;   the  Company   recorded
compensation expense of approximately $0.3 million for these share awards.

Note 11. Contingencies

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

EX-13, PAGE 21

<PAGE>
Note 12. U.S. and Foreign Operations

The  Company's  operations  are located in the United  States and South  Africa.
Financial information by geographic area is as follows (in 000s):
<TABLE>

<S>                                      <C>                 <C>                  <C>              <C>                <C>
                                                                                         Twelve Months
                                                                 Nine Months

    (UNAUDITED)                                        Company
Net sales:                               April 1, 1996 to      August 23, 1995     April 1, 1995 to  August 23, 1995    Year Ended
    United States:                       December 31, 1996   to December 31, 1995  August 22, 1995   March 31, 1995  March 31, 1995
    Domestic .............................  $42,855              $17,386        $20,189                 $30,676            $47,111
    Export ...............................    8,274                3,304          4,407                   6,494              7,382
    South Africa .........................    8,809                2,983          2,258                   4,295              3,633
 .........................................  $59,938              $23,673        $26,854                 $41,465            $58,126
Operating income:
    United States ........................    $723                $3,096         $4,733                  $5,890             $7,852
    South Africa .........................   1,728                   374            363                     973                363
 .........................................  $2,451                $3,470         $5,096                  $6,863             $8,215
Identifiable assets (at end of period):
    United States ........................ $95,385               $82,109                              $  84,988            $42,585
    South Africa .........................  11,529                 2,953                                  4,404              2,113
    Eliminations .........................  (9,283)                 (971)                                (1,310)              (835)
 ......................................... $97,631               $84,091                                $88,082            $43,863

Transfers of products  from the United  States to South Africa were not material
during the periods presented above.  Export sales from the United States include
sales to customers in Europe, the Caribbean and Africa.
</TABLE>


Note 13. Financial Information of Carson, Inc. (Parent Company)

The assets of Carson,  Inc. on an  unconsolidated  basis  consist  solely of its
investment in Carson Products  Company.  During the period from April 1, 1996 to
December  31,  1996,  and for the period from August 23, 1995 to March 31, 1996,
the results of operations of Carson,  Inc. consisted solely of its equity in the
earnings of Carson Products  Company and its cash flows consisted  solely of the
cash  provided by  financing  activities  of $42.4  million  and $12.0  million,
respectively,  from the sale of its  common  stock  and cash  used in  investing
activities of $42.4 million and $12.0 million,  respectively, for its investment
in Carson Products Company.

Note 14. Certain Relationships and Related Transactions

Morningside
Carson Products and Morningside Capital Group, L.L.C.,  ("Morningside")  entered
into a Management  Assistance  Agreement dated August 23, 1995 (the  "Management
Agreement"),  pursuant to which  Morningside  and a  shareholder  of the Company
agreed to supply  the  services  of a  principal  member of  Morningside  to the
Company to provide certain advice and assistance. Such services are provided for
a fee of  $350,000  per  year,  payable  on a  monthly  basis  in  advance  plus
reimbursement for out-of-pocket expenses. The termination date of the Management
Agreement is August 23, 1998; however,  the term of the agreement shall continue
after such  termination  date until terminated by not less than 30 days' advance
notice by either party.
     In connection with the Acquisition,  Morningside  received fees of $500,000
from the Company for arranging and negotiating the financing for the Acquisition
and  performing  other  consulting  and  financial  advisory  services  and  was
reimbursed by the Company for certain  related  expenses.  Under the  Management
Agreement, the Company paid Morningside approximately $25,000 in fiscal 1996 for
reimbursement of out-of-pocket expenses.  Morningside received a fee of $100,000
for  arranging  and  negotiating  the terms of the New Senior Bank  Facility and
performing other consulting and financial  advisory services.  In addition,  the
Company  reimbursed  Morningside  for  approximately  $35,000  of  out-of-pocket
expenses  incurred in connection with the initial public offering.  From time to
time  Morningside  may provide  additional  financial  advisory  services to the
Company, for which Morningside will receive usual and customary compensation.

Fees Related to the Acquisition
A corporation in which the Company's chief financial officer serves as President
and is a principal stockholder, was paid $290,000 and received 159,180 shares of
the Company's Class C Common Stock from the Company in connection with financial
advisory services related to the Acquisition. A law firm in which a director and
shareholder of the Company serves as President and Chief  Executive  Officer was
paid  approximately  $690,000  for  services  rendered in  arranging  the equity
investment in the Company in connection with the Acquisition. A principal lender
and  a  shareholder  of  the  Company   received  fees  and   reimbursement   of
out-of-pocket expenses totalling $1,783,000 in connection with the Acquisition.

EX-13, PAGE 22
<PAGE>

     Note 14.  Certain  Relationships  and Related  Transactions  (continued) AM
Cosmetics  Morningside  AMAcquisition Corp., ("AM Acquisition"),  entered into a
Subscription Agreement dated as of June 26, 1996 (the "Subscription  Agreement")
with Carson  Products,  providing  for the  purchase  by Carson  Products of 300
shares of  cumulative  Payment  in Kind  Preferred  Shares  (the "PIK  Preferred
Shares")  issued  by  AMAcquisition,  at  a  price  of  $10,000  per  share.  AM
Acquisition  was formed by Morningside on behalf of an investor group to acquire
the assets of Arthur  Matney Co.,  Inc.  Certain key  management  personnel  and
shareholders  of the  Company are also key  management  and  shareholders  of AM
Cosmetics. AMCosmetics sells three brands of "budget"cosmetics,  one of which is
targeted  at  the  African-American  consumer.  The  PIK  Preferred  Shares  are
non-voting  and are  entitled  to  cumulative  dividends  payable  quarterly  in
additional PIK Preferred Shares at a rate of 12%per annum. Additionally, the PIK
Preferred  Shares  are  subject to  redemption  in whole at the option of Carson
Products  on or after July 1,  2005,  at the  stated  value per share  (which is
$10,000  per  share)  plus an amount in cash  equal to all  accrued  and  unpaid
dividends on the PIK Preferred Shares.
     Concurrent with its investment in AM Acquisition,  Carson Products  entered
into a Management  Agreement  (the  "Carson-AM  Management  Agreement")  with AM
Cosmetics,  pursuant  to which  Carson  Products  agreed to manage the  business
operations of, and provide certain other services to AM Cosmetics. In return for
the management and other services it will provide,  Carson  Products is entitled
to fees equal to 1%of AM  Cosmetics'  annual  net sales  subject to a minimum of
$500,000 per annum. The  Carson-AMManagement  Agreement expires on June 26, 2004
unless terminated earlier, or renewed for an additional  three-year period at AM
Cosmetics'  option by giving Carson Products written notice thereof at least 180
days prior to the expiration date.  Either party may terminate the AM Management
Agreement by providing the other party with written notice, at least 360 days in
advance if terminated by Carson Products and 60 days in advance if terminated by
AM Cosmetics.

INDEPENDENT AUDITORS REPORT

Board of Directors and Stockholders of Carson, Inc.:

        We have audited the accompanying  consolidated balance sheets of Carson,
Inc. and its  subsidiaries  as of December 31, 1996 and March 31, 1996,  and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for the periods  from April 1, 1996 to  December  31, 1996 and from August
23, 1995 to March 31,  1996.  We also  audited  the  accompanying  statement  of
operations,   stockholders'   equity,  and  cash  flows  of  Aminco,  Inc.  (the
Predecessor)  for the period from April 1, 1995 to August 22,  1995.  Our audits
also included the financial  statement  schedule  listed in the index at Item 14
for such periods.  These financial  statements and financial  statement schedule
are the  responsibility of the Company's  management.  Our  responsibility is to
express  an  opinion  on these  financial  statements  and  financial  statement
schedule based on our audits.
     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
        In our opinion,  such consolidated  financial statements present fairly,
in all  material  respects  the  financial  position  of  Carson,  Inc.  and its
subsidiaries  as of December 31, 1996 and March 31, 1996, and the results of its
operations and its cash flows for the periods from April 1, 1996 to December 31,
1996 and from August 23, 1995 to March 31, 1996,  and the results of  operations
and cash flows of the  Predecessor  for the period  from April 1, 1995 to August
22, 1995 in conformity with generally accepted accounting  principles.  Also, in
our opinion,  such financial statement schedule,  when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.


DELOITTE & TOUCHE LLP

Atlanta, Georgia
March 7, 1997

EX-13, PAGE 23


<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

Directors of Aminco, Inc. and Subsidiaries:

     In  our  opinion,  the  accompanying  consolidated  statements  of  income,
shareholders' equity and of cash flows present fairly, in all material respects,
the financial  position of Aminco,  Inc. and its subsidiaries at March 31, 1995,
and the  results  of their  operations  and  their  cash  flows  for the year in
conformity  with  generally  accepted  accounting  principles.  These  financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our  audit.  We  conducted  our audit of these  statements  in  accordance  with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable  assurance about whether the financial statements are
free from material misstatement.  An audit includes examining,  on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall  financial  statement  presentation.  We
believe  that our audit  provides a reasonable  basis for the opinion  expressed
above.

PRICE WATERHOUSE LLP

Atlanta, Georgia
May 8, 1995


EX-13, Page 24